Energy Technology Choices: Shaping Our Future · 2018-04-29 · OTA Project Staff—Energy Technology Choices: Shaping Our Future Lionel S. Johns, Assistant Director, OTA Energy,

Energy Technology Choices: Shaping OurFuture

July 1991

OTA-E-493NTIS order #PB91-220004

Recommended Citation:

U.S. Congress, Office of Technology Assessment, Energy Technology Choices: Shaping OurFuture, OTA-E-493 (Washington, DC: U.S. Government Printing Office, July 1991).

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)

Foreword

This assessment responds to a request by the House Committee on Energy andCommerce, the House Committee on Government Operations, and the Senate Committee onEnergy and Natural Resources to provide an evaluation of the technical risks and opportunitiesfacing our Nation’s energy future.

The report provides a broad overview of energy choices facing the Nation. It is not anexhaustive analysis of any one technology; rather, it draws together the main themes of OTAreports from the past 16 years, and other documents, into an outline of the main directions thecountry could follow. We hope that the report will be used as a ‘‘roadmap,’ not anencyclopedia. It reviews options for increasing energy supply and using energy moreefficiently in the face of resource constraints and the contrasting goals the Nation faces. It thenanalyzes packages of options that would be appropriate to meet national objectives. There isan old Chinese proverb that is appropriate to U.S. energy strategy: “If we don’t changedirection, we’re very likely to end up where we’re headed. ”

OTA appreciates the invaluable assistance provided by the project’s advisory panel andreviewers during the course of this study.

w D i r e c t o r

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Advisory Panel—Energy Technology Choices: Shaping Our Future

Charles A. BergMechanical EngineeringNortheastern University

James H. Caldwell, Jr.Consultant

Daniel A. DreyfusStrategic Analysis and Energy ForecastsGas Research Institute

Frederick J. EllertConsultant

David Lee KulpFuel Economy Planning and ComplianceFord Motor Co.

Edwin RothschildCitizen Action

Maxine SavitzGarrett Ceramic Components Division

Jessica MathewsWorld Resources Institute

Reviewers

John Sampson TollUniversity Research Associates

Jack W. WilkinsonSun Company, Inc.

Mason WillrichCorporate Planning and Information SystemsPacific Gas and Electric Co.

Rosina BierbaumOffice of Technology Assessment

Robert FriResources for the Future

Robert FriedmanOffice of Technology Assessment

William FulkersonEnergy DivisionOak Ridge National Laboratory

Karen LarsenOffice of Technology Assessment

Steven PlotkinOffice of Technology Assessment

Richard E. RowbergScience Policy Research Division

\ Congressional Research Service

NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members.The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for thereport and the accuracy of its contents.

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OTA Project Staff—Energy Technology Choices: Shaping Our Future

Lionel S. Johns, Assistant Director, OTAEnergy, Materials, and International Security Division

Peter D. Blair, Energy and Materials Program Manager

Project Staff

Alan T. Crane, Project Director

Andrew H. Moyad, Research AnalystJoanne M. Seder, Analyst

Administrative Staff

Lillian Chapman, Office AdministratorLinda Long, Administrative Secretary

Phyllis Brumfield, Secretary

Contributors

Robin RoyKathryn Van Wyk

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Contents

PageOverview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 1: Introduction: The Changing Context for Energy Technology Policy . . . . . . . . . . . . 7

Chapter 2: Technologies Affecting Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Chapter 3: Technologies for Energy Supply and Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Chapter 4: Potential Scenarios for Future Energy Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Chapter 5: Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

vi

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Overview

The energy crisis of the early seventies hasevolved into a more complex and subtle nationalsituation that still entails major dangers. Some fuels,gasoline in particular, are actually cheaper now inreal terms, and none shows any signs of imminentresource constraints. Energy is used with far greaterefficiency than 20 years ago and with less environ-mental damage per unit of consumption. However,the long-term problems of our growing energyuse-accumulating environmental degradation, thenational security costs of imported oil supplies, anda worsening trade imbalance from rising levels of oilimports-are as intractable as ever.

Improved technology is a major reason for thepresent lull in attention to energy. A vast number ofoptions that improved overall energy efficiencyallowed the economy to grow 39 percent from 1972to 1985 with essentially no increase in energyconsumption. New technology has also improvedthe production of oil and natural gas and thecombustion of coal. Success in moderating demandand improving supply has led to the present situationof ample supplies at moderate cost. Technology cancontinue to provide new benefits in the future. Manymore technologies for the conversion and use ofenergy are well along in the development processand can be expected to be cost competitive withfurther refinement or energy cost increases. Tables1 and 2 show the technologies that are available orunder development for greater efficiency or alterna-tive energy sources.

The three greatest uncertainties facing energypolicymakers are: how to assure a long-term supplyof reasonably priced, convenient fuels, especially fortransportation; how to protect the country againstdisruptions of petroleum imports; and how tomitigate emissions of carbon dioxide if globalwarming concerns require it. Just as energy itself isuseful only insofar as it enables one to achieve somedesired service, energy policy is important only in itscontribution to the three fundamental national goalsof a clean environment, healthy economy, andsecurity. Some initiatives contribute to all threegoals, while others have conflicting results.

Failure to address these uncertainties could havevery serious implications eventually. All indicationssuggest that U.S. oil production is in an irreversibledecline. Not only are imports almost certain to rise,but peaking production in petroleum fields in other

countries indicates that an increasing share ofproduction will be from the Middle East. If theinstability of the last several decades continues inthat region, it is likely that major disruptions ofsupply, possibly exceeding our ability to protect theeconomy against them, will occur. U.S. productionof natural gas, the cleanest conventional fuel, mayrise some, but it is likely that within a decade thelowest cost resources will be significantly depleted.Oil and gas supply almost two thirds of our energydemand, so the economic cost of price increases willbe great unless alternative modes of production orsubstitutes are available. Failing to prepare for newenvironmental concerns could lead to extremelycostly impacts if global warming develops into amajor threat. Complacency on energy issues entailsa major risk for the country on all counts-security,economic, and environmental.

High energy prices in the seventies and earlyeighties were largely responsible for the rapiddevelopment and implementation of energy savingtechnologies that reduced energy demand and led totoday’s relatively low energy prices. Conversely,these low prices, while good for the economy, arelimiting further efficiency, resource exploration, andalternative fuel investments.

Energy investments, whether supply or demand,typically last for decades. Thus, the energy system isslow to change, and problems that are unlikely to becritical for 20 years or more will be far more difficultto manage then if not addressed now. These criticalproblems include responding to the threat of globalclimate change, securing affordable supplies ofenergy, and protecting against oil import disrup-tions.

There is not now, and probably never will be, anysingle energy option that will ideally solve ourlong-term requirements. All options entail somecompromises. Opportunities to improve energyefficiency are closest to the ideal. Many cost-effective opportunities exist, even at today’s energyprices. Such investments are generally environmen-tally beneficial because they reduce energy produc-tion and consumption, economically beneficial be-cause they more nearly approach rational distribu-tion of resources, and beneficial to security becausethey reduce petroleum imports. However, signifi-cant structural and behavioral barriers impede theirimplementation. Alternative energy sources (e.g.,

–1–

2 ● Energy Technology Choices: Shaping Our Future

Table l—Technologies Affecting Demand

Technology Sector Availability Comments- . . .-. -. . .

Variable speed heat pump. . . . Residential/commercial

Scroll-type compressors (heatpump/air conditioning).... . . Residential/commercial

Thermally active heat pump. . . Residential/commercialLow-emissive windows . . . . . . . Residential

Heat pump water heaters. . . . . Residential/commercial

Alternative insulation materials. Residential

Refrigerator insulation . . . . . . . . Residential

Efficient lighting products . . . . . Residential/commercial

Building energy managementand control systems . . . . . . . Residential/commercial

Industrial process changes:—Separation . . . . . . . . . . . . . Industrial

—Catalytic reaction . . . . . . . . Industrial

—Computer control andsensors . . . . . . . . . . . . . . . Industrial

Advanced turbine:-Steam-injected gas turbine

(STIG) . . . . . . . . . . . . . . . . . lndustrial/utility—Intercooling (ISTIG) . . . . . . lndustrial/utility

Electric motors. . . . . . . . . . . . . . Industrial

2-stroke engine . . . . . . . . . . . . . Transportation

Direct injection/adiabaticdiesel . . . . . . . . . . . . . . . . . . . Transportation

Ultra-high bypass engines . . . . Transportation

Alternative fuels:—Alcohol fuels . . . . . . . . . . . . Transportation

—Electricity. . . . . . . . . . . . . . . Transportation

C,N

c

RC,R

c

R

R

C,N,R

C,N

C,N,R

C,N,R

C,N

C,NN

c

R

C,R

c

C,N,R

R

Improves energy efficiency and provides more flexible control.Widely used in Japan. Increasing market share in United States.

Newer scroll-type compressors are 10 to 20 percent more efficientthan reciprocating ones. Widely produced in Japan. .

Could have significant impact in 10 to 20 years.Significant impact on reducing thermal energy loss in homes.

Research needed on improving durability, lowering emittance,and reducing condensation.

Offers significant reduction in electricity use; premium cost.Commonly used in Scandinavia.

Needed to counter loss of chlorofluorocarbon-blown insulation.Now being developed and tested.

Greatest potential for appliance efficiency improvements. Newproducts include vacuum insulation, compact vacuuminsulation, and soft vacuum insulation.

Combination of lighting options can cut commercial energy usesignificantly. Improved fluorescents, compact fluorescents, andelectronic ballasts commercially available. Research anddevelopment continuing on improving phosphors.

Greatest potential for savings in the commercial sector. Advancesin this technology have been continual.

Improvements in separation and control, and the use of membranetechnology and solvent extraction could reduce energy useconsiderably.

By increasing reaction rates, Iower temperatures and pressures canbe used that reduce heating and compression requirements.Discovery and use of new synthetic zeolites have contributed toenergy efficiency gain in petroleum refining and chemicalsindustries.

Improved monitoring and control optimizes conversion anddistribution of energy. Potential savings range from 5 to 20percent.

Currently used in cogeneration applications.Has potential to raise efficiency to about 50 percent. May be better

suited for utility applications; pilot-plant stage.Adjustable-speed drive and new high-efficiency motors account for

about half of the total potential savings in U.S. motors.Holds promise for long term. Questions remain about ability of

engine to comply with emissions standards.

Limited passenger car application in Europe; offers considerableefficiency improvements for both light-duty vehicles and heavytrucks. Questions remain regarding meeting more stringentemission standards.

Can raise efficiency by about 20 percent but costs two times asmuch as current generation bypass engines.

Use of methanol and ethanol should result in greater engineefficiency but costs are higher.

Big greenhouse advantage if derived from nuclear or solar energy.

KEY: C - commercial; N - nearly commercial; R - research and development needed.SOURCE: Office of Technology Assessment, 1991.

nuclear, renewable, synthetic fuel) have some high dependence on conventional fossil fuels foradvantages, but none will be cheap relative to several decades, increasingly interfering with envi-current fossil fuels. Thus without major policy ronmental and security goals and using more thaninitiatives, our energy system is likely to maintain its the optimal amount of energy.

Overview . 3

Table 2—Major Technologies for Energy Supply and Conversion

Technology Availability Comments—.OilDeepwater/arctic technologies

Enhanced oil recovery techniques—thermal recovery—miscible flooding-chemical flooding

0il shale and tar sands—Surface retorting—Modified in situ

Natural gas—Hydraulic fracturing

Coal—Atmospheric fluidized-bed combustion (AFBC)—Pressurized fluidized-bed combustion (PFBC)—Integrated gasification combined cycle (IGCC)

—Flue-gas desulfurization (FGD)—Sorbent injection

-Staged combustionNuclear

—Advanced light water reactor

—Modular high-temperature gas reactor(MHTGR)

—Power Reactor inherently Safe Module(PRISM)

Electricity—Combined cycle (CC)

—Intercooilng Steam injected Gas Turbine(ISTIG)

—Fuel ceils

—Magnetohydrodynamics (MHD)—Advanced batteries

-Compressed air energy storage (CAES)

Biomass—Thermal use—Gasification

—Production of biofuels

C,R

C,R

C,N

c

N,R

N

cC,N

R

c

N,R

R

c

NR

RR

c

cc

C,R

Existing technologies that are promising for deepwater areas includeguyed and bouyant towers, tension leg platforms, and subseaproduction units. Advances in material and structural design critical;innovative maintenance and repair technologies important.

Widely adopted over the past two decades.

Uneconomic at present oil prices.

Very complex process; not well understood although successful for someformations. Key to unlocking unconventional gas reserves.

Small-scale units commercial. Utility-scale AFBC in demonstration stage.PFBC is less well developed; pilot-plant stage.

Demonstration stage. Primary advantages are its Iow emissions and highfuel efficiency.

Mature technology; considerable environmental advantages.Commercially available control technology. Can remove nitrogen oxides

up to 90 percent.Has potential to remove up to 80 percent of nitrogen oxides.

Incorporates safety and reliability features that could solve past problems;public acceptance uncertain.

improvements to familiar technology; incorporates passive safetyfeatures; design of modular reactor completed.

Conceptual designs expected to be completed this year.

Conventional CC is a mature technology; advanced CC is indemonstration stage.

Pilot-plant stage. *Several types being developed. Fuels cells that use phosphoric acid as

electrolytes are in demonstration stage. Molten carbonate and solidoxide are alternative electrolytes that are less developed. Late 1990savailabiiity, at the earliest.

Difficult technical problems remain, especially formal-fired MHD systems.Research and development needed in utility-scale batteries to improve

lifetime cycles, operations maintenance costs. Promising batteries areadvanced lead, zinc-chloride and high-temperature sodium-sulfur..

First U.S. plant (110-MW)to begin operation in 1991; owned and operatedby Alabama Electric Cooperative, Inc.

Use of biomass by utilities is usually uneconomical and impractical.Anaerobic digestion used commercially when biomass costs are low

enough. Methane production from biomass not yet competitive withconventional natural gas unless other factors considered.

Research being done on wood-to-ethanol/methanol conversionprocesses. Could be demonstrated by 2000.

(Continued on next page)

Policies to address long-term energy concerns titive (at current energy prices) investments. Regula-include a wide range of initiatives. Energy taxes can tion can apply standards to raise performance ofinternalize costs, e.g., security or environmental automobiles, appliances and buildings, and controldamage otherwise not considered in decisions on the conditions under which Federal lands are avail-appliance, automobile, and industrial process pur- able for oil and gas exploration. Information pro-chases. Financial mechanisms, e.g., subsidies, can grams can improve decisionmaking. Research, de-target particularly favorable but otherwise uncompe- velopment, and demonstration can make available


Table 2—Major Technologies for Energy Supply and Conversion-Continued

Geothermal N—Dual flash—Binary cycle

Solar thermal electric—Central receiver R

—Parabolic solar trough c

—Parabolic dishes R

Photovoltaic N,R—Concentrator system—Fiat-plate collector

Wind power c

Ocean thermal energy conversion (OTEC) R

Single-flash system used extensively. Little commercial experience withdual flash. Binary cycle system maybe available in 40 to 50 MWerangeby 1995.

Several plants built, including one in California; 30-MW plant in Jordan ismajor project today.

several commercial plants built in California;additional capacity plannedappears to be marketable.

Testing being conducted in new materials and engines such as free-pistonstirling engine.

Improvements needed to make photovoltaic cells economic in the bulkpower market advances in microelectronics and semiconductors canmake photovoltaics competitive with conventional power by 2010.

Renewable source closest to achieving economic competitiveness in thebulk power market. Current average cost is 8 cents/kWh.

Research focused on dosed and open cycle systems; no commercialplants designed. May be competitive in 10yearsforsmallislandswheredirect-generation power is used. Use of OTEC domestically for electricpower is unlikely except for coastal areas around Gulf of Mexico andHawaii.

KEY: C - commercial; N = nearly commercial; R - research and development needed.SOURCE: Office of Technology Assessment, 1991.

new options. The Federal Government can contrib- ●

ute directly to ameliorating energy problems bytaking advantage of highly cost-effective measuresto reduce energy purchases for Federal facilities by

●

at least 25 percent. ●

Initiatives generally could be aimed at improving A

minimizing the use of energy as far as istechnologically possible,

emphasizing renewable energy sources, and

emphasizing nuclear energy.

the efficiency of use of energy and the supply of Any of these scenarios could be the most appro-

energy. This report contrasts a baseline scenario (no priate path depending on the resolution of uncertain-ties over climate changes induced by the greenhousemajor initiatives or surprises) with five variations

representing different paths the Nation could follow: effect, technological developments, and resourcediscoveries. Each scenario presents risks as well as

● emphasizing production of conventional fuels, opportunities. This report describes the choices● improving efficiency of use to the economic available to policymakers and the implications of

optimum, choosing one path versus another.

Chapter 1

Introduction:The Changing Context forEnergy Technology Policy

CONTENTSPage

THE ENERGY POLICY CONTEXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7TRENDS SHAPING ENERGY POLICY AND TECHNOLOGY CHOICES . . . . . . . . . . 9

Declining Energy Intensity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Sharply Increasing Dependence on Foreign Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Change in the Electric Utility Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Changing Environmental Dimensions of Energy Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14The Nuclear Dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Renewable Energy Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Technology Research, Development, and Demonstration . . . . . . . . . . . . . +.. . . . . . . . . . . . 16

CANDIDATE ENERGY POLICY GOALS TO REFLECT A NATIONALENERGY STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Limit Oil Import Dependence and Diversify Supply Sources . . . . . . . . . . . . . . . . . . . . . . . 17Improve Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Improve Environmental Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Implications of Goals on U.S. Oil Import Dependence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Linking U.S. Energy Strategy to Global Climate Concerns . . . . . . . . . . . . . . . . . . . . . . . . . 18

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

BoxesBox Pagel-A. National Energy Strategy: A Historical Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10l-B. Changes in U.S. Oil Supply and Demand Since 1973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13l-C. The Changing U.S. Electric Utility Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

FiguresFigure Page1-1. Index of U.S, GDP, Energy Intensity, Energy Use, and Electricity Use . . . . . . . . . . . 111-2. U.S. Oil Imports, 1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 121-3. Total Oil Use and Imports U.S., Europe, and Japan, 1973 and 1988 . . . . . . . . . . . . . . 121-4. U.S. Electricity Consumption, 1989 Base Case to 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . 14

TableTable Page1-1. OTA Reports That Address Energy Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Chapter 1

Introduction: The Changing Context forEnergy Technology Policy

In the 17 years since the Arab oil embargo of1973-74, our perceptions of the role of energy in theUnited States and world economies have changedconsiderably. Throughout the 1970s, concern aboutenergy price and availability spurred the develop-ment of a wide range of new energy supply anddemand technologies. The dramatic increases inenergy efficiency of the U.S. economy were secondonly to Japan’s during that period. Those efficiencyimprovements coupled with the decontrol of oil andgas prices initiated during the late 1970s led toincreases in supply and falling energy prices in themid- 1980s. The result is that current policy concernsabout energy are not driven by the sense of urgencyabout price and availability typical of the 1970s, butrather by other factors such as environmentalquality, international competitiveness, and nationalsecurity.

In addition, our understanding of how energy isproduced and used has matured significantly sincethe 1970s, and we are much better equipped to makesystematic, long-term decisions about energy policyand its interactions with other social, economic, andenvironmental policy. Today, a comprehensive,strategic national energy policy cannot be viewed asan end in and of itself. Rather, its direction mustcome from broader and more fundamental nationalgoals of economic health, environmental quality,and national security. Therefore, as we consider thesteps necessary to articulate a national energypolicy, it only makes sense to develop it in ways thatsupport these three and other related goals.

Congress currently is considering the President’sNational Energy Strategy and a wide range of otherenergy-related legislative proposals. The variousoptions reflected in these proposals must be weighedin the context of the three overarching goals notedabove. This is difficult, since the goals can conflict.For example, increased reliance on coal could cut oilimport dependence, but exacerbate problems of airpollution and global climate change. Nonetheless,some energy options support all three goals, particu-larly those that improve efficiency of production anduse.

New energy technology has always been a corner-stone of our strategies for dealing with current andlong-term energy policy issues. Such technologieshold promise for cleaner and more efficient energyuse, safer and more efficient recovery of energysupplies, and a smooth transition to a postfossil fuelera. Indeed, after two decades of mixed experienceswith new energy technology, we understand muchbetter the role of new energy technology in energypolicy. In this overview report we review a numberof the long-term U.S. energy technology and policytrends, discuss their interaction and implications,and finally consider a range of strategic energytechnology policy options. Further, we reflect onsome of these experiences and examine the risks andopportunities offered by major energy supply anddemand technology options.

OTA has examined new energy technologies forthe Congress since 1975 (see table l-l). This report,designed to be an overview of energy supply anddemand, is drawn largely from past OTA reports.Hence, it is not an exhaustive analysis of any onefactor. Rather, it tries to draw together the mainthoughts of a whole series of OTA reports and otherdocuments into a broad outline of the main direc-tions the country could follow with energy. Weexpect the report will be used by Congress as aroadmap, not an encyclopedia.

THE ENERGY POLICY CONTEXTAnnual global energy use grew from about 18

quads (quadrillion British thermal units)--equiv-alent to about 800 million tons of coal or 8.5 millionbarrels of oil per day—to 333 quads from 1900 to1989. Industrialized countries account for 70 percentof annual worldwide commercial energy consump-tion. Coal, oil, and natural gas combustion currentlyaccount for about 80 percent of this energy use, andthese fuels will likely continue to dominate foranother 50 years. Many developing countries stilldepend heavily on noncommercial fuels, e.g., wood,dung, and crop wastes, but as their economiesdevelop, they increasingly incorporate fossil fuels,

–7-

8 . Energy Technology Choices: Shaping Our Future

Table l-l-OTA Reports That Address Energy Technologiesa

Energy and Materials Program:Energy Efficiency in the Federal Government: Government by Good Example? OTA-E-492 (May

1991).Energy in Developing Countries, OTA-E-486 (January 1991).Rep/acing Gasoline: Alternative Fuels for Light-Duty Vehicles, OTA-E-364 (September 1990).Energy Use and the U.S. Economy, OTA-BP-E-57 (June 1990).Physical Vulnerability of Electric Power Systems to Natural Disasters and Sabotage, OTA-E-453

(June 1990).High-Temperature Superconductivity in Perspective, OTA-E-440 (April 1990).Electric Power Wheeling and Dealing: Technological Considerations for Increasing Competition,

OTA-E-409 (May 1989).Biological Effects of Power Frequency Fields Electric and Magnetic Fields-Background Paper,

OTA-BP-E-53 (May 1989).Oil Production in the Arctic National Wildlife Refuge: The Technology and the Alaskan Oil Context,

OTA-E-394 (February 1989).Starpower: The U.S. and the International Quest for Fusion Energy, OTA-E-338 (October 1987).U.S. Oil Production: The Effect of Low Oil Prices, OTA-E-348 (September 1987).New Electric Power Technologies: Problems and Prospects for the 1990s, OTA-E-246 (July 1985).U.S. Natural Gas Availability: Gas Supply Through the Year 2000, OTA-E-245 (February 1985).U.S. Vulnerability to an Oil Import Curtailment: The Oil Replacement Capability, OTA-E-243

(September 1984).Nuclear Power in an Age of Uncertainty, OTA-E-21 6 (February 1984).lndustrial Energy Use, OTA-E-198 (June 1983).lndustrial and Commercial Cogeneration, OTA-E-1 92 (February 1983).Increased Automobile Fuel Efficiency and Synthetic Fuels, OTA-E-185 (September 1982).Energy Efficiency of Buildings in Cities, OTA-E-168 (March 1982).Solar Power Satellites, OTA-E-144 (August 1981).Nuclear PowerPlant Standardization: Light Water Reactors, OTA-E-134 (April 1981).World Petroleum Availability: 1980-2000, OTA-TM-E-5 (October 1980).Energy from Biological Processes, OTA-E-124 (September 1980).An Assessment of Oil Shale Technologies, OTA-M-1 18 (June 1980).The Future of Liquefied Natural Gas Imports, OTA-E-110 (March 1980).Residential/ Energy Conservation, OTA-E-92 (July 1979).The Direct Use of Coal, OTA-E-86 (April 1979).Application of Solar Technology to Today’s Energy Needs, OTA-E-66 (September 1978).Enhanced Oil Recovery Potential in the United States, OTA-E-59 (January 1978).Gas Potential From Devonian Shales of the Appalachian Basin, OTA-E-57 (November 1977).Analysis of the Proposed National Energy Plan, OTA-E-51 (August 1977).Nuclear Proliferation and Safeguards, OTA-E-48 (June 1977).

Oceans and Environment Program:Changing by Degrees: Steps To Reduce Greenhouse Gases, OTA-O-482 (February, 1991).Facing America’s Trash: What Next for Municipal Solid Waste, OTA-O-424 (October 1989).Catching Our Breath: Next Steps for Reducing Urban Ozone, OTA-O-41 2 (July 1989).Oil and Gas Technologies for the Arctic and Deepwater, OTA-O-270 (May 1985).Acid Rain and Transported Air Pollutants: Implications for Public Policy, OTA-O-204 (June 1984).

International Security and Commerce Program:Energy Technology Transfer to China-A Technical Memorandum, OTA-TM-ISC-30 (September

1985).Technology and Soviet Energy Avai/abi/ity, OTA-ISC-153 (November 1981).

‘Avalable through the U.S. Government Printing Off iCe, Washington, ~.SOURCE: Office of Technology Assessment, 1991.

especially coal and oil, in their industrial and quads of total energy will be required by 2010,commercial sectors.l

assuming moderate economic growth. The baselinehe United States currently consumes about 81 scenario in this report, which includes noncommer-

quads of energy. Many analysts project that over 100 cial energy, increases from 84 quads in 1990 to 112

lsee Us. con~ss, OKlce of Technology Assessment Energy in Developing Counrries, OTA-E-486 (Washington, DC: U.S. @veM.ment ~bOffice, January 1991).

Chapter 1--Introduction: The Changing Context for Energy Technology Policy ● 9

in 2015. The National Energy Strategy’s CurrentPolicy Base projects U.S. energy consumption willreach approximately 115 quad by 2010.2 With nochanges in policy, the sources of energy we use tofuel the economy are expected at that time to be verysimilar to what they are today: about 40-percent oil,23 percent each for natural gas and coal, and14-percent renewable and nuclear power.3 Still,some important features of U.S. energy supply anddemand balance are changing and, in turn, arechanging the environment within which policydecisions will be made, especially decisions abouttechnology.

various “national energy plans” have beeninitiated frequently since 1939 (see box l-A),usually instigated by concerns over resource short-ages. Perhaps the lesson to be learned from thisrepeated attention is that energy policy must befundamentally grounded in long-term strategies butmust also accommodate short-term perturbations.Oil price disruptions have been the major perturba-tions in recent years, such as the 1990 price increasestemming from the Persian Gulf crisis.

However, reducing vulnerability to oil supplyshortages will require more than a large petroleumreserve. Without policy action, imports of oil arevery likely to increase substantially. Increasingdependence on imports, especially those from unsta-ble regions, will necessitate a gigantic and extremelyexpensive reserve to maintain present protectionagainst an extended import supply disruption. In-creasing efficiency and fuel flexibility in the trans-portation fleet, the sector most dependent on oil, willbe increasingly attractive. These measures wouldalso serve the vital goal of reducing air pollutantemissions. Far greater changes will be required ifmajor carbon dioxide (CO2) emissions reductionsare required to minimize climate change. Majorchanges in energy systems require decades andsteady commitment from political leaders, industry,and citizens, and planning now for such changeswould be prudent.

If the United States wishes to succeed in easing oilimport dependence, cutting emissions, and increas-ing energy productivity, we must establish long-term efficiency and supply goals, and stick to the

plan to achieve those goals through periods of bothcrisis and calm and through periods of varying oilprices. During the past decade, steady supplies, easyefficiency gains, and a retreat in the price of oilseduced us into largely abandoning efforts to pushresearch in energy efficiency and alternative sup-plies. The war in the Middle East generated concernsover energy security reminiscent of the 1970s. None-theless, as the current crisis passes, we may be onceagain beguiled into a false sense of energy compla-cency.

TRENDS SHAPING ENERGYPOLICY AND TECHNOLOGY

CHOICESThe trends that have significant implications for

long-term energy policy choices are: 1) the decliningenergy intensity of the U.S. economy between the1970s and mid- 1980s, 2) the sharply increasing U.S.reliance on foreign sources of oil, 3) the changingstructure of the electric utility industry, and 4) thechanging relationship between energy and the envi-ronment. This section discusses these trends andthree areas of particular interest for energy technol-ogy policy: nuclear power, renewable energy, andresearch and development.

Declining Energy Intensity

For many years most observers believed thatenergy use and the gross national product (GNP)were firmly linked, moving upward in lock step. Welearned from the energy shocks of the 1970s, however,that ingenuity can substitute for supply when theprice is right. In the 1970s as energy prices rose,consumers responded by shifting their market basketof purchases and by developing more efficient waysto provide energy services. The energy intensity ofthe economy, the energy consumed per unit of GNPproduced, fell 2.5 percent per year between 1972 and1985, most of which was due to improved efficiency(see figure l-l). The other major factor was thechanging structure of the U.S. economy (e.g., thedecline in energy-intensive industries, replaced byenergy-intensive imports). OTA addressed theseissues in its 1990 background paper Energy Use andthe U.S. Economy.

2Natio~/ Energy ~rra~egy: Powefiz Zdeasfor America, 1st ed. 1991/1992, DOE/S-0082P (Washington DC: U.S. GoVerMent ~fig ml%February 1991), p. C-9.

3SM tie U.S. ~aw wo~tion Adrninismtioq Annual Energy Outlook 1990 (DOE/EIA-0383(90), JWI. 12, 1~.


Box 1-A--National Energy Strategy: A Historical NoteIn 1939 President Franklin Roosevelt appointed a National Resources Planning Board to examine the Nation’s

resources policy options. The Board recommended Government support of research to promote "efficiency,economy, and shifts in demand to low-grade fuels” and that a “national energyprepared that “would be more than a ‘simple sum’ of policy

resources policy” should be directed at specific fuels.”1

Later efforts included : a refinement of the Board’s recommendations. in 1947 by President Truman‘s National

Security Board; Truman's Mat erials Policy Commission of 1950-52 (known as the Paley Commissionafter its Chairman William s. Paley); President Eisenhower’s 1955 Cabinet Advisory Committee on Energysupplies and Resources Policy the 1961 National Fuels and Energy Study commissioned by the U.S. Senate duringPresident Kennedy’s term; President Johnson’s 1964 “Resources Policies for a Great Society Report to thePresident by the Task Force on Natural Resources”; President Nixon’s 1974 “Project Independence Blueprint”;President Ford’s 1975 Energy Resources Council reflected in his omnibus proposal “Energy Independence Act of1975’ ‘; President Carter's 1977 “National Energy Plan”; President Reagan’s 1987‘ ‘Energy Security” report; and,of course most recently, President Bush’s 1991 “National Energy Strategy (NES).”

The major stated goals of the NES are the following:● encourage the adoption of cost-effective energy efficiency technologies in all sectors, including electricity

generation;● increase the use of renewable energy in electricity generation and the residential and commercial sectors;● in the industrial sector, increase fuel flexibility and decrease waste generation, particularly by recycling

wastes and increasing their use as process feedstock;● in the transportation sector, expand the use of alternative fuels, accelerate the scrappage of older, leas

efficient automobiles, promote mass transit and ride sharing, and evaluate whether the corporate average fueleconomy (CAFE) standards should be changed

l reduce U.S. vulnerability to fossil-fuel supply disruptions by improving and implementing advanced oilrecovery technology, increasing U.S. and global oil and natural gas production generally, and expandingstocks (a major focus of supply expansion will include increased outer continental shelf (OCS) and ArcticNational Wildlife Refuge (ANWR) exploration and development);

l revive the growth of nuclear power by standardizing powerplant design, accelerating the introduction ofadvanced designs, reforming the powerplant licensing process to hasten the growth of new nuclear capacity,and site a permanent waste facility, and

l enhance Federal research and development to reduce oil use, increase oil supplies, and develop alternativefuels.

The above list of NES goals is not complete, but it represents the key elements of the plan. There have beendisputes over the goals of the strategy, whether the policy approaches suggested m the document match these goals,and whether it offers a viable mix of demand control and supply enhancement options. These issues are forpolicymakers to resolve. For its part, the NES is a broad plan that premises to affect the way Some of our mostimportant economic, environmental, and national security policies develop m the coming years.

1EnergyResources and National Policy. Report of Energy Resources Committee to the Natural Resources Committee,DC: u.s. Government Printing Office, 1939); also summarized in C. Goodwin (ed.), Energy Policy in Perspective (Washington,Institution, 1981).

Technology was at the heart of this changing Sharply Increasing Dependence onintensity-technology ranging from dramatically Foreign Oilincreased efficiency in delivery of traditional energyservices, e.g., heating, cooling, industrial processes, Today, the United States consumes about 17and transportation, to entirely new services that million barrels of oil per day, 13 percent greater thanchanged our lifestyles, e.g., improved airline travel, in 1983. At the same time, the level of domestic oilpersonal computers, and fax machines. In chapter 2 production has declined, due to depletion of low-we examine the changing nature of U.S. energy cost resources and a lack of new discoveries. The netdemand and the implications of technology on result is that imports rose from about one-third ofdemand growth and efficiency improvement. total U.S. consumption in 1983 to nearly 45 percent


Figure I-l—Index of U.S. GDP, Energy Intensity,Energy Use, and Electricity Use

, ~ 1972 ■ 1.00

1.61.41.2

10.80.60.40.2

01952 1956 1960 1964 1968 1972 1976 1980 1984 1988

— B t u s — G D P ( 1 9 8 2 $ )

~ Intensity (Btus/GDP) ‘ - E lec t r ic i ty

SOURCE: U.S. Energy Information Administration, Month/y Energy Re-view, March 1991, DOE/EIA-0035(91 /03) (Washington DC:U.S. Government Printing Office, Mar. 28, 1991).

in 1990. This is addressed in OTA’s 1987 report U.S.Oil Production: The Effect of Low Oil Prices, and inits 1989 report Oil Production in the Arctic NationalWildlife Refuge: The Technology and the AlaskanOil Context.

Moreover, the fraction of total imports comingfrom Persian Gulf nations has increased from about4 percent of total U.S. consumption (10 percent oftotal U.S. oil imports) to over 10 percent (26 percentof current U.S. imports), as shown in figures 1-2 and1-3. As the Soviet Union, the United States, andother non-OPEC (Organization of Petroleum Ex-porting Countries) nations deplete their lowest-costoil reserves over the next decade or two, thegeopolitics of energy will increasingly focus on thecomparatively vast resources in the Middle East.OPEC4 controls three-quarters of proved worldcrude-oil reserves, including all major recent addi-tions. At least part of the rationale for OperationDesert Storm was due to our dependence on thatregion’s oil reserves or, in President Bush’s words,“U.S. economic interests there. ”

In this case, the disruption was minor because Iraqand Kuwait provided less than 5 percent of U.S.supply, and Saudi Arabia was willing and able tocompensate for the shortfall. In the future, however,major U.S. supplies could be interrupted or lost, withlimited replacements available only at great eco-

nomic or political cost. For example, if the recentGulf War had also interfered with Saudi Arabian oilexports, U.S. supply losses would have been muchmore severe.

Dependence on imported oil also strains ourinternational balance of payments considerably. Inthe first half of 1990, the U.S. imported 24 billiondollars’ worth of oil, an amount equal to 57 percentof our total trade deficit for that period. High levelsof oil imports do not by themselves lead to poor tradebalances (Japan is one counter example), but such ahigh cost warrants strenuous efforts to ensure that oilis used with optimal efficiency. Many opportunitiesfor increasing energy efficiency are noted in thisreport.

In addition, even in peacetime, the Pentagonspends many billions of dollars to protect oilsupplies. With the conclusion of Operation DesertStorm, military expenditures linked to preserving oilsupplies rose substantially. Rebuilding the war-torncountries of the Middle East may also prove veryexpensive. These are part of the costs of importedoil, even though they are not reflected in the price ofoil and oil products.

Some characteristics of today’s U.S. oil use,domestic supply, and import dependence are similarto those of the 1970s, e.g., the almost total relianceof our transportation sector on oil. Other features,however, have evolved considerably, including theefficiency of oil use in many industries, lowerdependence of electric utilities on oil, diversificationof world oil supplies (albeit not reserves), interna-tional agreements on oil sharing, the strategicpetroleum reserve, changes in energy regulation(e.g., removal of oil price controls and restrictions onnatural gas use), and the emergence of active spotand futures markets for oil supply. (See box l-B.)

All of these changes have had an effect on thepossible future of oil use and of U.S. dependence onimported oil. Despite these changes, the U.S. econ-omy is and will be increasingly dependent on foreignsupplies of oil for years to come. This dependencewill continue to threaten our national security, and itpromises to continue aggravating our balance ofpayments.

of Arabia, Iraq, Qatar, Venezuela, Iran, United Arab and Nigeria.


Figure 1-2—U.S. Oil Imports, 1989 (millions of barrels per day)

As ia 0 .80.3

1.22

Total: 8.1 million barrels per day Total: 2.1 million barrels per day

Total U.S. oil consumption, 17.3 million barrels per day

SOURCE: U.S. Central Intelligence Agency, International Energy Statistical Review, 1990.

Figure 1-3-Total Oil Use and Imports U.S., Europe,and Japan, 1973 and 1988

Million tons of oil equivalent

“ o o o ~ ~800

i

6 0 0 -

4 0 0 -

200-

o ’ m-U.S. Europe Japan U.S. Europe Japan

1973 1988

_ Oil imports = Domestic production

SOURCE: U.S. Energy Information Administration, International EnergyAnnual 7988, DO13EIA-00219(88) (Washington DC: U.S.Government Printing Office, Nov. 7, 1989).

Change in the Electric Utility Industry

The U.S. electric utility industry has weathereddramatic change in the last two decades. A dominantfactor precipitating change in the 1970s was theprice of fuel. On average, utilities had to pay over200 percent more in real dollars for fossil fuels in1984 than in 1972. In addition, the construction costsof new powerplants, particularly nuclear, rose dra-matically due to a combination of factors: increasedattention to environmental and safety issues (con-tributing to extended construction leadtimes andadded equipment costs), high inflation and interest

rates, delays in construction schedules and, in somecases, poor management. The higher costs of fueland capital meant higher electricity costs, andutilities sought higher rates for the first time indecades. Most utilities (and industry analysts) seri-ously underestimated the price elasticity of electric-ity demand. Demand growth plummeted from 7percent a year in the early 1970s to less than 2.5percent by the end of the decade. Though consumersbegan using electricity more frugally, powerplantconstruction schedules did not shrink accordingly,and an oversupply of capacity resulted, adding toutilities’ problems.

The outlook for the electricity generating industryhas improved. The demand for electricity has risensubstantially (see figure 1-4) and fuel costs havestabilized. However, the industry continues tochange, as evidenced by:

●

●

●

●

the emergence of an independent power pro-ducer industry and other signs of increasingcompetition in the industry (e.g., a number ofmajor mergers and acquisitions and proposalsto modify the Public Utility Holding CompanyAct);the accelerating trends of least-cost planning,integrated resource planning, and other innova-tive State regulation;increased attention to demand-side manage-ment and investment;the restoration of natural gas as an importantfuel for electric power generation;

Chapter Introduction: The Changing Context for Energy Technology Policy ● 13

Box l-B-Changes in U.S. Oil Supply and Demand Since 1973

Energy Efficiency of the US. Economy As noted above, energy efficiency has risen considerably in all sectorsof the economy, often through permanent structural changes driven by economics. Changes include improvementsin both the efficiency and flexibility of energy-using technologies. 1 For example, automobile, industrial boiler, andelectric powerplant fuel efficiency have all improved substantially. Nonetheless, many opportunities still remain,although they may be more difficult to secure without higher energy prices,2

Strategic Petroleum Reserve (SPR,): “The United States now has an SPR containing approximately 585 millionbarrels of crude oil,3 the equivalent of about 100 days of oil imports at current levels. Similarly, Europe and Japanhave also added to their strategic storage, although not to the same extent as the United States.

Diversified World Oil Production: Sources of world oil production have become substantially more diversifiedsince the 1970s, with the OPEC share of the world oil market declining from 60 percent in 1979 to approximately35 percent today. For several years, at least, no single country or cohesive group of countries will be able to controlas large a share of the world market as was possible previously. Eventually, however, OPEC will regain substantialmarket share, especially as U.S. and Soviet production declines.

Concentrated World Oil Reserves: Despite diversified world oil production, nearly all recent reserve additionshave been in the Middle East. Moreover, the costs of exploration, field development, and production in the MiddleEast remain considerably below that of other oil producing regions and are likely to remain so.

Increased Flexibility of Oil Use: A considerable portion of any increase in oil consumption both in the UnitedStates and in the remainder of the free world is reversible. For example, much of the increase in Us. oil use intransportation over the last decade involves changes in consumer behavior, e.g., increased driving, that could bequickly reversed in case of an oil shortage or large price increase. In the industrial sector, many of the shifts to oilfor a boiler fuel can be rapidly reversed with a shift back to coal or natural gas. Similarly, in the electric utility sector,a substantial portion of any increased oil use is likely to involve the use of existing oil-fired generatingcapacity-removed from baseline service when oil prices rose in the 1970s--in favor of coal, gas, or even nuclearplants. As long as the industry retains excess generating capacity, this use can be readily reversed, and even withdiminishing capacity, fuel switching capability is much more common now than in the 1970s.

New International Oil Trading Mechanisms: Most of the world’s oil is now traded through spot markets, incontrast to the long-term contracts of the 1970s. Coupled with an active futures market, this new oil trading situationmakes single country embargoes, which could never be airtight even in the past, still less of a threat.

Increased Availability of Natural Gas: The widespread concern in the 1970s about scarcity of natural gasresources has given way to aggressive increases in natural gas use, especially in industry, commercial space heating,and electric power generation.

International Agreements on Oil Sharing: The International Energy Agency (IEA) was created in the 1970sin part to coordinate maintenance of strategic stocks of petroleum as well as plans for demand reduction for useduring an emergency. In early 1991, the IEA governing board voted to draw on 2 billion bards of crude oil reservesto avert any shortages caused by the Middle East war.

Changed Energy Regulation: United States oil prices are no longer controlled as they were during the 1970s.In the event of a new price increase, the market forces that act to reduce demand and increase supply will be feltin full. In addition, restrictions on the use of natural gas in electric utility boilers and other industrial applicationsare no longer in effect. These and other regulations, e.g., the national 55 miles-per-hour speed limit, could bereimposed m case of crisis, but the overall trend has been toward letting the market control the allocation of energy.

Changing Economic Structure: Over the last decade, the steady decline in energy intensity (energy consumedper unit of gross domestic product produced) accelerated in response not only to the influence of improving energyefficiency, as noted above, but also to changing patterns of consumer demand, a shifting balance of imports andexports of both energy and nonenergy goods, and the changing market basket of goods produced in the UnitedStates. These changes have, as a consequence, had an effect on the future oil replacement potential m the U.S.economy.

1See U.S.Congress, Office of Technology Assessment, Technology and the American Economic Transition: Choices for the Future,OTA-TET-283 (Washington, DC: U.S. Government Printing Office, May 1988).

2OTA is examining this in much more depth in its ongoing assessment U.S. Energy Efficiency: Past Trends and Future Opportunities.3E n e r g y Information Administration, Monthly Energy Review, February 1991, DOE/EIA-0035(91/02), Feb. 25, 1991, p. 41.


Figure 1-4--U.S. Electricity Consumption,1989 Base Case to 2020

Millions of GWH,

6

5

4

3

2

1

01990 1995 2000 2005 2010 2015 2020

E%?%! Coal Z Z O i l ~ G a s

~~ Nuclear ~ Other (nonfossil)

SOURCE: Gas Research Institute Baseline for 1989.

● the anticipated effects of the Clean Air ActAmendments of 1991; and

. the long-term implications of policies concern-ing global climate change.

These changes are certain to affect future technol-ogy choices, operating characteristics, and regula-tory policy. Box 1-C summarizes these changes inmore detail.

Changing Environmental Dimensions ofEnergy Policy

Much of the energy policy enacted in the lastdecade has actually been driven by environmentalconcerns. Moreover, the impetus for accelerateddevelopment of some new energy technologies hasbeen spurred primarily by environmental concerns,e.g., clean coal technologies such as gasifiers andalternative transportation fuels such as methanol.The evolution of environmental regulation in air,water, nuclear waste, surface mining, oil explorationand development, and other areas will stronglyinfluence the evolution of energy supply and de-mand technologies in the coming decades. Theseissues are discussed in chapters 2 and 3.

The Nuclear Dilemma

In much of the industrialized world, including theUnited States, nuclear power is playing an increas-ing role in electric power generation, while simulta-neously encountering serious obstacles to furtherdevelopment, In the United States, nuclear powerprovides almost 20 percent of our electricity, but the

last viable order for a new nuclear powerplant wasmade in 1974.

In 1984 OTA delivered its report Nuclear Powerin an Age of Uncertainty, which addressed the issuesinvolved in keeping nuclear as an option, andconcluded: “Without significant changes in thetechnology, management, and level of publicacceptance, nuclear power in the United States isunlikely to be expanded in this century beyondthe reactors already under construction. ” Theconclusion is still valid today, but increasing con-cern over CO2 emissions, which nuclear can helpcontrol, greatly increases the importance of resolv-ing the issues.

Most of the major issues besetting the nuclearoption are related to the technology:

●

●

●

●

Are reactors sufficiently safe?Can they be built, operated and eventuallydecommissioned economically?Can nuclear waste be disposed of safely?Does nuclear power significantly increase therisk of the spread of nuclear weapons?

Several technological approaches to these issues,e.g., improved safety and economics, are discussedin chapters 3 and 4. Whether these efforts will beenough to improve public opinion is still uncertain.

Renewable Energy Technology

Some renewable energy technologies are alreadymature, e.g., hydropower, solar collectors, andpassive solar design features. At the other extreme,solar power satellites would require decades ofresearch and development (R&D). Some renewabletechnologies, e.g., photovoltaics and wind, arecommercially available but are competitive withtraditional fuels only for specific sites and can makeonly a limited contribution at present. Finally, otherrenewable technologies, e.g., solar thermal electricpower and some advanced biomass technologies(including biomass-based synthetic liquid and gase-ous fuels), have few commercial applications, buthave great potential for improved cost and perform-ance.

The technologies in the latter two categories—those with some commercial applications and thosethat are near-commercial, waiting for escalations infossil fuel prices, continued technical development,and possible public policy changes--could poten-tially be in a position for significant commercial


Box 1-C-The Changing U.S. Electric Utility Industry

Uncertainty in Electricity Demand Growth: A crucial legacy of the 1970s and 1980s is the uncertainty in futureelectricity demand growth. The experience of the 1970s reveals that users of electricity are able to alter the quantitythey use much more quickly than utilities can accommodate these changes with corresponding changes ingenerating capacity. The current range of published forecasts is about 1-to 4-percent average annual peak demandgrowth, This translates to a range of around a 30-gigawatt (GW) surplus of electric generating capacity to a 280-GWshortfall of capacity beyond currently planned additions and retirements by 2010. Even within individual forecasts,the range of uncertainty is typically very high. For example, the North American Electric Reliability Councilprojects that total electricity demand (summer peak demand) for 1999 with an 80-percent probability band will be128,000 megawatts (MW)--amounting to a 1OO-GW shortfall or about a 28-GW surplus at the ends of theuncertainty range compared to currently planned additions and retirements. 1

Shifting Electricity Markets: Compounding the demand uncertainty is the changing nature of demand. Forexample, in the residential sector there is saturation in some markets, e.g., many major appliances in homes, butthere is also intense competition between natural-gas-fired space heating and electric heat pumps. The future ofindustrial demand is clouded as some large industrial users of electricity are experiencing declines in domesticproduction due to foreign competition while others, like steel, are improving. At the same time, rapid growthcontinues in other areas, e.g., space conditioning for commercial buildings and electronic office equipment.Predicting the net impact of these offsetting trends, along with continued movement toward increased efficiency,has greatly complicated the job of forecasting demand.

Increasing Costs of Electricity Generation: Increased attention to environment and safety issues over the lasttwo decades has contributed to both extending leadtimes in the siting, permitting, and construction of newpowerplants as well as to rapidly rising per kilowatt costs of these plants, especially coal and nuclear plants. In the‘‘old’ days (1960s for the utility business) of steady demand growth, falling marginal costs (due largely toimproving technology) and low interest rates, an excess of new capacity was not all that costly and demand growthwould quickly erase the excess. Now, uncertainty about demand growth dominates. It is not only greater, but alsomore important, and overcommitting to new capacity can be very costly.

More Flexible Planning Strategies: Uncertainty has forced utilities to plan for contingencies. They now planfor a range of plausible future scenarios rather than committing to a fixed plan. When load growth exceedsexpectations, as in New England and the Mid-Atlantic Regions in the 1980s, shorter leadtime resources such asdemand-side management (DSM) and combustion turbines are called upon. Also, some utilities are performingpre-construction planning and site preparation to reduce the time required to construct new units, in case demandgrows rapidly.

More Technology Options: Utilities now seek technology that comes in smaller unit sizes that can much moreflexibly meet uncertain demand growth. The uncertainty in load growth provides the opportunity to dramaticallyexpand the role of DSM and smaller-scale, shorter leadtime generating technologies (e.g., natural gas-firedcombined cycle units) in utility resource plans. In addition, the prospects for advanced coal technologies renewableare expanding, although their commercial penetration is being slowed by low fuel prices.

Changing Regulatory Structure: In 1978, the Public Utility Regulatory Policies Act (PURPA) amended the1935 Federal Power Act to require electric utilities to purchase electricity from nonutility generating facilities thatmet standards established by the Federal Energy Regulatory Commission, i.e., cogenerators and small powerproducers termed qualifying facilities (QFs). PURPA was the first major Federal move to open the electric utilitymarket to nonutilities. Opening electricity markets to increased competition was the focus of the policy debates inthe electric utility industry throughout most of the 1980s. Until the late 1980s, however, competition played a minorrole in electricity markets, with the notable exception of facilities operated under PURPA.

In the last several years, as utilities resolved technical concerns and gained more experience with nonutilitygeneration through PURPA, State regulators established mechanisms to foster competition for new generatingfacilities, e.g., competitive bidding by independent nonutility power producers. Also until recently, most Stateregulation of electric utilities has in effect linked utility profits with the amount of electricity sold, discouragingutilities from motivating their customers or undertaking themselves cost-effective energy conservation options.Some State utility commissions are establishing integrated resource planning programs that allow utilities to profitfrom investing in energy conservation programs or promoting such programs by their customers.

1North American Electric Reliability Council, 1990 Electricity Supply & Demand for 1990-1999, NOVember 1990, p. 15.


application in the 1990s, but not at their current rateof technical development. For most renewable, thegoal of research, development, and demonstration(RD&D) remains to reduce costs and increaseperformance so that these technologies can competewith the conventional energy sources under tradi-tional terms.5 Performance improvements, cost re-duction, and resolution of uncertainties will alloccur, but the rate at which these improvementsoccur will depend on sustained progress in RD&Dand survival of an industry infrastructure. Moreover,as we gain experience with some renewable, welearn more about their own adverse environmentalimpacts, e.g., hydropower’s aquatic ecosystemsimpact and wind energy’s noise impacts.

Technology Research, Development, andDemonstration

Many technologies are available to supply energyor improve its use. Many more will be available asR&D programs are pursued. Some of these werenoted above. A continued Federal presence inRD&D is essential to sustain energy technologydevelopment. OTA’s 1985 report New ElectricPower Technologies: Problems and Prospects forthe 1990s identified a number of alternative policyoptions aimed at accelerating the commercial availa-bility of technologies potentially useful in theelectric power industry. These options apply inmany respects to other new energy technologies aswell since they focus on reducing cost, improvingperformance, and resolving uncertainty in both costand performance. The major policy questions are onthe level and direction of the Federal programs, andwhether it should include commercialization initia-tives.

The appropriate level and direction of RD&Ddepends on the perceived need for new technology.Economically, it is likely that a significantly largerRD&D program could be justified even undercurrent, noncrisis conditions. New technology cansave money, and the energy system is so large thateven a small saving can pay back a large investmentin R&D. If a major reduction of CO2 emissionsproves necessary, the RD&D program should bemuch larger. Every available efficiency, nuclear, and

renewable energy option would be necessary, andmost of these could be made available sooner withgreater funding. These technologies are discussed inthe following chapters.

Under less drastic conditions, the current levelmay be adequate, but shifts in emphasis amongprograms may be considered, depending on theresults desired. The scenarios in chapter 4 assemblethe technologies according to the conditions underwhich they would be most useful.

The current U.S. R&D strategy assumes thatprivate industry will commercialize new energytechnologies as they become viable. This strategyreflects the desire to avoid repeating prematurecommercialization failures, e.g., the Synthetic FuelsCorporation. However, it is legitimate to ask if thisstrategy may not be an overreaction to past failures,especially since the Federal Government may havea greater interest in promoting particular technolo-gies than has private industry. In particular, privateindustry is not traditionally expected to include

ket considera-environmental concerns or nonmartions of foreign policy and national security incorporate investment decisions. The Federal Gov-ernment plays the principal role in encouraging andsponsoring technology development for such rea-sons. Of particular concern is assuring availability ofliquid fuels as substitutes for oil and improvingefficiency in the use of oil, on which virtually ourentire transportation system relies. Another concernis finding more environmentally acceptable ways toprovide energy services. The current period of lowand stable world oil prices, which may well continuethrough the 1990s, provides a window of opportu-nity for developing supply substitutes and new, moreefficient end-use technologies, to ensure commer-cial availability of these technologies in the 1990s.

CANDIDATE ENERGY POLICYGOALS TO REFLECT A

NATIONAL ENERGY STRATEGYLong-term energy policy goals must be respon-

sive to the three long-term policy interests ofeconomic health, environmental quality, and na-tional security because energy’s importance is

Scomwtition under traditio~ terms neglects to amount adequately for the pollution and other externalities of energy production and use. Forrenewable to compete better in our current economic and regulatory system further RD&D will be needed. Of course, if externalities such asenvironmental damage were captured in the price system renewable technologies would at present be far more competitive with conventional fossil andnuclear sources.


mostly gauged by its ability to sustain such societalgoals. The following prospective energy goals areaimed at this end.

Limit Oil Import Dependence and DiversifySupply Sources

Candidate goals to reflect a strategy of limitingoil import vulnerability are: 1) to limit overall oilimports to a fraction of total U.S. oil use (perhaps50 percent); and 2) to diversify sources of worldoil production and, therefore, U.S. sources ofimports to regions of the world outside theMiddle East, where such imports can be alignedwith other U.S. policy interests. The latter includesthe transfer of technology to the Soviet Union toimprove oil production from depleted wells. Suchtransfers were discussed in 1981 in the OTA reportTechnology & Soviet Energy Availability. Sincethese decisions are primarily political not technolog-ical, this report focuses on the first goal.

Supply mechanisms to limit oil imports includesustaining or slowing the decline in domestic oilproduction, and developing and producing alterna-tive transportation fuels. Demand and fuel-switching mechanisms include improved efficiencyof use in all sectors and shifting industrial, residen-tial, and commercial oil use to other sources, e.g.,natural gas or electricity.

All of these options imply commercial develop-ment of new technologies. Some technology op-tions, however, may lead to policy conflicts. Forexample, the current strategy for developing alterna-tive transportation fuels is driven by the need toimprove air quality in urban areas. Likely optionsinclude alcohol fuels (methanol and ethanol), com-pressed natural gas, and electricity. If methanolproduced from natural gas proves to be the mostpractical and cost-effective option, most of theadditional demand would have to be met withimports, because U.S. production is unlikely toincrease sufficiently. The world natural gas marketis more diversified than is oil, but the mostinexpensive and plentiful supplies are, like oil,located in the Middle East.

Improve Energy Efficiency

OTA’s studies over the past decade have consist-ently shown that energy efficiency is an essentialcornerstone to a comprehensive energy policy frame-work. About two-thirds of the growing U.S. energyproductivity of the last decade is attributable toimproving energy efficiency. Efficiency gains havealso affected electricity use, which historically hasgrown faster than the economy but, in the lastdecade, has fallen back to the same rate of change asGNP. Moreover, these efficiency gains generallyhave been realized with net cost savings and withoutsacrifice of comfort or dollars. Considerable futureenergy efficiency gains are still possible in allsectors of the economy using existing technology.Even greater cost savings and efficiency gains willbe possible with technologies under current R&D.An efficiency goal of sustained improvement of 2percent per year6 is realistic for the United States.With more vigorous research on energy efficiency,coupled with investment and policy leadership, thisgoal can be met or exceeded-and with options thatare no more costly than pursuing the supply-sidepath. Moreover, pursuing such a goal supports allthree policy interests of economic health, environ-mental quality, and energy security.

Improve Environmental Quality

A responsible energy policy should complementas much as possible a responsible environmentalpolicy. Clearly there are some activities that can spurour economy and enhance national security but runcounter to environmental goals (e.g., aggressivelypursuing a long-term strategy of alternative trans-portation fuels such as methanol, but allowing thefeedstock for these fuels to be coal rather thanbiomass). But those activities should be seriouslyconsidered only if we have exhausted other optionsthat more generally support all three goals (e.g.,developing economical fuel cells that burn biomass-derived fuel efficiently and cleanly to power auto-mobiles).

With a wealth of existing or in some casesnear-commercial technology, we see no reason why

6 Mer= ~lciency is ~ to me~me for individual products or processes but difficult to define in the aggregate. ‘lbtd energy use divided by GNPyields the energy intensity of the economy, but shifts in the energy intensity may signal changes in the mix of the economy or the goods and servicesinvolved that do not necessarily mean changes in eftlciency. If the economy maintains its characteristics, then intensity and eftlciency are identical. Inthat case, thegoalcouldbemet by, e.g., a2-percent growth in GNPwith constant energy demand. If the economic trends of the past decade are maintainmi.e., energy-intensive industries such as steel declining while less intensive service industries grow, then energy intensity would have to decline by 3percent to show a 2-percent gain in efilciency; see U.S. Congress, Office of Technology Assessment, Energy Use and the U.S. Economy, OTA-BP-B57(TWshingtow DC: U.S. Government Printing Offke, June 1990).


existing environmental goals need to be signifi-cantly compromised to achieve energy goals. En-ergy and environmental goals are, of course, closelylinked and, therefore, neither energy nor environ-mental policies should be developed, assessed, orchanged in isolation.

Implications of Goals on U.S. Oil ImportDependence

In chapter 4 we consider several aggressivestrategies in supply, efficiency, and fuel shifting forreducing U.S. oil import dependence. The optionsinclude improving efficiency of energy use intransportation, industry, and buildings; increasingdomestic production of oil; and encouraging the useof alternative fuels.

It is clear that vigorous and sustained effortswould be required to stabilize oil import dependenceover the next several decades-even at a level of 50percent. The biggest opportunities for this lie on thedemand side. Fortunately, these can provide impor-tant new economic activity and strength at home. Tothe extent that we improve efficiency cost-effectively,supplies will last longer, environmental problemswill be eased, and international tensions lessened.But improved efficiency is unlikely to be enough.The opportunities on the supply side, e.g., enhanceddomestic production in the lower 48 States, offshore,and in Alaska, are more modest than increaseddemand efficiency, but still potentially important.And, as noted earlier, there are opportunities forusing alternative transportation fuels, e.g., methanoland electricity. These fuels have extensive long-termimplications, however. The oil replacement poten-tial must be weighed against the economic, energy,and environmental costs associated with producingand using these fuels. Last fall OTA released itsreport Replacing Gasoline: Alternatives for Light-Duty Vehicles, which addresses this subject in moredepth.

The pacing and mix of all the efforts describedabove are very important. Much can be done tocounterbalance the ominous projected growth of oilimport dependence, but even with relatively heroicmeasures the United States is likely to face a futureof high dependence on imports. We are not asoptimistic here as the administration’s position in

the National Energy Strategy. In particular, theNational Energy Strategy projects that the imple-mentation of its domestic oil production policiesalong with assumed increases in the use of alterna-tive fuels will lower net crude imports to just under41 percent of domestic demand by 2010.7 As thisNational Energy Strategy projection of slackeningimport dependence is largely based on assumptionsabout domestic production increases from enhancedoil recovery technologies and yet unverified ArcticNational Wildlife Refuge reserves, OTA considersthis drop in the level of oil imports improbable andoptimistic. Coupled with aggressive efficiency ef-forts, however, this projection would appear morereasonable. In the following chapters we outline thetechnology dimensions inherent in alternative strate-gies for reducing import dependence.

Linking U.S. Energy Strategy to GlobalClimate Concerns

For decades we assumed that fossil fuels couldsupply our energy needs for several more centuries.Our only serious “bet-hedging” to fossil fuels hasbeen nuclear power—fission and fusion. While thelatter goal remains frustrating and elusive, theformer now accounts for 20 percent of U.S. electric-ity, or about 8 percent of our total primary energybudget. Other nonfossil (mostly hydroelectric andbiomass) fuels add another 8 percent, so our presentnonfossil energy budget is about 16 percent. But thenuclear fission power enterprise, as noted earlier, isin deep trouble. Our long-term efforts to harnesssolar energy have been inadequate to produceoptions that could be widely deployed at reasonablecost.

The rising specter of air pollution and climatechange creates added concerns for continued reli-ance on fossil fuels. This means that renewed effortsto develop solar and nuclear power (fission andfusion) must be considered. Developing and pre-serving nuclear and solar options are certainlypossible, but they will require long-term commit-ments of research, development, and investment.The OTA report Changing by Degrees: Steps ToReduce Greenhouse Gas Emissions outlines thetechnical steps that would be necessary to reduceU.S. carbon dioxide emissions.

% its integrated analysis of proposed policy options, the National Energy Strategy projects that total U.S. oil demand in 2010 will amount to 19.2million barrels/day (MMB/D), while net imports in that year will be only 7.8 MMB/D. National Energy Strategy, op. cit., footnote 2, pp. C22-C23.

Chapter 1--Introduction: The Changing Context for Energy Technology Policy . 19

CONCLUSIONSIn addition to providing for contingencies and

interruptions, a priority policy consideration is todecide whether it is wise to constrain the growingU.S. appetite for imported oil. Another key policyavenue is the need to make an explicit commitmentto a smooth, multidecade transition to the postfossilfuel age as well as an era of constantly advancingenergy productivity. If we want to accomplish suchgoals at minimum cost, it will take more than adecade from whenever we start to stabilize ourdependence on imported oil, and it will take ahalf-century or more to get beyond fossil fuels.

Our long-term economic, environmental, and na-tional security future hangs on such transitions,and the specter of global warming could greatlyforeshorten the time we once thought we coulddepend on coal and other carbon-rich fossil fuels.The relationships among the long-term goals ofeconomy, environment, and security provide someimportant guiding principles-principles fromwhich a systematic, integrated, and comprehensiveenergy strategy, which is responsive to all threegoals, can logically follow. In the following chapterswe examine the technology dimensions of affectingthese transitions.

Chapter 2

Technologies Affecting Demand

CONTENTSPage

U.S. ENERGY USE . . . . . . . . . . . . . . . . . . . . ....23Changes in Energy Use From 1972 To 1988.23Future Energy Use . . . . . . . . . . . . . . . . . . . . . . . 26Energy Use by Sector-An Overview ....., 27

OPPORTUNITIES FOR ENERGYEFFICIENCY IMPROVEMENTS IN THERESIDENTIAL AND COMMERCIALSECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Opportunities for Improving Space Heating

and Cooling Efficiency . . . . . . . . . . . . . . . . . 30Opportunities for Improving Building

Envelope Efficiency . . . . . . . . . . . . . . . . . . . . 32Opportunities for Improving Water Heating

Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Opportunities for Improving Lighting

Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Opportunities for Improving Appliance

Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Opportunities for Improving Energy

Management and Control Systems . . . . . . . 37OPPORTUNITIES FOR ENERGY

EFFICIENCY IMPROVEMENTS IN THEINDUSTRIAL SECTOR . . . . . . . . . . . . . . . . . . 37Computer Control and Sensors . . . . . . . . . . . . 38Waste Heat Recovery . . . . . . . . . . . . . . . . . . . . . 38Cogeneration ● . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Separation . . . . . . . . . . , . . . , . . , , . . . . . , , . , . . 40Catalytic Reaction . . . . . . . . . . . . . . . . . . . . . . . . 40Combustion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Electric Motors . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Pulp and Paper Industry ...................42Petroleum Refining Industry ..............43Steel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Chemicals Industry . . . . . . . . . . . . . . . . . . . . . . . 45

OPPORTUNITIE S FOR ENERGYEFFICIENCY IMPROVEMENTS IN THETRANSPORTATION SECTOR ...........46Automobile Efficiency . . . . . . . . . . . . . . . . . . . . 46Heavy-Truck Efficiency . . . . . . . . . . . . . . . . . . . 47Aircraft Efficiency . . . . . . . . . . . . . . . . . . . . . . . 47Alternative Fuels . . . . . . . . . . . . . . . . . . . . . . . . . 49

OTHER FACTORS THAT AFFECTENERGY USE . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

PageEnvironmental Concerns . . . . . . . . . . . . . . . . . . 54Appliance Efficiency Standards . . . . . . . . . . . . 55Building Energy Codes . . . . . . . . . . . . . . . . . . . . 56Corporate Average Fuel Efficient (CAFE)

Standards . . . . . . ., . . . ., . . ., ., ., 57Electric Utility Programs-Demand-Side

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Oil Supply and Price Uncertainties . . . . . . . . . 58Fuel Switching . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

FiguresFigure Page2-1. Furnace Replacement Accumulated

Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312-2. Potential Energy Savings With Improved

Sensor Technology . . . . . . . . . . . . . . . . . . . . . 38

Table2-1.2-2.

2-3.

2-4.

2-5.

2-6.

2-7.

2-8.

2-9.

2-1o.

2-11.2-12.

TablesPage

Technologies Affecting Demand . . . . . . . 24Energy Overview, Selected YearS,1970-89 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Consumption of Energy by Sector,1970-89 . . . . . . . . . . . . . . , . . . . 26Household Energy Consumption byApplication and Fuel Source, 1978,1980-82, 1984, and 1987.......,,.... 28Comparison of Residential Energy UseForecasts . 29Comparison of Commercial Energy UseForecasts . . . . * . . . . . * * . . . ., * * . . . . . . . . . . 29Estimated Energy Used To produce Paperand Paperboard Products . . . . . . . . . . . . . . 42Technologies for Improving EnergyEfficiency in the Steel Industry . . . . . . . . 45Energy-Intensive Processes in chemicalManufacturing . . . . . . . . . . . . . . . . . . . . . . . 46Reported Efficiency Improvementsfor Developed or Near-Term Technology. 48Pros and Cons of Alternative Fuels . . . . 50Cumulative Energy Impacts of theNational Appliance Energy ConservationAmendments of 1988, 1990 to 2015 . . . 56

Chapter 2

Technologies Affecting Demand

After the oil crises of the 1970s, the United Statesmade tremendous strides in improving energy effi-ciency. This was accomplished by technologicaladvances in energy-using equipment and productionprocesses and structural shifts in the economytoward less energy-intensive products and services.By the mid-1980s, however, stable oil prices andsupplies shifted the Nation’s focus away fromenergy efficiency to other issues. As a result, energyuse began to rise and energy efficiency improve-ments slowed. Many opportunities for improvingefficiency were not realized. Recent events in theMiddle East have renewed concerns about U.S.dependence on foreign energy supplies and stimu-lated interest in energy efficiency. There are avariety of technologies that have the potential forimproving energy efficiency over the next 20 years.New technologies are constantly being added. Thischapter describes some of these technologies. (Seetable 2-l.) But first, the chapter characterizes energyuse today, the changes that have occurred since theearly 1970s, and what we can expect in the future.Also, this chapter discusses nontechnical factors thatinfluence energy use.

U.S. ENERGY USEIn 1989, the United States used a record-breaking

amount of energy. (See table 2-2.) Low oil pricesstimulated economic growth (3 percent in 1989) andan increase in energy demand. Petroleum consump-tion accounted for the lion’s share (42 percent) oftotal U.S. energy use. Natural gas use rose substan-tially, while coal use registered a slight increasefrom 1988 to 1989.1

Net energy imports also grew, with petroleumaccounting for most of the trade. Petroleum netimports reached their highest level since 1979,accounting for 41 percent of U.S. crude oil demandin 1989. Record energy use and a slight decline in

domestic production accounted for the increase.2

The U.S. Department of Energy (DOE) indicatesthat petroleum net imports for 1990 declined by2 percent.3

All sectors of the economy experienced increasedenergy use in 1989. In fact, the residential/commercial and transportation sectors used moreenergy than ever before.4 (See table 2-3.) Whileenergy use increased, energy intensity5 declined by1.7 percent. According to the U.S. Energy Informa-tion Agency (EIA), favorable weather conditionscontributed to the decline.

Changes in Energy Use From 1972 To 19886

From 1972 to 1988, two trends in energy con-sumption are discernible. The frost trend, from 1972to 1985, can be characterized by decreasing energyuse per dollar of gross domestic product (GDP) andrising energy prices. This was a departure from the1950s and 1960s when energy use and GDPincreased at the same rate. From 1985 to 1988, thetrend of steady decreases in energy intensity wasbroken.


Between 1972 and 1985, energy use remainedessentially flat (0.3 percent per year) while theeconomy experienced an average growth rate of2.5 percent per year. This relatively flat level ofenergy use coupled with economic growth resultedin a drop in energy intensity by 2.4 percent per yearor about 25 percent over this period. Fuel use alsochanged during this period. An almost nearly equalincrease in coal and electricity use was offset by arelatively large decrease in crude oil and natural gasconsumption.

The implementation of energy efficiency im-provements in production processes and structuralshifts in the economy toward less energy-intensive

W.S. Enqy reformation AdminiS&ation, Department of Energy, Annual Energy Review 1989, DOE/EIA-0384(89), my 24, 1990, P. 1.

%id., p. 2.3u.s. Ener~ reformation Administration, MOMMY Energy Review March J991, DOE/EIA-0035(91 /03), Mm. 28, 1991.

4u.s. &erg rnformar.ion Administration, op. cit., footnote 1.sEnergy intemi~ is defined M the Wout of energy used per net unit of economic value (e.g., Btu per dolk of grOSS domestic product).6Much of the ~omtion ~ this ~tion is draw from the OTA repo~ Energy ~~e and the Us. ECOMWZZy, OTA-BP-E-57 (wWhklgtOQ DC: U.S.

Government Printing Office, June 1990).

–23–


Table 2-l—Technologies Affecting Demand

Technology Sector Availability CommentsVariable speed heat pump . . . . Residential/commercial C,N Improves energy efficiency and provides more flexible control.

Scroll-type compressors (heatpump/air conditioning) . . . . . .

Thermally active heat pump. . .Low-emissive windows . . . . . . .

Heat pump water heaters. . . . .

Alternative insulation materials.

Refrigerator insulation. . . . . . . .

Efficient lighting products . . . . .

Building energy managementand control systems . . . . . . .

Industrial process changes:—Separation . . . . . . . . . . . . .

-Catalytic reaction . . . . . . . .

—Computer control andsensors . . . . . . . . . . . . . . .

Advanced turbine:—Steam-injected gas turbine

(STIG) . : . . . . . ;. . . . . . . . .—Intercooling (ISTIG) . . . . . .

Electric motors . . . . . . . . . . . . . .

2-stroke engine . . . . . . . . . . . . .

Direct injection/adiabaticdiesel . . . . . . . . . . . . . . . . . . .

Ultra-high bypass engines . . . .

Alternative fuels:

Residential/commercial

Residential/commercialResidential


Residential

Residential



Industrial

Industrial

Industrial

Industrial/utilityIndustrial/utility

Industrial

Transportation

Transportation

Transportation

—Alcohol fuels . . . . . . . . . . . . Transportation

—Electricity. . . . . . . . . . . . . . . Transportation

C

C,R

c

R

R

C,N,R

C,N

C,N,R

C,N,R

C,N

C,N

c

R

C,R

c

‘Widely used in Japan. Increasing market share in United States.

Newer scroll-type compressors are 10 to 20 percent more efficientthan reciprocating ones. Widely produced in Japan.

Could have significant impact in 10 to 20 years.Significant impact on reducing thermal energy loss in homes.

Research needed on improving durability, lowering emittance,and reducing condensation.

Offers significant reduction in electricity use; premium cost.Commonly used in Scandinavia.

Needed to counter loss of chlorofluorocarbon-blown insulation.Now being developed and tested.

Greatest potential for appliance efficiency improvements. Newproducts include vacuum insulation, compact vacuuminsulation, and soft vacuum insulation.

Combination of lighting options can cut commercial energy usesignificantly. Improved fluorescent, compact fluorescents, andelectronic ballasts commercially available. Research anddevelopment continuing on improving phosphors.

Greatest potential for savings in the commercial sector. Advancesin this technology have been continual.

Improvements in separation and control, and the use of membranetechnology and solvent extraction could reduce energy useconsiderably.

By increasing reaction rates, lower temperatures and pressures canbe used that reduce heating and compression requirements.Discover and use of new synthetic zeolites have contributed toenergy efficiency gain in petroleum refining and chemicalsindustries.

Improved monitoring and control optimizes conversion anddistribution of energy. Potential savings range from 5 to 20percent.

Currently used in cogeneration applications.Has potential to raise efficiency to about 50 percent. Maybe better

suited for utility applications; pilot-plant stage.Adjustable-speed drive and new high-efficiency motors account for

about half of the total potential savings in U.S. motors.Holds promise for long term. Questions remain about ability of

engine to comply with emissions standards.

Limited passenger car application in Europe; offers considerableefficiency improvements for both light-duty vehicles and heavytrucks. Questions remain regarding meeting more stringentemission standards.

Can raise efficiency by about 20 percent but costs two times asmuch as current generation bypass engines.

C,N,R Use of methanol and ethanol should result in greater engineefficiency but costs are higher.

. , R Big greenhouse advantage if derived from nuclear or solar energy.KEY: C = commercial; N = nearly commercial; R = research and development needed.SOURCE: Office of Technology Assessment, 1991.

industries were primarily responsible for lowering production processes that indirectly saved energy. Ifenergy intensity and changes in fuel use during this energy efficiency improvements had not been imple-period. About two-thirds of the decline in energy mented during this period, the United States wouldintensity can be attributed to energy efficiency have required 20 percent more energy in 1985 to

improvements. The remaining third came from a produce its output.

shift in the economy caused by changes in consumer Energy consumption per household declined asdemand and by technological improvements in well. A decrease in use of distillate fuel oil and

Chapter 2—Technologies Affecting Demand .25

Table 2-2—Energy Overview, Selected Years, 1970-89 (quadrillion Btu)

Activity and energy source 1970 1975 1980 1985 1986 1987 1988 1989

Production:Crude oil and lease condensate . . . . . . . .Natural gas plant liquids . . . . . . . . . . . . . .Natural gasa. . . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nuclear electric power. . . . . . . . . . . . . . . .Hydroelectric power . . . . . . . . . . . . . . . . . .Otherb . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total production . . . . . . . . . . . . . . . . . .Imports:Crude oilc. . . . . . . . . . . . . . . . . . . . . . . . . .Petroleum productsd . . . . . . . . . . . . . . . . .Natural gas , . . . . . . . . . . . . . . . . . . . . . . . .Othere . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total imports . . . . . . . . . . . . . . . . . . . . . .

Exports:Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Crude oil and petroleum products . . . . . .Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total exports . . . . . . . . . . . . . . . . . . . . .Adjustments . . . . . . . . . . . . . . . . . . . . . . .

Consumption:Petroleum productsh . . . . . . . . . . . . . . . . .Natural gas.... . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nuclear Power.. . . . . . . . . . . . . . . . . . . . .Hydroelectric poweri . . . . . . . . . . . . . . . . .Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total consumption . . . . . . . . . . . . . . . . .

20.402.51

21.6714.610.242.630.02

62.07

2.814.660.850.078.39

1.940.550.182.66

–1.37

29.5221.7912.260.242.65

–0.0466.43

17.732.37

19.6414.99

1.903.150.07

59.86

8.724.230.980.19

14.11

1.760.440.162.36

–1.07

32.7319.9512.66

1.903.220.09

70.55

18.252.25

19.9118.602.742.900.11

64.76

11.193.461.010.31

15.97

2.421.160.143.72

-1.05

34.2020.3915.422.743.120.08

75.96

18.992.24

16.9119.334.152.940.21

64.77

6.813.800.950.54

12.10

2.441.660.144.231.31

30.9217.8317.484.153.360.20

73.95

18.382.15

16.4719.514.473.020.23

64.23

9.004.200.750.48

14.43

2.251.670.144.05

-0.36

32.2016.7117.264.473.390.21

74.24

17.672.22

17.0520.14

4.912.590.24

64.82

10.074.100.990.60

15.76

2.091.630.133.850.12

32.8717.7418.01

4.913.070.25

76.84

17.282.26

17.4920.74

5.662.310.23

65.97

11.034.721.300.52

17.56

2.501.740.174.411.08

34.2318.5518.855.662.640.27

80.20

16.122.16

17.7821.35

5.682.770.22

66.07

12.604.571.390.40

18.95

2.641.840.294.771.10

34.2019.4018.905.702.920.20

81.35aDry natural gas.b[n~~e~elwt~itypr~uc~from g~~therma~w~,wa$te,~nd, photovolta~,and~larthermal $oUrce$connectedtodechic utilitydistribution systems(see note below).

clnd~e$inlpor~ ofmdeofl forthe Strategic Petroleum Reserve, which began in1977.d[n~~e$imv~$ofu~ini$h~ oils and natural gasplantliquids.elncl~e$ coal, coal coke, and hydroelectric power.flndudes natural gas, coal coke, and hydroelectric Power.9A balancing item. Includes stock changes, losses, gains, miscellaneous blending components, and unaccounted for supply.hpetroleum pr~ucts suWli~ includes natural gas pla~ I@uids and cruds oil burned as fuel.il~l~= industrial generation of hydroelectric power and electricity imports.jlncludes electricity produced from geothermal, wood, waste, wind, Photovoltaic, and solar thermal sources connected to electric utility distribution systems(see note below) and net imports of ma] coke.

NOTE: Data do not indude the consumption of wood energy (other than that consumed by the electric utility industry), which amounted to an estimated 2.4quadrillion Btus in 1987. This table also does not indude small quantities of other energy forms for which consistent historical data are not available,such as geothermal, waste, wind, photovoltaic, or solar thermal energy sources except that consumed by electric utilities. Sum of components maynot equal total due to independent rounding.

SOURCE: U.S. Energy Information Administration, Annua/ Energy Review 1989, DOE/EIA-0384(89) May 24, 1990; hfcmthfy Energy Review Apri/ 1991,DOE/El&O035 (91/04), Apr. 26, 1991, p. 17.

kerosene accounted for most of the decline.7 Higheroil prices triggered conservation, efficiency im-provements, and fuel switching. The two recessionsthat occurred during this period also helped torestrain consumption. The OTA report Energy Useand the U.S. Economy provides a detailed discussionof shifts in energy use over the last two decades andwhat is likely to happen in the future.


Energy use increased by 8 percent, a significantdeparture from the previous 13-year trend. Morethan half of the increase was supplied by petroleum.All sectors of the economy contributed to theincrease. Although energy use rose, energy intensitycontinued to drop because of the pace of economicgrowth (11 percent in 3 years). But the level of

W.S. Energy Information Administration, op. cit., footnote 1, p. 19.


Table 2-3-Consumption of Energy by Sector,a 1970-89 (quadrillion Btu)

Residential ElectricYear and commercialb Industrial b Transportation b utilities Total

1970 . . . . . . . . . . . . . . . . . . . . . . .1971 . . . . . . . . . . . . . . . . . . . . . . .1972 . . . . . . . . . . . . . . . . . . . . . . .1973 . . . . . . . . . . . . . . . . . . . . . . .1974 . . . . . . . . . . . . . . . . . . . . . . .1975 . . . . . . . . . . . . . . . . . . . . . . .1976 . . . . . . . . . . . . . . . . . . . . . . .1977 . . . . . . . . . . . . . . . . . . . . . . .1978 . . . . . . . . . . . . . . . . . . . . . . .1979 . . . . . . . . . . . . . . . . . . . . . . .1980 . . . . . . . . . . . . . . . . . . . . . . .1981 . . . . . . . . . . . . . . . . . . . . . . .1982 . . . . . . . . . . . . . . . . . . . . . . .1983 . . . . . . . . . . . . . . . . . . . . . . .1984 . . . . . . . . . . . . . . . . . . . . . . .1985 . . . . . . . . . . . . . . . . . . . . . . .1986 . . . . . . . . . . . . . . . . . . . . . . .1987 . . . . . . . . . . . . . . . . . . . . . . .1988 . . . . . . . . . . . . . . . . . . . . . . .1989 . . . . . . . . . . . . . . . . . . . . . . .

21.7122.5923.6924.1423.7223.9025.0225.3926.0925.8125.6525.2425.6325.6326.5026.7326.8327.6229.0029.50

28.6328.5729.8631.5330.6928.4030.2431.0831.3932.6130.6129.2426.1425.7527.7327.1226.6427.8729.0129.46

16.0916.7217.7118.6018.1218.2519.1019.8220.6120.4719.6919.5119.0719.1319.8720.1020.7621.3622.1922.38

16.2717.1518.5219.8520.0220.3521.5722.7123.7224.1324.5024.7624.2724.9625.9826.4826.6427.5528.6329.20

66.4367.8971.2674.2872.5470.5574.3676.2978.0978.9075.9673.9970.8570.5274.1073.9574.2476.8480.2081.35

aDatadonotindude~nsum@ion ofwoodenergy(otherthan thatconsumed bytheelectric utility industry) which amounted toan=timatd 2.4qudrillbnBtuin1987.Thistabledoesnotindudesmallquantities ofotherene~yformsforwhich~mistenthkton~l&taarenotavaNable,su&~~otherma~We,wind, photovoltaic, orsolarthermal energy sources except that consumed byeleettic utilities.

blnd~estho~fo~flfuels ~nsum~dir~t[y in thesector, utility electricity salestothesector, and energy losses intheconversion and transmission ofelectricity.Conversionand transmission losses areallocated tosectors in proportionto electricity salestosectors.

NOTE: Sum of components may not equal total due to independent rounding.

SOURCE: U.S. Energy Information Administration, Amtua/ Enegy Review 1989, DOE/EIA-0384(69), May 24, 1990; MorIth/y Energy Review Apn/ 7991,DOE/EtA-0035 (91/04), April 26,1991, p. 35.

decline slowed considerably to -0.8 percent per yearduring this period.

An increase in the level of overall spending and ashift in spending toward more energy-intensiveproducts are two of the factors that contributed to theincrease in energy use. For example, Federal Gov-ernment spending dramatically changed as nonde-fense purchases fell by 16 percent over the 3-yearperiod, and defense purchases grew by 1O percent. Inaddition, household spending shifted away fromnondurable to durable goods like furniture andelectronics. OTA found no evidence that businesses’energy efficiencies declined during this period.

Future Energy Use

Increases in energy use should be less in the futurethan what was experienced between 1985 and 1988,when the annual gross national product (GNP)growth rate was 2.9 percent. The U.S. Department ofLabor’s moderate economic growth scenario as-sumes a 2.3 percent GNP growth rate for 1988-2000.In addition, structural changes that result in less

energy use and improvements in energy efficiencyare likely to continue in the future.

The impact of technology on future energy use isspeculative. A variety of energy-saving technologiesare available and have the potential for significantenergy efficiency gains. The critical factor iswhether there is a willingness to implement thesetechnologies. Implementation or adoption will de-pend on the costs of the technology and the energyit saves, government policies, and consumer accep-tance.

Moreover, business decisions to invest in energy-saving technologies are made in the context of manyother competing criteria. Industry makes investmentdecisions that affect energy efficiency on the basis ofa strategic planning process that considers not onlyenergy costs but also a number of other factors. Themost important of these factors are perception ofproduct demand and competition; the cost of capital,materials, and labor; and government policy.8

W.S. Congress, Office of Technology Assessmen6 Industrz”aZ Energy Use, OTA-13198 (WSShingtom DC: U.S. Government Printing Offke, June1983), p. 9.

Chapter 2—Technologies Affecting Demand ● 27

Energy Use by Sector—An Overview

Residential/Commercial Sector

In 1989, energy use in the residential and com-mercial sectors accounted for about 36 percent oftotal U.S. energy use. (See table 2-3.) Space heatingand cooling accounted for almost 59 percent of thetotal energy used in the residential sector in 1987(the most recent year for which data are available),as shown in table 2-4.9

Natural gas is the primary energy source for spaceheating in the residential sector. Electricity isessentially the only energy source for air condition-ing and the major source for appliances, whichcommonly include refrigerators, TVs, ovens, andclothes washers.

In the commercial sector, a few end-uses accountfor a major portion of total energy use: spaceheating, cooling and ventilation, and lighting. Elec-tricity is the predominant energy source in commer-cial buildings, followed by natural gas. In 1986 (themost recent year for which data are available),electricity accounted for almost half of total com-mercial sector energy use, followed by natural gas(34 percent) and fuel oil (9 percent).10

From 1979 to 1986, energy consumption perhousehold declined considerably. A number offactors were responsible for the 20-percent drop inresidential energy intensity: reduced household size,improved shell and equipment efficiencies, andlifestyle changes. In the commercial sector, energyuse per square foot declined from 115,000 Btus in1979 to about 89,000 Btus in 1986. The 23-percentdrop in commercial energy intensity was the resultof efficiency improvements in new buildings andretrofits to existing ones. Geographical shifts and thechanging mix of commercial buildings also contrib-uted to the decrease.11

The energy intensity of commercial buildings willprobably continue to decrease as new, more efficient

technologies are absorbed and new constructionpractices are implemented, but the level of declinewill slow due to the proliferation of electronicequipment, such as personal computers, copiers, andcommunications equipment. From 1984 to 1989, thenumber of computer workstations increased from6.5 to 25.3 million.12 Modern office equipment nowrequires as much electricity as is used for lighting. Inaddition, some modern, more powerful electronicequipment may require more electricity than oldermodels. For example, a laser printer requires 5 to 10times as much electricity as an old impact printer.And, more powerful desktop computers use almosttwo times as much electricity as the previousgeneration.

A number of organizations forecast residentialand commercial energy use. A few of these arepresented in tables 2-5 and 2-6. Each of the forecaststook into account a number of variables, includingenergy prices, GNP growth, and building andhousing stock expansion. With the exception of theAmerican Gas Association (AGA) forecast, residen-tial electricity demand was projected to rise. Theelectrification of space and water heating was citedas one of the major reasons for the increase inelectricity demand. AGA projected no increases inresidential electricity demand from the period 1985to 2000.13

These forecasts for commercial energy use are ingeneral agreement for 2000; however, by 2010forecasts diverge. The variations are a result ofdifferent assumptions, perspectives, and forecastingapproaches. For example, the EIA forecast assumeselectricity prices decrease at an average rate of 0.7percent per year, while the AGA assumes electricityprices increase at an average rate of 1.9 percent peryear.14

A variety of energy-efficient products and sys-tems have been developed and commercialized overthe past decade. These and new promising energyefficiency developments are the focus of the section

$TJ.S. Energy Information Administration, op. cit., footnote 1, p. 43.WIbid., p. 57.l%id., p. 41.W.S. Department of commerce, Bureau of the Census, Statistical Abstract of the United States 1990, lloth Edition Washington DC: U.S.

Government Printing Office) 1990, “Computers in the Oftlce,” special feature.lsHoward S. Geller, American COUIICil for an Energy-Efficient Economy, Residential Equipment Eficiency: A State-of-the-Art Revt”ew, COnh’ilCtOr

report prepared for the Office of Technology Assessmen4 May 1988, pp. 39-40.lhHow=d s. ~ller, ~encw Comcil for ~ ~er~.Efficient ~nomy, co~rcial Buil~”ng E@pwnt EfiCiency: A State-of-the-Art Review,

contractor report prepared for the OffIce of Tedmology Assessment, May 1988, p. 3.


Table 2-4-Household Energy Consumption by Application and Fuel Source, 1978,1980-82, 1984, and 1987

Consumption (quadrillion Btu)

Application and fuel source 1978 1980 1981 1982 1984 1987

Space heating:Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.26Electricity a, ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.41Distillate fuel oil and kerosene . . . . . . . . . . . . . . . . . . . 2.05Liquefied petroleum gases . . . . . . . . . . . . . . . . . . . . . . 0.23

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.95Air conditioning.b

Electricitya. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.31Water heating:Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.04Electricity a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.29Distillate fuel oil and kerosene . . . . . . . . . . . . . . . . . . . 0.14Liquefied petroleum gases . . . . . . . . . . . . . . . . . . . . . . 0.06

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.53Appliances:Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28Electricity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.46Liquefied petroleum gases . . . . . . . . . . . . . . . . . . . . . . 0.03

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.77Totalb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.56

Natural gasb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.58Electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.47Distillate fuel oil and kerosene . . . . . . . . . . . . . . . . . 2.19Liquefied petroleum gases. . . . . . . . . . . . . . . . . . . . 0.33

3.320.281.320.255.17

0.32

1.240.310.240.071.86

0.381.550.041.97

9.324.942.461.550.36

3.810.301.130.225.45

0.33

1.100.330.210.061.69

0.491.530.032.05

9.515.392.481.330.31

3.310.271.050.194.81

0.30

1.080.330.090.061.56

0.391.520.041.95

8.624.772.421.140.29

3.510.301.100.215.13

0.36

1.100.320.150.061.62

0.351.530.041.92

9.044.982.481.260.31

3.380.281.050.224.94

0.44

1.100.310.170.061.64

0.341.720.042.10

9.134.832.761.220.32

alnd~es elWt~ity generat~ for distrihtion from wood, waste, geothermal, wind, photovoltaic, and Soiar thermal elwttiity.b[nd~es a small amount of natural gas used for air conditioning.

NOTE: Sum of mmponents may not equal total due to independent rounding.

SOURCE: U.S. Energy Information Administration, Annudf%ergy Review 1989, DOE/EIA-0384(89) May 24, 1990.

“Opportunities for Energy Efficiency Improve-ments in the Residential and Commercial Sectors. ”

Industrial Sector

In 1989, energy use in the industrial sectoraccounted for about 36 percent of total U.S. energyuse.15 Energy is used for direct heat, steam genera-tion, machinery operation, and feedstocks. Oil isfrequently used for the production of direct heat orsteam generation. Coal is used more for steamgeneration. Natural gas is dominant in mining andmanufacturing because it burns cleanly and isavailable. Natural gas has also been used as afeedstock for fertilizers. Electricity is primarily usedfor motors.

Over the years, the industrial sector has continuedto rely on these three fossil fuels and electricity, buttheir relative contributions have changed. For exam-ple, coal accounted for a 26-percent share ofindustrial energy in 1960 but registered only a13-percent share in 1989. From 1960 to 1989,

petroleum’s share ranged from 33 to 41 percent to itspresent 37-percent share. Natural gas use was verysimilar to that of petroleum. During the same period,electricity use increased from 7 to 14 percent.16

Since 1972, the industrial sector has takennumer-ous steps to reduce its energy use per unit of output.A number of process changes and the application ofnew technologies, such as sensors and controlsystems, heat recovery systems, and continuoussteel casting have improved energy efficiency. Forexample, U.S. industries used less energy in 1985than in 1963 to produce the same mix and level ofproducts. A discussion of promising energy-efficient technologies follows in the section “Op-portunities for Energy Efficiency Improvements inthe Industrial Sector.”

Transportation Sector

In 1989, the transportation sector accounted forabout 27 percent of total energy consumption in theUnited States. The sector, which is almost totally

15u.s. FMag Information Administration op. cit., footnote 1, p. 13.161bid., p. 21.


Table 2-5-Comparison of Residential Energy Use Forecasts

Primary energy use (quadrillion Btu)

Forecast 1985 1990 2000 2010

Lawrence Berkeley Laboratory (1987,)a . . . 15.5 17.0 18.0 19.9U.S. Department of Energy (1985)b. . . . . . — 17.8 19.8 21.3U.S. Energy Information Administration

(1987)C . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 16.9 18.6 —Data Resources, Inc. (1986)d . . . . . . . . . . . 15.0 16.8 17.9 18.7Gas Research Institute (1985)e . . . . . . . . . . — 16.9 17.8 18.7American Gas Association (1986)f . . . . . . . 14.3 13.8 14.8 —Oak Ridge National Laboratoryg . . . . . . . . . 16.0 17.2 18.4 20.4National Energy Strategyh. . . . . . . . . . . . . . — 18.2 (20.8) 23.3a~mputer ~n provided by Jim McMahon, Lawrence Berkeley Laborato~, Berkeley, CA, November 1987.b~f-ce of planning, poliq and Ana&sis, U.S. Department of Energy, “National Energy Policy Plan Projections to theYear 2010,” Washington, DC, 1985.

CU.S. Energy Information Administration, “Annual Energy Outlook 1987,” DOE/EIA-0363(87), Washington, DC, March1988 (base case).

dData Resources, Inc., “Energy Review,” Lexington, MA, summer 1966.eG= Resear& Instit@e, ‘11987 GRI Baseline proj~tion of IJ.S. Energy SUpply and Demati to 2010,” Chicago, IL,December 1987. (Not including wood and other renewable energy sources.)

fAmeri~n Gas Ae~ation, “AGA-TERA Base Case 1986-l,” Artington, VA, January 1986.9X Ridge National Laboratory, “Energy Efficiency: How Far Can We Go?” ORNUTM-1 1441, January 1990, p.7.hNational Energy strategy, First Edition 1~1/1992 (Washington, DC: IJ.s. Government printing office, February1991), p. C-l 5. NOTE: Year 2000 NES projection inte~lated from 1990 and 2010 figures.

SOURCES: Brookhaven National Laboratory, “Analysis and T=hnology Transfer Annual Report-1986,” Upton, NYAugust 1987; and other references cited above.

Table 2-6-Comparison of Commercial Energy Use Forecasts

Primary energy use (quadrillion Btu)

Forecast 1985 1990 2000 2010

Lawrence Berkeley Laboratory (1987)a . . . 11.6 13.3 15.8 18.5U.S. Department of Energy (1985)b . . . . . . — 13.3 16.1 18.0U.S. Energy Information Administration

(1987)C . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.6 12.8 15.4 —Data Resources, Inc. (1986)d . . . . . . . . . . . 11.5 12.8 14.6 17.4Gas Research Institute (1985)e . . . . . . . . . . — 12.2 14.0 16.7American Gas Association (1986)f . . . . . . . 12.7 13.3 15.6 —Oak Ridge National Laboratoryg . . . . . . . . . 10.8 13.1 16.0 18.8National Energy Strategyh. . . . . . . . . . . . . . — 13.8 (17.6) 21.3apacific Northwest Laboratory Commercial Energy USS Model.boff~e of planning, po[iq and Ana&sis, U.S. Department of Energy, “National Energy Poliq Plan Projections to theYear 2010,” Washington, DC, 1985.

CIJ.S. Energy Information Administration, “Annual Energy Outlook 1987,” DOE/EIA-0888(87), Washington, ~, Mar*1988 (base case).

dData Remurcm, IN., “Energy Review,” Lexington, MA, summer 1966.eG= Resear~ lnstit~e, ‘11987 GRI Baseline proj~tion of fJ.S. Energy Supp& and Demati to 2010,” Chicago, IL,December 1987. (Not including renewable energy sources.)

fAmeri~n Gas ~s~ation, “AG&TERA Base Case 1986-l,” Arlington, VA, January 1986.90ak R“dge National Laboratory, “Energy Efficiency: How Far Can We Go?” ORNIJTM-1 1441, January 1990, p.7.hNational Energy strategy, First Edition lggl/1992 (Washington, f)c: U.S. Government printing Offim, February1991), p. c-15.

NOTE: Year 2000 NES projection interpolated from 1990 and 2010 figures.

SOURCES: Brookhaven National Laboratory, “Analysis and Technology Transfer Annual Report-1986,” Upton, NYAugust 1987; and other references cited above.

dependent on petroleum, used 10.85 million barrels total U.S. automobile fleet alone accounts for aboutper day in 1989, which is more than the United States 30 percent of all U.S. oil consumption; the totalproduces domestically. Its share of total U.S. petro- light-duty fleet, which also includes vans and lightleum consumption was almost 63 percent.17 The trucks, accounts for about 39 percent. The automo-

1%id., p. 137.


bile and light-duty fleets are the largest availabletargets for reducing U.S. oil use.

Over the last two decades, tremendous strides inautomobile fuel efficiency have been made. The fuelefficiency of the new car fleet has essentiallydoubled between 1974 and today. The potential forfurther reducing energy use in the transportationsector is promising if the industry is given enoughlead time. A number of new energy-saving technolo-gies are either on the market or under investigation.They offer the potential to significantly improvefleet fuel economy in the long term (by 2010). Inaddition, recent interest in developing alternativetransportation fuels can have positive effects onenergy demand by diversifying fuel supplies and/orreducing demand for gasoline. In the short term,however, a number of factors are expected to slowdown the rate of efficiency improvement. Theseinclude increasing sales of new high performanceand luxury cars, growth in the use of light trucks forpassenger travel, and a continued demand for certainolder car models. A discussion of promising technol-ogies and alternative fuels follows in the section“Opportunities for Energy Efficiency Improve-ments in the Transportation Sector. ’

OPPORTUNITIES FOR ENERGYEFFICIENCY IMPROVEMENTS

IN THE RESIDENTIAL ANDCOMMERCIAL SECTORS

From 1974 to 1986, technical advances in energy-using equipment and building construction practicesand materials have significantly improved energyefficiency in the residential and commercial sectors.High energy prices during this period were theimpetus for the rapid development and implementa-tion of a variety of energy-saving technologies.Strong government support for research and devel-opment (R&D) programs in energy efficiency alsocontributed to accelerating technology develop-ment. However, considerable potential for energysavings remains. In recent years lower energy priceshave slowed the rate of efficiency improvement anddampened the prospects for near-term commerciali-zation of new technologies. In addition, Federalfunding for energy technology R&D has declined

over the last decade. Increasing Federal R&Dsupport could accelerate the development and de-ployment of energy saving technologies. The fol-lowing section discusses opportunities for improv-ing energy efficiency in the residential and commer-cial sectors.

Opportunities for Improving Space Heatingand Cooling Efficiency

Space heating and cooling are the most energy-consuming applications in households and commer-cial buildings. Space heating alone accounts forabout two-thirds of total residential sector energyuse.18

In homes and commercial buildings that use fuelsfor space heating, newer more energy efficientfurnaces and boilers are already common. The GasAppliance Manufacturers Association (GAMA) es-timates that about 47 percent of all new gas furnacessold have efficiency ratings of between 65 and 71percent. Gas furnaces with efficiency ratings of 80percent make up about 33 percent of the market, and90-percent efficient furnaces make up about 20percent of the market.l9 Since the early 1980s, thesehighly efficient furnaces have been promoted bymanufacturers and relatively well-received by con-sumers.

The decision to purchase a super efficient furnacemust weigh the increase in initial cost against theincreased savings. An Illinois Department of Energyand Natural Resources survey indicates that naturalgas furnaces in the 90+-percent efficiency range coston average about $2,100 to $2,600. An 80-percentefficient furnace can be installed for an average ofabout $1,500. A comparison of annual savings andpaybacks from furnace replacements is shown infigure 2-1.20

The best modern furnaces are already close tomaximum efficiency (within 10 percent of maxi-mum theoretical efficiency). Improvements in en-ergy efficiency in the sector will depend less on newtechnology than on encouraging people to use thebest available equipment.

In addition, older furnaces can be retrofitted toachieve higher efficiencies by adding such features

181bid., p. 43.l~e~ C. K@ and Nimk P. Hall, ‘‘Furnace Replacement: The High Effkkncy payOff,” Home Energy, vol. 7, No. 3, May/Jnne 1990, p. 22.

%id.


Figure 2-l—Furnace Replacement AccumulatedSavings (60 percent efficient v. 80 and 92 percent)

Dollar savings (thousands)

I 1 1 1 , 1

3 4 5 6 7 8 9 10Years after replacement

80% efficient + 92% eff icient

80% payback ■ 92% payback

With 5-percent escalation included, 92 percent efficient furnaces take2 years more to pay for themselves than the 80 percent efficient furnaces.SOURCE: “Furnace Replacement: The High Cost Efficiency Payoff,”

Home Energy, vol. 7, No. 3, May/June 1990.

as flame-retention burners, electric ignition, powerburners, and condensing heat extractors. Flameretention burners are a cost-effective measure for oilfurnaces. Double-digit energy savings with pay-backs of 2 to 5 years are typical for this retrofit.However, other retrofit programs have had mixedsuccess, indicating that investments have to bechosen carefully .21

In homes and commercial buildings that useelectricity to space heat, heat pumps offer a majoropportunity for improving energy efficiency. Heatpumps typically consume one-third to one-half asmuch electricity for heating as do electric resistance-based systems. However, heat pumps operate atcooler temperatures than furnaces, so the air from thevents may feel drafty and heat the house moreslowly. In 1987, heat pumps were used in about 25percent of all electrically heated housing units. Thenumber of commercial buildings with heat pumpsnearly doubled between 1983 and 1986.22

Current heat pump technologies do not operatenear their maximum theoretical efficiency. Thus, theopportunities for improvement are significant. Forexample, the development of variable speed controlsfor capacity modulation will improve efficiency andprovide a better match between output and spaceconditioning needs. One estimate notes that variablespeed heat pumps will use 25 to 50 percent lesselectricity than typical heat pumps installed in themid-1980s. 23 Incorporating variable speed controlsalso provides quieter operation, more flexible con-trol, better dehumidification capability, and thepossibility of self-diagnostic features.

Variable-speed heat pumps have been available inJapan since the early 1980s. About one-half of allheat pumps in Japan use variable-speed control.24

Variable-speed heat pumps are also available in theUnited States. The number of manufacturers offer-ing this technology is growing; and newer, moreefficient models are continually being tested andmarketed.

Improvements in compressors for heat pumps andair conditioners also promise to have higher effi-ciency rates than conventional types. For example,newer scroll-type compressors have efficiencies of10 to 20 percent higher than reciprocating compres-sors. In addition, scroll-type compressors aresmaller, lighter, and quieter. They are widely pro-duced in Japan and are expected to be produced andused in the United States in the near future.

The next major advance in heating/cooling tech-nology may be the thermally active heat pumps(TAHP). A TAHP is similar to a conventionalelectric heat pump except that the electric motor isreplaced by ‘‘something” that burns fuel, e.g., aninternal combustion engine. Two of the advantagesof TAHPs are that they can use a variety of fuels, andthey are more efficient than a comparable electricsystem. TAHPs use exhaust heat from the engine tosupplement the heating cycle.25 TAHPs could havea significant impact on residential and commercialenergy use in the next 10 to 20 years, but they will

21sm Coheq “Fifty Million Retrofits Lder, ” Home Energy, vol. 7, No. 3, May/June 1990, pp. 14-15.ZZu.s. Ener~~o~ationAW~@ation, Ho~~ing characte~”sties 1987, DOE~~.0314(87),” my 198$), p. 12; md Characteristics of commercial

Bui/dings 1986, DOE/EIA-0246(86), September 1988, p. 21.~~ller, Residential Equipment E@ciency, Op. cit., fOOtnOte 13, P. 20.

~Debbie Lowe, “A New Generation of Heat Pumps,” Home Energy, vol. 6, No. 2, March/April 1989, p. 12.tio~~dge Natio~~bomtoV,E nergy TechnozogyR&D: w~t couzd~akeaDifference? VO1. 2, part 1, “End-UseTechnolo~,” ORNL-65441 1

V2/Pl, December 1989, pp. 33-34.


have to be competitive with conventional systems interms of first cost and maintenance.

Both DOE and the Gas Research Institute (GRI)have funded research on TAHPs. A number ofadvanced TAHPs have been developed. Theseinclude internal combustion engine-driven units,Ike-piston Stirling engine systems, and absorptionsystems. In the United States, the internal combus-tion engine-driven units are in the prototype stageand have been tested in the laboratory. The Japaneseare also doing research in this area and havemanufactured and field-tested a number of internalcombustion-driven systems. The best performancesare comparable to the best electric systems incooling, about 75 percent better in heating, and verycompetitive in operating costs.26

Several Stirling engine-driven heat pumps havebeen developed and tested. Stirling engines areattractive as heat pump drivers because they have thepotential to be highly efficient, quiet, and longlasting. The performance of Stirling engine-drivenheat pumps has been similar to that of the internalcombustion engine.27

Similar progress has been made in advancedabsorption systems. A number of advanced absorp-tion systems are under development and have beentested in the laboratory. They are about 20-percentmore efficient in cooling than the best absorptionchillers28 available.29 Cost studies have shown thatthe installed cost for a small absorption heat pumpis in the range of installed costs for a gas furnace plusan electric air conditioner.30

Other refrigeration equipment efficiency improve-ments are being developed. These include the use ofcapacity modulating systems and novel refrigerationcycles. These advancements could improve energyefficiency by 30 to 50 percent.3l

Opportunities for Improving BuildingEnvelope Efficiency

Efforts are being directed at improving thethermal efficiency of building envelopes. Much ofthe research has focused on materials that havehigher thermal resistance per unit thickness and newenvelope configurations that are more thermallyresistant.

For wall systems, alternative construction prac-tices have promising potential for improving effi-ciency. These include innovative designs that keepthe structural elements away from the exterior shelland retrofit insulation practices that shield existingthermal bridges (highly conductive heat flow paths).Thermal bridges can reduce the overall thermalefficiency of some wall systems by 30 percent.Demonstration homes in Minnesota that use newinsulation techniques use 68-percent less heat thanthe average U.S. home.32

Prospects for new high-thermal-resistant productsfor wall systems are being explored. These includeevacuated or foam cores molded to conform to theexterior shape of the building and molded fiberwalls.33

Improving the thermal resistance of roofs issomewhat difficult because roofing materials arecompact and not much can be done to improvethermal resistance per unit thickness except to focuson materials. Alternatives to chlorofluorocarbonfoam insulation are being developed and tested. Inaddition, waterproof membranes must be developedthat can maintain their resiliency through continualthermal stressing over periods of 20 years or more.And, improved techniques must be developed forfastening roof elements to the structural building.34

‘Ibid., p. 34.2%id., p. 35.~Abso@on c~ers ~ the o~y av~ble fuel-b- refrigeration systems. They can burn either Mti g= or oil to produce chilled wter fOr

cooling. Absorption chillers are not widely used in the United States because they are not cost and/or performan ce competitive with current electricsystems. But in Japan, where energy costs are higher and the Government favors systems that use natural gas, 80 percent of all commercial buildingsare cooled with absorption chillers.

Mow ~dge hJatio~ Laboratory, op. cit., foonote 25, p. 35.~Gellm, Residential Equipment Eficiency, op. cit., footnote 13, p. 23.Sloa.k ~dge Natioti Laboratory, op. cit., footnote 25, p. 33.

32J.H. Gibbons, P.D. Blair, and H.S. Gw@ “Strategies fOr ~ergy Use,” Scientzjic American, vol. 262, No. 3, September 1989, p. 141.330& ~dge National L&omtory, op. cit., footnote 25, pp. 25, 39.‘Ibid., p. 39.

Chapter 2—Technologies Affecting Demand . 33

A number of successful innovations have im-proved the thermal efficiency of windows. As muchas 25 percent of residential and 4 percent of U.S.total energy use escapes through windows.35 Thus,the potential for reducing energy use is significant.

The introduction of two coatings technologies hasimproved window performance substantially. Onetechnology applies a heat reflective coating directlyon the glass, and the other applies similar coatings toa clear polyester film that is mounted inside sealedinsulating glass. Low-emittance (low-e) coatingsand films have increased glass insulation values upto as much as R-4.5. For example, the addition oflow-e coatings to a double-pane glass increases theinsulation value of a window up to as much as R-3.(A single-pane glass is roughly the equivalent ofR-1; double-pane, R-2; and triple-pane, R-3.) Toincrease further the insulation value, a colorless inertgas, such as argon, can be added inside a sealedlow-e window unit, thereby increasing the R valueto R-4. Using a heat reflective coating on a clear,colorless film mounted inside a double-pane win-dow unit can increase the R value to R-4.5.36

In January 1990, a window with an R-8.1 insulat-ing value was introduced. The use of multiple-coated films mounted inside sealed insulated glassmade this development possible. This windowachieves almost the thermal resistance of an ordinaryinsulated stud wall, thus greatly reducing a majorheat leakage. In addition, it reduces sound transmis-sion much more effectively than ordinary windows(important near highways and airports) and virtuallyeliminates ultraviolet light, which damages fabrics.However, it is significantly more expensive. HurdWood Windows quotes prices for a typical 2’6” x 5’casement window as: $257 for R-2.6 clear, double-glazed; $320 for R-4.1 with a single coated film;$441 for R-8.1 double film (quadruple glaze) withinert gas. In a moderate climate, the R-8.1 windowwould save less than 10 dollars’ worth of energy peryear relative to the R-2.6 window which is not agood return for investment of $184. Thus thesewindows are economical only in severe climates orwhere the other features are valued.

Two of the most important advantages of improv-ing window insulation performance are: 1) reducingenergy costs and 2) increasing the capacity of existingheating, ventilation, and air conditioning (HVAC)systems or allowing the use of smaller HVACsystems in new construction and renovations.37

Many new window products that incorporate theseinnovations are already on the market. In fact, a fewlarge window manufacturers have standardized loweglass products. And, DOE indicates that demand forlow-e windows has increased 5 percent annuallysince the products were introduced in 1983.38

Additional research is being conducted on improv-ing the durability of the coatings and lowering theiremittance and reducing condensation.

Opportunities for ImprovingWater Heating Efficiency

Incremental efficiency improvements have beenachieved by adding insulation wraps or installingconvection-inhibiting heat traps to existing waterheaters. Also, more efficient conventional waterheaters are commercially available at a modestincrease in first cost of about $20 to $100. Thesemore efficient water heaters provide 10- to 25-percent energy savings with a 11/2- to 3-yearpayback.

Innovative water heaters were developed andcommercialized in the 1980s. Heat-pump waterheaters, for example, use about 50-percent lesselectricity than conventional electric water heaters.A heat-pump water heater can cost anywhere from$800 to $1,200, four times that of a conventionalelectric water heater.39

Heat-pump water heaters can be operated togetherwith a mechanical ventilation system in houses thathave low infiltration. The heat pump removes heatfrom the exhaust air stream during the heatingseason and from the incoming air stream during thecooling season and uses this heat to operate the waterheater. The ventilation air streams are a very efficient

3SRick Bevington and Mur H. Rosenfeld, “Energy for Buildings and Homes,” Scientific American, vol. 263, No. 3, September 1990, p. 80.~Todd W. Si@ “windows for the ‘90s,” Public Power, May-June 1990, VO1. 48, No. 3, PP. 40-41.

S%id., p. 41.“’Window Company Standardizes Low-E Glass,” Home Energy, vol. 7, No. 3, May/June 1990, p. 6.3913. ~s~ J. Cktom H. &ller, ~d W. ~oner, American COWCil for an Energy-IMcient Economy, EnergyEflciency in Buildings: PWVSS and

Promise (Washington, DC: 1986).


source of heat for the heat-pump water heater. Suchsystems are commonly used in Scandinavia.40

Highly efficient gas- or oil-fired water heating ispossible by coupling a hot water tank to a high-efficiency space heating furnace. This achieveswater heating efficiencies of 80 to 85 percent andsaves fuel. A similar technology recently introducedis a high-efficiency integrated space and waterheating system. It features electric ignition, a powerburner, and flue gas condenser to provide both spaceand water heating at efficiency levels of 85 to90 percent. Neither the heat-pump water heater northe high-efficiency integrated gas-fired space andwater heating system has significantly penetratedthe marketplace. Low sales are attributed to highfirst cost and limited availability .41

GRI has supported the development of a gas waterheater with pulse combustion and flue gas condensa-tion (similar to the most efficient gas furnaces). It isestimated that the water heater will use 25 to40 percent less fuel than conventional gas heaterscurrently produced. The estimated retail cost isabout $900, roughly three times that for a standardwater heater.42

Opportunities for Improving Lighting Efficiency

Lighting is the second largest end-use in thecommercial sector and a significant portion of totalenergy use. Fluorescent lights are heavily used incommercial buildings.

Fluorescent lamps are being improved throughsize and weight reductions. For example, switchingfrom standard fluorescent ballasts to electronicballasts that weigh only about four ounces candecrease energy use. Lawrence Berkeley NationalLaboratory developed a high-frequency, solid-stateballast that increases lamp efficiency by 20 to25 percent.43 Adding an optical reflector to fluores-cent lamps increases useful light output by 75 to100 percent, cutting energy use by 30 to 50 per-cent.44

Photo credit: Chris Calwell, courtesy of Home Energy Magazine

The availability of energy-efficient lighting products hasincreased significantly in recent years.

Another option for improving fluorescent lightingefficiency is to develop more efficient phosphors.Phosphors currently in use are 40-percent efficient.Research is underway to develop phosphors thatconvert one ultraviolet photon into two visiblephotons, resulting in 75-percent efficiency andreducing energy use by 50 percent.45

In the commercial sector, a combination ofoptions, such as replacing standard fluorescentlamps and ballasts with energy efficient types;replacing incandescent bulbs with fluorescent light-ing; and installing reflectors, lighting controls, andoccupancy sensors could cut electricity use forlighting by nearly 50 percent. Overall electricity usein the commercial sector could drop by about20 percent.46 Of course, the decision to retrofit mustweigh the initial costs against the increased savings.

Residential op. Cit., footnote 6, p. 7. pp. 19-20.

Laboratory, op. cit., 25, p. 36. Equipment op. P.

Laboratory, op. cit., 25, p. 36. S. and C. “Commercial/Governmental Electricity Conservation Potential,” report prepared by Synergic

Resources Corp. for the Public Service Commission of the District of Columbia, DC, March 1987.


The costs of retrofitting conventional lightingfixtures to more efficient ones are very site-specific.A recent lighting retrofit project conducted by theU.S. Postal Service showed a cost of $81 per lightingfixture. The retrofit included the installation ofreflectors, magnetic ballasts, and new lamps.47

In the residential sector, energy use for lightingaccounts for only about 7 percent of the total sectorenergy use.48 Almost all residential lighting isprovided by incandescent lamps. One way incandes-cent bulbs can be improved is by placing a quartztube around the filament. The quartz tube has anoptical coating that passes visible light but reflectsinfrared radiation. General Electric has introduced a350-watt quartzline lamp that replaces a standard500-watt lamp, and it is expected that this develop-ment will eventually reach households.49

In the early 1980s, compact fluorescent lampswere introduced to replace incandescent bulbs.Fluorescent lamps provide 3 to 5 times more lightper watt of power consumed and last 5 to 10 timeslonger. But, they cost between $10 and $20 each.Consequently, they have been marketed primarily tothe commercial and industrial sectors where lightsare used more extensively. The installation ofcompact fluorescent light bulbs in Newark, NewJersey schools, for example, cut electricity use by 15to 20 percent, reduced maintenance, and increasedillumin ation levels.50

Because compact fluorescent lamps are largerthan incandescent types, have color rendering prob-lems, cost the consumer more, and are often difficultto find, residential market penetration is low. How-ever, if the most heavily used incandescent bulbswere replaced with compact fluorescent, totalelectricity use for household lighting could drop by30 to 40 percent.51 Thus, the potential for energysavings is significant.

Opportunities for Improving ApplianceEfficiency

Refrigerators and Freezers

In recent years, the energy efficiency of refrigera-tors and freezers has improved considerably. How-ever, there is still significant potential for improve-ments. About two-thirds of refrigerator/freezer en-ergy use is due to heat transfer through walls and notfrom door openings and food cooling.52

New advances in insulation products are underdevelopment. These technologies take advantage ofthe heat-transfer properties of a partial vacuum ortrapped layers of gas to achieve higher insulationvalues. One type of vacuum insulation being exam-ined uses rigid steel barriers, glass spacers, and avery low pressure or hard vacuum. Others uselow-density fillers and a higher-pressure soft vac-uum. Yet another concept uses no vacuum but trapsgas within a number of reflective barriers.53

For soft vacuum insulation designs, silicon-basedgels and fine powders are being tested. Aerogelinsulation panels have been installed in standardrefrigerators for testing by DOE. Thermalux, aCalifornia firm that manufactures aerogel panels,estimates that they would cost appliance manufac-turers between $1 and $2 per square foot.54

Materials that have been examined for powderinsulation fillers are fumed silica, precipitated silica,silica dust, perlite, glass fiber, glass wool, and flyash. Costs for these materials vary. For example,fumed silica is expensive but performance is high.Precipitated silica, fly ash, and perlite also work welland are cheaper.55

The use of these new vacuum insulation designsin refrigerator/freezers could reduce their electricityconsumption by 25 to 50 percent. Japanese manufac-turers already incorporate first-generation, soft vac-uum panels into some of their models. These panels

47- Ne.soq DiviSi~n Ener~ Cwrtitor, us. pos~ Service, pe~o~ comm~catio~ San Diego, C!A, Sept. 26, 1990.4SU.S. En~~ ~o-tion Admini~~tio~ Department of Energy, Energy c~n~e~a~~n Multi-year plan, FY1989-93, 1987.

4gGeller, Residential Equipment Eficiency, Op. Cit., fOOtnOte 13, P. 24-%levington and Rosenfeld, op. cit., footnote 35, p. 78.Sllbid., p. 11.s~avid J. HoUghtoq “Refrigerator hu+xdations for the zlst CentWY,” Public Power, November/December 1990, p. 48.Wbid., p. 49.Wbid.Ssfiid.


have measured insulating values of R-16 to R-20 perinch of thickness. However, some concerns aboutpanel insulation durability and maintenance havebeen raised. These concerns will have to be ad-dressed before these products are used extensively inthe United States.5G

The Solar Energy Research Institute (SERI) andthe Lawrence Berkeley Laboratory (LBL) havepursued different approaches to vacuum insulation.SERI has built a number of prototype panels thatincorporate steel outer layers and glass spacers. Theprototype panels, called compact vacuum insulation(CVI), are estimated to cost refrigerator/freezermanufacturers between $1 and $4 per square foot.Because the panel is very thin, the interior volume ofa refrigerator/fkeezer could be increased. Applianceindustry estimates indicate that additional volumecould be worth $45 to $50 per cubic foot, and couldhelp offset the high cost of the insulation. Thus far,manufacturers have shown little interest in CVI.57

LBL has been developing superinsulated gas-filled panels that resemble windows more thanrefrigerator/freezer insulation panels. The estimatedcost to the appliance manufacturer is $0.40 to $1.50per board foot. The panels use a number of sheets oflow-e plastic separated by air gaps, which areloosely filled with very thin, crumpled low-e plasticmaterial. The entire panel is filled with low conduc-tivity gas and sealed. LBL has applied for a patent.58

Another promising option is to shift from one totwo refrigeration systems. This improves thermody-namic efficiency and results in less dehydration offood in the refrigerator compartment. Refrigerator-freezers with dual refrigeration systems are manu-factured in Europe.59

The use of electronic variable speed controls isanother way to improve the efficiency of refrigera-tion systems. Electronic variable speed controls,which modulate cooling output, can produce elec-tricity savings of about 20 percent.60

Cooking and Laundry

There have been a number of promising develop-ments in cooking technology and clothes drying. Forexample, a high-efficiency electric oven, called thebiradiant oven, was developed and demonstrated inthe 1970s. Its features include highly reflective wallsand two heating elements that operate at relativelylow temperatures. Tests show that the biradiant ovenuses about 60-percent less electricity than conven-tional ovens. Manufacturers have shown little inter-est in producing the biradiant oven even though itappears to be technically and economically viable.61

Another development, the infrared-jet impinge-ment burner for gas stove tops, promises fuel savingsof 15 to 25 percent. This burner utilizes a high degreeof radiative heat transfer from a ceramic flameholder. Other advantages of the infrared jet impinge-ment burner are a reduction in nitrogen oxide andcarbon monoxide emissions, uniform heating, fastresponse, and ease of cleaning. GRI field-tested theburner and is continuing to reduce production costand increase lifetime.G2

Some promising advances in clothes dryers are onthe horizon. A heat-pump clothes dryer has beendeveloped, and tests show electricity savings of 50to 60 percent relative to a conventional clothes dryer.(Larger-scale heat pump dryers at-e used for dryinglumber and food products.) The heat-pump clothesdryer has a drain pipe rather than an exhaust vent,which is advantageous in apartment buildings. Amajor disadvantage is its cost. The estimated retailprice of the dryer is $600 to $700, about twice thatof a conventional electric dryer. The payback on theextra first cost is about 8 years. Commercializationand marketing are expected to begin in the nearfuture.G3

Microwave clothes dryers are also under develop-ment. However, there are problems with high waterretention when drying larger loads.

56Gefl~, Residential Equip~nt Eficiency, op. Cit., fooblote 13, P. 18.

s7Hou@to% op. cit., footnote 52, p. 50.58 fiid.

59Geller, Residential Equipment E@ciency, Op. Cit., fOOtflOte 13, P. [email protected]., p. 24.‘%id., pp. 24-25.G%id., p. 26.


Opportunities for Improving EnergyManagement and Control Systems

Energy management and control systems are usedto monitor and adjust heating and air conditioning,lighting, and other energy-using appliances, primar-ily in commercial buildings. Energy managementand control systems are diverse and vary from asimple thermostatic control to complex pneumaticcontrol systems with many sensors, microproces-sors, and other components.

Behavioral changes, particularly changes in in-door air temperatures, are an important element inbuilding energy management programs. The EIA,which has been tracking indoor air temperaturessince 1981, reports that winter indoor air tempera-tures dropped during the 1973-84 period. This dropwas an important factor in the decline in U.S.residential energy use during this time.64

Improvements in control technologies and sen-sors, and diagnostic equipment could result inenergy savings as high as 10 to 15 percent of totalU.S. energy use. The commercial sector offers thegreatest potential for savings.65

Strides have also been made in the residentialsector. Automated control systems comparable tothose used in commercial buildings are now beinginstalled in houses. These “smart” houses, as theyare commonly called, are being promoted by anumber of manufacturers, utilities, the ElectricPower Research Institute, and the National Associa-tion of Home Builders. For example, the SouthernCalifornia Edison Co. and a number of local buildersinitiated a House of the Future pilot project. Newhomes are equipped with automated systems andcontrols and a number of energy-saving technolo-gies, such as compact fluorescent light bulbs, energyefficient appliances, and occupancy sensors.66

Over the years, advances in energy managementand control have been continual. Nevertheless, someopportunities still have not been realized. Forexample, there is a lack of reliable, low-cost meters

for measuring oil and natural gas use in buildings.Also, humidity sensors need further development.67

OPPORTUNITIES FOR ENERGYEFFICIENCY IMPROVEMENTS IN

THE INDUSTRIAL SECTOR68

The industrial sector is both diverse and large. Ituses energy for probably a wider variety of purposesthan does any other sector of the economy. Energyis used for direct heat, steam generation, machineryoperation, and feedstocks. The most intensive indus-trial processes involve the direct application of heatto break and rearrange molecular bonds throughchemical reactions. Processes such as smelting,cement manufacture, and petroleum refining typi-cally involve large amounts of heat.

Since it peaked in 1970, industrial energy use perunit of output (energy intensity) has been decliningdue to a number of factors: efficiency improvements,innovative process changes and the application ofnew technologies, changes in the product mix (leveland demand for products), and the price of energy.Many of the energy efficiency gains realized overthe last decade have been the result of good businesspractices.

Most firms regard energy efficiency in the contextof a larger strategic planning process. Investmentsare evaluated and ranked according to a variety offactors: product demand, competition, cost of capi-tal, labor, and energy. Thus, energy-related projectsare not treated differently from other potential invest-ments and must contribute to the corporate goals ofincreased profitability and enhanced competitiveposition. This view has important policy implicationsfor reducing energy demand. Incentives aimed atdecreasing energy demand growth must competewith other strategic factors and therefore have to besubstantial to make a significant impact.

OTA found that the best way to improve energyefficiency in the industrial sector is to promotegeneral corporate investment. Lowering interestrates would increase capital availability and allow

~stevel.1 Meyers, “Energy CO~ ption and Structure of the U.S. Residential Sector: Changes Between 1970 and 1985,” Annual Review of Energy1987, vol. 12, 1987, pp. 92-93.

fio~ Ridge Natio~ Laboratory, op. cit., foomote 25, p. 28.66B~@ton and Rosenfeld, op. cit., foomote 35, p. 82.GT()~ Ridge Natioml Laboratory, op. cit, footnote 25, p. 28.68For a more indep~ disc.sion of industri~ energy use, s= OTA ~pofi ]~~m”az Energy use, Op. Cit., fOOtnOte 8.


more projects to be undertaken. Industries thatbelieve energy prices will continue to rise have astrong impetus to use capital for more energyefficient equipment. However, it should be notedthat growth in product demand is essential ifinvestment is to take place, even with lower interestrates. The OTA report Industrial Energy Use pro-vides a more indepth discussion of corporations’investment behavior.

While the industrial sector has made impressivestrides in reducing energy use, opportunities forfurther gains in energy efficiency have by no meansbeen exhausted. A number of promising develop-ments in crosscutting technologies are discussedbelow. They include computer control systems andsensors, waste heat recovery, cogeneration, cata-lysts, separation processes, combustion, and electricmotors. Also, opportunities for improving energyefficiency in four of the most energy-intensiveindustries-pulp and paper, petroleum refining,chemicals, and steel industries-follows.

Computer Control and Sensors

Computer control systems and sensors are addedto existing equipment, such as a boiler, to improvethe performance, or to an industrial process tomonitor the production line for wastage and qualitycontrol. In a production line, computerized processcontrol systems can be used to optimize such thingsas paper thickness, polymer color, or petroleumviscosity. Almost any energy-using process can bemade more efficient if specific parameters at eachpoint in the process can be measured and conditionsoptimized. Figure 2-2 shows the potential for energysavings associated with improved sensor technologyfor several industries. Potential savings in the rangeof 5 to 20 percent can be achieved for each of theindustries. In addition, improved sensors have thepotential for reducing total industrial energy use by10 percent.69

Waste Heat Recovery

Whenever fuel is burned, the products of combus-tion are a potential source of waste heat. Thereforethe recovery of waste heat has enormous potential

Figure 2-2—Potential Energy Savings WithImproved Sensor Technology

Food

Textiles

Wood and lumber

Pulp and paper

Chemicals

Petroleum

Ceramics and glass

Primary metals

Energy

0 1 2 3 4 5 6 7Quads

use: m Current = Potential

SOURCE: U.S. Department of Energy, the DOE Industrial Energy Conser-vation Program, Research and Development in Sensor Technol-ogy, DOE/NBM-7012450, April 1987, p. 4.

for saving energy. Waste heat recovery systems canimprove the overall energy efficiency by recoveringheat from combustion gases in a steam boiler or fromexcess thermal energy from a process stream prod-uct. A great deal of waste heat recovery has beentaking place, especially since 1974.

Traditional approaches to heat recovery includetransferring heat from a high-temperature, wasteheat source (combustion gases) to a more usefulmedium, e.g., steam, for low-temperature use; orupgrading thermal energy to a level that can beuseful as a heat source. Heat exchangers are used forthe former approach and vapor recompression andheat pumps are used for the latter.

New approaches to waste heat recovery have beenbroadened to include improved monitoring andcontrol to optimize conversion and distribution ofenergy. A 1985 survey indicated that waste heatrecovery could reduce energy inputs by 5 percent inpetroleum refineries. In the chemicals industries,existing waste heat recovery programs have reducedenergy usage per pound of product by 43 percentsince 1974.70

@OW Mdge Natio~ hborato~, Energy Technology R&D: What Could Make a Difference? vO1. 2, pm 3, “CrOSS-CUt@ S~CXMX ~dTeehuology,” ORNL-6541/V2/P3, December 1989, p. 11.

7QIC ~dge Natioti Laboratory, op. cit., footnote 25, pp. 71,76.ylAmorede~~&scus~ion of ~ogenerationmd is poten~ fipactsc~~ fo~d inlndmm”azandco~rciaz cogenerati~n U.S. CO~SS, ~Ce

of Technology Assessrneng OTA-E-192 (Washington, DC: U.S. Governrnent Printing OffIce, February 1983).


Cogeneration 71

Cogeneration is defined as the production of bothelectrical or mechanical power and thermal energyfrom a single energy source. In industrial cogenera-tion systems, fuel is frost burned to produce steam.The steam is then used to produce mechanicalenergy at the turbine shaft, where it can be useddirectly, but more often is used to turn the shaft of agenerator, thereby producing electricity. The steamthat leaves the turbine still has sufficient thermalenergy to provide heating and mechanical drivethroughout a plant.

The principal technical advantage of a cogenera-tion system is its ability to improve fuel efficiency.A cogeneration facility uses more fuel to produceboth electric and thermal energy. However, the totalfuel used to produce both energy types is less thanthe total fuel required to produce the same amount ofpower and heat in separate systems. A cogeneratorwill achieve overall fuel efficiencies 10 to 30 percenthigher than separate conventional energy conversionsystems.

Major industrial cogenerators are the pulp andpaper, chemicals, steel, and petroleum refiningindustries. The pulp and paper industry has been aleader in cogeneration because it has large amountsof burnable wastes (bark, scraps, forest residuesunsuitable for pulp) that can supply energy neededfor plant requirements. The industry considerspower production an integral part of the manufactur-ing process.

In the 1980s, a favorable economic and regulatoryclimate encouraged the growth of cogeneration inthe industrial sector. Since the passage of the PublicUtility Regulatory Policies Act (PURPA) in 1978,the amount of electricity received by utilities fromnonutility sources has grown dramatically. Accord-ing to the Edison Electric Institute, electricity salesto utilities from nonutility sources increased from6,034 gigawatt-hours (GWh) in 1979 to 93,677GWh in 1989. The latter figure represents 3 percentof the total electricity available to the utility industryfor distribution.72

Estimates of current and projected nonutilitycapacity vary considerably, however, so it is diffi-cult to measure the growth of this industry withprecision. Although there is no definite count ofnonutility capacity in the United States, the EdisonElectric Institute estimated that 40,267 megawatts(MW) of nonutility capacity was in operation at theend of 1989. Cogeneration accounted for 29,216MW, or about 73 percent of the total.73

Estimates of future capacity growth also vary.Several estimates suggest that roughly 38,000 MWof capacity will be online by 1995. By the year 2000,other studies estimate that nonutility capacity will beas high as 80,000 MW.74

In the 1980s, a favorable economic and regulatoryclimate encouraged the growth of cogeneration inthe industrial sector.

Advanced turbines have attracted renewed atten-tion for cogeneration applications because they cansave energy and provide fuel flexibility. Over time,turbine efficiency and size have increased consider-ably as new turbine technologies and advancedmaterials allowed for hotter combustion tempera-tures. 75 Many of the advances in design and hightemperature materials for turbines result from mili-tary R&D for improved jet engines.

In addition to hotter combustion temperatures,capturing the energy of the hot exhaust gases tomake useful steam offers further options to improveefficiency. A process receiving increased attention isthe steam-injected gas turbine (STIG). In the STIG,steam is injected into the turbine’s combustor. Theresult is greater power and electrical efficiency. Forexample, in turbine units based on General Electric’sLM-5000 (which is derived from the engine used inthe Boeing 747, some DC-1 OS, and the AirbusA300), steam injection allows an increase in powerfrom 33.1 MW to 52.5 MW and increases efficiencyfrom 33 to 40 percent.76 STIG units have been usedin cogeneration applications, allowing for greaterflexibility and efficiency when the industrial processhas variable steam requirements. Intercooling, afurther enhancement to STIGS, may further increase

72~Son Ek..~c ~Sti~te, 1989 Capaciv ~~ Generation of Non-utility Sources of Energy, wxhkgto~ ~, Apd 1991, p. 29.T%id., p. 1.74u.s. ConWss, ~lce of Technology Assessment Electn”c Power Wheeling and Dealing: Technological Considerations for Increasing

Competition, OTA-E-4(I9 (Washington, DC: U.S. Government Printing Offke, May 1989), pp. 46-47.75~~utili9 mbopow~ for the 1990S,” EPRIJournal, April/May 1988, pp. 5-13.76R. willi~, E. Larson, “Aeroderivative llrbines for Stationary powm,” Center for Energy and Environmental Studies, Prineeto% May 1988.


power and efficiency to nearly 50 percent. Technol-ogy transfer from future improvements in jet enginescould further raise efficiency to over 50 percent.77

Turbines that can use coal or biomass gasificationas fuel could be a promising technology for cogener-ation applications.

Separation

Separation of two or more components in a mixtureis one of the most energy-intensive processes in theindustrial sector. Separations account for about 20percent of industrial energy use. Separation ofliquids is commonly accomplished through thedistillation process, one of the most energy-intensive separation technologies. Other separationtechnologies include cryogenics, pressure swingadsorption, and mercury or asbestos diaphragmelectrolytic processes.

Distillation retrofit projects offer significant po-tential for energy savings. For example, a smallincrease in the number of trays in a distillationcolumn can reduce energy use. Also, improvementsin distillation control technologies will not onlyenhance product quality but lower energy consump-tion as well. It is estimated that improvements in thedistillation process can reduce energy consumptionby 10 percent.78 Further reductions in energy use arepossible by using other currently available proc-esses: the use of membranes for reverse osmosis andmicrofiltration, or supercritical fluid (solvent) ex-traction.

Membrane technology is based upon the principlethat components in gaseous or liquid mixtures perme-ate membranes at different rates because of theirmolecular characteristics. Solvent extraction usesfluids with a high affinity for one component of achemical mixture, but immiscible with the remain-ing components. Both technologies are used by thechemicals industry. In 1984, OTA noted that the useof solvent extraction in a synthetic fiber plant savedan estimated 40,000 barrels of oil equivalent annu-ally. 79 Membrane separation technology is expected

to capture a number of other markets, including foodand beverage processing.

Catalytic Reaction

Another crosscutting technology is catalytic reac-tion. Catalysts are used in many industries tofacilitate chemical reactions. The petroleum refiningand chemicals industries rely heavily on catalysts toperform a variety of functions, including raisinggasoline octane level, removing impurities, andconverting low-grade hydrocarbons to higher valueproducts.

Opportunities exist for improving energy effi-ciency through catalytic reaction. By increasingchemical reaction rates, lower temperatures andpressures can be used, which in turn reduce heatingand compression requirements.

The discovery and use of new synthetic zeolites incatalytic processes also have contributed to energyefficiency gains in both the petroleum refining andchemicals industries. These industries have spentconsiderable time and effort in identifying anddeveloping unique zeolites for use in synfuelsproduction, petrochemical manufacture, and nitro-gen oxide (NOX) abatement.80

Also, energy efficiency can be improved by usingcatalytic reaction to recover organic acids in pulpand paper industry waste streams and in processedurban waste. Typically, these wastes are dumpedbecause there is no method for extracting the acidsunless the streams are first concentrated. A catalyticprocess could convert the organic acids to hydrocar-bons, which can be easily separated from water.81

Combustion

Combustion of fossil fuels is one of the principaluses of energy in the industrial sector. The OakRidge National Laboratory (ORNL) estimates thatmore than 50 percent of industrial energy is burnedin boilers and process heaters. The combustionprocess itself is very efficient, but inefficienciesarise in the extraction and use of the thermal energy.

‘Ibid.780m Ridge National Laboratory, op. cit., footnote 25, p. 70.7~or additio~ ~omtion on oil rep~~ment ~pabi@ fi me industri~ ~tor, scx us. Congress, Hlce of TdIIIOIO~ Assessmen4 U.S.

Vulnerability to an Oil Zmport Curtailment: The Oil Replacement Capability, OTA-E-243 (Wastdngto~ DC: U.S Governrne nt Printing Office,September 1984).

~OA Kdge National Laboratory, op. cit., footnote 25, p. 67.Sllbid.


A number of opportunities exist to improve energyefficiency.

The pulsed gas or condensing furnace is a demon-strated improvement in the combustion process. Thefurnace uses a pulsed combustion technique toinduce a draft. This technique has been appliedprimarily to space heating systems, but there maybeother applications for this technology in industry. Inaddition, advances in cogeneration systems forindustrial and large commercial applications havethe potential to increase thermal utilization efficien-cies and reduce first cost.

Foremost among new technologies is atmosphericfluidized-bed combustion (AFBC). It is commer-cially available for industrial applications and hasthe potential to be widely used in cogenerationoperations. Its major advantages include fuel effi-ciency, pollution control, and its small size. AFBCplants currently in use by cogenerators appear to beable to produce electricity at lower costs than otherconventional coal plants. However, this technologyis not without technology concerns. Difficulties withfuel and sorbent feeding systems are two of the mosttroublesome problems. According to ORNL, theAFBC, when perfected, is likely to be the coal-burning technology of choice for many industrialapplications because pollution control is relativelyeasy to accomplish.

In addition, combustion control systems havebeen extensively applied to industrial operations andare expected to play an even greater role in thefuture. For example, in the combustion process, agiven quantity of fuel requires a freed and easilymeasured quantity of air. Having an excess quantityof air or fuel results in either unused air being heatedor incomplete combustion of the fuel. A computercontrol system could optimize the fuel:air ratio bycontrolling the rate at which each is introduced intothe combustion chamber.

Electric Motors

Electric motors are the workhorses of the indus-trial sector. They power pumps, fans, and compres-sors, and drive heating and ventilation systems. Inthe industrial sector, motors use 65 to 70 percent of

82 Pumps alone account forindustrial electricity.about 31 percent of total electricity used by electricmotors in the United States.83 Thus, there is asignificant potential for energy savings.

Standard electric motor efficiency generallyranges from 80 to 90 percent. By increasing the ironand copper content of the core and windings,respectively, energy efficiencies can be improved tobeyond 95 percent. This incremental increase maynot seem significant at first blush, but even smallincreases in electric motor efficiency could translateinto considerable savings. Electric motor capitalcosts are only a small fraction of their operatingcosts.84 A typical large industrial motor uses elec-tricity that costs 10 to 20 times its capital cost peryear. Thus, even a 1 percent gain in efficiency couldtranslate into significant savings.85

Crucial to achieving greater energy efficiencieswith electric drive is the ability to control motorspeed. Typically, pumps and fans need to vary speedto accommodate changing process needs. This isoften done by operating the pump or fan at full speedand then throttling speed with a partly closed valveor damper. When this method is used, enormousenergy losses are realized. According to one esti-mate, industrial and commercial pumps, fans, andcompressors have average annual energy losses of20 to 25 percent.86 The adjustable-speed drive,which is commercially available, can improve effi-ciency by 10 to 40 percent.87

New high-efficiency motors can reduce magnetic,resistance, and mechanical losses by more than 50percent, compared to the electric motor of a decadeago. The use of higher quality materials and innovativedesign have made these improvements possible.Together, high-efficiency motors and adjustable-

gz~nold p. FiCke~ Clark W. &U.ngs, and Amory B. Lovins, “Effkient U* of Ekcticity, ‘‘ ScientijicAmerican, vol. 263, No. 3, September 1990,p. 67.

gso~ Ridge National Laboratory, op. cit., footnote 25, p. 68.84u.s. ConW~s, offl~e of T~~olo~ Assessment, Indus~”al Energy use, op. cit., fOOhlOte 8, p. .50.

ssFicke~ et al., op. cit., footnote 82, p. 67.86s~F. Baldwin, “Energy EfiIcient Motor Drive Systems,’ Elecm”city: Eficient End-Use and New Generation Technologies and Their Planning

Implications, Thomas B. JohanssoIL Birgit Bodhmd, and Robert H. Williams (eds.) (Lund, Sweden: Lund University Press, 1989), p. 33.sTFickett et al., op. cit., footnote 82, p. 68.


Table 2-7—Estimated Energy Used To Produce Paper and Paperboard Products (in million Btu per ton produced)

From mixed recycled paperFrom 100%

. .Minimum virgin Change due

virgin wood fiber content to recyclingProduct Energy use (percentage) Energy use (percentage)

Paper products:Newsprint . . . . . . . . . . . . . . . . 44.33 0 34.76 –21 .6Printing paper . . . . . . . . . . . . . 67.72 16 43.43 -35.9Packaging paper . . . . . . . . . . 47.07 70 43.48 -7.6Tissue paper . . . . . . . . . . . . . . 68.52 0 29.46 -57.0Paperboard products:Liner board . . . . . . . . . . . . . . . 14.46 75 36.28 +150.9Corrugated board . . . . . . . . . 37.22 0 36.28 -2.5Box board . . . . . . . . . . . . . . . . 25.97 0 36.25 +39.6Food service board . . . . . . . . 29.19 100 N/AOther paper board . . . . . . . . .

—17.65 0 36.32 +105.8

Construction board . . . . . . . . 31.71 65 32.24 +1.7SOURCE: T. Gunn and B. Hannon, “Energy Conservation and Recycling in the Paper Industry,” Resources and ErMr,gy5:243-260, 1983.

speed drives account for about half of the totalpotential energy savings in U.S. motors.88

Significant energy savings can also be realized bybetter matching motor size to the load, improvedmaintenance, and the use of controls to regulate,among other things, the electricity supplied to themotor and the torque transmitted to the machine.89

Pulp and Paper Industry

The pulp and paper industry is a major energyuser. In 1985 (the most recent year for which data areavailable), the industry used 2.21 quads, making itthe fourth largest energy user of primary energy inthe industrial sector. A number of opportunities existto improve efficiency. Several of the cross-cuttingtechnologies discussed earlier can offer significantenergy savings. For example, the use of computercontrol systems and sensors to optimize the combi-nation of heat and chemicals can cut energy costsand improve pulp quality. In one mill, sensors andcontrols reduced steam requirements by 19 per-cent. 90

Technologies that integrate fermentation into theconventional pulping process can also offer energy

savings. They include biopulping, chemical pulpingwith fermentation and black liquor phase separation,and ethanol organosolv pulping. A substantial amountof research is still needed for each of these processes.

Recycling waste paper may provide further en-ergy savings. Recycled waste paper, or secondaryfiber, can be used to make various paper and paper-board products. Using recycled fiber for some paperproducts, like newsprint, printing paper and tissue,may require less energy. Savings can result fromreducing energy demand in the process of makingpaper from waste paper and from a reduction in needto harvest and transport timber. However, savingscould be offset by the energy needed to collect,transport, and de-ink the waste paper .91 Based onstudies done in the early 1980s, estimates of energyused to produce paper and paperboard products areshown in table 2-7.

According to the U.S. Environmental ProtectionAgency (EPA), paper and paperboard recoverytotaled 18.4 million tons in 1988, a recovery rate of25.6 percent. This compares to a recovery rate of16.7 percent in 1970.92 Paper and paperboard millsare the major consumers of secondary fiber.

8%id.a%id.~mc H. ROSS and Daniel Steinmeyer, “Energy for Industry,” Scientific American, vol. 263, No. 3, September 1990, p. 94.glF~r a more ~.depth d~as~ion of ~yc@ technology= ~ bets, s= Us. Co=ss, ~lce of TecMology Assessment, Facing America’s

Trash: What Nextfor Municipal Solid Waste? OTA-O-424 (Washington, DC: U.S. Government Printing Offke, October 1989).92u.s. Environment@ fiotWtion Agmcy, Ctiractenzation Of Muni~pal solid waste in the Unitedstates: ]990 Update, EP..53O-SW-9O-O42, J-

1990, pp. ES-7, 11.gsMuch of the ~ormation in this section is drawn from the OTA repo~ Industrial Energy Use, Op. Cit., fOOtnOte 8, pp. 99-100.


Photo credit: American Petroleum Institute and Exxon Corp.

A large petroleum refinery complex.

Petroleum Refining Industry93

A number of energy efficiency opportunities havebeen identified in the petroleum refining industry.The most productive options appear to be in theareas of improved combustion, the recovery oflow-grade heat, and the use of process modifica-tions.

The greatest single loss of energy in a refineryoccurs during the final cooling of process streams.Where feasible, heated streams first could be used toheat other process streams, thus reducing the energyneeded to cool. However, opportunities for recover-ing significant amounts of low-level heat are un-likely to be found in existing plants but in newfacilities that are designed to optimize heat recovery.Opportunities focus on how to recover heat in the200 to 250 degrees Fahrenheit range and improve

heat exchange by better matching the heat sourceand heat sink. A 1985 survey indicated that im-proved heat exchange could reduce refinery energyuse by about 9 percent. The survey also noted thatprocess modifications could save up to 11 percent ofenergy use.94

Process heaters and steam boilers also offeropportunities for reducing energy use. Optionsinclude improving combustion by using stack gasanalyzers and combustion control instrumentation;reducing stack gas temperatures by using air pre-heater to heat incoming combustion air; and install-ing convection sections at the heater outlets to heatincoming feed or to generate steam.

Continued improvements in computer controlsystems and sensors offer energy-savings benefits aswell. In addition to reducing energy use, these

and “Survey Plants for Energy Savings,’Hydrocarbon Process, vol. 64, No. 7, pp. 51-56; reported Oak RidgeNational Laboratory report, op. cit., footnote 25, p. 76.


systems improve performance, increase output, andoptimize product specifications. A number of energymanagement control systems are available today.One control system company estimates that energysavings of 5 to 10 percent can be realized in thepetroleum refining industry.95

Steel Industry

While the energy intensity of steelmaking hasdecreased over the years, steelmaking is still one ofthe most energy-intensive industries. The steelindustry includes blast furnace-based integratedmills; nonintegrated minimills; and independentproducers of wire, bars, and pipes who purchase andprocess semifinished steel.

All stages of steel production use energy to alterthe chemical composition of the metal or to work themetal into useful forms and shapes. The industry hasa number of options to save energy. These includethe electric-arc furnace and continuous casting. Theelectric-arc furnace saves energy by allowing thesubstitution of scrap metal for iron ore. This methoduses about 50-percent less energy than the blastfurnace or basic oxygen furnace methods.

Continuous casting saves energy by eliminatingthe need for ingot stripping, heating, and primaryrolling. Continuous casting reduces energy use byabout 50 percent, as compared to ingot casting. Also,the yield is much greater than from ingot castingbecause less metal must be returned to the steelmak-ing process in the form of waste and unfilled ingotmolds. Continuous casting increased from 12 per-cent in 1977 to 53 percent in 1986.96 High productquality and yield and reductions in production costsare responsible for the increase.

A new steelmaking process—thin slab casting—is attracting the attention of the industry worldwide.This innovative process has the potential to reduceenergy use and production time considerably. Forexample, the final slabs, which are only one-tenth ofan inch thick, can be made in only 3 hours instead ofas long as a week using conventional procedures.Steel industry analysts indicate that the processcould change production methods throughout the

Photo credit: American Iron and Steel Institute

Steel slab emerging from a continuous slab caster.

industry. The first commercial use of thin slabcasting in the United States is done at the NUCOR,Inc. plant in Indiana.97

Also, the innovative direct and ore-to-powdersteelmaking processes could offer substantial en-ergy savings. The direct steelmaking process re-places the coke-oven/blast furnace steps with onecontinuous process. The key to its success iseffectively transferring heat from postcombustion tothe bath. Another advantage of the direct steelmak-ing process is that it can use either iron ore or scrap.ORNL estimates that the process can reduce energyuse by 20 to 30 percent and yield production ratesthat are two to three times higher than those of a blastfurnace.98

The ore-to-powder steelmaking process elimi-nates the ore-melting process with magnetic separa-tion and chemical leaching. ORNL estimates thatthis method may reduce energy use by 40 percentand decrease capital costs. The need for highlyrefined magnetic separation may be a technicalbarrier to using this method.99

Laboratory, op. cit., footnote 25, p. 78. p. 86.

Steel Faster and Cheaper,”The New Times, Business Technology, Feb. 27, 1991, pp. D-6, D-7. National Laboratory, op. cit., footnote 25, p. 88.


Table 2-8-Technologies for Improving Energy Efficiency in the Steel Industry

Investment option Energy efficiency-improving characteristics

Dry-quenching of coke . . . . . . . . . . . . . .

Coke-oven gas desulfurization . . . . . . .Blast furnace top-gas turbine . . . . . . . . .External desulfurization of hot metal . . .

High-pressure blast furnace . . . . . . . . . .Electric-arc furnace (EAF) . . . . . . . . . . .

Water-cooled panel, EAF . . . . . . . . . . . .

Oxyfuel burners, EAF. . . . . . . . . . . . . . .

Open hearth, shrouded, fuel-oxygenlances. . . . . . . . . . . . . . . . . . . . . . . . . .

Basic oxygen furnace (BOF) gascollection. . . . . . . . . . . . . . . . . . . . . . .

Scrap preheating, BOF. . . . . . . . . . . . . .Secondary, ladle refining, EAF . . . . . . .Closed system ladle preheating . . . . . . .Continuous casting . . . . . . . . . . . . . . . . .

Thin slab casting . . . . . . . . . . . . . . . . . . .Continuous slab reheaters. . . . . . . . . . .Continuous annealing and reheating

systems. . . . . . . . . . . . . . . . . . . . . . . .Direct rolling . . . . . . . . . . . . . . . . . . . . . .Indication heating of slabs/coils.. . . . . .Steam-coal injection into the

blast furnace . . . . . . . . . . . . . . . . . . . .

Recovers waste heat of hot coke from ovens; saves coke; reduces environmental pollutionbecause coke is quenched in a closed system.

Natural gas substitute. Some loss of calorific value, but improved product quality.Recovers waste energy by cogeneration. Only possible with the best high-pressure furnaces.Saves coke by allowing lower slag volume and hot metal temperature in the blast furnace.

Some energy used in desulfurization.Lowers coke consumption.Allows for increased use of scrap, thereby lowering overall energy requirements for steel

production.Allows for higher productivity and net energy savings in melting when refractory consumption

is considered.Saves electrical energy and reduces melting time. Total energy consumption maybe

increased.

Reduces fuel requirements in the open hearth. May prolong useful life of open hearth.

Recovers calorific value of carbon monoxide with net energy savings.Allows for greater use of scrap, thereby saving energy in ironmaking.Saves electrical energy by removing refining function from EAF.Saves natural gas used for preheating ladles.Increases yield, thereby decreasing overall energy requirements; saves fuel gas in ingot

reheating.Has the potential to reduce energy use and production time.Saves clean fuel gas through increased efficiency.

Saves clean fuel gas through increased efficiency.Saves clean fuel gas through the elimination of slab reheating.Allows fuel switching to electricity, conserves total energy, and increases yield.

Allows fuel switching from more expensive gas or oil. Technology should be available in5 years.

SOURCE: Office of Technology Assessment, 1991.

A number of other opportunities are summarizedin table 2-8. Many of these options require retrofit-ting existing equipment. Some of the energy-savingsopportunities will result in additional benefits suchas a reduction in environmental impacts and animprovement in product quality.

Chemicals Industry100

Of the four industries examined, the chemicalsindustry is by far the most complex. It producesseveral thousand products and uses the most energyof the four industries. Table 2-9 shows six of themost energy-intensive processes in chemical manu-facturing.

Dramatic improvements in energy use can resultfrom changes in physical separation. According toOTA, incremental improvements in the distillation

process have achieved 25-percent energy savings inmany plants.

Alternative approaches to conventional distilla-tion include vacuum distillation, freeze crystalliza-tion, and liquid-liquid (solvent) extraction. Theincreased cost-effectiveness of turbocompressorsand advances in vacuum pumps and cryogenictechnology have vastly increased the relative attrac-tiveness of both vacuum distillation and crystalliza-tion. The most appealing characteristic of freezecrystallization as a separation technique is that theprocess requires less energy. About 150 Btus areneeded to freeze a pound of water compared to about1,000 Btus to boil water in the conventional distilla-tion process.

The most promising of the alternative approachesto conventional distillation appears to be liquid-liquid extraction, which uses a solvent with a high

lmMuch of the info~tion in r.his s~tion is drawn from the OTA report, Zndusm.al Energy Use, Op. Cit., fOOtaOte 8, pp. 115.


Table 2-9--Energy-lntensive Processes inChemical Manufacturing

Electrolysis includes all industrial electrolytic processes in whichelectricity is used in direct chemical conversion.

Fuel-heated reaction for processes that require some type ofheat to force a chemical reaction to take place can besubdivided into low- and high-temperature operations. Energysources include steam (except for high-temperature reaction),natural gas, residual oil, distillate oil, and even fluidized-bedcoal combustion. Where precise temperature regulation isrequired, natural gas and distillate fuel oil are used.

Distillation processes include those that require physical separa-tion of end products from both feedstocks and byproducts byevaporation and condensation.

Refrigeration includes processes that compress and expand arefrigerant, such as ammonia or a fluorocarbon, for thepurpose of cooling feedstocks or products below ambienttemperatures.

Evaporation includes those processes that use passive-evaporation cooling. In general, the evaporated water is lost tothe atmosphere, and the heat energy is unrecoverable.

Machine drive is used by many chemical industry processes topump, compress, or move feedstock and end product materi-als. Machine drive arises from electric motors, steam turbines,or gas turbines. A subcategory of machine drive processes-mixing and blending (especially in polymerization proc-esses)--can be very energy intensive due to the high viscosityof the materials.


affinity for one component of a mixture but immisci-ble with the remaining components. One companyreported that this technology saved an estimated40,000 barrels of oil equivalent annually.

Also, the use of membrane separation technologyin the chemicals industry is growing. The technol-ogy has been used to replace other more costlyseparation technologies such as cryogenics, pressureswing adsorption, and mercury or asbestos dia-phragm electrolytic processes. One of its majoradvantages is that membrane separation systems canimprove product quality.

Continued improvements in energy managementand advances in computer control systems andsensors will contribute to reducing energy use in thechemicals industry. ORNL estimated that the devel-opment of a full component of sensors could reduceenergy use by 10 to 15 percent in both the chemicalsand pulp and paper industries.101

OPPORTUNITIES FOR ENERGYEFFICIENCY IMPROVEMENTS INTHE TRANSPORTATION SECTOR

Since the early 1970s, efficiency improvements inthe transportation sector have been dramatic. Theretirement of older, less efficient vehicles and theintroduction of new, more efficient models havebeen responsible for these improvements.

The fuel efficiency of the new car fleet doubledbetween 1974 and 1989. The average fuel efficiencyof the light-duty fleet should continue to rise over thenext decade, but the rate of improvement will beslowed by a leveling off of further efficiencyimprovements in new vehicles. In the current OTA“business as usual” scenario, new car fleet econ-omy for 2001 is 33 mpg.102

The energy intensity of commercial air travel hasbeen cut by more than one-half since 1970, as aresult of more efficient aircraft and operations.However, efficiency improvements in heavy trucktransport has been less dramatic than those achievedby passenger cars.

In recent years, concerns about urban smog haverenewed interest in alternative fuels. Energy securityconcerns have further stimulated interest in thesefuels. Alternative fuels of primary interest for theU.S. light-duty fleet are methanol, ethanol, com-pressed or liquefied natural gas, hydrogen, andelectricity. The advantages and disadvantages ofthese fuels are discussed later.

Automobile Efficiency

OTA has concluded that the fuel economy of thenew car fleet could range from 29.2 to 30.3 mpg in1995. With no fuel economy standards or other newpolicies that could alter fuel economy, such asgasoline taxes, and no significant changes in marketforces, domestically manufactured new car fleeteconomy will be about 28.3 mpg. Total new car fleeteconomy will be about 29.2 mpg, assuming a35-percent import share. OTA believes that theindustry could realistically meet a higher level—30.3 mpg—for 1995.

Significant.ly higher levels of fuel efficiency in thelong term (by 2010) can be achieved without drastic

IOIO& ~dge FJatio~ Uih-iw-y, op. cit., footnote 25, P. 69.10~.s. cowe~~, office of TW~olo= Assesment, Improving Automobile Fuel Economy: New &a&r&, New Approaches, fOlthUILlliIlg ~pofi.

Chapter 2—Technologies Affecting Demand . 47

shifts in size and performance, using only technolo-gies that are generally expected to be commercial-ized shortly after the turn of the century. A fleet fueleconomy of 45 mpg is possible. Some of thetechnology changes needed to achieve this fueleconomy level include extensive use of aluminumand fiberglass reinforced plastics, 5-speed automatictransmissions, improved packaging, low-rolling re-sistance tires, and engine improvements, such asweight reduction of reciprocating engine compo-nents, low-friction pistons and rings, five-valvedesigns, and intake valve control.

By 2010 even higher levels of fuel efficiency arepossible if significant technological advances arecommercially available in the 2000-10 timeframe.For example, a fleet fuel economy of about 55 mpgcan be attained if maximum weight and dragreduction and packaging efficiency benefits are fullyexploited. Also, the direct-injection diesel engineand turbocharging must capture 20 percent of thesmall car market to realize this level of fuelefficiency.

Electric vehicles can make a major contribution toefficiency gains as well as urban air quality, but onlyif storage technology is improved to address con-sumer acceptance and cost considerations. A forth-coming OTA report, Improving Automobile FuelEconomy: New Standards, New Approaches, dis-cusses indepth the potential for long-term auto-motive fuel efficiency.

Table 2-10 lists a number of technologies whoseintroduction or wider use offer the potential toimprove fleet fuel efficiency. In addition, there area number of technologies at various stages ofdevelopment that appear to show promise of achiev-ing large efficiency gains. For example, new designsof a two-stroke engine for automobile applicationsmay be capable of achieving fuel economy gains of11 to 14 percent over conventional four-strokeengines. However, questions remain about the abilityof the engine to comply with emissions standards.The advanced two-stroke engine employs directinjection of fuel and forced air scavenging. Due toforced air scavenging, the exhaust stream is lean, andthe technology (three-way catalysts) for reducing

NOX emissions is not yet available. This problemmay be solved with better control of airflow, and itappears possible that with further development theengine can meet future NO, standards.103

Other engine designs said to hold considerablepromise include direct-injection diesels and low-heat rejection engines (also called adiabatic diesels).The direct injection (DI) diesel has seen limitedpassenger car application in Europe. The DI dieselwas rated by Volkswagen and Mercedes Benz asbeing 12 to 15 percent more efficient than theindirect injection (prechamber) diesel. Previousproblems meeting nitrogen oxide and particulateemissions standards have been solved. Audi plans onintroducing a direct injection diesel in the UnitedStates. 104 Stricter emissions requirements couldpose a problem, however.

Adiabatic diesels eliminate the cooling systemrequired by current engines and insulate cylindersand pistons to retain thermal energy within thecombustion chamber and exhaust system. The abil-ity of this and other diesel engines to meet morestringent emissions standards is in some doubt.

Heavy-Truck Efficiency

Opportunities for heavy-truck fuel efficiencygains include better aerodynamics, reduced rollingresistance, and the development of adiabatic diesels.In a conventional diesel engine, about 25 percent ofthe fuel energy is lost as waste heat to the coolingand lubricating of fluids, and another 35 percent islost as waste heat in exhaust gases. The adiabaticengines offer the greatest potential for improvingefficiency of freight transport. It may be capable ofachieving 40 to 50 percent decreases in energy lostto waste heat.105

The ceramic gas turbine has also be identified asa potentially attractive heavy-duty engine because ofits anticipated fuel efficiency and flexibility.

Aircraft Efficiency

Passenger travel by commercial jetmore than tripled since 1970. At theenergy use increased only by aboutHigher load factors, improved engine

aircraft hassame time,43 percent.efficiencies

los~erwand Environmental tiySiS, ‘‘AnAssessment of Potential Passenger Car Fuel Economy Objectives for 2010,’ contractor report preparedfor the U.S. Environmental Protection Agency, February 1991, pp. 4-21,4-22.

lwlbid., p. 4-24.IOSO* ~dge Natio~ Laboratory, op. cit., foo~ote 25, p. 3.


Table 2-10--Reported Efficiency Improvements for Developed or Near-Term Technology

Percent improvements over 1987 basea

EEA Industryestimates estimates

Technology (% F/E benefit) (% F/E benefit) Commentb

Front-wheel drive . . . . . . . . . . . . . . . . . . . . . . . . .Drag reduction . . . . . . . . . . . . . . . . . . . . . . . . . . .4-speed auto transmission . . . . . . . . . . . . . . . . .Torque converter lock-up . . . . . . . . . . . . . . . . . .5-speed auto transmission . . . . . . . . . . . . . . . . .Electronic transmission control . . . . . . . . . . . . .Continuously variable transmission (CVT) only.Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

oil (5W-30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Advanced tires . . . . . . . . . . . . . . . . . . . . . . . . . . .

Engine improvementFuel injection

—Throttle-body fuel injection . . . . . . . . . . . . .—Multipoint fuel injection (over throttle body

injection) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Overhead camshaft . . . . . . . . . . . . . . . . . . . . . .Roller cam followers . . . . . . . . . . . . . . . . . . . . . .Low-friction pistons/rings . . . . . . . . . . . . . . . . . .

4 valves per cylinder engine . . . . . . . . . . . . . . . .4 cylinder replacing 6d . . . . . . . . . . . . . . . .6 cylinder replacing 8d . . . . . . . . . . . . . . . .

Intake valve control . . . . . . . . . . . . . . . . . . . . . .

10.02.34.53.02.50.53.5

-0.5

0.50.5

3.03.0

6.02.02.0

5.08.08.06.0

0.5-1.02.03.0

1.5-2.00.1-2.0

0.51.0-2.5

1.0

0.21.0

3.01.0-3.0

1.0-3.53.02.0

1.0-3.5(-2.0)-0.5

1.0-3.51.5-3.0

Over 1970s rear wheel drive vehiclesPer 10 percent coefficient of drag reductionWidely used in 1988Wldely used in 1988Over 4-speed automatic transmissionFor automatic transmission onlyOver 4-speed automatic transmission oars onlyVaries between 0.3 and 0.7 depending on

market classAlready used in some large oars—

Widely usedWidely used

Over old overhead valve designWidely used in domestic oarsExcept for specific engines alreadyincorporating technologyAt constant performanceAt constant performanceAt constant performanceSynergistic effects with 5-speed auto/CVT

aThe list of technolo~ benefits cannot be summed to provide an overall benefit.bFord Motor CCL% ex~anations for the significant differences between EEA and indU.Stry estimates:

Front-wheel driv+Ford’s analyses and data indicate that front-wheel drive provides a smali potential forfuel economy improvement because of a slightreduction in vehicle weight (60 pounds) for mid-size and smaller cars. Ford rear-wheel drive models introduced since the late 1970s are 660 pounds lighterthan their predecessors. There are no technological reasons for a net efficiency gain with front-wheei drive.

4 valve over 2 valve engine—8asad on U.S. Environmental Protection Agency data, Ford indicates that the average fuei economy improvement is 3percent for equal performance engines which have incorporated 4-valve designs. The 10:1 compression ratio assumed by EEA may not be appropriate forall vehicles.

4 cylinder replacing 6 cylinder; 6 cylinder replacing 8 cylinder-Reducing the number of cylinders will reduce engine friction but increase luggingspeeds. As a result, 4-cylinder engines tend to have higher idling speeds and thus lower fuel economies than 6-cylinder engines; 6-cylinder engines haveslightly higher iugging speeds than 8-cylinder engines. Thus, no substantial fuel economy effect is realized by replacing 8 cylinders with 6.

Intake valve control-Systems that provide 6 percent fuel economy benefits are not suitable for typical engines because they severely compromisewide-open throttle performance.

%ecause newly designed engines all have multiple impmvements, the efficiency benefits representad by individual changes are not easily separated.dl gW Distribution: 20.5 percent-V-8; 29.5 percent—V-6; 50 percent-4 cylinder)

KEY: EEA - Energy and Environmental Analysis. F/E - Fuel efficiency.

SOURCES: Energy and Environmental Analysis, “AnAssessment of Potential Passenger Car Fuel Economy Objectives for2010,” contractor report preparedfor the U.S. Environmental Protection Agency, February 1991; and the Ford Motor Co.

and aerodynamics doubled seat-mile per gallonefficiencies. 106

Aircraft efficiency will continue to improve asnewer, more efficient planes replace the older, lessefficient ones. For example, the Boeing 747-400 andthe 737-500 are 10 to 20 percent more efficient thanthe equipment they replaced. Also, advances inengine technology, aerodynamics, controls, andstructural materials for frames and high-temperaturematerials for engine components will be required toachieve improvements in fuel efficiency in thefuture.

Engines

The ultrahigh-bypass turbofan engine achievesgreater thrust per pound of fuel used by sending aslittle as 15 percent of the air entering the engineshroud through the combustor. The remainderpasses around the core and is accelerated by turbineengine-driven fans.

Ducted ultrahigh-bypass engines have yieldedefficiency improvements of 10 to 20 percent. Un-ducted, or propfans, using advanced propeller de-signs, can achieve 20 to 30 percent efficiency

l~Ibid., p. 5.


improvements over current high-bypass turbofanengines. However, these advanced engines costtwice as much as current-generation high-bypassengines. 107

Improvements in engine efficiency are dependenton the development of high-temperature materials,such as metal matrix and ceramic matrix composites.These materials will allow higher turbine inlettemperatures, reduce the need for airfoil cooling,permit higher pressure ratios, and reduce engineweight. Because these ceramic materials are subjectto brittleness and sensitive to flaws, they are currentlynot being used. To achieve advanced engines’efficiency gains, research will have to focus onhigh-temperature materials.

Aerodynamics and Aircraft Weight

Further reductions in aerodynamic drag andairframe weight are needed to achieve future energyefficiency improvements. Advances in computerhardware and software programs will enable engi-neers to optimize aircraft design. In addition, con-trolling air flow to minimize turbulence is necessaryto improve efficiency. Some promising conceptsinclude using suction on key wing surfaces tosmooth airflow and changing wing shapes to adaptto changes in speed, altitude, and weight. Perhapsthe most promising concepts involve puttinggrooves in the portion of the wing in front of the spar,through which air is vacuumed to reduce turbulence,with ultrasmooth wing surfaces behind to maximizethe area of naturally laminar flow. It is expected thatsome of these wing concepts will be introduced inthe early 1990s. Two of Airbus’ new models willinclude variable-camber wings that adapt theirprofiles automatically during flight to matchchanges in weight, speed, and altitude.108

In addition, composite materials have the poten-tial for reducing frame weight by 30 percent withequal or better structural strength. Today, compositematerials are used only for a limited number ofcomponents such as vertical fins and the horizontalsurfaces of sailplanes. It is possible that futureadvances could enable planes to be constructed of80-percent composites by the 21st century.109

Alternative Fuels110

Alternative fuels of primary interest for the U.S.light-duty fleet are:

. reformulated gasoline,

● alcohol fuels-methanol and ethanol,● compressed or liquefied natural gas (CNG or

LNG),. hydrogen, and● electricity.

Interest in these fuels is based on their potential toaddress environmental and energy security con-cerns. The use of alternative fuels as a substitute forgasoline is being promoted by EPA, the CaliforniaEnergy Commission, and others as a way to addressthese concerns.

Much is already known about alternative fuels.Not surprisingly, each of these fuels has disadvan-tages as well as advantages. Aside from fuel cost, themajor barrier that most alternative fuels mustovercome is the need to compete with the highlydeveloped technology and massive infrastructurethat exists to support the production, distribution,and use of gasoline as the primary fleet fuel.Concerns about the performance and range ofvehicles that use alternative fuels are also barriers tointroduction and public acceptance. Nevertheless,each of the suggested alternative fuels has one ormore features, e.g., high-octane, low emissionspotential, that imply some important advantage overgasoline in powering vehicles. Table 2-11 presentssome of the tradeoffs among the alternative fuelsrelative to gasoline.

The technologies for producing alternative fuelsare still developing and changing. Ongoing researchand development programs are attempting to addresstechnical problems and reduce overall costs. Forexample, the success of ongoing research on low-cost manufacture of ethanol from wood waste wouldradically improve ethanol’s environmental and eco-nomic attractiveness. The outcome of this and otherresearch initiatives is still uncertain.

1°71bid., p. 6.1°81bid., p. 7.l@?J.bid.llOMuch of the ~o~tion in thk s~tion is drawn from U.S. Con~ss, Oftlce of Technology Assessment Replacing Gasoline: Alternative Fuels

for Light-Duty Vehicles, OTA-E-364 (WashingtoxL DC: U.S. Government Printing OffIce, September 1990).


Reformulated Gasoline reactivity of these emissions. It is appealing becauseit requires no vehicle adjustments or new infrastruc-

Reformulated gasoline is gasoline that has been ture, aside from modifications to existing refineries.reblended specifically to reduce exhaust and evapo- Although reformulated gasoline is now being sold inrative emissions and/or to reduce the photochemical many locations in the United States, these gasolines

Table 2-1 l—Pros and Cons of Alternative Fuels

Fuel Advantages Disadvantages

Methanol . . . . . . ● Familiar liquid fuel.● Vehicle development relatively advanced.. Organic emissions (ozone precursors) will have

lower reactivity than gasoline emissions.● Lower emissions of toxic pollutants, except

formaldehyde.● Engine efficiency should be greater.● Abundant natural gas feedstock.● Less flammable than gasoline.● Can be made from coal or wood (as can gasoline),

though at higher cost.● Flexfuel “transition” vehicle available.

Ethanol . . . . . . . ● Familiar liquid fuel.● Organic emissions will have lower reactivity than

gasoline emissions (but higher than methanol).● Lower emissions of toxic pollutants.● Engine efficiency should be greater.● Produced from domestic sources.● Flexfuel “transition” vehicle available.● Lower carbon monoxide with gasohol (1 O percent

ethanol blend).● Enzyme-based production from wood being devel-

oped.Natural gas . . . . ● Though imported, likely North American source for

moderate supply (1 mmbd or more gasoline dis-placed).

● Excellent emission characteristics except for poten-tial of somewhat higher nitrogen oxide emissions.

● Gas is abundant worldwide.● Modest greenhouse advantage.● Can be made from coal.

Electric . . . . . . . ● Fuel is domestically produced and widely available.● Minimal vehicular emissions.● Fuel capacity available (for nighttime recharging).● Big greenhouse advantage if powered by nuclear or

solar.. Wide variety of feedstocks in regular commercial

use.

Hydrogen . . . . . ● Excellent emission characteristics, minimal hydro-carbons.

● Would be domestically produced.● Big greenhouse advantage if derived from pho-

tovoltaic energy.● Possible fuel cell use.

Reformulatedgasoline.. . . . ● No infrastructure change except refineries.

● Probable small to moderate emission reduction.● Engine modifications not required.● May be available for use by entire fled, not just new

vehicles.

● Range as much as one-half less, or larger fuel tanks.● Would likely be imported from overseas.● Formaldehyde emissions a potential problem,

especially at higher mileage, requires improvedcontrols.

● More toxic than gasoline.● Ml 00 has nonvisible flame, explosive in enclosed

tanks.● Costs likely somewhat higher than gasoline,

especially during transition period.● Cold starts a problem for M1OO.● Greenhouse problem if made from coal.● Much higher cost than gasoline.● Food/fuel competition at high production levels.● Supply is limited, especially if made from mm.● Range as much as one-third less, or larger fuel tanks.● Cold starts a problem for E1OO.

● Dedicated vehicles have remaining developmentneeds.

● Retail fuel distribution system must be built.● Range quite limited, need large fuel tanks with added

costs, reduced space (liquefied natural gas (LNG)range not as limited, comparable to methanol; LNGdisadvantages include fuel handling problems andrelated safety issues).

● Dual fuel “transition” vehicle has moderate perform-ance, space penalties.

● Slower refueling.● Greenhouse problem if made from coal.

● Range, power very limited.● Much battery development required.● Slow refueling.● Batteries are heavy, bulky, have high replacement

costs.● Vehicle space conditioning difficult.● Potential battery disposal problem.● Emissions for power generation can be significant.● Range very limited, need heavy, bulky fuel storage.● Vehicle and total costs high.● Extensive research and development effort required.. Needs new infrastructure.

● Emission benefits remain highly uncertain.● Costs uncertain, but will be significant.● No energy security or greenhouse advantage.

SOURCE: Office of Technology Assessment, 1991,

Chapter 2-Technologies Affecting Demand . 51

have been rushed into the market in advance ofresearch results, and their formulations may changeas ongoing research begins to identify optimalgasoline formulae.

Methanol

Methanol, which is commonly known as woodalcohol, is a light volatile flammable alcohol usuallymade from natural gas but can be manufactured fromcoal and biomass. It has an energy content of abouthalf that of gasoline (i.e., the fuel tank has to be twiceas big for the same range), an octane level of 101.5,and a much lower vapor pressure than gasoline.

The advantages of methanol include its potentialto reduce urban ozone, particularly in cities that havesignificant smog, and its high-octane level, whichallows higher (or leaner) engine air-fuel and com-pression ratios. Engines that operate at leanerair-fuel and higher compression ratios are more fuelefficient.

One of its disadvantages is its potentially highprice in relation to current gasoline prices. Theeconomic competitiveness of methanol continues tobe a source of controversy. Estimates of methanolcosts have ranged from competitive with gasoline tomuch higher than gasoline. OTA concludes thatmethanol will most likely be more expensive thangasoline in the early stages of an alternative fuelsprogram. Without government guarantees, metha-nol’s gasoline-equivalent price is likely to be at least$1.50/gallon. During the initial period, governmentguarantees could bring the cost down to as low as/$1.20/gallon if natural gas feedstock costs were verylow. Costs of manufacturing methanol from coalwill be much higher. A recent report by the NationalResearch Council estimates methanol-from-coal’scrude oil equivalent price to be over $50/barrel, andmethanol from wood, over $70/barrel.111

Another disadvantage of methanol is its low vaporpressure, which is problematic for cold weatherstarts. Also, methanol is more toxic than gasoline. Itis absorbed through the skin more quickly thangasoline, but prolonged or frequent contact isnecessary for acute symptoms to appear.112

Methanol is the most “ready” of the alternativefuels. Methanol for chemical use has been producedfor many decades and thus production technology iswell known. Recent attention has focused on thepotential for using methanol as an automotive fuel,either 100 percent methanol or mixed with up to15-percent gasoline. Vehicle technology capable ofburning a gasoline/methanol blend has been demon-strated and could be produced in a few years. Workis continuing on improving the efficiency, driveabil-ity, and emissions characteristics of methanol-burning engines.

A number of cities and States have expressedinterest in methanol use. California, for example, hasa program to stimulate the development of a fleet ofmethanol-capable vehicles. Moreover, Congress haspassed measures to stimulate development and salesof methanol-powered vehicles, and is consideringlegislation to develop alternative-fueled fleets incities suffering from ozone problems.

Ethanol

Ethanol is a grain alcohol that is produced byfermenting starch and sugar crops. It has an energycontent of about two-thirds that of gasoline and, likemethanol, an octane level of 101.5, and a muchlower vapor pressure than gasoline. Because of itshigh octane level, an ethanol-powered vehicle willoutperform an equivalent gasoline vehicle andprovide some improvement in energy efficiency.

Ethanol made from food crops would be the mostexpensive of the major alcohol fuels. Even so, it hasmanaged to gain support because of its potentialcontribution to the agricultural economy. Everyyear, nearly 1 billion gallons of ethanol are added toU.S. gasoline stocks to create gasohol. The additionof small quantities of ethanol to gasoline is viewedprimarily as a means to reduce carbon monoxideemissions; the use of 100-percent ethanol is viewedas a means to reduce concentrations of ozone inurban areas.

Improvements in the current production systemare needed to enhance ethanol’s prospects for use intransportation. SERI and others are conductingR&D on ethanol-from-biomass production proc-esses and have achieved important advances. SERI

lllcommitt= on fi~uction Tedmologies for Liquid Transportation Fuels, National Research Counc& “Fuels TO Drive @T FUtUR” (w_tOQDC: National Academy Press, 1990).

llzP.A.~c~ele, ~~Apew=tiveon~eF_bfli~, Toxicity, andEnviro~enM Safety Dis~ctiomBe~~n Methanol and Convention fidS, ”American Institute of Chemical Engineers 1989 Summer National Meeting, Philadelpl@ PA Aug. 22, 1989.


recently formed a cooperative partnership with theNew Energy Co. of South Bend, Indiana, to commer-cialize the process developed by SERI. SERI hopesto be able to produce ethanol-horn-biomass for nomore than $25/barrel of oil equivalent by the end ofthe decade.113

Currently, ethanol production is profitable be-cause the Federal Government and about one-thirdof the States subsidize ethanol use by partly exempt-ing gasohol (a 90-percent gasoline/10-percent etha-nol blend) from gasoline taxes. The current FederalGovernment subsidy amounts to $0.60/gallon.Under certain market conditions, ethanol productionmay reduce Federal crop subsidies and generatesecondary economic benefits to the Nation. How-ever, it also may generate large secondary costs bypromoting crop expansion onto vulnerable, erosivelands.

Natural Gas

Either compressed or liquefied natural gas canserve as an alternative fuel for vehicles. There areabout 700,000 CNG vehicles in use worldwide, withthe largest group in Italy. Generally, natural gas-powered vehicles are gasoline vehicles retrofitted touse either gasoline or natural gas. At current prices,dual-fueled vehicles are not cost competitive withgasoline-powered ones in most uses, and they willnot become so unless oil prices rise sharply whilegas prices stay low or gasoline is heavily taxed.

Most of these dual-fueled vehicles have lesspower and some driveability problems when pow-ered by natural gas. The power loss and drivabilityproblems are due to the design and/or installation ofthe retrofit components. Improvements in power anddriveability can be realized with more sophisticatedretrofit kits or in factory-built, dual-fueled vehicles.Nevertheless, dual-fueled vehicles will have a diffi-cult time competing with gasoline vehicles orvehicles fueled with other, higher energy densityfuels.

Single-fueled vehicles optimized for natural gasuse are likely to be more attractive in terms ofperformance and somewhat more attractive in termsof cost. The cost of pressurized storage will make thevehicles more expensive (about $700 to $800 more)than a similar gasoline-powered vehicle. A naturalgas-powered, single-fuel vehicle should be capable

of similar power, similar or higher efficiency, andsubstantially lower carbon dioxide (COZ) emissionsbut somewhat higher NOX emissions than an equiva-lent gasoline-powered vehicle. Natural gas-poweredvehicles have the potential to leak methane, which isthe prime constituent of natural gas. Methane is amore powerful greenhouse gas per molecule thanCOZ. In addition, the range of natural gas-fueledvehicles will continue to be unattractive compared togasoline-fueled vehicles.

The Ford Motor Co. has done extensive work withCNG vehicles, including light-duty car and trucks,as well as heavy-duty trucks.

Hydrogen

Hydrogen, which is the lightest gas, has a verylow energy per unit of volume because it is so light,but it has the highest energy content per pound ofany fuel. It can be used in a fuel cell and in internalcombustion engines. Hydrogen is available from anumber of sources. It can be produced from hydro-carbons or from water by several processes: 1) coalgasification; 2) combining natural gas and steam(steam reforming); 3) applying high temperatures,with or without chemicals, to water (thermal andthermochemical decomposition); 4) adding an elec-trolyte and applying a current to water (conventionalelectrolysis; potential sources of the electricity arediscussed in chapter 3), or by electrolyzing steamrather than water (high-temperature steam electroly-sis), or by using light with a chlorophyll-type chem-ical to split out the hydrogen (photolysis) fromwater. Currently, steam reforming of natural gas isthe least expensive production method.

Hydrogen’s primary appeal is its cleanliness and,ultimately, its enormous resource base (water). Ahydrogen-powered vehicle should emit virtually nohydrocarbons, particulate, sulfur dioxide, COZ orcarbon monoxide, and only moderate NO= emis-sions. Disadvantages of using hydrogen include itshigh cost, and low energy density (one-sixth that ofgasoline), and the need for onboard vehicle storage.Onboard storage can be either in the form of heavyand bulky hydrid systems that will adversely affectrange and performance, or in bulky cryogenicsystems that will reduce available vehicle space.Both are expensive.

113’ ’SERI Signs First Cooperative R&D Agreernen~” New Technology Week, vol. 5, No. 19, May 6, 1991, p. 8.


The thermal efficiency of a hydrogen-poweredengine should be at least 15 percent higher than anequivalent gasoline engine, and even higher in a fuelcell. As with other fuels, engine efficiency, perform-ance, and emissions are interdependent, and maxi-mizing one may increase or decrease the others. Forexample, operating very lean will increase effi-ciency but decrease power and driveability.

The development of a hydrogen-fueled fleet isstill in the early stages of research. Work needs to bedone on storage and delivery systems, large-scaleproduction systems, and engines. The productionsystem with the largest resource base--coal gasifi-cation-may be the closest to becoming fullycommercial. (The Lurgi gasifier is fully commercialand some others are arguably commercial.) How-ever, coal gasification will create substantial nega-tive impacts from COZ emissions. The Cool Waterintegrated coal gasification combined cycle planthas performed extremely well, and the next genera-tion technology is expected to achieve substantialimprovements in cost and efficiency. The Japaneseand West Germans have strong hydrogen vehicledevelopment programs, but they have produced onlya small number of prototype vehicles. Major uncer-tainties remain about the configuration and perform-ance of a hydrogen engine. Also, a breakthrough instorage technology may be needed, and work needsto be done on pipeline transport because purehydrogen will damage certain steels. Inhibitingagents to be added to hydrogen must be found, or aseparate pipeline infrastructure must be built.

Electricity

The use of electricity as a fuel has severaladvantages: available and adequate supply infra-structure, with the exception of home chargingstations, and virtually no vehicular emissions. Thelatter advantage can be particularly important inpolluted areas. Pollutants that are emitted at generat-ing stations that must be operated to charge thebatteries often play only a minor role in urban airquality, but do contribute to problems associatedwith long-range pollution transport, particularly acidrain and degradation of visibility. OTA has con-cluded that a fleet of several tens of millions ofvehicles could be supported by existing generatingcapacity, assuming that vehicles would be rechargedat night when electricity demand from most otheruses is low.

Disadvantages of electric vehicles (EVS) usingcurrent technology, in particular lead-acid batteries,include limited range, performance and capacity.Most EVs built to date have required recharging atabout 100 miles or less. They are also expensive tobuy and may require a special charger. DOEestimates the cost for a home recharging station to be$400 to $600.

Improving the prospects for electric vehicles inthe marketplace will depend on extending theirrange considerably and upgrading performance in avariety of traffic situations. This can be accom-plished by improving battery and powertrain tech-nologies. The outlook for significant improvementsin commercial battery technology appears promis-ing, but uncertainties remain about costs and theenvironmental implications of disposing and recy-cling associated with battery production. The ad-vanced batteries necessary for successful EV pene-tration in the urban market are too far away frommass production to allow reliable cost estimates tobe made. A number of advanced battery types showpromise. These include nickel/iron, nickel/cadmium,zinc/bromide, lithium/iron sulfide, sodium/sulfur,and metal-air.

Some analysts consider the nickel/iron batteryvery promising for the next generation of electricvehicles because it has demonstrated long lifecycleand ruggedness. This battery type, however, pro-duces large quantities of hydrogen during recharge,uses a lot of water, and is relatively inefficient.Leading European battery developers have halteddevelopmental work on nickel/iron batteries. Thehigh-temperature sodium/sulfur battery offers muchhigher energy and power densities than lead/acidand nickel/iron types. Also, it has no water require-ment, does not produce hydrogen when recharging,and has very high charging efficiencies. In the longterm, the metal air battery holds some promise. Thisbattery type has high power density and can berecharged rapidly by replacing the metal anodes,adding water, and removing byproducts. However,metal-air batteries are the farthest from commercialreadiness.

A consortium was recently formed to accelerateresearch on EV batteries. The consortium consists ofthe three U.S. automakers, the Electric PowerResearch Institute (EPRI), and several utilities. Themembers have proposed a 4-year, $300-millionR&D project that will focus on reducing or holding


Photo credit: General Motors Corp.

General Motors’ prototype electric vehicle, the Impact. TheImpact’s battery pack, shown being installed, takes up the

center portion of the vehicle. The current range of thevehicle is over 100 miles between charges. With improvedbatteries-a key hurdle facing this technology-both range

and efficiency would increase.

the line on battery costs, reducing weight, andincreasing power capacity. DOE will provide50 percent of the funding and participate in theproject, although it is not a member of the consor-tium.114

Over the years, interest in EVs has fluctuated, butrecent concerns about air quality have put thistechnology back on the R&D agendas of U.S.automakers. In January 1990, General Motors intro-duced the Impact, its most recent electric-poweredcar design. According to General Motors, the Impacthas a range of 120 miles at average highway speedsof 55 mph. Battery charging can be done by simplyplugging in an onboard charger and will requireabout 2 hours to complete. General Motors has notannounced production plans, and cost information isnot available.115

In addition, EPRI and the Chrysler Corp. recentlyannounced plans to develop an electric-poweredminivan suitable for passenger or light-service work.

The Chrysler electric-powered minivan will have atop speed of 65 miles per hour and will be able to go120 miles between charging. It will use a nickel/ironbattery with an onboard charging unit. Chryslerhopes to begin production and marketing by 1994.116

EPRI and General Motors also have a similarongoing project. Production of the General Motorselectric-powered van has just begun.117

Also, hybrid electric vehicles have been attractingattention as a way to exploit the respective advan-tages of gasoline and electricity. For example, in onetype of hybrid, an electric motor provides the motivepower, and a small gasoline-powered engine is usedas an electric generator to provide the range. Inanother type of hybrid, a small gasoline-poweredengine provides the motive power with an electricmotor providing additional power. Yet anotherhybrid is the fuel cell-powered electric vehicle. Afuel cell is used to charge the battery and an electricmotor provides the motive power. The fuel cell canoperate on hydrogen or reformulated methanol.

Fuel cell hybrids are at an early stage of develop-ment. Concerns about fuel cell cost and weight andlow power density represent important market barri-ers that will have to be addressed before the use ofvehicle fuel cell systems is a viable option.

OTHER FACTORS THAT AFFECTENERGY USE

Environmental Concerns

Recent concerns about environmental problemssuch as air pollution, ozone depletion, and thegreenhouse effect could influence how buildings useenergy and how buildings get energy. For example,the recently signed international agreement, theMontreal Protocol,118 set out a schedule for reducingproduction and consumption of many chlorofluoro-carbons (CFCs), the major source of ozone deple-tion. The Montreal Protocol requires participatingcountries with high CFC use per capita (greater than0.3 kilograms) to reduce production and consump-tion of the most common CFCS-CFC-11 and

Advanced Battery Consortium Has “ Federal Lands, Mar. 11,1991, p. 10; and “DOE Increase in Commitment to Electric Vehicle Battery R&D,” Jan. 14, 1991,

Highlights, To 14, p. 7.

destroying stratospheric ozone, 47 reached on a set of measures in September 1987. A stronger version was adopted in June 1990.


CFC-12-by 20 percent of 1986 levels in the next3 years, and to achieve a 50-percent reduction by1997, and a 100-percent phaseout by the year 2000.

CFCs are used primarily in refrigeration systems,including automobile air conditioners, refrigerators,and centrifugal chillers, and in building insulationfoams. In the United States, refrigeration accountsfor 80,000 tons of CFCs used per year, or about 22percent of the total. A typical refrigerator containsabout 1/2 pound of CFC in its cooling systems and2½ pounds in its foam insulation.119 CFCs a r e

released during the manufacturing process, servic-ing and disposal of air-conditioners and refrigera-tors. Some CFCs used in insulating foams are alsoreleased during the manufacturing process, but mostremain in the foam and slowly leak out over time.Therefore, a large reservoir of CFCs exist withinbuildings.

Alternatives to CFC insulation and refrigerantsare available, and others are being developed. Thechemicals industry is developing manufacturingprocesses for these products. In addition, alternativebuilding designs and construction techniques canreduce the need for air-conditioning and supplemen-tal insulation. Also, using air-conditioning technolo-gies based on waste heat or solar energy can exploitalternative ways to maintain comfortable tempera-tures in buildings.

In the transportation sector, concern about urbansmog and the greenhouse effect may have an impacton vehicle energy efficiency. The new more strin-gent emission standards, especially for NOX willforce manufacturers to tradeoff cost, fuel efficiency,and emissions. Historically, manufacturers havepursued a variety of strategies to achieve previousstandards. For example, to meet the 1981 emissionsstandards, many Japanese manufacturers chose touse oxidation catalyst technology and accepted anefficiency loss of 6 to 8 percent; General Motors metthe same standard with “closed loop” electronicfuel control systems with three-way catalysts thatincurred no efficiency loss. The effect of the newNO= standard (0.4 grams/mile) on fuel efficiency isnot clear-cut. One OTA contractor, Energy andEnvironmental Analysis, Inc., estimated the poten-tial fuel economy penalty (or gain foregone) to beabout 1 percent, with significant variation possible,

depending on how the manufacturers choose to tradeoff efficiency and costs.120 Another OTA contractor,Sierra Research, indicates that automakers need notsacrifice efficiency if they are willing to add morecatalysts, at a cost of about $100.

Environmental and, most recently, energy secu-rity concerns have renewed an interest in alternativetransportation fuels as a way of reducing ozonelevels in urban areas and decreasing U.S. reliance onforeign oil supplies. The oil crises of the 1970sspurred a number of Federal initiatives to supple-ment or replace gasoline with alternative fuelsproduced from domestic coal and oil shale. Theseinitiatives, which were generally not viewed assuccessful, were largely abandoned in the early1980s.

In September 1990, the California Air ResourcesBoard approved a smog control plan that is expectedto reduce hydrocarbon emissions by 28 percent,nitrogen oxide by 18 percent, and carbon monoxideby 8 percent by the year 2000. The plan phases inprogressively cleaner vehicles, which could includecompressed natural gas vehicles and ‘flexible-fuel’cars, and requires the production of electric vehicles.A number of other States are considering similarstandards, which are stricter than the recently passedclean air standards.

Appliance Efficiency Standards

Appliance efficiency standards will also have animpact on energy efficiency. The Federal Govern-ment and several States have enacted minimumefficiency standards for residential appliances. Al-though NAECA does not set standards as high as canbe achieved by the best currently available technol-ogy, it does require that standards be reviewed andallows for raising them. Standards for refrigerators,freezers, and small gas furnaces have been promul-gated. Standards for other appliances are beingdeveloped.

In the 1970s, California took the lead by adoptingefficiency standards for a wide range of products,including refrigerators, freezers, air conditioners,and heat pumps. Even tougher standards wereadopted by the California Energy Commission in themid-1980s. In 1987, the National Appliance EnergyConservation Act of 1987 (NAECA) set minimum

ll~oughton, op. cit., footnote 52.

IZ%.G. ~e~, r)ir~tor of Engineering at the Energy and Environmental Alldysis, rnc., pCXSOMl COIMllUlliCatiOn.


Table 2-12-Cumulative Energy Impacts of the National Appliance Energy Conservation Amendmentsof 1988, 1990 to 2015

Base case SavingsSavings

Electricity All fuels Electricity All fuels Electricity all fuelsDepartment of Energy region (TWh) (quads) (TWh) (quads) (%) (%)

New England . . . . . . . . . . . . . . . . 1,261 18.1 13 0.1 1.0 0.7New York/New Jersey . . . . . . . . . 1,833 28.6 27 0.3 1.5 1.0Mid Atlantic . . . . . . . . . . . . . . . . . . 3,464 30.9 69 0.2 2.0 0.8South Atlantic . . . . . . . . . . . . . . . . 9,112 21.8 320 0.1 3.5 0.4Midwest . . . . . . . . . . . . . . . . . . . . . 5,234 63.1 110 0.5 2.1 0.8Southwest . . . . . . . . . . . . . . . . . . . 4,022 23.1 135 0.2 3.4 0.8Central . . . . . . . . . . . . . . . . . . . . . 1,584 14.3 38 0.1 2.4 0.7North Central . . . . . . . . . . . . . . . . 1,312 13.3 20 0.1 1.5 0.7West. . . . . . . . . . . . . . . . . . . . . . . 3,423 26.9 61 1.8Northwest . . . . . . . . . . . . . . . . . . . 2,087 5.8 29 0.3/(0.0) 1.4 (0.3)

Total . . . . . . . . . . . . . . . . . . . . . 33,332 245.8 822 1.9 2 . 5 0.8SOURCE: Lawrence Berkeley Laboratory, “The Regional and Economic Impacts of the National Appliance Energy Conservation Act of 1987,’’ Berkeley, CA,

June 1988.

efficiency (or maximum consumption) standards formany appliances121 and will result in the leastefficient appliances being taken off the market. Thestandards, which apply at the point of manufacture,vary according to product type and size.

The initial Federal standards are relatively strin-gent. For example, of all classes of refrigerators,refrigerator-freezers, and freezers, only 7 models outof 2,114 listed in the Association of Home Appli-ance Manufacturers directory meet the 1993 stand-ards. Most models will have to be improved orredesigned over the next 2 years. Thus, the standardscould have a significant impact on residential energyuse in the future. The American Council for anEnergy Efficient Economy estimated that by 2000,the standards will reduce U.S. residential energy useby about 0.9 quads/year and peak summer demandby 21,000 MW.122

LBL also estimated the impacts of the appliancestandards on energy use. Table 2-12 shows theenergy impacts by region by the year 2015. Areduction in electricity use is the primary benefit ofthe standards. According to LBL, the standards willsave 2.8 quads of electricity; the percentage savingsfor all other fuels are relatively modest compared tothose for electricity. The largest absolute andpercentage electricity savings will occur in the South

Atlantic and Southwest regions. The large savings inthese regions can be attributed to the relativelygreater cooling loads found in these climates andthus the prevalence of air conditioning.123

Other impacts of the standards include a slightshift away from central air and heat pumps in favorof room air conditioners. LBL notes that theinteraction of a number of factors, including equip-ment costs, climate, and consumer preferences, areresponsible for the shift. In addition, electric waterheaters sales are expected to increase at the expenseof other types of water heating equipment. Theprojected increase in electric water heater salesresults from the higher cost of efficient nonelectricwater heaters, according to LBL. Both shifts aresmall-about 1 to 3 percent. LBL notes that thenational appliance standards will produce a netsavings benefit of $25 billion.124

Building Energy Codes

Standardized building energy codes that definethermal characteristics have the potential to improveenergy efficiency by preventing the least efficientbuildings from being constructed. Currently there islittle support from States and localities and theconstruction industry. In the 1970s there was someinterest in a standardized code for new buildings.

121~~n product *S ~e included: 1) refrigerators, refrigerator-freezers, and freezers; z) room air Condition_; 3) Centd air WnditiOn~ ~central air conditioning heat pumps; 4) water heaters; 5) furnaces; 6) dishwashers; 7) clothes washers; 8) clothes &yrs; 9) direct heating equipment;10) kitchen ranges and ovens; 11) pool heaters; 12) television sets; and 13) fluorescent lamp ballasts.

lz~~er, op. cit., footnote 13, p. 30.l~Jos~hH. Eto et~., ti~ence Berkeley hhmtory, The RegionalEnergy andEconomichnpacts of the NationalAppIianceEnergy co~~ation

Act of 1987, June 1988, pp. 15, 16, and 19.l~Ibid.


Congress enacted legislation in 1976 requiring thedevelopment of the Building Energy PerformanceStandards, a mandatory national code based onperformance standards. However, before the build-ing energy performance standards were finalized in1983, the law was modified to be mandatory only forFederal buildings.

The American Society of Heating, Refrigeration,and Air-Conditioning Engineers (ASHRAE) alsopromulgates standards. ASHRAE standards, whichtypically require a 3-year payback period, areregularly updated. Compliance is voluntary; mostStates adopt but poorly enforce the ASHRAEstandards. The Federal buildings standards arenearly identical to ASHRAE’s new Series-90, butthey, too, are seldom enforced.

ASHRAE previously released standards in 1975and 1980. The 1980 standard was estimated to resultin energy reductions in commercial buildings of 12to 29 percent compared to buildings constructed inthe late 1970s. Modifications to lighting contributedabout half of the total savings. The new ASHRAEstandard is expected to provide 20- to 25-percentenergy savings in commercial buildings over theprevious ASHRAE code. It is important to note,however, that the average energy efficiency of newbuildings in most States exceeds the 1980 ASHRAEstandards.

Some States, especially on the west coast, requiretighter standards and enforce them. Other States areconsidering novel approaches to encouraging energyefficiency. For example, the State of Massachusettsis considering hookup fees and rebates to encourageenergy efficiency in new commercial buildings.Commercial buildings (50,000 square feet or larger)that will use more electricity per square foot thanaverage would be charged a stiff utility hookup fee.Buildings designed to use less electricity thanaverage will receive a rebate. The fees collectedfrom the owners of the less-energy efficient build-ings are rebated to the energy efficient buildingowners.in

Standards are equally important for existingbuildings. Some cities in California have recentlyenacted conservation ordinances for existing resi-

dential and commercial buildings. These ordinancesstipulate that a building must be upgraded tominimum standards before the title is transferred.126

Corporate Average Fuel Efficient (CAFE)Standards

The purpose of the CAFE standards is to boostfuel efficiency beyond what the manufacturersbelieve the market alone warrants. From 1973 to1987, automobile fuel efficiency gains were impres-sive. The current CAFE standards establish a uni-form efficiency target of 27.5 mpg that must beachieved by all manufacturers regardless of the mixof vehicles in their fleets. The efficiency target,however, is subject to revision, pending ongoingU.S. Department of Transportation rulemaking. Thecurrent standard places a more difficult technologi-cal burden on companies that sell a mix of vehiclesizes than on companies selling small vehicles only.Automakers who focus on small cars will have moreflexibility than the “full line” manufacturers tointroduce features that are attractive to consumersbut are fuel inefficient. OTA indicates that a higherfuel economy level could be achieved if all auto-makers were required to improve efficiency to themaximum extent possible.

Electric Utility Programs—Demand-SideManagement

Demand-side management programs can result ingreater investments in energy efficient equipmentand building shell improvements. Utilities in allregions of the country are using demand-side man-agement programs to reduce load and to possiblydefer the need for future generating capacity addi-tions. In addition, State public utility commissionsand energy offices have supported these programs.EPRI forecasts that by the year 2000 demand-sidemanagement programs could reduce summer peakdemand by 6.7 percent (45 GW) and annual electricuse by 3 percent.127

Demand-side management programs include ac-tivities undertaken by a utility or customer toinfluence electricity use. Activities undertaken byutilities include rate programs (time of use or time ofday), interruptible rates, real-time pricing, no de-

1~Bevington and Rosenfeld, op. Cit., foo~ote 35, pp. 85-86.126~id.

127E1ec~c PowerReS=Ch~ti~te, “~pact of r)e~nd-side -gement on~u~e C@oma Elec~c@~~& An Update,” EPRI CU-6953,September 1990, p. v.


mand charge under certain conditions, and use of“smart’ demand meters. The time of use rate is themost frequently used.128

A growing number of utilities offer financialincentives to commercial, industrial, and residentialbuilding owners who invest in energy efficientequipment, such as appliances, space conditioningsystems, lighting products, and motors. Rebateswere the most popular form of financial incentive.Most utilities use minimum efficiency levels as theunit of measure for the rebates.

A national survey completed in 1986-87 foundthat about 35 to 50 percent of the Nation’s utilitieshave some type of energy efficiency rebate program.The most frequently stated purpose of the rebateprogram was to promote energy efficiency, followedby peak load reduction. According to the survey,commercial and industrial rebate programs reduced,on average, peak demand by 13.6 MW per year.Residential rebate programs reported peak demandsavings, on average of 9.7 MW per year. The averagepeak demand reduction for all programs was 21 MWper year.129

Another survey, conducted by ORNL, found thatmany utilities increasingly recognize the commer-cial buildings sector as a significant source ofuntapped savings in energy and corresponding peakdemand. Rebate programs for commercial buildingsare likely to expand and proliferate in the futurebecause of the potential cost and energy savings ofsuch initiatives, according to ORNL.

And, there are indications that utilities are willingto go beyond financial incentives to encourageinvestment in energy efficiency. For example, Pa-cific Gas and Electric (PG&E), with help from theNatural Resources Defense Council (NRDC), devel-oped a $2 billion, 10-year program aimed atpromoting energy efficiency. The program includes

a state-of-the-art facility for demonstrating anddeveloping energy efficient technologies, which isexpected to open in late 1991, a research study toidentify economical ways to improve energy effi-ciency, consumer education programs, and, ofcourse, financial incentives. PG&E’s goal is to cutpeak demand growth by 75 percent (2,500 MW) forthe 1990-2000 period.130

Under this innovative program, PG&E sharehold-ers and customers are expected to benefit. Afterefficiency measures are installed, dollar savings areestimated. For every dollar saved, shareholders willreceived 15 cents. Customers will receive 85 percentof the savings through rate reductions. However,customers will pay slightly higher rates in the shortterm to cover the costs of the program.131

Oil Supply and Price Uncertainties132

Short-term or even long-term interruptions in theavailability of Middle Eastern crude oil alwaysremain a possibility. Oil supply interruptions and theaccompanying increases in oil prices weaken theU.S. economy, increase inflation, and decreasepersonal disposable income. After the Iraqi invasionof Kuwait in early August 1990, crude oil pricesjumped from about $18/barrel to a high of more than$40/barrel and then back down again. The initialhike in oil prices contributed to the U.S. recession.There was also some concern at the time thatescalating oil prices would trigger a global reces-sion.

While the demand for petroleum is generallysensitive to price, other factors can also influenceconsumption. Existing plant and equipment and thepotential for sizable shifts in fuel preference canlimit the ability to save oil. Also, personal disposa-ble income and demographic changes can also havean impact on oil use. Thus, there is considerableuncertainty about the rate of investment in energysaving equipment during an oil disruption. In fact,

lmJ.O. Kolb and M.fj. Hubbar~ ‘CA Review of Utility Conservation programs for the commercial Building Sector,” ORNL/CON-zXl O*R.i@eNational Laboratory, Oak Ridge, TN, 1988, p. 26.

1294 ‘A ComPn&W of utility-SpOIISOd Energy Effkiency Rebate Programs,’ report prep=d by the CO nsumer Energy Council of AmericanResearch Foundation and the American Council for an Energy Efficient Economy for the Electric Power Research Institute, EPRI EM-5579, Palo Alto,@ December 1987.

130TeS~ony of ~eg M. Ru%m, Sefior Vice president and ~ne~ wger, Electric Supply, ~cflc GM and Ekchic, before the U.S. sateCommittee on Energy and Natural Resources, Regarding Titles III and IV of the National Energy Security Act of 1991, Concerning Energy Effkkmcyand Renewable Energy, Feb. 26, 1991; and “PO&E Launches $2-Billion Energy Saving Prognuq” LosAngeles Times, Business Sectiom Mar. 14, 1991,p. D1.

131rbido

13~orade~~ di5WSSion of U.S. ~~bili~ t. oil d~ptions, seeu.s. Congress, ~lce of Tec~ology Assessment, U.S. vuznerabizi~ to an OilZmport Curtaibnent, OTA-B243 (WashingtorL DC: U.S. Government Printing Offlce, September 1984), and a forthcoming update.


the strain of high oil prices on personal disposalincome may actually minimize investment in moreenergy efficiency equipment. For example, residen-tial and commercial oil users may be unable to investin new heating and hot water equipment at a timewhen their heating bills are straining their finances.Or, consumers may defer the purchase of new, moreefficient automobiles.

In any event, the increasing U.S. reliance onforeign oil supplies, particularly the insecure sourcesof supply in the Middle East, and the potential forlarge increases in oil prices should be strongincentives to evaluate the energy efficiency progressthat has been made to date and to continue to look forenergy-saving opportunities. During the Arab oilembargo of 1973-74, crude oil prices quadrupled,and more than doubled again during the Iraniancrisis of 1978-80. These disruptions and the resultantincreases in oil prices changed U.S. thinking aboutthe importance of energy. Historically, the U.S.simply shifted from one supply source to another asdeclining supplies or other concerns shifted con-sumer preferences. Little research attention andpolicy concern were given to energy conservationuntil after the 1973 oil embargo. However, rising oilprices and the specter of insufficient supplies thatfollowed 1973 set in motion a flurry of research,demonstration, and development programs, govern-ment initiatives, and private commitment to payattention to the cost of energy and to lower that costthrough improved efficiency in design and process.Federal spending for conservation R&D, for exam-ple, increased from about $3 million in fiscal year1974 to $406 million in fiscal year 1980 (1982constant dollars),133 but has since declined. Theresult of all of these efforts was that the U.S.economy became considerably more energy effi-cient, across all sectors.

Fuel Switching

Fuel switching away from oil was another re-sponse to the oil disruptions of the 1970s. It became

an important way of restoring services formerlysupplied by oil and enhancing the reliability of fuelsupplies. Many energy users in the industrial andutility sectors now have the capability to switchbetween alternative fuel sources quickly-oftenwith only a twist of a knob-to take advantage ofrelative differences in fuel prices and availability.Today, there are more than 100,000 dual-fuel unitsin the United States. About two-thirds can burn gascontinuously.

Typically, utilities switch from oil to gas whengas prices are lower and vice versa. For example, in1979 and 1987, utilities switched to natural gasbecause prices were lower. And, in 1986 the reversewas true.

Additions to fuel switching capability will dependon a number of factors, including seasonal andregional demand, availability of supplies, priceconsiderations, and technical constraints. Much fuelswitching capability has already been realized. Sincethe mid-1970s, many oil-fired generating plantshave been converted to gas- or coal-fired units.Those that have not been converted generallyinclude units that are too small to justify conversion,or cannot be converted because of environmental orfinancial constraints, or lack coal-burning handlingand storage capability. In addition, inadequate fuelsupplies or storage may preclude switching on animmediate or continuous basis.

Given these considerations, DOE estimates thatnatural gas could at a minimum replace about 85,000barrels of oil per day immediately.134 The DOEestimate could be higher when several new pipelineprojects come on line. The projects are beingdeveloped to supply domestic and Canadian gas tothe northeast and California. Also, acid rain legisla-tion will make natural gas a more attractive fueloption for reducing sulfur emissions.

lssCo~essio~Res~ch Servim,Energy CoMervation: TechnicalEflciency andProgram Electiveness, IB85 130, UPtitiJ~. 10,1991, a~chedtables.

l~u.S. ~er= ~o~tionAtistration, Department of Energy, Electric Power i140nthZy, “PetroleumF uel-Switching Capability in the EkctricUtility Industry,” September 1990.

Chapter 3

Technologies forEnergy Supply and Conversion

CONTENTSPage

U.S. ENERGY SUPPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63TECHNOLOGICAL OPPORTUNITIES FOR IMPROVING FOSSIL

FUEL SUPPLIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Petroleum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NON-FOSSIL FUEL ENERGY AND ADVANCED TECHNOLOGIES . . . . . . . . . . . . .The Nuclear Power Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Fusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Future Electricity Supply Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Renewable Energy Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .

OTHER FACTORS AFFECTING SUPPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Environmental Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Obstacles to a Nuclear Revival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Electric and Magnetic Fields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Electricity Demand Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

666671747879848491

103103105107107

FiguresFigure Page3-1. Production Platform Technologies for Frontier Areas . . . . . ., * . . * . * . * * . . . . . . . . . . 683-2. Location of Principal Tight Formation Basins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 733-3. Pressurized Water Reactor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813-4. Boiling Water Reactor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823-5. First Generation CAES Plant . . . . . . . ., . . . . . . *, . . . . . . . . . . . . * * * *, * * * * * *...*..., 883-6. DOE Energy R&D Budget: 1980-1991 Selected Budget Lines . . . * . *,, **.**.... 91

TablesTable Pa&+

3-1. Major Technologies for Energy Supply and Conversion . . . . . . . . . . . . . . . . . . . . . . . . 643-2. Production of Energy by Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653-3. Status of Alaska State Coastal Exploration, Development, and

Production Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . * * * *, **..*... 69

Chapter 3

Technologies for Energy Supply and Conversion

Despite stable energy supplies and prices, recentevents in the Middle East and declining domestic oilproduction have triggered concern over the long-term adequacy of U.S. energy supplies. In addition,environmental considerations, e.g., global warmingand high ozone levels in urban areas, will continueto have an impact on energy supply choices.

A variety of technologies (table 3-1) show prom-ise for replacing and/or extending the Nation’s oiland gas resources and providing other options.Included are technologies for improving coal com-bustion, electric power generation, and nuclear andrenewable energy supply options. This chapterbegins with a brief summary of U.S. energy re-sources and ends with a discussion of nontechnicalfactors that could affect U.S. supply options.

U.S. ENERGY SUPPLYFossil fuels continue to dominate the U.S. energy

market. Table 3-2 shows U.S. energy production bysource from 1970 to 1989. Coal accounts for thelargest share of domestic energy production today.The U.S. Energy Information Administration (EIA)indicates that there are enough coal reserves tosustain current levels of production for more than200 years. Most of the coal (62 percent) is mined eastof the Mississippi River, but Western coal has beenincreasing its share since the mid- 1960s. The growthin Western coal production is partly a result ofenvironmental concerns over Eastern high-sulfurcoal. Also, surface mining, which is more prevalentin the West, has a higher productivity rate thanunderground mining.1

Coal has been the United States’ major energyexport. Japan, Italy, and Canada are our leadingcustomers. Together they accounted for about 41percent of total coal exports in 1989.2 In the UnitedStates, electric utilities are the largest market forcoal.

The United States has used more than half of itsoil and gas, and estimates of undiscovered recover-able resources are inherently uncertain. Oil produc-tion in the contiguous States has been decliningsince the mid-1970s, and in 1989 Alaskan produc-tion declined for the first time since 1981. The lowprice of oil over the past 4 years has contributed tothis decline.

Exploration was also affected by the low price ofcrude. According to the EIA, exploration indicatorsshowed a dramatic drop in the number of seismiccrews, operating rigs, and completed wells.3 Moreoil will be discovered in the United States, but it isvery unlikely that new discoveries will reverse thelong-term decline.

This decline in production translates into a greaterdependence on oil imports. In 1989, petroleum netimports reached 41 percent of total consumption.Saudi Arabia, Canada, Venezuela, and Nigeria areour biggest suppliers. These and other oil producingcountries have used less than 35 percent of theirresources. According to a recent resource assess-ment, the Middle East has the majority of theidentified reserves for the world, enough oil tocontinue production for 124 years. It is likely that theUnited States will continue to import Middle Easternoil for many decades.4

Since the early 1980s, domestic natural gasproduction has been declining. New wells have beenadded, but at a much slower pace than previously.Texas, Louisiana, and Oklahoma produce more thantwo-thirds of the U.S. total. Most of the natural gasis from onshore and State offshore wells, but aboutone-fourth is produced from leased Federal offshoreareas.s

Recent estimates indicate that demand for naturalgas will continue to exceed growth in domesticproduction. In 1989, natural gas imports accounted

Iu.s. Energy ~ormation Atitration, Department of Energy, Annual Energy Review 1989, DOE/EIA-0384(89), my 2x$, 1990. p. 177.

?Ibid., p. 178.31bid., p. 1.‘@.D. Masters et al., “World Resources of Crude Oil, Natural Gas, Natural Bitumem and Shale Oil,” paper presented at World Petroleum Congress,

Housto% TX, 1987; in Oak Ridge National Laboratory, Energy Technology R&D: What Could Make a Diference? “Supply Technology,”ORNL-6541/V2/P2, vol. 2, Part 2, December 1989, pp. 2-4.

SU.S. Ene~ Mormation Administration, op. cit., footnote 1, p. 158.

--63–


Table 3-l-Major Technologies for Energy Supply and Conversion

Technology Availability CommentsOilDeepwater/arctic technologies

Enhanced oil recovery techniques—thermal recovery-miscible flooding-chemical flooding

Oil shale and tar sands-Surface retorting—Modified in situ

Natural gas—Hydraulic fracturing

Coal—Atmospheric fluidized-bed combustion (AFBC)—Pressurized fluidized-bed combustion (PFBC)—Integrated gasification combined cycle (IGCC)

—flue-gas desulfurization (FGD)-Sorbent injection

-Staged combustionNuclear

—Advanced light water reactor

—Modular high-temperature gas reactor (MHTGR)

—Power Reactor Inherently Safe Module (PRISM)Electricity

—Combined cycle (CC)

—Intercooling Steam Injected Gas Turbine (ISTIG)—Fuel cells

—Magnetohydrodynamics (MHD)

—Advanced batteries

—Compressed air energy storage (CAES)

Biomass—Thermal use-Gasification

—Production of biofuels

Geothermal—Dual flash—Binary cycle

Solar thermal electric-Central receiver

—Parabolic solar trough

—Parabolic dishes

Photovoltaic-Concentrator system—Flat-plate collector

Wind power

Ocean thermal energy conversion (OTEC)

C,R

C,R

C,N

c

N,R

N

cC,N

R

c

N,R

R

c

NR

R

R

c

cc

C,R

N

R

c

N,R

R

c

R

Existing technologies that are promising for deepwater areas includeguyed and bouyant towers, tension leg platforms, and subseaproduction units. Advances in material and structural design critical;innovative maintenance and repair technologies important.

Widely adopted over the past two decades.

Uneconomic at present oil prices.

Very complex process; not well understood although successful for someformations. Key to unlocking unconventional gas reserves.

Small-scale units commercial. Utility-scale AFBC in demonstration stage.PFBC is less well developed; pilot-plant stage.

Demonstration stage. Primary advantages are its low emissions and highfuel efficiency.

Mature technology; considerable environmental advantages.Commercially available control technology. Can remove nitrogen oxides

up to 90 percent.Has potential to remove up to 80 percent of nitrogen oxides.

Incorporates safety and reliability features that could solve pastproblems; public acceptance uncertain.

Improvements to familiar technology; incorporates passive safetyfeatures; design of modular reactor completed.

Conceptual designs expected to be completed this year.

Conventional CC is a mature technology; advanced CC is indemonstration stage.

Pilot-plant stage.Several types being developed. Fuels cells that use phosphoric acid as

electrolytes are in demonstration stage. Molten carbonate and solidoxide are alternative electrolytes that are less developed. Late 1990savailability, at the earliest.

Difficult technical problems remain, especially for coal-fired MHDsystems.

Research and development needed in utility-scale batteries to improveIifetime cycles, operations maintenance costs. Promising batteries areadvanced lead, zinc-chloride and high-temperature sodium-sulfur..

First U.S. plant (11O-MW) to begin operation in 1991; owned andoperated by Alabama Electric Cooperative, Inc.

Use of biomass by utilities is usually uneconomical and impractical.Anaerobic digestion used commercially when biomass rests are low

enough. Methane production from biomass not yet competitive withconventional natural gas unless other factors considered.

Research being done on wood-to-ethanol/methanol conversionprocesses. Could be demonstrated by 2000.

Single-flash system used extensively. Little commercial experience withdualflash. Binary cycle system may be availabfe in 40-to50-MWe rangeby 1995.

Several plants built, including one in California; 30-MW plant in Jordan ismajor project today.

Several commercial plants built in California; additional capacity plannedappears to be marketable.

Testing being conducted in new materials and engines such asfree-piston sterling engine.

Improvements needed to make photovoltaic cells economic in the bulkpower market advances in microelectronics and semiconductors canmake photovoltaics competitive with conventional power by 2010.

Renewable source closest to achieving economic competitiveness in thebulk power market. Current average cost is 8 cents/kWh.

Research focused on closed and open cycle systems: no commercialplants designed. May be competitive in 10 years for small islandswhere direct-generation power is used. Use of OTEC domestically forelectric power is unlikely except for coastal areas around Gulf of Mexicoand Hawaii.

KEY: C = commeraal; N = nearly commercial; R - research and development needed.SOURCE: Office of Technology Assessment, 1991.

Chapter 3-Technologies for Energy Supply and Conversion ● 65

Table 3-2--Production of Energy by Source (quadrillion Btu).

Natural NuclearNatural Crude gas plant Hydroelectric electric

Year Coal gas’ oilb liquids power c powerd Other Total

1970 . . . . . . . . . . . . . . . . . .1971 . . . . . . . . . . . . . . . . . .1972 . . . . . . . . . . . . . . . . . .1973 . . . . . . . . . . . . . . . . . .1974 . . . . . . . . . . . . . . . . . .1975 . . . . . . . . . . . . . . . . . .1976 . . . . . . . . . . . . . . . . . .1977 . . . . . . . . . . . . . . . . . .1978 . . . . . . . . . . . . . . . . . .1979 . . . . . . . . . . . . . . . . . .1980 . . . . . . . . . . . . . . . . . .1981 . . . . . . . . . . . . . . . . . .1982 . . . . . . . . . . . . . . . . . .1983 . . . . . . . . . . . . . . . . . .1984 . . . . . . . . . . . . . . . . . .1985 . . . . . . . . . . . . . . . . . .1986 . . . . . . . . . . . . . . . . . .1987 . . . . . . . . . . . . . . . . . .1988 . . . . . . . . . . . . . . . . . .1989 . . . . . . . . . . . . . . . . . .

14.6113.1914.0913.9914.0714.9915.6515.7614.9117.5418.6018.3818.6417.2519.7219.3319.5120.1420.7421.35

21.6722.2822.2122.1921.2119.6419.4819.5719.4920.0819.9119.7018.2516.5317.9316.9116.4717.0517.4917.78

20.4020.0320.0419.4918.5717.7317.2617.4518.4318.1018.2518.1518.3118.3918.8518.9918.3817.6717.2816.12

2.512.542.602.572.472.372.332.332.252.292.252.312.192.182.272.242.152.222.262.16

2.632.822.862.863.183.152.982.332.942.932.902.763.273.533.352.943.022.592.312.77

0.240.410.580.911.271.902.112.703.022.782.743.013.133.203.554.154.474.915.665.68

0.010.010.030.050.060.070.080.080.070.090.110.130.110.130.170.210.230.240.240.22

62.0761.2962.4262.0660.8459.8659.8960.2261.1063.8064.7664.4263.9061.2165.8564.7764.2364.8265.9766.07

a Dry natural gas.blncludes lease condensate.cElectric utility and industrial generation of hydroelectric power.dGenerated by electric utilities eOther is electricity generated for distribution from wood, waste,geothermal,wind, photovoltaic, and solar thermal energy.

NOTE: Sumofcomponents maynotequal total duetoindependent rounding.

SOURCE: U.S. Energylnformation Administration, Armua/Energy/?etiew 1989, DOWElA-0364(89), May24, 1990; and Month/yf%ergyReviewApti/ 1991,DOE/EIA-0035(91/04), Apr.26, 1991, p.19.

for almost 7 percent of total gas consumption and areexpected to increase in the near term. Canada is ourmajor supplier with Algeria providing smalleramounts. The United States also exports smallamounts of gas to Japan.6

Electricity has steadily increased its share of thetotal U.S. energy market from 24.4 percent in 1970to about 36 percent in 1989. In the past 15 years, theelectric utility industry has had financial problemsdue to excess capacity, as powerplants ordered in the1970s came online and demand growth fell belowindustry’s expectations. Excess capacity is disap-pearing as demand grows and local shortages mayoccur, but overall, resources appear to remainadequate. In fact, according to the North AmericanElectric Reliability Council, most regions have morethan enough capacity to meet their increasing needsfor several years. This projection rests on twoassumptions: 1) that electricity use increases at

projected rates, and 2) that existing and plannedcapacity is available as projected.

Since the mid- 1970s, coal- and nuclear-poweredgeneration have displaced substantial quantities ofpetroleum and natural gas. Growth in oil and gas usebegan to slow in the 1970s, and consumptiondecreased during the first half of the 1980s. In 1989,coal accounted for 56 percent of electric utilityconsumption, compared to 9 percent for natural gasand 6 percent for petroleum.7

Nuclear power accounted for about 19 percent ofelectricity generation in 1989,8 and preliminary U.S.Department of Energy (DOE) estimates indicate thatnuclear power’s share increased by 1 percent in1990. 9 Nuclear power’s contribution to electricpower generation has increased steadily since themid- 1960s. The number of operable nuclear generat-ing units reached an all-time high (1 12) in 1989, butonly a few of the planned new units remain under

‘%id.mid., p. 203.81bid., p. 219.%J.S. Energy Information Administration, Electic Power Monthly March 1991, DOE/EIA-U226(91/03), March 1991, p. 23.


construction, and no additional units are planned.10

Uncertainty about electricity demand, increases inconstruction costs and rising interest rates, andquestions about nuclear safety and waste disposalhave contributed to the decline of nuclear power asa supply option.

Renewable energy resources account for a smallshare of total energy supplies today. Hydroelectricpower is by far the greatest contributor, accountingfor about 2.7 quads (quadrillion British thermalunits) in 1989.11 However, concerns about theenvironment and our dependence on imported oilhave renewed interest in alternative sources ofenergy. The conversion of solar energy to electricity,using either photovoltaics or thermal-electric tech-nologies, offers an exciting but not yet competitiveresource under traditional economic terms. Contin-ued improvements in performance and cost ofelectric power from wind turbines and geothermaltechnologies are also expected.

TECHNOLOGICALOPPORTUNITIES FOR

IMPROVING FOSSIL FUELSUPPLIES

Oil, natural gas, and coal are the primary energysources in the United States because they areconvenient and economical. They are expected toremain so in the foreseeable future. Technologiesthat can extend the production of oil and gas orreplace them with equivalent fuels from coal are thefocus of this section. In addition, new technologiesfor improving the combustion of coal are examined.

Petroleum

Conventional Production Technology

Primary conventional techniques utilize naturalforces to coax the oil to the surface. Pressurizedwater can be used to displace oil, or oil can bedrained downward from a high elevation in areservoir to wells at lower elevations. However,

most of the reservoir’s oil remains in place. Tech-niques can be used to augment natural forces. Theseinclude injecting fluids (commonly, natural gas) intoan oil reservoir. This is commonly known assecondary recovery. Conventional primary and sec-ondary recovery technologies can recover aboutone-third of the oil in place.

Drilling techniques also can be used to improverecovery. Geologically targeted infill drilling, forexample, involves drilling reservoirs at closer thannormal intervals. Each reservoir has to be geologi-cally targeted in order for this recovery method to beeconomical. The Oak Ridge National Laboratory(ORNL) estimated that the geologically targetedinfill-drilling technique will recover an additional 8percent of the original oil in place.12

In addition, the use of horizontal drilling inoffshore production is rapidly expanding. The ad-vantages of using horizontal drilling are improvedrecovery, better drainage, and the ability to drill andcomplete several wells from one offshore productionplatform. 13

Deepwater Technologies14

Most of the undiscovered oil and gas reserves inthe United States are expected to be found offshoreor onshore Alaska. The Alaska Outer ContinentalShelf (OCS) region includes about 1,300 millionacres. The U.S. Department of the Interior has leased8.2 million acres since 1976.15

The technologies to explore and produce the oiland gas in these remote locations have developed,and will probably continue to develop, in anevolutionary fashion. The oil and gas industrymoved its onshore technology offshore-frost ontopiers, then onto seabed-bound platforms, and finallyonto floating vessels as it ventured into deeper water.Technological advances continue to be made as newdeepwater fields are discovered. From the mid-1960s to mid-1980s, technological developmentsimproved deepwater exploratory drilling from amaximum depth of 632 to 6,952 feet.

1~.s. En~gy ~o~tion Admi.nismtioq op. cit., footnote 1, p. 219.lllbid., p. 7.l@A Mdge National Laboratory, op. cit., footnote 4, p. 12.lqrbid.ldMo~t of ~ discu~~ion ~ b~~ on tie OTA ~epofi oil and Gas Technologies for the Arctic and~eep~ater, OTA-0-270 ~aShk@OQ ~: U.S.

Government Printing Oflke, May 1985). The reader is referred to this report for a more indepth discussion of the technological, economic, andenvironmental factors that affect exploration and development of energy resources in the Arctic regions.

15u.s0 ~p~ent of tie ~te~or, ~m~s -g=ent SeNice, Alas~ update: septe&er ]$l&Jan~q 1990, MMS90-(1012,” 1990, p. 1.

Chapter 3--Technologies for Energy Supply and Conversion ● 67

Thus far, nearly all offshore fields have beendeveloped using freed-leg production platforms.These platforms can probably be designed for waterdepths of 1,575 feet or more. However, as depthsincrease, structures become larger, more substantial,and thus more expensive. The cost and size of theseplatforms may limit their application to greaterdepths.

Existing technologies that are promising fordeepwater areas include guyed and buoyant towers,tension leg platforms, and subsea production units.(See figure 3-l.) All but the subsea units are flexiblestructures that ‘‘give way” under wind, wave, andcurrent forces. Current technologies can be extendedto depths of about 8,000 feet without the need formajor breakthroughs.

The guyed tower is a tall, slender structure thatrequires less steel than a freed-leg platform. Guylines or anchor lines are used to resist lateral forcesand to hold the structure in a nearly vertical position.Exxon installed the first guyed tower in the Gulf ofMexico. The buoyant tower is also a tall, slenderstructure. Large buoyancy tanks, rather than guylines, maintain the tower’s vertical position.

A tension leg platform is a floating platform thatis freed by vertical tension legs to foundationtemplates on the ocean floor. Buoyancy is providedby pontoons. Bouyancy in excess of the platformweight maintains tension on the legs. This technol-ogy can be used economically in deep water. Itsprimary disadvantages are the operational complex-ity relative to fixed platforms and its limited deckload capacity. The first tension leg platform wasinstalled in 1984 by Conoco in the North Sea.

Subsea production systems are also used todevelop deepwater fields. Wells are drilled from afloating rig and completed on the seafloor. There aretwo types of subsea production systems: wet or dry.The wet system is relatively insensitive to waterdepth and can be installed in deep water in much thesame manner as in shallow water. It is limited by thedepth capability of the floating drilling unit. In thedry system, the well head is housed in a dry,atmospheric chamber on the sea floor. Flowlineconnection and maintenance work can be done byworkers inside the chamber. Personnel are trans-ported to and from the chamber in a diving bell. Mostsubsea production systems are single well. The oil is

produced through a flowline to shore or to a freed orfloating platform. One of the limitations of thissystem is the need to have surface facilities toprocess and transport the oil.

A number of production-related technologies arecrucial to the development of deepwater areas.Advances in materials and structural design andfoundation engineering are critical. Innovative tech-niques for the installation, maintenance, and repairof platforms and pipelines are also important.Deepwater pipeline systems will involve adaptionfrom conventional pipelaying techniques, but newapproaches will have to be developed to overcomeproblems, e.g., buckling by long unsupported spanlengths, higher strain levels, and severe seas. Sup-port operations, e.g., diving and navigation, will beincreasingly important. Because human diving capa-bility is limited, manned vehicles and remote-controlled unmanned vehicles will be increasinglyused for these purposes.

Arctic Production16

Offshore exploration of the Arctic region began inthe mid- 1970s. Since then, the pace of activity andtechnological advances have increased significantly.See table 3-3 for the status of North Slope explora-tion and production projects.

Because of the severe environment, oil and gasdevelopment in the Arctic region is a major techno-logical challenge. Production systems must with-stand exposure to severe and corrosive conditionsfor the life of the oil fields, which is usually 20 yearsor more. Ice conditions, including duration, thick-ness, and movement, are perhaps the most critical ofthe environmental considerations.

The type of exploratory drilling rig and thetechnology needed for field development are deter-mined by site and environmental conditions. Mostoffshore exploratory drilling has been done frommanmade (gravel) islands. However, gravel islandscould be prohibitively expensive in water deeperthan 50 to 60 feet. The alternatives are steel andconcrete structures built as caissons or completebottom-mounted units. There are many designs forthese structures, including conical shapes to reduceice forces.

Additional research is needed on ice properties,movements, and forces under a range of conditions

IG~ctic is defimed as me Beatio~ Chtichi, and Bering Seas north of the Aleutian Islands.


Figure 3-1—Production Platform Technologies for Frontier Areas

Statfjord 8 MagnusConcrete Gravity Base Platform Steel Template- Hutton

(Norway) Jacket Platform Tension-Leg Platform Block 2280 Troll(1982) (U. K.) (U. K.) Guyed Tower (U. S.) Concrete Gravity-Base

\ a (1982) (1984) (1984) Platform

To anchor (1 ,350 feet) Sea floor 1,122 feet

SOURCE: U.S. Congress, Office of Technology Assessment, Oil and Gas Technologies for the Arctic and Deepwater, OTA-O-270 (Washington, DC: U.S.Government Printing Office, May 1985), figure 3-3.

that are likely to be encountered. Increased surveil-lance from satellites and aircraft is needed to providereal-time data. These data are important for struc-tural design purposes, logistics, and tanker transpor-tation design and planning. In addition, more infor-mation is needed on oceanographic and meteorolog-ical processes and seismicity.

Exploration Technology

Many experts believe thatStates’ low-cost oil has been

most of the Uniteddiscovered and pro-

duced. Increasingly, new production must comefrom oil finds in hostile, expensive frontier areas orfrom high-technology, high-cost oil recovery opera-tions. Improvements in technologies that measuregravity and magnetism and record seismic informa-ion are critical to selecting favorable drill sites.Seismography, which was originally developed torecord earthquakes, is now used as a prospectingtool. A seismograph provides the only direct way ofacquiring subsurface structural information withoutdrilling wells. The petroleum industry has recently

developed new recording instruments called seis-mometer group recorders.

Another improvement, the borehole gravimeter,can measure rock densities as far as several hundredfeet away from the borehole. The borehole gravi-meter can also be used to indicate rock content—whether it is oil, dry gas, or water. This informationis key to understanding structural conditions.

Continual advances in computers and electronicequipment have made it possible to analyze largergeographical areas more easily and interpret datamore accurately.

Enhanced Oil Recovery

As noted earlier, conventional recovery tech-niques recover on average about 34 percent of the oilin place. Improvements can be made by usingenhanced oil recovery techniques. The techniquesmost commonly used are thermal recovery, misci-ble flooding, and chemical flooding. They havebeen widely adopted over the past two decades. The

Table 3-3-Status of Alaska State Coastal Exploration, Development, and Production Projects

Desig- Explora-Unit/field/ nated Lease Sale Reserves Reserves tory Delin- Devel- Primary Secondary Tertiary Status as ofprospect operator sale date in place recoverable drilling eation opment production production production December 1989

Colville Delta Texaco N/A N/A(Texaco)

Duck Island Unit BP Joint Federal- 09/10/69 1,000 MMBO 0,8 Tcf(Endicott) Exxon State lease 12112179 375 MMBO

SaleGwydyr Bay Unit ARCO State Sale 23 09/10/69 30-60

MMBO

Kaktovik Prospect Chevron Negotiated with 11/83 N/A(KIC well) Arctic Slope

Regional Corp.Kuparuk Unit ARCO State sale 14 07/14/65 4,400 MMBO

N/A

070MMBO

Lisburne Field ARCO State sale 14 01/24/67 3,000 MMBO 165 MMBO

Mine Point Unit Conoco State sale 14 07/14/65

Niakuk Prospect BP State sales 14 07115165 145 MMBOand 18 01/24167 88 Bcf

North Star Amerada N/AHess

Pt. McIntyre ARCO State sale 14 07114165 N/A

Point Thomson Exxon State sale 18 01/24/67Unit

Prudhoe Bay Unit ARCO/BP State sale 13, 12/09/64 23.5 BBOsale 14, sale 18 07/14/65

01/24/67

UGNU Field in ARCO State sale 13, 12/09/64 6-11 BBOKuparuk/ sale 14, sale 18 07/14/65Prudhoe/Mine 01/24/67

West Sak Field ARCO BF(SM) 12/12/79 15-25BBO

60 MMBO

58 MMBO35 Bcf

150 MMBO

300 MMBO

350 MMBO5 Tcf9.4 BBO29 Tcf

o

750 MMBO

xx

x

x

x

x

x

x

x

x

xx

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

No activity.

x Maintain production at 100,000 bpd.

Total of 12 wells. Renewed interest inprospect by Vaughn Petroleum (etal.) in 1987. Drilled two wells bothP&A. Reduced reserve estimatesand wait for higher oil price. Conocoresigns as operator.

Tight hole.

x x x Steady production at 260,000 bpd; 39percent oil field depleted.

x x Recoverable reserve estimatesreduced 50 percent.

x Shutdown since January 1987; Conocoreceived drilling permits. Plans tobegin production again.

Army Corps of Engineers rescindedearlier causeway denial. BP mustsubmit additional data on causeway,

Initial stages of development; proposedunit agreement.

Drilled three wells in 1988 and 1989with approved drilling permits forthree more.

Will drill another delineation wellspring1990.

x x x Enhanced recovery techniques andsale good reservoir management willkeep production at 1.5 MMbpdthrough 1969 with slower productiondecline now anticipated. Eileen WestEnd Field started producing in June1988. Peak production will be 60,000to 70,000 bpd in 1990 from 76 wells.

Drilled production test well April 1989.Loose sandstone reservoir and lowAmerican Petroleum Institute gravitypresent major technological hurdles.

ARCO filed application with ACOE tobuild gravel pads. Subsequently,delayed citing economic impact.

KEY: ACOE = Army Corps of Engineers; BBO = billion barrels of oil; Bcf = billion cubic feet; bpd = barrels per day; MMBO = million barrels of oil; Tcf - trillion cubic feet.SOURCE: U.S. Department of the Interior, Minerals Management Service Alaska Update, September 1988-January 1990, MMS90-0012,1990, p. 33.


use of enhanced recovery methods is dependent onthe characteristics and location of the field.

Thermal Recovery Process—The viscosity ofcrude oil varies considerably. Some crudes flow likeroad tar, others as readily as water. High viscositymakes oil difficult to recover with primary orsecondary production techniques. Viscosity of mostoils decreases as the temperature increases. Thepurpose of thermal oil recovery processes is to heatthe oil to make it flow more easily. The oil can beheated by injecting hot water, steam, or hot gasesinto a well.

More than 90 percent of thermal recovery projectsin the United States are in California, where heavycrudes are common. According to ORNL, total oilrecovery using primary pumping and thermal recov-ery can exceed 50 percent of the available oil in thefield. The cost of the thermal process can range from$3 to $18 per barrel.17

Miscible Gas Flooding—Another common ap-proach to enhanced oil recovery is miscible gasflooding. Miscible gas, which is usually either ahydrocarbon mixture (natural gas) or carbon dioxide(CO2), is injected into a well. Inert gases, such asnitrogen, can also be used for gas flooding. Thegases act as solvents, forming a single oil-like liquidthat can flow through a reservoir to other wells moreeasily than the original crude. Hydrocarbon gasflooding is economical when there is a large supplyof available natural gas. For example, hydrocarbonflooding accounts for about 10 percent of oilproduction in Alberta, Canada, where there is a largesupply of natural gas associated with the productionof oil. Also, unused natural gas can be injected backinto the field to increase oil yield. This is being donein the Alaskan North Slope fields.18

In the contiguous United States, the use ofhydrocarbon flooding is less common because of thelower availability of and greater demand for naturalgas. COZ flooding is more common. COZ is injectedunder such high pressure that it becomes like a liquidwhich is miscible with oil. More than 60 percent ofgas flooding projects in the United States use carbondioxide. The cost of COZ flooding ranges from about$10 to $23 per barrel.19

Chemical Flooding—A number of other proc-esses involve injecting chemicals (e.g., surfactantsand polymers) into the water-flooded field to alterthe properties of the liquids. Polymers are added tothe field to increase the viscosity of water. Surfac-tants are used to alter the surface properties of theoil-water and permit the removal of oil fromcapillary regions of a field. Chemical floodingprocesses are not yet well developed. Moreover, oilyields from these processes are difficult to predict.The cost of polymer flooding can be low but so toocan the yield of additional oil. One estimate of thecost of surfactant flooding is between $15 and $30per barrel. In addition, the degradation of chemicalscan be a problem.20

Microbial enhanced oil recovery is a variation ofchemical flooding. Microorganisms, which are in-troduced into a reservoir, produce detergent-likematerials that would perform much the same func-tion as polymers and surfactants. This technology isnot well developed and a number of uncertaintiesremain. For example, any bacteria developed wouldneed to be monitored for potential environmentalimpacts.

Although enhanced oil recovery is a particularlyattractive technology for extending known oil sup-plies, it is hampered by a number of uncertainties.These include the inability to predict the amount ofoil that can be recovered and the difficulty incharacterizing the field. These uncertainties maylimit the use of enhanced recovery techniques tothose projects where improvements in recovered oilare sufficient enough to take the risk. Currentresearch and development (R&D) programs arefocusing on understanding the physical processestaking place in an enhanced recovery operation andquantitatively examining the structure and flowpatterns of the field.

Oil Shale and Tar SandsProduction Technologies

Oil shale is the second most abundant fossilenergy resource in the United States. North Ameri-can oil shale resources in place are estimated at5,600 billion barrels. How much is recoverable is not

170* ~dge National Laboratory, op. cit., footnote 4, pp. 12-13.

181bid., p. 13.l%id.%id.

Chapter 3-Technologies for Energy Supply and Conversion . 71

known.21 At present oil prices, recovery of theseresources is uneconomic.

Oil shale consists of a porous sandstone that isembedded with a heavy hydrocarbon known askerogen. Because the kerogen already containshydrogen, a liquid shale oil can be produced from theoil shale simply by heating the shale to break thekerogen down into smaller molecules. This can beaccomplished by a surface retort process, a modifiedin situ process, or a so-called true in situ process.Liquid shale oil can be upgraded relatively easily tocrude oil.

In the surface retort method, oil shale is mined andplaced in a metal reactor where it is heated toproduce the oil. This method is best suited to thickshale seams near the surface. In the modified in situprocess, an underground cavern is excavated and anexplosive charge detonated to fill the cavern withbroken shale rubble. Part of the shale is ignited toproduce the heat needed to crack the kerogen. Liquidshale oil flows to the bottom of the cavern and ispumped to the surface. The modified in situ methodis used in thick shale seams deep underground. In thetrue in situ process, holes are bored into the shale andexplosive charges are ignited in a particular se-quence to break up the shale. The rubble is thenignited underground, producing the heat needed toconvert the kerogens to shale oil. The true in situmethod is best suited to thin shale seams near thesurface.

The surface retort method requires the mining anddisposal of larger volumes of shale than the modifiedin situ method. The true in situ method requires verylittle mining. However, high oil yields of relativelyuniform quality are difficult to achieve using themodified and true in situ methods. This is due todifficulties in controlling underground combustionand ensuring that the heat is efficiently transferred tothe shale.

Since 1980, Unocal has constructed a commer-cial-size oil shale project in Colorado. The under-ground mine produces 13,500 tons of crushed ore perday, and the retorting complex is designed to

produce 10,000 barrels of oil per day. In 1988, thecomplex operated for several months at 5,000 to6,000 barrels per day at a cost of $45/barrel.22

Tar sands resources in North America are esti-mated at315 billion barrels, most located in Canada.Oil from tar sands is being commercially producedat the huge Athabasca deposit in Alberta, Canada. Inthe United States and Canada, much of the resourceis not minable at the surface and will have to beproduced using in situ extraction technologies. R&Defforts have focused on the chemical and physicalproperties of tar sands and the physics of mobilizingand extracting the bitumen constituents.23

Natural Gas24

Conventional Gas Production

The way in which gas is produced depends on theproperties of the reservoir rock and whether the gasoccurs by itself or in association with oil. Hydrocar-bons in the reservoir rock migrate to the producingwell because of the pressure differential between thereservoir and the well. How readily this migrationoccurs is a function of the pressure of the reservoirand the permeability of the reservoir rock. When thereservoir rock is of low permeability, the rock maybe artificially fractured to form pathways to thewellbore. This is accomplished either with explo-sives or by hydraulic means, pumping a pressurizedfluid into the well.

Production can continue as long as there isadequate pressure in the reservoir to propel thehydrocarbons toward the producing well. If gas isthe only propellant, the reservoir pressure decreasesas the gas is extracted and is eventually no longersufficient to force the hydrocarbons toward the well.In a water-driven reservoir, water displaces thehydrocarbons from the pores of the reservoir rock,maintaining reservoir pressure during productionand improving the recoverability of the hydrocar-bons. In most reservoirs, gas recovery is highcompared to oil recovery. A recovery value of 80percent is typical.

z%id., p. 9.‘Ibid., pp. 18-19.~Ibid.~Muchof tie infomtionin this s=tion is @wfrom the OTA report U.S. NaturaZGasAvaiZabiZi~: Gas Supply Through the Year20@l, OW-E-245

(Washington, DC: U.S. Government Printing Office, February 1985). The reader is referred to this report for a more indepth analysis of conventionaland unconventional gas supplies.


When gas occurs in association with oil, it can bereinfected into the reservoir to maintain pressure formaximum oil recovery. Gas is also reinfected whenthere are no pipeline facilities available to transportit to market.

Enhanced Gas Recovery

At some reservoirs, recovery efficiencies aremuch lower than 80 percent. For example, recoveryrates for water-driven reservoirs found along theTexas and Louisiana Gulf Coast are known to be 50percent or less. These poor recovery rates result fromwater encroachment and the subsequent trapping ofgas in water-driven reservoirs and from uncertaintiesabout the characteristics of the reservoir. A betterunderstanding of gas field characteristics and im-provements in drilling and production technologieswould increase recovery efficiencies.25

Unconventional Gas Production

Unconventional @s includes tight sands, De-vonian shale, methane from coal, and geopressuredbrine. The Devonian shales and methane from coalare the best understood of the unconventionalresources and appear to have the most near-termpotential for contributing to supply. Estimates oftotal recoverable unconventional gas resources are600 trillion cubic feet (Tcf) for tight sands, 400 Tcffor Devonian shale, and 400 Tcf for coal seams.2G Ifnatural gas is to play a significant role in reducingC02 emissions, it will be important to find ways ofrecovering ‘‘unconventional’ gas resources.

Tight gas is natural gas that is found in formationsof sandstone, siltstone, silty shale, and limestone.These formations are characterized by their very lowpermeability. There are two distinct types of tightformations: blanket formations, which extend later-ally over large areas, and lenticular formations,which consist of many small discrete reservoirs,often shaped like lenses. Figure 3-2 shows the maintight gas-bearing basins in the contiguous UnitedStates.

Over the past several decades, rising gas prices,tax policies, and improvements in production tech-nology have encouraged gas producers to exploitmore lower permeability formations. Because ofpoor flow characteristics of reservoir rock in tightformations, economically recoverable gas can be

achieved only by increasing permeability by fractur-ing the rock surrounding the wellbore. This fractur-ing is most commonly hydraulic, which involvespumping a fluid under high pressure into the welluntil the rock breaks down. Sand or other materialsare added to the fluid to serve as wedges to preventthe fractures from closing.

The fracturing process in tight formations is verycomplex and not well understood. It is difficult totell what a fracture will do or what it has done evenafter the well is producing or proved unproductive.Despite these uncertainties, fracturing has beensuccessful, at least for the blanket formations.Large-scale fracturing of lenticular formations hasnot been very successful. Lenticular formationdevelopers have tended to use shorter, less expen-sive fracturing treatments, which may imply lowergas recovery.

Devonian shale gas is produced from shalesformed about 350 million years ago--during theDevonian period. Devonian shales occur primarilyin the Appalachian region, Illinois, and Michigan.The shale gas occurs as free gas in the fractures andpores of the shale and also as gas physically boundto the shale (adsorbed gas).

As with tight sands, Devonian shale productiondepends on well stimulation to overcome the natu-rally low permeability of the reservoir and open uppathways for the gas to flow to the wellbore. Unliketight sands, however, successful Devonian gasproduction depends on the well intersecting a naturalfracture network, either directly or through aninduced fracture.

Stimulation by the use of explosives has beenprevalent in production history, and more sophisti-cated explosive techniques may be promising forfuture development. Also, new fracturing fluids thatavoid formation damage have been used for De-vonian shale development. These include gas-in-water emulsions, nitrogen, and liquid carbon diox-ide. The gas-in-water emulsions have been popular,but nitrogen has also grown in use for shallow wellsbecause it does not cause formation damage.

Methane from coal is a byproduct of the coalformation process that is trapped in the coal seams.Methane is found in all coal seams, although its

~o~ Ridge National Laboratory, op. Cit., footnOte 4, P. 17.%Jhid., p. 8.

Figure 3-2—Location of Principal Tight Formation Basins

Snake RiverCownyarp

\

Greater GreenRiver Basin Northern

[Big Horn Great Plains

Basin Province

\ ~ . . l \

1 F - - - - # l \ ,

San Juan /DenverBasin Basin “M Cotton BlacK Warrior \

Valley Basin

Trend

Ft. “WorthBasin

AnadarkoBasin

SOURCE: U.S. Office of Technology U.S. Natural Gas OTA-E-245 (Washington, DC: U.S. Government Printing Office,February 19S5), figure 26.

amount per unit volume or weight of coal tends to beproportional to the carbon content of the coal.Anthracite and bituminous coal have high carboncontent and higher gas content. Methane contentalso increases with depth.

Because coal in itself is essentially impermeable,methane production depends on intersecting thenatural fracture network to provide pathways for thegas to flow to the well. A second condition ofeconomic production of methane is to promote theresorption of the gas from the coal into the fracture

system by reducing the pressure in the fractures.Many coal seams contain water and thus thereservoir pressure is partially a hydrostatic pressurecaused by groundwater. Reducing pressure usuallyinvolves pumping water out of the seam. The waterremoval also increases the relative permeability ofthe gas in the fracture network, allowing more gas toflow to the wellbore. The effective recovery ofmethane may require drilling wells on relativelyclose spacing and pumping water from them rapidlyand simultaneously in order to maximize the pres-sure drop. This practice of close spacing is in sharp


contrast to the wide spacing used in conventionalgasfields.

A variety of methods can be used to enable wellsto intersect the naturally vertical fracture network.Horizontal wells may be drilled from within aworking mine or a specially drilled shaft. The lattermethod is expensive. Vertically drilled wells maybeslanted toward the horizontal, so as to run parallel toand within the coal seam. Hydraulic fractures canalso be used to connect the wellbore to the fracturesystem.

Other unconventional gas sources include geo-pressured brines and gas hydrates. Geopressuredbrines are found deep within the Earth under highpressures and temperatures. They are found primar-ily in the Gulf Coast region of the United States. Inorder to produce the gas, the brines are pumped tothe surface, the gas is removed, and the brines aredisposed. Gas hydrates are an icelike mixture of gasand water, called a clathrate, which forms undercertain temperature and pressure conditions oftenfound in water depths greater than 100 feet and underpermafrost. The resource is potentially huge andmay be augmented by free gas trapped under theimpermeable hydrate. It should be noted, however,that gas hydrates are unstable. If they warm just a bit,natural gas is released, contributing to global warm-ing.

Future efforts to recover tight gas, Devonian shalegas and methane from coal will depend on advancesin well stimulation technologies and improvementsin drilling patterns. Also, additional research isrequired to understand gas production mechanismsand develop an exploration rationale for identifyingattractive drilling sites.

Coal

Coal is burned to produce heat, which in turn isused to generate steam for process heat or theproduction of electricity. The heat may be useddirectly in industrial processes or space heating.Coal also can be used to effect chemical reactionssuch as the reduction of iron ore or the production oflime, or indirectly as a source for the production ofsynthetic gaseous or liquid fuels.

Direct Combustion

Three major factors influence the way coal isburned: 1) the size of the facility, 2) the environ-mental standards the facility is required to meet, and3) the characteristics of the coal to be burned. Mostcoal is still burned in pulverized coal-fired boilerfurnaces. Raw crushed coal is pulverized and blownwith air into large furnace cavities, where the cloudof coal dust burns much like a fuel gas. The heat istransferred to water, which boils to generate steam.Over the years, improvements in combustion tech-nology have resulted in larger plants that can operateat higher temperatures and pressures, and thereforehigher efficiency. Further efficiency gains are likelyto be incremental. In recent years, much of theattention has been focused on reducing emissions.

Conventional technology can meet existing emis-sion standards, especially in large facilities. Emerg-ing technologies are likely to be necessary to meetstricter standards, especially in small- and medium-size facilities. They also may permit substantialgains in efficiency.

Fluidized-bed combustion (FBC) technology27

offers an emerging alternative. Its basic principleinvolves the feeding of crushed coal for combustioninto a bed of inert ash mixed with limestone ordolomite. The bed is fluidized, or held in suspension,by injecting air through the bottom of the bed at acontrolled rate great enough to cause the bed to beagitated much like a boiling fluid. The coal burnswithin the bed, and the sulfur oxides (SOx) formedduring combustion react with the limestone ordolomite to form a dry calcium sulfate. Thiscapability to capture sulfur in situ reduces oreliminates the need for expensive add-on sulfurremoval equipment. According to the National AcidPrecipitation Assessment Program (NAPAP) report,the FBC system can remove up to 95 percent ofsulfur dioxide (S02) and up to 80 percent of thenitrogen oxide (NOX) emissions.28

There are two basic types of fluidized combustors:the atmospheric fluidized-bed combustor (AFBC)and the pressurized fluidized-bed combustor(PFBC). The AFBC operates at atmospheric pres-sure. Small-scale AFBCs already are used commer-

27Mu~h of this ~ection is ~W from tie OTA r~~fi New Elecm”~ power Technologies: problem ad prospects for the 1990$, OZ4-E-246(Washington, DC: U.S. Government Printing Offke, July 1985).

28~atio~ ~i~ ~wipi~tion A~~~~e~t ~o~ N~~ Report 25, Technologies ad Other MeaSUreSfOr Controiiing Enu”ssions: perjor?nance,Costs and Applicability, Wa.shingtoU DC, 1990, p. 6-36.

Chapter 3--Technologies for Energy Supply and Conversion . 75

cially around the world for process heat, space heat,various other industrial applications, and electricalgeneration.

The PFBC operates at high pressures and there-fore can be more compact than the AFBC. It can runexhaust heat through the turbines as well as thesteam cycle. The PFBC also may produce moreelectricity for a given amount of fuel. Despite thesepotential advantages, the PFBC has more serioustechnical obstacles to overcome and is less welldeveloped than the AFBC. For example, the corro-sion of gas turbine blades is a primary concern forcombined cycle PFBCs. In addition, fuel and sorbentfeed control may be difficult. The first PFBC/combined cycle plant began testing in March 1991.The test is expected to last 3 years. The demonstra-tion plant is one of the flagship projects in DOE’sClean Coal Demonstration Program.29 It is unlikelythat more than a few PFBC commercial units couldbe completed and operating before the end of thecentury, although the PFBC’s longer-term potentialis quite promising.

The primary types of AFBCs are bubbling bed andcirculating bed. The bubbling-bed AFBC is charac-terized by low gas velocities through the bed. Theresult is a bed from which only the smaller particlesare entrained with the gas. Conversely, the gas flowvelocities through the circulating bed are rapid.Neither technology has been built to produce elec-tricity on a scale (100 to 200 megawatts (MW)) thatis attractive to utilities. The bubbling-bed technol-ogy is the older of the two and thus greater operatingexperience in the United States. Also, the bubbling-bed combustor can be readily retrofitted to someconventional boilers. The disadvantages includefuel-feed problems, which are encountered in largerunits. With the circulating-bed combustor, the fuel-feed problem may be less serious. However, there isless experience operating circulating-bed AFBCs.

More than 1,000 MW of existing coal-firedcapacity are being converted to the AFBC technol-ogy. And, about 100 smaller AFBC systems fornonutility applications are either generating poweror on order.30 It is expected that larger utility-scaleAFBC units will be ready for use by the mid- 1990s.

OTA estimated that the capital cost of a large AFBCis comparable to conventional coal-freed plantsequipped with scrubbers—$ 1,260 to $1,580/kilowatts of electric power output (kWe).

OE has selected two AFBC projects to promoteutility use. One project, a circulating fluidized-bedsystem replaces three small coal-fried boilers with110 MW of capacity. The second project involvesrepowering a 250-MW Southwestern Public ServiceCo. facility. Also, DOE has selected two projects todemonstrate the PFBC technology. The capital costof a 500-MW PFBC is estimated to be about $1,350or $1 ,750/kWe for a 200-MW plant.31

The integrated gasification combined cycle(IGCC) technology is another alternative to conven-tional coal-fired plants. In the IGCC process, coal ismixed with air and steam at high temperatures,which causes the coal to gasify to a mixture ofhydrogen, carbon monoxide, and hydrogen sulfide,called syngas. The ash is separated and disposed ofor used. The sulfur in the coal is converted intohydrogen sulfide, which eventually can be convertedto elemental sulfur or some solid waste material. Thecleaned gas is burned in a combustion turbine. Thehot exhaust gases that exit the combustion turbinegenerate steam, which can then drive a steam turbineto produce electricity. The name “combined cycle”refers to the use of both gas-fueled combustion andsteam turbines in the system.

An IGCC system’s major advantages are its verylow rate of emissions and its fuel efficiency. It alsorequires less water than a conventional coal-firedsteam plant, and because of the modular design,construction time is shorter. One of the areas whereadditional research is needed is in fuel gas treatment.

Hot gas cleanup systems remove sulfur andnitrogen compounds and particulate from the fuelgas without cooling and then reheating the gas.These compounds are very abrasive and must beremoved to prevent turbine blade and componentfailure. Existing gas cleanup technology must oper-ate at relatively cool temperatures. Switching froma cold- to hot-gas cleanup system could increaseefficiency by 3.6 percent,32 but many difficulttechnological problems must be overcome.

29’ CPFBC and a New Era for cod Arise From Mothballed Plant” Power, VO1. 135, No. Q, APril 1991, p. 10S.

~Enviro~ntal and Energy Study Conference Special Repon, “Clean Coal Technologies: A Key Clean Air Issue,” Oct. 31, 1989, p. 7.qlNatio~ Acid Precipitation Assessment Repom op. cit., footnote 28.s@~ Ridge National Laboratory, op. cit., footnote 4, p. 30.


One of the biggest IGCC demonstration projectsis the 1OO-MW Cool Water Plant located in Daggett,California. It has been operating successfully since1984 and has demonstrated the ability to meetstringent California pollution standards using bothlow-sulfur Western coal and high-sulfur Easterncoal.

In the Cool Water process, a coal-water mixture isinjected into a pressurized, oxygen-fed gasifier. Amedium grade fuel is produced. The sulfur in thecoal is converted mostly into hydrogen sulfide, andthe nitrogen oxide is converted into molecularnitrogen. The hot gases heat the tubes of water,creating steam. The steam is used to drive turbinesto produce electricity. The gas and slag are thenseparated. A sorbent is used to remove 97 to 99percent of the sulfur from the gas produced fromcoal.33 The cleaned gas is burned in a turbine at a lowtemperature, which reduces NOX production.

Capital costs for an IGCC system could rangefrom $1,200 to $2,350/kWe (net). For smaller units(250-MW range), costs are expected to be higher,about $1,600 per kWe. The Electric Power ResearchInstitute (EPRI) estimates a plant cost of $1,630/kWe for a 500-MW IGCC. The gas production andpurification facilities will account for about 40percent of total costs. Operating and maintenancecosts could range from 6 to 12 mills/kilowatt hour(kWh).34

Technologies for Controlling Emissions35

Typically, emissions are reduced by four meth-ods: 1) cleaning coal to reduce sulfur content, 2)switching to low-sulfur coal, 3) using wet flue-gasand 4) using combustion controls for NOX emissions.According to NAPAP, almost all high-sulfur Easterncoal is cleaned before being burned. Physical coalcleaning reduces SO2 by 10 to 30 percent, butreductions of 50 percent can be achieved.

New advanced coal cleaning technologies canremove up to 65 percent of the sulfur content in coal.These technologies include advanced froth (multi-stage) flotation, electrostatic separation, and oilagglomeration. The costs of removing S02 using themultistage flotation process are estimated to rangefrom $131 to $268/metric ton removed, depending

on the sulfur content of the feed coal. The costs forthe oil agglomeration process ranges from $221 to$472/metric ton removed. These technologies areexpected to be commercial by the mid-1990s, butnone will be adequate to meet New Source Perform-ance Standards by themselves.

The removal of S02 from stack gases is termedflue-gas desulfurization (FGD). Devices com-monly referred to as scrubbers are used in thisprocess. The function of the scrubber is to bring theflue gases, which contain SO2, into contact with achemical absorbent, such as lime, limestone, magne-sium oxide, etc. FGD technologies are characterizedas wet or dry, depending on the state of the reagentas it leaves the absorber.

There are two FGD processes: nonregenerable(throwaway) or regenerable. In the throwawayprocess, the absorbent and the SO2 react to form aproduct which is disposed of as sludge or solid. Theregenerative process recovers the absorbent in aseparate unit for reuse in the scrubber and generallyproduces a product with market value, such aselemental sulfur or sulfuric acid. A great majority ofthe FGD processes employed by the utility industryare wet, nonregenerable systems that use limestoneor lime.

Wet scrubbing for new plants can remove up to 95percent of S02. The technology does not removeNOX, but this can be accomplished by incorporating1ow-NOX burners into the design of a new plant.Capital and operating and maintenance costs of thewet limestone FGD technology are dependent on thetype of coal burned and the amount of sulfurremoved. For example, the capital cost of a 500-MWplant that burns coal with a 0.5-percent sulfurcontent and removes 70 percent of the sulfur isestimated to be $140/kilowatt (kW). The capital costis $200/kW for a 200-MW plant that burns 4-percentsulfur coal and is required to remove 90 percent ofS02 emissions.

Another promising technology for reducing SO2

emissions is sorbent injection. This technology hasthe potential to reduce sulfur dioxide emissions byup to 70 percent. There are two types of sorbentinjection: the furnace sorbent injection process andthe low-temperature sorbent injection. Both proc-

BBEnvironmental and Energy Study Conference Report, Op. Cit., fOOmOte 30.

~u.s, CO-S, Office of Technology Assessment, op. cit., fOOtnOte 27.35~s s=tion is &am from tie Natio~l Acid Preo”pitafion Assessment program Report 25, op. tit., footnote 28.


esses should be available in the mid-1990s. Thefurnace sorbent injection process sprays a calcium-based sorbent material, such as limestone or calciumhydroxide, into the furnace. The heat decomposesthe sorbent into lime which captures the SO2 andforms calcium sulfate. The calcium sulfate and flyash are separated. The low-temperature, or postcom-bustion, sorbent injection process introduces acalcium-based sorbent into the flue gas, but fartherdownstream from the combustion zone. Postcom-bustion sorbent injection is potentially cheaper thanfurnace sorbent injection and wet flue-gas scrub-bing. Sorbent injection retrofits are estimated to costfrom $48 to $99/kW, depending on the size and thedifficulty of retrofitting the plant. In the UnitedStates, several commercial-scale utility projects arenow demonstrating furnace sorbent injection.

Currently, NOX emissions are reduced by modify-ing the design or operating conditions of combustionequipment. Common techniques include loweringexcess combustion air, recirculating the flue gas, andinjecting steam or water into the firebox. Reducingexcess air reduces the quantity of atmosphericnitrogen available for NOX formation. Flue-gasrecirculation and steam or water injection reduceflame temperature, which is an important factor indecreasing NOX production. Some of these tech-niques may reduce energy efficiency because theylower combustion temperatures.

Low NOX burners are standard features on almostall recently built utility boilers. According to theNAPAP report, low NOX burners can reduce NOX byup to 80 percent. The lOW-NOX burner technologyrestricts airflow into the combustion chamber, whichlowers combustion temperatures and NOX forma-tion. In the United States very few retrofits havebeen performed. Thus, costs are difficult to deter-mine. NAPAP indicated that retrofit capital costscould range from $8 to $34/kW.

Other advanced technologies such as gas re-burning and staged combustion could be commer-cially available in the United States by the mid-1990s. Gas reburning has been used in Japan as aretrofit to oil- and gas-freed plants. In this process,the primary fuel is burned in a secondary combustionzone, which destroys the NOX produced in theprimary combustion zone. Gas reburning has thepotential to reduce NOx, emissions by 40 to 75

percent. Several commercial projects have demon-strated fuel reburning using natural gas and coal asthe reburning fuel.

Another advanced technology is selective cata-lytic reduction (SCR). The SCR process is the onlycommercial control technology that can reducenitrogen oxides up to 90 percent. SCR is a flue-gastreatment process that reduces NO= to molecularnitrogen and water by reacting ammonia with NOX

in the presence of a catalyst at temperatures between300 and 400 degrees Celsius. The catalyst is theprimary capital and operating cost component of thistechnology. SCR can be used in a wide variety ofapplications, including new and retrofit coal-, oil-,and gas-fired facilities.

Japan and Germany have considerable experiencewith SCR. U.S. experience with this technology ismore recent but expanding. SCR has been used onseveral gas-freed combustion turbines in Californiaand New Jersey, but has not been applied commer-cially on boilers that burn high-sulfur and high-alkaline ash content coals. Many boilers in theUnited States use these types of coal. Before SCR iswidely used in this country, concerns about catalystlife, performance, and costs must be addressed.

Gasification

Gaseous fuels can be synthesized by combiningcoal with varying amounts of hydrogen and oxygen.Gasification technologies can be used to producesubstitute natural gas (SNG); synthesis gas, whichcan be converted to liquid fuels or used to manufac-ture chemicals; and to generate electricity in gasifi-cation combined cycle systems.

In the 1970s, there was a great deal of interest incoal gasification because of concerns about theadequacy of natural gas supplies. More than 100 coalgasification projects were under consideration.Many have since been discontinued because of thechanging energy picture. R&D continues on a fewprocesses, such as, ash agglomerating, fluidized-bedprocess, British Gas/Lurgi gasifiers, and the Rhein-braun direct fludizied-bed hydrogasification proc-ess.36

The Gas Research Institute (GRI) is finding R&Don the direct methanation process, which convertshydrogen and carbon monoxide to methane andcarbon dioxide. The process can be used to treat raw

360A ~dge Nation~ Laboratory, op. cit., footnote 4, P. 23.


gas from a gasifier with little or no pretreatment.Direct methanation requires no steam. GRI hopesthat direct methanation will improve the economicsof converting coal to SNG.37

Also, advances in acid gas removal could improvethe economics of SNG production from coal. One ofthe critical elements in producing SNG is theremoval of unwanted gases, such as C02 andhydrogen sulfide, from the product stream. There area number of commercial technologies that removeacid gases. However, only a limited R&D effort isdirected at improving acid gas removal.38

Following the 1973-74 oil embargo, coal gasifica-tion became a valuable source of synthesis gas,which can be converted to chemicals and feedstocks.The CO2 produced by the gasification process has anumber of applications. For example, CO2 is used inenhanced oil recovery operations, in the synthesis ofurea (ammonia and fertilizers) and in the carbona-tion of beverages. Several plants use coal gasifica-tion to produce synthesis gas. A plant in Tennesseehas been operating since 1983 and produces aceticanhydride, acetic acid, and methanol.39

Liquefaction

Liquid fuels can also be synthesized by chemi-cally combining coal with varying amounts ofhydrogen and oxygen. Coal liquefaction processesare generally categorized according to whetherliquids are produced from the products of coalgasification (indirect processes) or by reactinghydrogen with solid coal (direct processes).

The first step in the indirect liquefaction processis to produce a synthesis gas consisting of carbonmonoxide and hydrogen and smaller quantities ofvarious other compounds by reacting coal withoxygen and steam in a gasifier. The liquid fuels areproduced by cleaning the gas, adjusting the ratio ofcarbon monoxide to hydrogen in the gas, andpressurizing it in the presence of a catalyst. Depend-ing on the catalyst, the principal product can bemethanol or gasoline.

A number of large-scale gasifiers required for theindirect liquefaction process have been commer-

cially proven. These include the Lurgi, Westing-house, Texaco, and Shell processes. For the lique-faction component of the indirect process, theFischer-Tropsch process has proven effective. Thisprocess has been demonstrated and proven effectivein South Africa for converting synthesis gas to avariety of products, including propanes and butanes,diesel, fuel oil, and methane.

The direct liquefaction process produces aliquid hydrocarbon by reacting hydrogen directlywith coal, rather than from a coal-derived synthesisgas. A variety of direct liquefaction processes havebeen developed. These include pyrolysis, solventextraction, and catalytic liquefaction. Much atten-tion has been given to a process that dissolves andhydrogenates the coal at high temperatures (800 to850 degrees Fahrenheit) and pressure (1,500 to3,000 pounds per square inch (psi)), with or withoutcatalysts .40

In the United States, direct liquefaction is themost advanced of all the potential processes forproducing liquid fuels from coal. Between 1972 and1982, four pilot plants demonstrated the feasibilityof direct liquefaction. One of the plants, the Wilson-ville, Alabama Advanced Coal Liquefaction Re-search and Development facility, is still operating.Since 1983, improvements have been made in thequantity and quality of the liquid fuels produced(distillate fuel oil, kerosene, and gasoline). Theincreases in quantity and quality have improved theeconomics of liquefaction. According to ORNL, thecurrent liquefaction process would be cost-effectiveat a crude oil price of $35 per barrel.41

Further advances are possible. DOE efforts havefocused on improving catalysts that will allowefficient liquefaction using lower pressure andtemperatures.

NON-FOSSIL FUEL ENERGY ANDADVANCED TECHNOLOGIES

Nuclear and renewable energy technologies pro-vide less that 15 percent of our energy needs.However, many of the key decisions that will be

371bid.381bid., p. 24.3?Ibid., pp. 24-25.%id., p. 33.al~id., pp. 33-34. “


considered are related to these technologies. Fur-thermore, they can contribute significantly to energysecurity and environmental quality, especially re-duced CO2 emissions.

The Nuclear Power Option

Nuclear power has come to an impasse for avariety of reasons. If there is to be a revival, manyimprovements are likely to be required to reactortechnology and its management. In addition, prog-ress on waste disposal must be sufficient to demon-strate convincingly that technology and sites forsafe, permanent disposal will be available. Also,nuclear power is unlikely to be widely acceptable ifit contributes, or has a significant potential tocontribute, to the spread of nuclear weapons. De-pending on how well these problems are met,nuclear power will either gradually wither away orresume its growth as a substantial contributor to ourfuture energy needs.

Some observers doubt the viability of nuclearpower. Construction costs are high, and overruns arecommon; catastrophic accidents are possible; andthe problems and costs of waste disposal and plantdecommissioning have not been resolved. In addi-tion, foregoing nuclear power would enhance themoral leverage of nations seeking to stem theproliferation of nuclear weapons. The advantages tophasing out nuclear power, therefore, seem great.

Nevertheless, there are still strong national policyarguments for maintaining the option. An improvednuclear reactor may well be competitive with coaland much cheaper than oil or gas for electricitygeneration. Coal prices could also rise sharply withoil and gas if nuclear is not available as a competitor.Also, nuclear power is the only non-CO2 option thatcan now be expanded rapidly.

The lack of nuclear plant orders since the mid-1970s raises questions of whether the industry willbe able to respond adequately if new orders material-ize. Specialized knowledge and facilities will be lostas the industry contracts. However, there is no“point of no return. ” Utilities are increasinglypurchasing components for operating plants fromforeign companies, and new orders could be sup-plied the same way, at least until the domesticindustry rebuilds. Even entire reactors and major

nuclear systems could be imported without greatimpact on the utility, its customers, or the nationalbalance of payments. However, the situation isunlikely to get so extreme over the next few years.The major reactor vendors will probably be able tokeep current, especially if it appears probable that arevival will occur, but many of the companies thatproduce minor but necessary components are drop-ping their certification. This suggests that the longerthe hiatus before the next order, the slower therevival. Not only will design and manufacturingcapabilities have to be rebuilt, but so will nuclearengineering departments at universities.

Nuclear Powerplant Technology42

The technology has largely, though not com-pletely, matured. If a utility were to order anothernuclear plant now, it could start construction with anessentially complete design, and the final productshould not differ markedly from this design. Inaddition, the advanced designs now being readied byseveral of the reactor manufacturers are incorporat-ing safety and reliability features that should go along way to solving many of the past problems.

However, reliability and safety concerns havebeen so pernicious that even the most experiencedutilities would not consider nuclear to be a viableoption at present. The hostility, negative expecta-tions, and encumbrances that were created by all theproblems have left a legacy that will not bedissipated simply by showing that most of theproblems have been alleviated.

If it is deemed desirable to preserve the nuclearoption, there are two basic approaches to overcom-ing the problems discussed above. The present lightwater reactor (LWR) technology can be improvedsufficiently that utilities would feel secure orderinganew plant. Standardized designs would be licensedafter exhaustive safety analysis. Each applicantwould use a preapproved design not subject togeneric safety issues, so utilities would not facecontinual changes during construction. Only site-specific features would require custom design andlicensing. Issuance of the operating permit woulddepend only on showing that the construction metstandards. These designs would improve on currentdesigns by simplifying operations and increasingsafety. The advanced LWRs are a major step in this

42~s ~Sc.Sion iS @w ~m tie OTA ~Wo~ N~C/ear Power in anAge o~Uncertain~, C)TE.E-ZIG (w~~to~ Dc: U.S. GoveIIWrIent fit@Offke, February 1984).


direction. This approach relies on the expertise thathas been gained with several hundred LWRs in theworld and the evolving maturity of a familiartechnology.

Alternatively, an entirely different technologycould be tried that should be so demonstrably safethat problems of changing regulation, public accep-tance, and investor uncertainty should not be majorfactors. The high-temperature gas reactor(HTGR) and the liquid metal reactor (LMR) arealternative concepts that can incorporate passivesafety features to the point where it is essentiallyimpossible for an accident to occur that could resultin off-site releases of radioactivity. However, boththese concepts present uncertainties of operabilityand economics because of their unfamiliarity.

Both approaches (improved, familiar technologyand radically different technology) have advantagesand disadvantages. It should also be noted that it isentirely possible that neither will work, i.e., that thelegacy of problems is so great that no reactor willprove acceptable.

No matter which approach is tried, standardiza-tion will be important. No nuclear plant will becheap, and no utility is going to start constructionwithout assurances that the plant will be bothlicensable and well designed to be operable andefficient. No reactor vendor or architect/engineer islikely to go to the trouble and expense of designinga plant and licensing the design unless it canapportion these costs among many sales. Standard-ization is the only way to meet these constraints.Customized plants can be just as safe and, undersome conditions, just as economic, but for the nextround of orders, standardization offers practicalassurances of licensing and construction that areprobably essential.

It is also noteworthy that any new plants in theUnited States are likely to be smaller than those fromthe early days of nuclear power. Due to uncertaintiesof future load growth and rate regulatory treatment,utilities are avoiding large plants of any type. Allparties will want to limit their financial risk, andsmall plants cost much less though somewhat moreper kilowatt of capacity. It should be much easier todemonstrate compliance with regulations and costprojections of a small plant since it would be morepractical to build a full-scale demonstration model.

The ideal may well be modular units that can belargely factory manufactured and delivered rapidlyas needed. Reactors are unlikely ever to be as simpleto install as combustion turbines, but recent experi-ence suggests (not unambiguously) that large plantsare more subject to delays and cost escalation thansmall plants. Manufacturers are likely to find inno-vative ways to package small reactors that furtherreduce costs. Thus the economies of scale of largeplants are probably not as great as has been thoughtin the industry and may be outweighed by otheradvantages of small units. Small, modular reactorsare particularly appropriate for standardization asthey will be assembled from components that can beserially manufactured. As the number of reactorsordered increases, costs should drop.

Advanced Light Water Reactor—Two differentreactor designs have been developed for the LWR:the pressurized water reactor (PWR) and the boilingwater reactor (BWR) (see figures 3-3 and 3-4). ThePWR maintains its primary coolant under pressureso that it will not boil. The heat from the primarysystem is transferred to a secondary circuit througha steam generator, and the steam produced there isused to drive a turbine. In the United States, abouttwo-thirds of the nuclear reactors are pressurizedwater reactors.

The BWR eliminates the secondary coolant cir-cuit found in a PWR. In the BWR, the heat in the coreboils the coolant directly, and the steam produced inthe core drives the turbine. There is no need for aheat exchanger, such as a steam generator, or for twocoolant loops. In addition, since more energy iscarried in steam than in water, the BWR requires lesscirculation than the PWR.

LWRs have been operating in the United Statesfor more than 25 years. They have had good safetyrecords. There has never been an accident involvinga major release of radioactivity to the environment.Their operating performance, while not as good asexpected initially, has been comparable to that ofcoal-fired powerplants.

Improvements could be made to LWRs by rede-signing the plants to address safety and operabilityconcerns. Advanced LWR designs have been devel-oped by Westinghouse Electric Corp. and GeneralElectric Co. Efforts have been directed at reducingrisks and improving reliability. For example, thenew BWR design enhances natural circulation of theprimary coolant, which increases the ability of the


Figure 3-3-Pressurized Water Reactor

SOURCE: U.S. Congress, Office of Technology Assessment, NuclearPowerinan Age of Uncertaintv. OTA-E-216 (Washington. DC: U.S. Government PrintingOffice, February 1964), figure 20. -

coolant to remove decay heat in the event the maincirculation system fails. In the new PWR design,coolant piping has been reconfigured and theamount of water in the core has been increased toreduce the possibility that a pipe break could drainthe primary coolant enough to uncover the core.

Inherently Safe Advanced Reactor Concepts—Incentives for developing a more forgiving reactorarise from several sources. LWR designs haveevolved in a patchwork fashion, and there are still anumber of unresolved safety and reliability issues.Also, the Three Mile Island accident heightenedconcerns about the susceptibility of LWRs to seriousmishaps arising from human error. A more forgivingreactor design became desirable in terms of invest-ment protection as well as public health and safety.

The modular high-temperature gas-cooled reac-tor (MHTGR) is an example of an effort to developan inherently safe reactor. The MHTGR is cooled byhelium and moderated by graphite, and the entirecore is housed in a prestressed concrete reactor

. . - . .

vessel. The reactor uses enriched uranium alongwith thorium, which is similar to nonfissionableuranium in that it can be transformed into useful fuelwhen it is irradiated. The fuel particles are coatedwith multiple layers of ceramic material and carbon.The ceramic coating can withstand extremely hightemperatures (up to 1,600 degrees Celsius) withoutdamage.

Because helium is used instead of water as acoolant, the MHTGR can operate at a highertemperature and a lower pressure than an LWR. Thisresults in a higher thermal efficiency for electricitygeneration than can be achieved with other reactordesigns. It also makes the MHTGR particularlysuited for the cogeneration of electricity and processheat.

The gas-cooled reactor has several inherent safetycharacteristics that reduce its reliance on engineereddevices for safe reactor operation. First the use ofhelium as a primary coolant offers some advantages.Because helium is noncorrosive in the operating


Figure 3-4-Boiling Water Reactor

Containment vessel

SOURCE: U.S. Congress, Office of Technology Assessment, Nuclear Power inan Age of Uncertainty OTA-E-216 (Washington, DC: U.S. Government PrintingOffice, February 1984), figure 20.

temperature range of the reactor, it causes littledamage to components. Furthermore, it is transpar-ent to neutrons and remains nonradioactive as itcarries heat from the core. Also, the design of thefuel and core structure for the gas-cooled reactor hasinherent safety features. The fuel can withstand veryhigh temperatures, and the large thermal capacitanceof the graphite in the core and support structureswould slow the temperature rise even if the flow ofcoolant was interrupted. Operators would have agreat deal of time to diagnose and correct a situationbefore the core is damaged. Even if all measures fail,heat transfer out of the core should always be highenough to prevent damage to the fuel pellets andresultant catastrophic release of radioactivity.

The high-temperature gas-cooled reactor wassuccessfully demonstrated in 1967. The plant, PeachBottom 1, operated at an average availability of 88percent. A much larger plant that was to have beenthe prototype for commercial plants was built at FortSt. Vrain, Colorado. This reactor, now closed,suffered from many problems though the nuclearpart worked well. These problems are partly respon-

sible for a change in direction to smaller, modulargas reactors.

Preliminary conceptual design of a modularreactor has been completed. The simplification ofplant design using passive features and factoryfabrication should overcome the economic disad-vantages of smaller size. Because of its modest sizeand passive safety features, the MHTGR technologyis well suited to export markets. A number ofcountries have expressed interest in the MHTGR.They include the U. S.S.R., Italy, Israel, and China.

In addition to the MHTGR reactor, a small,passively safe liquid metal reactor (LMR) is beingdeveloped-the power reactor inherently safe mod-ule (PRISM). The PRISM technology uses liquidsodium to cool the reactor core. The reactor vessel ishoused in an outer “guard” vessel. The purpose ofthe outer vessel is to catch any leaking sodium.There is a 5-inch gap between the two vessels, whichis filled with argon to prevent the reaction of sodiumwith air. Both vessels are placed in an undergroundconcrete silo. Air is allowed to circulate freelybetween the silo wall and the “guard” vessel to


Photo credit: Princeton Plasma Physics Laboratory

The Tokamak Fusion Test Reactor at Princeton Plasma Physics Laboratory, where the first ever experiments on deuterium-tritiumplasmas are scheduled to occur in 1993.

remove residual heat passively to the outside. DOEis funding PRISM research, and conceptual designsare expected to be completed in 1991.43

Resource Extension

The technologies for fuel reprocessing and breed-ing are well developed. Over the last three decadesthe United States has spent about $16 billion onbreeder reactor technology. The liquid metal so-dium-cooled fast breeder reactor (LMFBR) is thesystem of choice for breeding.44

The LMFBR is conceptually similar to the LMR.However, the LMFBR has a higher breeding ratio.The LMFBR can convert uranium-238 into fissileplutonium at a rate faster than its consumption offissile fuel.

The reactor fuel rods contain a mixture ofplutonium dioxide and depleted uranium dioxide. Ablanket of rod containing depleted uranium dioxidesurrounds the core. The initial loading could useeither plutonium recovered from spent light waterreactor fuel or enriched uranium. Subsequent load-ings would use plutonium bred in the LMFBR.

The most serious risks from reprocessing areincreased opportunities for the proliferation ofweapons and the possibility of nuclear terrorism.Little economic justification exists now for reproc-essing but, as the number of reactors grows, uraniumprices will eventually rise. So will the value of theplutonium, leading to economic incentive to recoverand recycle.

Interest in Passive Reactor Designs,“ vol. 14, No. 3, 1989, pp. 10-12. National Laboratory, op. cit., 4, 58.


Fusion

Over the past 35 years, there has been greatprogress in nuclear fusion research, but there remainmany scientific and technological issues that needresolution before fusion reactors can be designedand built. According to OTA, 30 years of additionalR&D are required before a prototype commercialfusion reactor can be demonstrated. If successfullydeveloped, fusion has the potential to providesociety with an essentially unlimited source ofelectricity. It may also offer significant environ-mental and safety advantages over other energytechnologies. Fusion technology is beyond thetimeframe of this report, but it is one of only threelong-term options. R&D must continue on fusion ifthe United States is to have the technology by themid-21st century.

Nuclear fusion is the process by which the nucleiof two light atoms combine or fuse together. Thetotal mass of the final products is slightly less thanthe total mass of the original nuclei, and thedifference-less than 1 percent of the originalmass-is released as energy.

Hydrogen, which is the lightest atom, is theeasiest to use for fusion. Two of its three isotopes,deuterium and tritium, in combination work best infusion reactions. When deuterium and tritium react,kinetic energy is released. This energy is convertedto heat, which then can be used to make steam todrive turbines.

However, certain conditions must be met beforehydrogen nuclei fuse together. The nuclei must beheated to about 100 million degrees Celsius. Atthese temperatures, matter exists as plasma, a statein which atoms are broken down into electrons andnuclei. Keeping a plasma hot enough for a longenough period of time, and effectively confining itare crucial for generating fusion power.

The behavior of plasmas, and the characteristics,advantages, and disadvantages of various confine-ment concepts need further study. At this stage, it isnot known which confinement concept can form thebasis of an attractive fusion reactor. The tokamak,which is a magnetic confinement concept, is themost developed, attaining plasma conditions closestto those required in a fusion reactor. Its principalconfining magnetic field is generated by externalmagnets that run in toroidal direction. The tokamakalso contains a poloidal magnetic field that is

generated by electric currents running within theplasma.

Research on alternatives to the tokamak continuesbecause it is not clear that the tokamak will result inthe most attractive or acceptable fusion reactor. Foran indepth discussion of fusion R&D, the reader isreferred to the OTA report Star Power: The U.S. andthe International Quest for Fusion Energy.

Future Electricity Supply Options

The U.S. electric power industry experiencedtremendous change during the 1970s and 1980s,leading to considerable uncertainty. Because of thisuncertainty, utilities now consider a broader range ofoptions to accommodate future demand. In additionto its reliance on conventional technologies, utilitiesemploy less capital-intensive and nontraditionaloptions to ensure supply adequacy. These includeload management and conservation programs, lifeextension of existing facilities, smaller-scale powerproduction, and increased purchases from otherutilities and nonutility generators. These optionsoffer utilities more flexibility in responding todemand fluctuations.

Utilities are using demand management programsto reduce system peak demand and to defer the needfor future generating capacity additions. Demandmanagement programs include activities undertakenby a utility or customer to influence electricity use.Some utilities are just initiating demand manage-ment programs while others have been heavilyinvolved for years and very dependent on theseprograms to meet system electricity needs. Demandmanagement programs are discussed in chapter 2.

Life extension or plant improvement options arereceiving more attention as a way of deferring theneed for new capacity. Many of the older (30 or moreyears) plants have attractive unit sizes (100 MW orlarger) and performance characteristics (heat ratesclose to 10,000 British thermal unit/kilowatt hour(Btu/kWh)). And, in many cases, plant improvementcan also increase efficiency up to 5 to 10 percentand/or upgrade capacity. Refurbishments are under-way at a number of utilities. For more detailedinformation about plant improvement opportunities,see OTA’s assessment New Electric Power Technol-ogies: Problems and Prospects for the 1990s.

Purchasing power from other utilities and nonutil-ity generators is yet another option to ensure supply


adequacy. The development of sophisticated com-munications equipment and control technologiesand cost differentials have fostered an increasinglyactive market in bulk power transactions amongutilities. Bulk power transfers constitute a signifi-cant share of total U.S. electricity sales. Canadianpower imports are also increasing.

This section focuses on a number of new promis-ing technologies for electric power generation.These include the intercooled steam injected gasturbines, combined cycle conversion, and fuel cells.

Advanced Turbines

Turbines fueled by oil or gas have providedelectric power for five decades. They were usedprimarily to meet peak loads because of theirrelatively low efficiency. Recently, they have at-tracted renewed attention because of their lowcapital cost and improved fuel efficiency. Newturbine technologies and advanced materials haveallowed for hotter combustion temperatures. Manyof the advances in design and high-temperaturematerials for turbines result from military R&D forimproved jet engines.

The steam injected gas turbine (STIG) has fargreater power and electrical efficiency than olderdesigns, as discussed in the cogeneration section ofchapter 2. The addition of intercooling to the STIG(ISTIG) should further increase power and effi-ciency improving their value for central powerstation applications. Part of the incoming com-pressed air used for combustion is passed throughthe turbine blades for cooling. This permits highercombustion temperatures. General Electric is con-ducting design work and indicates that this technol-ogy will be able to reach an average efficiency of48.3 percent at an installed capital cost of $400/kW.45

Adding a steam turbine to a combustion turbine isanother relatively new approach, called the com-bined cycle. A combined cycle powerplant is highlyfuel efficient (up to 47 percent).46 The steam turbineportion of a combined cycle plant can be added longafter the combustion turbine has been in service,allowing greater planning flexibility. A key techno-logical development allowing for widespread accep-

tance of combined cycle plants has been improvingthe reliability of the combustion turbines.

It may also be economically feasible to convert acombined cycle plant to run on gas derived fromcoal, as in an IGCC system. The turbine initially canbe freed by natural gas, delaying construction of thecoal gasifier until fuel prices and other economicconditions warrant. The IGCC is discussed in thecoal section of this chapter.

Fuel Cells

Fuel cells produce electricity by an electrochemi-cal reaction between hydrogen and oxygen, which,at least in theory, can produce electricity much moreefficiently than current technology for burning fuel.The hydrogen can be supplied by a hydrocarbonfuel. A typical fuel-cell powerplant consists of threemajor components: fuel processor, fuel-cell powersection, and power conditioner. The fuel processorextracts hydrogen from the fuel. The hydrogen isthen fed into the fuel-cell power section. The fuelcells are joined in a series of stacks which form thepowerplant. The electrical power that flows from thestacks is direct current (DC). With some voltageregulation, the DC power can be used if the load iscapable of operating with DC. Otherwise a powerconditioner is required to transform the DC intoalternating current (AC). Neither combustion normoving parts is required in the production of power.A single fuel cell produces about 1 volt.

There are several types of fuel cells beingdeveloped. They are categorized according to thetype of electrolyte used in the conversion process.Fuel cells that use phosphoric-acid as the electrolyteare the most developed, but concerns about perform-ance and costs persist. The phosphoric-acid fuel cellis likely to account for most of the fuel cellsdeployed in the 1990s. Other fuel cells employalternative electrolytes such as molten carbonate andsolid oxide. Molten carbonate and solid oxide fuelcells reform hydrocarbon fuels directly in the cell.These fuels cells, which operate at high tempera-tures, produce waste heat that can be used forcogeneration applications. The molten carbonateand solid oxide fuel cells are not expected to bedeployed until the late 1990s at the earliest.

45Ro~fi H. Williams and WC D. -n, “Expanding Roles for Gas Ibrbines in power Generation,” reprinted from Elecm”ci~jicientEn& Useand New Generation Technologies, and Their Planning Implication (no date), p. 531.

a“Utility ‘lkrbopower for the 1990s,” EPRKJournal, AprWMay 1988, pp. 5-13.


Fuel cells are expected to produce electricity withmodest environmental impacts relative to those ofcombustion technologies. Efficiency is estimated tobe between 36 to 40 percent for smaller units and 40to 44 percent for larger ones, and future technologymay realize efficiency rates well over 50 percent.Another advantage is the short leadtime (2 to 5years) required to build a fuel-cell powerplant.Because fuel cell systems are modular, they can bebuilt at a factory and assembled at the site. Installa-tion can be accomplished in many locations, includ-ing areas where both available space and water arelimited. Other advantages include fuel flexibilityand responsiveness to changes in demand.47

The installed capital costs of prototype fuel-cellpowerplants are about $3,000/kWe. The fuel cellpower section will account for about 40 percent ofthe costs. Operating and maintenance costs areestimated to range from 4.3 to 13.9 mills/kWh.Replacing cell stacks will account for the largestshare of operation and maintenance costs. Fuel costsare expected to be about 27 to 33 mills/kWh.48

Magnetohydrodynamics

In magnetohydrodynamic (MHD) generators, astream of very hot gas from a furnace (about 5,000degrees Fahrenheit) flows through a magnetic fieldat high velocity. Because the gas is an electricalconductor, current is produced through electrodesmounted on the sides of the gas duct. Used inconjunction with conventional power technology,MHD might raise plant efficiency by 10 percent.However, many difficult technical problems remainunsolved, especially for coal-freed MHD systems.Perhaps the strongest argument for continuing a highlevel of R&D activity is the promise of being able toextract more useful energy from coal if concernsover CO2 emissions prove accurate.

Storage 49

Electricity storage is of enormous benefit toutilities. Storage reduces the amount of generatingcapacity that is required to meet peak loads andspinning and transmission reserves. Utility custom-ers also can use storage devices to avoid the highprice of electricity during peak periods.

Advanced batteries, compressed air energy stor-age (CAES), and pumped hydro are storage technol-ogies that are well developed and could, undercertain circumstances, be used in the 1990s.

Advanced Batteries-Batteries are more efficientand flexible than mechanical energy storage sys-tems. In addition, they are modular and thus requireshort leadtimes to construct. Capacity can be addedas needed and sited near the intended load. Abattery’s ability to react in a matter of seconds makesit valuable for optimizing a utility’s operations.

Three types of utility-scale batteries are promis-ing: advanced lead, zinc-chloride, and sodium sul-fide (NaS) batteries. Lead batteries are widely usedtoday, mostly in cars.

Lead-acid batteries consist of a negative leadelectrode and a positive lead dioxide electrodeimmersed in an electrolyte of sulfuric acid. As thebattery discharges, the electrodes are dissolved bythe acid and replaced by lead sulfate, while theelectrolyte becomes water. When the battery isrecharged, lead is deposited back on the negativeelectrode, lead peroxide is deposited back on thepositive electrode, and the concentration of acid inthe electrolyte increases.

Over the years, research has continually improvedlifetime cycles of the lead-acid battery. It is possibleto buy a load-leveling lead-acid battery with aguaranteed lifetime of 1,500 cycles (about 6 years).Refinements could further improve the lifetime up to3,000 to 4,000 cycles.

One of the disadvantages of lead-acid batteries iscapital cost. Operation and maintenance costs aredependent on the durability of various batterycomponents in a corrosive environment and how thebattery is used. According to OTA, the largestcomponent of operation and maintenance costs willmost likely stem from the periodic replacement ofbattery stacks.

Zinc-chloride batteries have been under devel-opment since the early 1970s. During charging, zincis removed from the zinc-chloride electrolyte anddeposited onto the negative graphite electrode in the

470ak Mdge NatiO@ Ialxratqj Energy Technology R&D: What Could Make a Difference? vol. 2, Part 1, “End-Use Technology,”ORNL-65441/V2/Pl, December 1989, p. 138.

~u.s. Conmss, office of Technolom Assessment, op. cit., footnote 27.4~~ess ~~ewise not~, mo5t of ~5 Swtion is b~~ on he OTA r~ortNewElectn”c power Technologies: Problems and Prospects for the ~990s,

op. cit., footnote 27. For more information on this topic the reader is referred to this report.


battery stack. Chlorine gas is formed at the positiveelectrode. The gas is pumped into the battery pump,where it reacts with water at 10 degrees Celsius toform chlorine hydrate, an easily manageable slush.During discharge, the chlorine hydrate is heated toextract the chlorine gas, which is pumped back intothe stack, where it absorbs the zinc and releases thestored electrical energy. The zinc-chloride technol-ogy is complex and is sometimes described as beingmore like a chemical plant than a battery.

Cost estimates for the zinc-chloride battery areabout $500/kWe, less expensive than the lead-acidtype because of the inexpensive materials that gointo its manufacture. The operation and maintenancecosts are uncertain. However, the expected longerlifetimes and less expensive replacement costs forthe stacks and sumps could levelize replacementoperation and maintenance costs in the 3- to 9-mills/kWh range.

A major safety concern is associated with theaccidental release of chlorine. Because chlorine isstored in a solid form, sumps must be sufficientlyinsulated so that in the event of a refrigerationsystem malfunction the chlorine will stay frozen.

Interest in commercializing the NaS battery isstrong, and funding has reached about $140 millionannually. 50 The NaS battery system requires anoperating temperature of 350 degrees Celsius. Atthis temperature, both the sodium and sulfur areliquid. During discharge, sodium is oxidized at oneelectrode and travels through the electrolyte whereit is reduced at the second electrode to form sodiumpolysulfide. The major advantages of the NaSbattery are its high overall efficiency (88 percent)and its high energy density compared with that forthe lead-acid battery. One of the primary concernsover this technology is maintainingg the high operat-ing temperature during both charging and discharg-ing. Fluctuations in temperature will result inelectrolyte cracking.51

Compressed Air Energy Storage—A CAES plantis a central storage station where off-peak power isused to pressurize an underground storage cavernwith air. The compressed air is later released to drivea gas turbine. The frost U.S. CAES project wasscheduled to begin commercial operation in March

1991. Alabama Electric Cooperative, Inc. owns the11O-MW plant.52

In a conventional plant, the turbine must power itsown compressor, which leaves only about one-thirdof the turbine’s power available to produce electric-ity. The compressed air from a CAES is used in aturbine which, freed from its compressor, can drivean electric generator up to three times as large. Thegases discharged from the turbine pass through a‘‘recuperator,’ where they discharge some of theirheat to the incoming air from the cavern, increasingthe overall efficiency of the plant. (See figure 3-5.)

Three types of caverns may be used to store air:salt reservoirs, hard rock reservoirs, or aquifers. Thesalt reservoirs are found in Louisiana and easternTexas. Salt caverns are mined by pumping awater-based solution into the deposit and having itdissolve a cavern. Salt caverns are air tight.

Rock caverns are located throughout the UnitedStates. They are excavated with underground miningequipment. A compensation reservoir on the surfacemaintains a constant pressure in the cavern as thecompressed air is injected and withdrawn. Aquiferreservoirs are naturally occurring geological forma-tions, occurring in much of the Midwest, theFour-Corners region, eastern Pennsylvania, andNew York. They consist of porous, permeable rockwith dome-shaped, nonporous, impermeable caprock overlying them. The force of the surroundingwater confines the compressed air and maintains itat a constant pressure as it is injected and withdrawnfrom the rock.

Compared to batteries, CAES plants are in a moreadvanced stage of development and are likely to beless expensive than batteries on a dollar per kilowatt-hour basis. However, CAES plants require longerleadtimes to construct, probably from 4 to 8 years,depending on size.

Pumped Hydro--There are numerous pumpedhydro plants in the United States. Some plantsrequire a large, above-ground reservoir while othersstore water underground. Above-ground reservoirshave become difficult to site, and undergroundstorage is only economical in very large units.

m@& Wdge Nation~ hboratory, “End-Use Technolo~, ” Op. Cit., fOOtJ.10te XT, p. 163.

‘lIbid.52’’ Compressed M Used To Produce Economical Pedc power, ” Power, vol. 134, No. 6, June 1990, p. 77.


Aftercooler

(Cools airbefore it

enters cavern

Figure 3-5-First Generation CAES Plant

Exhaust

— \ \ T r a n s f o r m e r

Generator/ i

‘ I ?“’er l ‘otor =Compressed

(The intercoolers cool the air after it emergesfrom one compressor and before it enters thenext compressor. This increases compressorefficiency.)

I Cornpressed air

air

Cornpressed air

A Compressed Air Energy Storage (CAES) plant is a modification of a conventional gas turbine cycle. Its principal components are combus-tion turbines, compressors, a generator/motor, and an underground storage cavern. The system stores energy by using electricity from the gridto run the compressor and charge the cavern with compressed air. This energy is discharged by releasing the compressed air to the combustionturbine where it is mixed with natural gas or oil and burned to produce the power which drives the generator. In a conventional gas turbine plantthe turbine drives its own compressor simultaneously with the generator so that only a third of the turbine’s total power is available to produceelectricity. Thus, a CAES plant stores the energy in off-peak electricity to make a gas turbine three times as fuel efficient.

A Compressed Air Energy Storage (CAES) plant is a modification of a conventional gas turbine cycle. Its principal components arecombustion turbines, compressors, a generator/motor, and an underground storage cavern. The system stores energy by using electricityfrom the grid to run the compressor and charge the cavern with compressed air. This energy is discharged by releasing the compressedair to the combustion turbine where it is mixed with natural gas or oil and burned to produce the power which drives the generator. In aconventional gas turbine plant, the turbine drives its own compressor simultaneously with the generator so that only a third of the turbine’stotal power is available to produce electricity. Thus, a CAES plant stores the energy in off-peak electricity to make a gas turbine three timesas fuel efficient.SOURCE: U.S. Congress, Office of Technology Assessment, New Electric Power Technologies: Problerns and Pmspecfe for the 19Ws, OTA-E-2~

(Washington, DC: U.S. Government Printing Office, July 19S5), figure 4-27.

A pumped storage plant recycles the water that the upper reservoir occurs during off-peak hoursflows through its turbine, sending it through a using the utility’s least costly resources.reversible turbine from a lower to an upper reservoirfor reuse. Although pumped storage facilities use Expanded use of pumped storage facilities couldmore energy for pumping than they generate for improve overall efficiency. Currently, U.S. pumpedpower, they assist in peak power production, when storage capacity is only 3 percent of the country’selectricity is most costly to produce. Replenishing total capacity. Foreign studies suggest that increas-

et al., Potential of Renewable Energy, an White Paper, ofEnergy CO: Energy Research March 1990), p. A-3.


ing the share to 20 percent might benefit the U.S.power grid.53

Other storage technologies are flywheels, andsuperconducting magnet energy storage. These tech-nologies are not likely to be commercial before theyear 2000.

Transmission and Distribution

Transmission and distribution lines carry electricenergy from the powerplant to the user. Mosttransmission in the United States consists of over-head AC lines operated at 69 kilovolt (kV) or above.Distribution systems operate at lower voltages,typically under 35 kV, to transport smaller amounts

of electricity relatively short distances.

Transmission systems are extraordinarily com-plex. They must be developed in concert withgenerating plants, but utilities are experiencingincreasing difficulty in siting lines. Few importantlines have been stopped, but that may not be true inthe future. One of the major issues is the healtheffects of electric and magnetic fields, discussed

later in this chapter. The technical options discussedhere may help alleviate some of the concerns.

In recent years, long-distance transmission hasincreased significantly. Transmission capacity insome regions is already strained by the high usage.Improvements in transmission and distribution tech-nologies can improve performance and reliability.Options for increasing transmission capability in-clude improving control of reactive power andvoltages on a network and increasing the thermal orvoltage capacity of an individual existing line,improving control of power flows on a network,decreasing the response time of generators andtransmission line switching, and adding new lines.

Developments that may have significant long-term effects on transfer capability are high-powersemiconductors, advances in computer and dataprocessing, and in the very long term, possibly evensuperconductivity. High-power semiconductors arenow being used on high voltage direct current(HVDC) powerlines to convert AC power to HVDCand back again. The high-power semiconductors


(thyristors) used in this application are expensiveenough that HVDC powerlines are only practical inlong lines or as interconnections between asynchro-nous systems. Lower cost and high-capacity semi-conductors will make shorter DC lines economicallypracticable and allow multiterminal HVDC lines,instead of the two terminals now used. Because theconversion voltages at both ends of the line can becontrolled, HVDC transmission allows completecontrol of network flow.

Advances in communication and data processingshould improve reliability and economy. The currenttransmission and distribution system is largelymechanically controlled. The development of moreflexible transmission controls and distribution auto-mation will allow more efficient operation, but at the

price of complexity.

Superconductors will have a number of possibleapplications in the utility industry. These include: 1)magnetic energy storage, 2) superconducting gener-ators, and 3) transmission lines.

Electricity storage may be the most likely earlyuse of superconductors. The concept is less devel-oped than the storage technologies discussed earlier,but superconducting magnets could be more eco-nomical and easily sited. The difficulties of thisapplication include cost, refrigeration, and theenormous magnetic stress on brittle ceramic super-conductors.

Another possible application is superconductinggenerators. preliminary designs and testing havebeen done using lower temperature metal supercon-ductors. Even small reductions of losses can beimportant because of the high-power flow involved.

Superconducting transmission lines are anotherpossible application, but not as attractive as theymight first appear. Although superconducting cableswould have no resistance, this would have to bebalanced against cooling losses and the cost of thecable and burial. HVDC circuits would benefit muchmore from superconducting lines. The cost ofAC/DC conversion equipment will limit the use ofsuperconducting lines until the price of high-powersemiconductors declines. For more informationabout superconductivity, please see the OTA reportHigh-Temperature Superconductivity in Perspec-tive.

Hydrogen

Many technologies such as nuclear power andemerging options such as photovoltaics and wind aremost suitable for the production of electricity.Insofar as the electricity can be loaded onto thepower network and delivered to customers, that isthe most efficient method. However, electricity hassome significant disadvantages as an energy carrier.At present it cannot be stored economically, and it isexpensive to transport long distances although, asdiscussed above, new technologies may changethese conclusions.

A potential alternative is to produce hydrogen,most probably by electrolyzing water, and deliver-ing it via pipelines, much like natural gas. Hydrogenprovides inherent storage, as does natural gas; it isless expensive to ship long distances than electricity;and it can be consumed almost as cleanly—thecombustion product being water vapor (a smallamount of NOX may also result).

However, hydrogen also involves several disad-vantages. Costs would be high unless the electricityis extremely inexpensive (in which case the losses oflong-distance transmission and storage of electricitywould not be very important). Losses in the electrol-ysis process and in compressing and delivering thehydrogen would be substantial. Pipelines built fornatural gas could be unsuitable because hydrogencan embrittle steel pipes, shortening their lifetimes,and because the energy density is lower than naturalgas, limiting the amount that can be delivered. Thusnew and expensive pipelines could be required.

The easiest displacement would be of natural gas,but demand for gas is greatest for heating in thewinter, when most renewable energy technologieshave relatively low output. Thus, annual storagewould be required if hydrogen were to become asignificant part of the energy system. Hydrogenwould be more valuable as a replacement forgasoline, but storage in small quantities in automo-biles would be almost as difficult as storing electric-ity in batteries.

Hydrogen may play an important role eventuallybecause of its natural partnership with intermittentsolar technologies, but first the cost of thosetechnologies must drop to very competitive levels.Lowering the costs of producing and storing hydro-gen is the focus of DOE R&D efforts. Much R&D


effort is still needed to bring hydrogen concepts tothe demonstration stage.

Renewable Energy Technologies

Renewable energy sources can supply space andprocess heat as well as electrical power. Somesources can be converted to feedstocks, for produc-ing chemicals, or to fuel, for transportation. Ingeneral, the resource bases are inexhaustible andwidely but irregularly distributed in both space andtime, making storage very important. And, althoughthe potential of each resource seems enormous, onlya small amount of the resource is economicallyrecoverable at present. As a group, renewable energytechnologies are relatively clean and provide neededprotection against a disruption in oil supplies. Newenergy technologies will enhance U.S. competitive-ness and help reduce the trade deficit.

Continued R&D are needed to improve theefficiencies of promising renewable technologies, toreduce the risk of new technologies, and to helpintegrate renewable into existing energy systems.Yet, Federal funding for renewable R&D hasdeclined over the last decade (see figure 3-6).Several recent studies have suggested that for acomparatively small increase in investment, theFederal Government could significantly hasten thedevelopment and deployment of renewable technol-ogies. The Solar Energy Research Institute (SERI)and ORNL have concluded that the Federal budgetfor renewable R&D was only about half of whatcould be technologically justified.54

Hydroelectricity

Hydroelectric facilities use the kinetic energy inflowing water to generate electricity. Most hydro-power facilities capture and store water via dams andreservoirs. Others operate in a run-of-river modewhereby water flow is not altered. Hydropower-generating capacity is affected by the volume flowof water and the difference in elevation of the wateras it passes through the plant.

In 1989, hydroelectric power contributed about2.7 quads to total U.S. energy supplies.55 Hydro-

Figure 3-6-DOE Energy R&D Budget: 1980-1991Selected Budget Lines

Billions of dollars (1982), appropriated5 1

2

1

0 !

m F u s i o n

m F o s s i l

= N u c l e a r

m Eff ic iency

= R e n e w a b l e

8 0 8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0 9 1

SOURCE: Congressional Research Serviee, Energy Conservation: T~-dca/Etiiu”encyan dProgram Effectiveness, 1885130, UpdatedApr. 2,1991, table 2.

power represents about 12 percent of installedelectric generating capacity. Although the overallcapacity of hydropower has doubled since 1960, thegrowth rate has slowed. The 88 gigawatts (GW) ofpresent capacity include 64 GW of conventionalhydro, 17 GW of pumped hydro, and 7 GW ofsmall-scale (30 MW or less) hydro.56

According to SERI, only about half of theNation’s hydropower capability has been devel-oped.57 As of January 1, 1988, the United States has76.1 GW of conventional hydropower and 19.1 GWof pumped storage capability still untapped. Of thisamount, DOE estimates that for conventional hydro-power it is economical to develop only 30 percent,or 22 GW, given current economic and regulatoryconstraints. By the year 2030, a net increase of8-GW conventional and 5-GW pumped storage isprojected, a growth of less than 0.5 percent peryear. 58

Hydropower is an attractive energy source be-cause it is clean, it takes advantage of a largedomestic resource base, and it responds quickly toutility load swings. Its availability (95 percent onaverage) is greater than that of thermal generating

54u.s. cowe~~, ~lce of T~~~l~~ ~=~=en~ Chnging ByDegrees: Steps To Reduce &een~~e Gases, OTL1-()-482 (wSShkl@OQ DC: U.S.Government Printing Office, February 1991), p. 105.

55u.s. mm= ~o~tion Administration op. cit., footnote 1, p. 9.~Soli,U lilnergy Re~ch Institute, op. cit., footnote 53, p. A-1.sTIbid., p A-3.~~id., pp. A-3, A-4.


plants. Hydropower facilities are characterized bylow annual operating costs, long service lives, andlow emissions of pollutants. Hydropower facilitiescan also aid flood control and provide recreation.

On the other hand, hydropower entails high initialcapital costs, potentially serious environmental is-sues (e.g., aquatic life considerations and the loss offarmlands, wetlands, and scenic areas), dam safetyconcerns, and keen competition by other interests foruse of the water base.

Technical Opportunities-Several areas of re-search promise to improve the economics of hydro-power development and reduce its environmentaldrawbacks. For example, research on hydro-turbines has resulted in technologies that may provequite beneficial to hydropower development. Avariable-speed, constant-frequency generator hasbeen designed to alter the turbine speed in responseto changes in the hydraulic head, allowing theturbine to operate at maximum efficiency.

New ultralow-head turbines, designed for use atsites with elevation differentials of less than 10 feet,could provide nearly 4,000 MW of additionalcapacity .59

Large-scale deployment of free-flow turbines foruse in flowing rivers could help develop an addi-tional 12.5 GW of capacity.60 Use of such turbineswould entail very little civil work, no impoundmentof water, little disruption of flow, and no costlyupgrade of dam structures.

The development of cross-flow turbines thatoptimize air injection and suction head in the drafttube and the design of replacement turbine runnerswith improved efficiency and air ingestion capabili-ties offer additional savings.

Further research is needed to identify and mitigatethe environmental impacts of hydropower. Of partic-ular interest are technologies to: 1) allow fishmigrating downstream to bypass dams (upstreambypasses are reliable technologies), 2) specify in-

steam flow requirement for aquatic life, and 3)quantify the cumulative impacts of multiple-sitedevelopment of a river basin.

Biomass61

Biomass already is a significant source of renew-able energy. It is the only nonfossil liquid fuel fortransportation applications. The industrial sectoruses 2 quads of energy from biomass, almost all ofit in the pulp, paper and lumber industries. Many ofthese industries use biomass in the cogeneration ofheat and electricity. Furniture manufacturers andfood processors are other significant users. Theresidential sector uses nearly 1 quad of firewood,mostly for space heating and cooking.62

Biomass Resources—The energy potential ofbiomass is enormous. DOE estimates a total energypotential of at least 55 quads in 2000, under certainconditions. Present capacity, excluding cultivatedenergy crops and wood and grain not used forbiomass, is estimated to be 14 quads.63

Energy Crops—hardwood trees and herbaceouscrops dedicated as energy resources-are the great-est potential source of biomass. The goal of provid-ing a year-round, abundant supply of biomass isbeing supported by genetic engineering efforts andbreeding research to increase yields and reduce costsof plants such as corn, sorghum, ‘energy’ cane, andshort-rotation hardwoods. DOE reports that duringthe next 25 years, average annual crop yields areexpected to be 5 to 11 dry tons per acre. At 9 dry tonsper acre, the use of 192 million acres of potentialcropland could generate a gross biomass energycapacity of 26 quads. It is not known at this time howmany acres could be devoted to energy cropproduction without having a major impact on other”crops and forest production. Currently, about 900million acres are classified as cropland or commer-cial forestland. Of that total, about 10 percent iswithheld from production to either reduce cropproductivity or for soil conservation purposes. Anaverage of 328 million acres are planted annually.64

590A Ridge Natio~ Laboratory, op. cit., footnote 4, p. 80.

%id.61 Bioms refers t. ~ten~5 from biologic~ so-es that can be converted to fuel or feedstock: wood and WOOd wastes, residues from PromSs@l

food and wood products, agricultural wastes, sewage and municipal solid wastes, aquatic plants and algae, and “energy crops” grown speciilctdly toprovide fuel or feedstock.

szso~ Energy Resemch Institute, op. cit., footnote 5$ p. B-8.631bid., p. B-17.Wbid., pp. B-5, 6.


Other sources of biomass are described below:

●

●

●

●

Conventional wood resources, includes woodnot used by the forest products industry in thethinning out of commercial forests. SERIestimates that conventional wood resources, ifmanaged properly, could supply 6.5 quads ofenergy annually.65

Agricultural and forestry wastes include pri-mary and secondary residues. Primary residuesare the stalks, limbs, bark, and leaves left on theland after harvesting. Expensive to collect, theyare often left to enrich the soil. Secondarywastes emanate from processing (e.g., ricehulls, black liquor from pulping) and can oftenbe used as fuel at little or no cost.Agricultural oil seed crops that produce veg-etable oil offer an interesting but not yetcommercial source of energy. Soybeans, whichdominate this market, produce oil that is almosttotally usable as fuel, yet soybean products arevalued more highly for other uses. Rapeseed oilis a promising energy source.Certain aquatic energy crops produce oil thatwith upgrading could substitute for jet anddiesel fuel. These plants include microalgaeand macroalgae (e.g., kelp, cattails, waterhyacinths, and spartina).

Biomass offers many environmental benefits.Carbon dioxide produced during combustion isbalanced by reabsorption by the growing plants.Emissions of SOX and other air pollutants arenegligible or at least as easily controlled as thosefrom fossil fuels.

Although abundant, biomass resources are thinlydispersed. Collecting and transporting biomass toconversion centers can be costly, considering itsrelatively low ratio of energy content to weight. Ifbiomass is to become a major source of economicalenergy, additional crops will have to be grown thatare more productive, less costly, and sited closer toconversion centers. Gearing up energy crop produc-tion will entail greater land and water use, withvarious impacts according to locale. Recent ad-vances in biotechnology can improve plant produc-

tivity and develop new plants. For example, produc-tivity can now be increased 5 to 10 times over thenatural growth rate of trees.66 However, the increasein biotechnology and genetic engineering effortswill have to satisfy concerns of public and environ-mental safety.

Converting Biomass to Energy—Biomass can beused directly as fuel or converted to other forms foruse as fuel or feedstock. Ultimately, biomass will bemore useful if converted to gaseous or liquid fuels,but the conversion process can cost as much as thecollection of biomass and feedstock production.

Thermal Use of Biomass—The principal energyuse of biomass is the production of heat, via directcombustion in air, for use in process heating, spaceheating, and cogeneration systems. About 64 per-cent of this energy is used by the lumber, pulp, andpaper industries. Homeowners and commercial enti-ties use the rest.

Electricity is produced primarily through thedirect combustion of wood, wood wastes, and woodbyproducts. Most users of biomass for powergeneration are nonutility generators (NUGs) thathave ready access to wastes or byproducts at little orno cost. Many utilities, however, purchase powerfrom cogenerators who use biomass as fuel. In 1989,biomass-fueled capacity accounted for about 20percent of total NUG capacity (40,267 MW). Bio-mass capacity included agricultural waste, munici-pal solid waste, and wood.67 Utilities now operatewood-fired powerplants in California, Maine, Mich-igan, Oregon, Vermont, Washington, and Wiscon-sin. About 5,200 MW of total utility capacity iswood-fired.68

The use of biomass by utilities is usually uneco-nomical and impractical. Biomass has a lowerenergy content than coal, and delivery costs arehigher because of the dispersed nature of theresource. Generally, biomass must be procuredwithin a 50-mile radius of the powerplant to beeconomical. EPRI estimates that the costs of produc-ing electricity from a wood-fired plant is 11 cents/kWh compared to 7 cents/kWh for coal-freedplants.69

‘Ibid., B-5.@()& Ridge National Laboratory, op. cit., footnote 4, p. 84.GvEdison Electric ksti~te, 1989 capacity and Generation of Non-Utility Sources of Energy, Apti 1991, P. 9.68ElW~c power ReScuch ~ti~te, Technical Brief, “Wood-~erica’s Renewable Fuel,” RP2612-12, 1990.

@Ibid.


Gasification of Biomass-The production ofmethane (essentially natural gas) from biomass forsupply to a natural gas system is accomplished bybiological anaerobic digestion. Anaerobic digestionis particularly well-suited for very wet feedstocksand has been used commercially when biomass costsare low enough. Given a feedstock cost of $2.00/MBtu, methane can be produced for $4.50/MBtu, acost not yet competitive with conventional naturalgas unless other factors such as disposal costs areconsidered.70

Methane production from landfills, sewage treat-ment, and farm wastes will continue to increase butwill be important only for specific locales. Biomasscan also be converted by partial oxidation to syngas,which can be used as a fuel or as a feedstock formethanol production.

Production of Biofuels71—A variety of liquidfuels and blending components can be producedfrom biomass for use primarily in transportation.These biofuels include alcohol fuels (ethanol andmethanol), as well as synthetic gasoline, jet, anddiesel fuel.

Each year nearly 1 billion gallons of ethanol areadded to U.S. gasoline stocks to create gasohol, a90-percent gasoline/10-percent ethanol blend. Theuse of ethanol has gained support because of itspotential contribution to the U.S. agricultural econ-omy. The Federal Government and about one-thirdof the States subsidize ethanol use by partly exempt-ing gasohol from gasoline taxes. Without thesesubsidies, ethanol would not be competitive withgasoline. OTA estimates that the full cost ofproducing ethanol ranges from $0.85 to $1.50/gallon, compared to wholesale gasoline prices ofabout $0.55/gallon.

Corn is the least expensive agricultural feedstockfor ethanol production, especially when the byprod-uct of the production process can be sold. Wood andplant wastes are less expensive feedstocks, but thecosts of available conversion processes are higher sothat the net cost of producing ethanol from wood andplant wastes is more expensive than ethanol fromcorn. SERI is working on improving wood-to-

ethanol processes and indicates that economic com-petitiveness can be reached by the year 2000.

Methanol can also be made from wood and otherbiomass materials, but the costs of production areuncertain. The National Research Council estimatedthat the crude oil equivalent price of methanolproduced from wood, using demonstrated (not yetcommercial) technology, is over $70/barrel. Forbiomass-based methanol to be competitive withcoal-based methanol, improvements are needed inconversion technology and all aspects of growingand harvesting of biomass feedstocks. SERI expectsthe wood-to-methanol process to be ready fordemonstration on a commercial scale by 2000 at thecurrent R&D pace.

The production of diesel and jet fuel frommicroalgae is not as promising for the near term.Organisms with high growth rates that produce highoil content must first be developed. In addition,demonstration ponds must be built and operated ona large scale to make this process economical.

Converting biomass to synthetic hydrocarbonfuels through pyrolysis (thermal decomposition inthe absence of air) of the biomass and catalyticupgrading of the biocrude to gasoline has beendemonstrated in pilot plants but not developed forcommercial use. Research results suggest a currentcost estimate of the pyrolysis process to be $1.60/gallon for gasoline. A target of 85 cents/gallon isexpected by 2005 if improvements are made incatalytic conversion and if feedstock costs are$2.00/MBtu. 72

Commercial production of synthetic gasolinefrom biomass depends on improvements in theefficiency of the fast pyrolysis process. Specificneeds include an increase in the yield and quality ofthe hydrocarbons produced. SERI expects that by2020, fast pyrolysis technology should be commer-cially feasible at current levels of R&D.73

Geothermal Energy

Resources of natural heat below the Earth’ssurface can be used directly for space and processheat or converted to electricity. Although the actual

~fjo~ Ener~ Re~ch Institute, op. cit., fOO~Ote 53, p. B-7.

71 For a mom ~depth ~~ussion of ~te~tive fuels, see the OTA reportlteplacing GasolinAZternutive Fue/sjiirL”ght-Duty Vehicles, Ow-E-q64(Washington, DC: U.S. Government Printing Off@ September 1990).

v2so~ her~ Resemch Institute, op. cit., footnote 53, p. B-7.

731bid., p. B-16.


resource is enormous-potentially 10 millionquads74 in the United States alone-the amount thatcan be recovered economically is small. Neverthe-less, using available technology, about 23,000 MWof capacity from geothermal resources could betapped over the next 30 years, according to the U.S.Geological Survey.

75 In 1989, the U.S. geothermalindustry produced 2.8 billion kWh.76 Modest techni-cal advances could dramatically increase the use ofthis resource.

Geothermal resources take several forms: steam,hot water, volcanic magma, hot dry rock, andgeopressured brines. Except for brines located alongthe Gulf Coast, most of these resources underlie thewestern third of the country.

The Resource Base—The geothermal resourcebase includes usable heat contained within the Earthto a depth of about 3,000 feet.77 Only 3.8 percent ofthis resource comes from hydrothermal reservoirs,naturally occurring hot water or steam at tempera-tures of 90 degree C. or more to a depth of 900 feet.78

Only a small portion of the hydrothermal resourceis composed of the very hot (150 degree Celsius andmore) vapor-dominated reservoirs used to generateelectricity. Two-thirds of identified hydrothermalresources are in the moderate range of 70 to 121degrees Celsius.79 These resources and those that areof lower temperature show promise of recoveryusing available improved hydrothermal technolo-gies.

The largest part of the geothermal resource baseis found in: 1) magma, accessible regions of moltenrock at temperatures of 850 degrees Celsius andhigher; and 2) hot dry rock (HDR)--deep, hotregions of rock that can potentially be fractured byfluid pressure to create manmade reservoirs. Nocommercial recovery of either resource yet occurs.Likewise, energy from the geopressured-geothermalresource-zones of hot brine containing dissolvedmethane-that occurs mainly along the Gulf Coasthas yet to be recovered.

Converting Geothermal Energy-Convertinggeothermal resources to energy entails bringing theresource to the Earth’s surface via a production welland then converting geothermal energy to usefulenergy.

The technology for converting hydrothermal re-sources is well established. Dry natural steam can beconverted to electric power by conventional turbinegenerators. Flash and binary cycle conversion tech-nologies must be used to convert other geothermalresources. Flash steam technology is used withhigh-temperature liquids (less than 200 degreesCelsius) to produce steam to drive a turbine-generator. Binary cycle systems use the heat of ageothermal liquid to vaporize a second, workingfluid. These systems are used when liquids are nothot enough (below 200 degrees Celsius) for flashsteam approaches.

Although there has been little commercial experi-ence with this technology, the dual-flash system isexpected to be more efficient than the single-flashsystem now in extensive use. Dual-flash units areprojected to be about 40 to 50 MWe in size by1995.80

The binary cycle system is more complicated andcostly because it uses a secondary working fluid,thus entailing special turbines and heat exchangers.Binary systems have an advantage in that theworking fluid can have thermodynamic characteris-tics superior to steam, resulting in a more efficientcycle. Moreover, binary cycles operate efficiently ata wide range of plant sizes.

These same conversion systems used for hydro-thermal resources can be adapted for recoveringenergy from geopressured zones, hot dry rock, andmagma. Geopressured-geothermal resources canproduce electricity at projected power costs of 7.5 to16 cents/kWh, not counting the value of the naturalgas byproduct.81

740ff1ce of Tech.uoIo~ Assessment, op. cit., footnote 27, P. 96.7SSOIW En~gy Research Institute, op. cit., footnote 53, p. c-l.76u.s. En~~ ~omtion Administmtioq op. cit., footnote 1, pp. 201-239.~Ibid.TsOfflce of Technology Assessment, op. cit., fOOtUOte 27, P. 96.T%id.%id., p. 98.slsol~ Enm~ Research Jnstitute, op. cit., fOOtnOte 53, P. C-s.


Hot dry rock technologies offer great promise forcommercially developing the large geothermal re-source potential. The rock is fractured to createreservoirs into which water is pumped. Once heated,the water is brought back to the surface, where itsheat can be used directly or converted to electricity.With the needed technology developed, this methodis projected to generate power at 5 cents/kWh.82

The heat from magma is recovered by pumpingwater into the subsurface to extract heat. Fieldexperiments to confirm drilling techniques, reser-voir dynamics, and other parameters are neededbefore this technology can become commercial.Magma energy costs are estimated to be 4.5 to 8cents/kWh.83

The costs of identifying and developing geother-mal resources are high. Improved technology forresource exploration and reservoir conflationcould reduce costs as much as 25 to 40 percent foradvanced concepts.84 Moreover, predictions of res-ervoir performance must be enhanced.

Substantial cost reductions could also be made indrilling, completing, and operating geothermalwells. Accelerated research is needed on high-temperature equipment and corrosion-resistant ma-terials. Savings of 15 to 20 percent for hydrothermaltechnology and 25 to 40 percent for advancedconcepts could result. However, environmental is-sues, such as wildlife management and scenicconsiderations could restrict the development ofsome geothermal sites. SERI points out that the‘‘not-in-my-backyard’ syndrome is just as true forgeothermal projects as it is for other energy facili-ties. 85

Solar Thermal Electricity

Solar thermal electric plants use mirrors or lensesto concentrate sunlight, heating a fluid which is thenused to produce electricity. Solar thermal systemsoperating with storage or with another fuel systemoffer significant potential for meeting peak or

intermediate utility needs. Solar thermal electricplants produce 0.01 quad per year.86

Much progress has been made in the technologyin the last decade. Several different solar thermalsystems can produce electricity for about 12 to 15cents/kWh. The DOE program goal is to produceelectricity for 5 cents/kWh.87

Three technologies could be deployed competi-tively in the next 20 years: central receivers; andtwo distributed, or modular concepts, parabolictroughs and parabolic dishes.

Distributed systems have been more successfulthan central receivers. Since each unit is independ-ent, it is easier to install. Each central receiver,however, must be designed for a specific number ofheliostats (the concentrators). Heliostats must beindividually focused on the central receiver andmust follow a unique tracking system. However, itis not yet clear which concept will be superior in thelong term.

Central Receivers—The central receiver is afreed receiver mounted on a tower. At its base a largefield of mirrors, known as heliostats, tracks the sun,reflecting solar energy onto the receiver. The mirrorsmust move both vertically and horizontally on aprecisely determined path. Liquid or air inside thereceiver transports the thermal energy to a steam-driven turbine for generating electricity. In the1970s, several solar thermal electric plants werebuilt, including the 1O-MW Solar One Plant locatedin Dagett, California. The 30-MW Phoebus projectin Jordan is the major central receiver projecttoday .88

The most dramatic advances for central receivershave been in heliostat design and in the fluids usedin the receiver. The most promise is seen in replacingthe glass and metal mirrors in heliostats withstretched membranes of aluminum or steel sheetsthat are silvered on one face and curved to reflectsolar energy at the right angle. Stressed membranesare about 20 percent of the weight of glass/metal

821bid.831bid.‘Ibid., p. C-5.8sIbid.8%id, p. E-3.6To& ~dge Natio~ Laboratory, op. cit., fOOtMe 4, P. 105.88&l J. Wetiberg and Ro~fi H. W7fi~s, “Energy From the s~” Scientific A~rican, -h 1990, VO1. 263, No. 3, p. 149.

mirrors, which reduces the cost of the heliostat aswell as the foundation and control system.

Research is also focused on replacing the steam/water in central receivers with molten nitrate salt.Molten salt can be maintained at lower pressuresthan steam (reducing pipe costs), and it stores heatwell (reducing the need for heat exchangers orsecondary systems). Storing several hours’ worth offull power would allow complete load following inthe summer when air conditioning peaks in the lateafternoon.

Recent utility studies project annual central re-ceiver system efficiencies of 14 to 15 percent, withcosts of 8 to 12 cents/kWh for a next-generationplant using advanced receiver and heliostat technol-o g i e s .89 -

Parabolic Dishes—A parabolic dish is a dish-shaped collector with a receiver mounted at its focalpoint near the center. Each module includes atwo-axis tracking device. Several dishes are usuallyarrayed on a field, forming a distributed system. Theconcentrated heat may be used directly by a heatengine placed at the focal point, or may be trans-ported by a fluid or air for remote use. Some designsuse an array of mirrors, like a minicentral receiver.

New materials are being sought to replace tradi-tional reflecting surfaces on the dishes. Of mostinterest is a stretched membrane of polymer. Othermaterials include large metal mirrors, mirrors incor-porating structural support, and Fresnel lenses.

The most efficient system tested incorporates afree-piston Stirling engine at the focal point. About30 percent of insolation can be converted to electric-ity by such a system, which is higher than any other

Research Institute, op. cit., 53, p.


solar electric technology.90 The Stirling enginecould be very reliable because of its mechanicalsimplicity, but it will need further development toimprove its efficiency and cost.

Power costs from a system of stretched membranedishes and a Stirling engine are projected to be 5cents/kWh when commercially available.91

Parabolic Solar Troughs-Collectively, para-bolic solar trough systems account for more than 90percent of the world’s solar electric capacity. Aparabolic trough tracks the Sun vertically, which issimpler than the vertical and horizontal trackingrequired from heliostats and parabolic dishes. Thetrough concentrates sunlight onto a tube fried withfluid, usually very hot oil, at its focal line. The fluidcirculates between troughs, finally transferring itsheat through a heat exchanger to water or steamdestined for a turbine generator.

Standing alone, solar troughs are best used forindustrial applications. For electric power genera-tion, supplemental gas-fired superheaters are used tocreate steam hot enough to drive a turbine.

From 1984 to 1988 several commercial solartrough plants, totaling 275 MWe, were built by theLUZ Corp. in California. LUZ is presently con-structing 80 MWe of capacity, and is planning for300-MWe additional capacity by 1994. These para-bolic trough electric plants operate in the hybridmode, using natural gas. Improvements in engineer-ing, manufacturing, and construction techniqueshave reduced electric costs from 23 cents/kWh inearly plants92 to 8 cents/kWh in 1990. These areaverage costs, including the contribution of naturalgas, which is cheaper than the solar portion.93

Company officials at Southern California Edisonproject further system cost reductions of 30 per-cent,94 which would make solar trough systemscompetitive in a wider range of markets.

Industry Outlook-solar thermal energy will notlikely be a competitive baseload energy sourceunless oil and gas prices rise significantly.95 Al-

though no major breakthroughs are envisioned thatwould lower costs below current projections, thesereductions may be enough to make solar thermal avaluable source of supplemental energy. One marketfor which it maybe uniquely qualified is toxic wasteneutralization, where photochemical effects maybemore effective than simple heat.

For the near term, the solar trough/natural gashybrid system appears to be the most marketable.Utility studies suggest that in the long term centralreceiver and parabolic dish technologies offer themost cost-competitive generation if cost-effectivestorage technologies can be developed. The U.S.budget for solar thermal research, however, hassteadily declined in the last 10 years, and the UnitedStates has lost its leadership to European countriesin marketing solar thermal technology to foreignmarkets. Besides its environmental benefits, devel-oping solar thermal energy technologies offers apotential multibillion-dollar domestic and interna-tional industry.

Photovoltaic Energy

Photovoltaic (PV) cells, which directly convertsunlight to electric current, have been used for yearsin calculators, watches, and space satellites. Otherniche markets such as remote sites are also develop-ing. These applications have sustained the PVindustry while the technology has developed forusing PV cells economically in the bulk powermarket. Although PV energy is more expensive thanconventional energy for most uses, costs continue todrop. The present cost is now 20 to 30 cents/kWh—about five times the cost of conventional electric-ity.96 With further advances in microelectronics andsemiconductors, photovoltaics can become competi-tive with conventional power sources by 2010,maybe earlier. Some PV cells have already reachedefficiencies of nearly 30 percent.

To capture solar energy, PV cells are groupedtogether in modules that are then linked in arrays ona large panel oriented toward the Sun. PV systemsare used with battery storage in locations far from

~oak Ridge National Laboratory, op. cit., footnote 4, p. 105.%30LM 13ner~ Research Institute, op. cit., foonote 53, p. E-2.nweinberg and Will-, op. cit., footnote 88, p. 149.gssok En~~ Research Institute, op. Cit., footnote 53, p. El.Wweinberg ad Wti, op. cit., footnote 88, p. 149.950* Ridge Natio~ ~oratoly, op. cit., footnote 4, p. 105.

%Wein~rg and Williams, op. cit., foOtf.10te 88, p. 149.


Photo credit:ARCO Solar, k

Photovoltaic central station,

existing powerlines. The direct current electricityproduced can be converted to alternating current andfed into the electric grid, but this is not yetcost-effective.

Technology advances have been focused on twotypes of PV module systems: the concentratorsystem and the flat-plate collector. Each systemuses a variety of materials and configurations.

Concentrator Systems—In a concentrator sys-tem, lenses focus sunlight onto PV cells so that theequivalent of 50 to 1,000 Suns are focused on eachPV cell. Such a system requires direct sunlight anduses expensive, though highly efficient, cells alongwith an inexpensive concentrator. A fairly complex,two-axis tracking system maximizes Sun exposure.At very high Sun concentrations, active cooling withcirculating fluids is necessary.

The concentrator module could be the technologyof choice for central station use in the near termbecause this option involves fewer materials possi-bilities. Moreover, the most promising advances forthis system have been improvements in solar cellefficiency.

Technical Opportunities—Two semiconductor

materials are being considered for near-term concen-trator systems: silicon (Si) and gallium arsenide(GaAs). Silicon is the most mature PV technology.Improvements in silicon cells will involve incre-mental advances and improved mass productionrather than basic technical advances.

Unlike silicon, GaAs does not degrade much athigh temperatures, a significant consideration foruse at 500 to 1,000 Suns, where active cooling canbe necessary. Furthermore, only a few microns of


GaAs are enough to absorb all the solar radiation,whereas a few hundred microns of single crystalsilicon (c-Si) are needed for the same job. However,growing thin films of GaAs in the quantity andquality needed is not yet feasible.

Concentrators that keep optical losses small andmaintain focused radiation on cells throughout windstress, thermal cycling, and tracking are the centralfocus of R&D programs. In the near term, 20-percentefficient concentrator modules can be achieved.97

Flat-Plate Collectors—This type of PV modulesystem exposes a large surface area of intercon-nected arrays of PV cell modules to the Sun. Thissystem uses cells cheaper but less efficient thanthose in the concentrator system. Unlike the concen-trator system, flat-plate collectors can operate indiffuse sunlight, and no cooling system is required.Very little maintenance is required.

Flat-plate systems entail a large number ofinterconnections between a large number of cells.The integrity of these connections, and their protec-tion against hostile elements in the environment, aremore important than the protection of the cellsthemselves. Making cells as large as possiblereduces the number of interconnections.

Technical Opportunities—Minimizing cell cost

is critical for flat-plate modules. The complex designand manufacturing process for highly efficientconcentrator cells may always be prohibitivelyexpensive for one-Sun use. Focusing R&D effortson improving automated high-yield processing ofone-Sun cells may be more fruitful than changingcell design itself. Improvements in the quality ofsolar cell grade Si may also be possible.

A variety of cells can be used in flat-plate systems.They include single crystal, polycrystalline andribbon silicon, and amorphous silicon.

Single Crystal Cells—The expense of growingand slicing single-crystal cells makes it unlikely thatsuch cells will be used extensively in flat-platetechnology. Other forms of silicon and new process-ing technologies are the best hope for improvingflat-plate technology .98

Polycrystalline and Ribbon Silicon-Castingprocesses yielding large-grained polycrystalline sili-con and techniques for making continuously pulledribbon silicon may yield acceptable efficiencies atsignificantly reduced cost.

Thin-film Technology--The cheapest approach toPV energy conversion is the deposition of thinsemiconductor films on low-cost substrates. Thinfilms are amenable to mass production and use onlya small amount of active material. Materials usedinclude copper iridium diselenide, cadmium tellu-ride (with small-area laboratory cell efficiencies of19 percent), and amorphous silicon.99 To be effec-tive, deposition techniques must be developed toensure high-quality and defect-he material withinindividual grains. If the thin film is polycrystalline,grain boundary effects must be minimized.

Amorphous silicon (a-Si) is interesting becauseonly a thin film of inexpensive material is needed forhigh absorption and because large-area films of a-Siand multifunction a-Si cells can be made easily.However, efficiency is low and degrades over time.Research is focusing on improving efficiency bymeasures such as stacking cells (multifunctioncells).

Wind Power

Wind power is the solar energy technology closestto being economically competitive in the bulk powermarket. In 1989, wind powerplants generated over2 billion kWh of electricity, 100 at an average of

8 cents/kWh. At the best sites the cost was only5 cents/kWh.101

Wind turbines convert the energy of the wind torotating shaft power, which is converted to electricalenergy. Horizontal axis wind turbines capture windvia propellerlike blades attached to a rotor mountedon a tower, similar in appearance to windmills ofold. Vertical axis wind turbines look like gianteggbeaters: their two or three long, curved blades areattached to a vertical shaft at both ends. Theseturbines require no orientation to catch the flow ofwind from any direction.

~@& Ridge National Laboratory, op. cit., fOO~Ote 4, p. 121.

‘Ibid., p. 117.%id., p. 118.loosok ~er~ Res~ch Institute, op. cit., footnote 53, p. 8.1°IJeanine Anderson, “New Third,” Public Power, vol. 8, No. 3, May-June 1990, p. 23.


Wind is an intermittent resource that varies fromregion to region. Sites with small differences in windvelocity have great differences in energy output,because power output increases with the cube of thewind speed. Thus, an average wind speed of 19 milesper hour (mph) will produce 212 percent moreavailable energy than will an average speed of 13mph. 102

Technical Opportunities-Although the costs ofwind-derived energy have dropped dramaticallysince 1981, few of these reductions stemmed fromtechnological improvements. Most of the savingsresulted from standardization of procedures, massproduction techniques, improvements in siting, andthe scheduling of maintenance for periods of lowwind.103 New turbines are now able to remain inoperation almost 95 percent of the time.104 I naddition, the lifetime of critical components for windturbines has doubled in the last 10 years.105

DOE and industry analysts agree that within thenext 20 years expected improvements in wind powersystem design will yield electric power at 3.5cents/kWh for sites with only moderate wind re-sources.106 Some Midwestern States, with averagewind speeds of 14 to 16 mph, would be likelybeneficiaries of such technology.

Additional improvements will derive from moresophisticated turbines that can adapt to the changingspeed and direction of the wind, thereby helpingprovide more constant frequency power to a utility.Pacific Gas and Electric and EPRI are engaged in a5-year project to develop, build, and test prototypesof a 300-kW variable-speed, wind turbine whoseblades and electronic controls allow the rotor to turnan optimum speed under a variety of wind condi-tions. Advances in electronic controls that aresensitive to changing wind characteristics, andadvanced materials that yield lighter, stronger com-ponents are expected to further improve wind energycompetitiveness.

Wind power sites must have adequate wind,suitable topography, accessibility to both utility andtransportation systems, and acceptability from envi-

Photo credit: U.S. Wn@ower, Ed Linton, photographer

Small wind turbines.

ronmental, regulatory, and public perception per-spectives. Characterizing a site has proven costlyand time-consuming, because techniques for extrap-olating data from one site to another are not yetrefined. Extensive, customized wind measurementsare necessary at most sites to estimate and maximizetheir full potential. There is a need to establish acoordinated program for integrating, documenting,and disseminating wind measurements on a con-stant, long-term basis.

In the past decade, U.S. funding for wind energyresearch dropped to $9 million per year, a tenth ofwhat it was at its peak.107 Technical improvementswill be necessary if wind turbines, particularly smallturbines, can compete without subsidies. Moredetailed information is also needed about wind

Institute, Op. cit., 53, p.

op. cit., footnote 88, 147-148. Research Institute, op. cit., footnote 53, p. 8.

cit., footnote op. cit., footnote 88, p.

op. cit., footnote 101, p. 26.


resources, cost, and performance. Many industryobservers recommend establishing minimum per-formance standard levels for turbine certification.

In general, improvements in wind energy areexpected to continue, and the cost of electric powerfrom wind turbines in high-wind regions maybecome considerably lower than power from othersources. The rate of improvement will be heavilyinfluenced by future trends in the avoided costs or“buy-back rates” offered by utilities to nonutilityenergy producers. If these costs are low or uncertain,technological development and application will beslowed. Conversely, high avoided costs, stimulatedperhaps by rising oil and gas prices or shrinkingreserve margins of generating capacity, might con-siderably accelerate the contribution of wind power.

Ocean Energy Systems

The ocean—with its waves, tides, temperaturegradations, marine biomass, and other dynamiccharacteristics-contains an enormous amount ofenergy. Exploiting this resource has proved difficult.

ocean thermal energy conversion (OTEC) ex-ploits the difference between temperatures of sur-face water and water as deep as 1,000 m108 togenerate electricity. Differences as small as 20degree Celsius can produce usable energy. Tappingthis vast resource, particularly in tropical oceans,would produce an estimated 10 million megawattsof baseload power, according to SERI.109

Research has focused mainly on the closed-cycleand open-cycle OTEC systems for generating elec-tricity. The closed-cycle system recirculates a work-ing fluid, like ammonia, to power a vapor turbine forelectricity generation. Warm seawater is used tovaporize the ammonia via a heat exchanger (evapo-rator). The expansion of the vapor runs the turbine.Cold, deep-sea water than condenses the vapor viaanother heat exchanger (condenser).

An open-cycle system uses warm seawater that isflashed into steam in a partial vacuum chamber asthe working fluid to power a low-pressure steamturbine. The steam exiting the turbine is condensedby cold seawater. If a surface condenser is used, thecondensed steam stays separate from the seawater,

providing desalinated water. Effluents from eitheropen- or closed-cycle systems can be converted tofreshwater through a second stage evaporator/condenser system.

No commercial OTEC plants have been tested,but under some conditions, OTEC-derived electric-ity may be competitive in the next 5 to 10 years forsmall islands where power from diesel generators isvery expensive. Use of OTEC domestically forelectric power is unlikely except for coastal areasaround the Gulf of Mexico and Hawaii.

It should also be noted that the basic OTECtechnology-the conversion of large quantities ofheat at low temperature differences to electricpower--can also be used to exploit waste heat atindustrial and commercial facilities. Many refiner-ies, steel plants, chemical processing plants, etc.dump heat at much higher temperatures than areavailable in the ocean. Exploiting this energy wouldbe much easier than building and operating anOTEC and would supply power right at a load centerinstead of out in the ocean. Similarly, thermalpowerplants exhaust a huge amount of energy (60 to70 percent of all energy input to the plant), thoughat lower temperature differences. A bottoming cycleusing OTEC-type cycles could make an asset out ofan environmental problem, and feed the powerdirectly into the grid. Both these applications arelikely to be economical long before OTEC.

Other ocean energy technologies that convertwave energy and tidal power receive much lessattention than OTEC. The U.S. Government does nomajor wave R&D, but Norway, Britain, and Japando. The greatest U.S. wave energy potential, with anestimated mean incident energy of 40 to 50 kW/m,is found on the West Coast. Wave energy duringwinter storms can reach over 200 kW/m, causingsafety and design problems. Major technical chal-lenges requiring engineering evaluations and devel-opment involve offshore siting (waves dissipatecloser to shore), structural difficulties, the mooring,and the power transmission cable. Estimates forwave power for the Pacific Northwest are a yearlyaverage power level of 1.64 MW, but a peak powerof more than 3.3 MW during Winter.110

lo8~e me-e m is the differen~ btween high and low tides, which creates a hydrostatic head like that in hydropower.

IWSO~ fier~ Research Institute, op. cit., footnote S3, p. D-1.

1 IOIbid., p. D-9.lll~id.


The total U.S. tide potential has been estimated at18,300 GW.111 Only three coastal areas, however,are promising: one in Maine and two in Alaska. aminimum tidal range of 5 m is needed for tidal powerto be considered practical. Research in microhydrotechnology may make tidal systems feasible at lessertidal levels.

Municipal Solid Wastes (MSW)

About two-thirds of the solid waste generated byhouseholds and by commercial, industrial, andinstitutional operations is burnable and can beconverted to energy.

Conversion Technologies—MSW can be con-verted to electricity and process heat by either masscombustion or refuse-derived fuel combustion. Inmass combustion, MSW is burned with or withoutpretreatment or sorting of the inherent waste prod-ucts. In refuse-derived fuel combustion, recyclablematerials and noncombustible materials are frostremoved from the MSW. The remaining material ismade into pellets.

Waste-to-energy facilities function much like afossil fuel steamplant. The fuel is burned to heatwater, and the steam drives a turbine to generateelectricity. The steam can also be used in districtheating/cooling systems. SERI estimates that cur-rent use of MSW for electricity totals 0.11 quads.Under current programs, that amount is expected torise to 0.45 quads by 2010 and 0.57 quads if R&D isincreased. 112 Most waste-fired capacity is owned bynonutility generators.

Another energy product, methane, can be recov-ered from MSW for use in natural gas systems viathe anaerobic digestion of MSW’s digestible com-ponents. If the cost of MSW disposal exceeds$40/ton, the net cost of MSW-derived methane maybe as low as $3.50/MBtu, making it nearly competi-tive with the cost of delivering natural gas to thecities. 113

A less economic recovery of methane is possiblefrom the natural decomposition of MSW in landfills.Currently, 0.01 quad of landfill methane is recov-ered.114 For safety reasons, other methane is col-

lected from landfills and flared, because the volumeis too low to be economical.

Several problems exist with present MSW ap-proaches. MSW plants have higher capital andoperating expenses than those of wood- or fossil-fired plants, mainly due to feedstock processingcosts and to later emissions and solid waste disposal.

Some of these costs are balanced by credits foravoiding MSW disposal. Thus, overall costs ofpower generation average 7 cents/kWh but couldalter depending on the economics of particularlocales.115

A variety of technology improvements are beingsought for reducing the costs of electric powergeneration and emission control, increasing theattractiveness of MSW as a fuel for electric power-plants. New ways are needed to dispose of dioxins,nitrogen oxides, chlorinated gases, solid residues,and ash. Automatic trash sorting to remove glass,plastics, and other recyclable would improve com-bustion and reduce disposal problems.

For methane production by anaerobic digestion ofMSW, improvements are needed in solids loadingrates and digestion efficiency. Also needed areimprovements in the stability and control of digesteroperation. An accelerated program with industryinvolvement and cost-sharing could reach perform-ance goals if tipping fees for MSW exceed the $25to $50/ton range.116

Extensive commercial use of gasification ofMSW may be economical already in areas wheredisposal costs are high (where tipping fees are above$100/ton at lanfills).

OTHER FACTORS AFFECTINGSUPPLY

Environmental Concerns

Perhaps of greatest concern is the greenhouseeffect produced by gases emitted during fossil fuelcombustion. These greenhouse gases, which includeC02, methane, NOX, and chlorofluorocarbons, trapheat in the atmosphere preventing its radiation into

l%id., p. B-20.l%id., p. B-7.IWbid., p. B-8.1151bid., p. B-6.11’%id., p. B-11.


space. Global temperatures could increase by 2 to 9degrees Fahrenheit over the next century if currentemission trends continue. The anticipated rise intemperature could lead to devastating changes inclimate, agriculture and forestry, and populationshifts.

The United States is a major contributor togreenhouse gas emissions. U.S. carbon emissionsfrom energy use account for 25 percent of the worldtotal. Coal accounts for 35 percent of U.S. carbonemissions; petroleum, about 45 percent; and naturalgas, about 18 percent.

A recent OTA report, Changing by Degrees: StepsTo Reduce Greenhouse Gases, concluded that theUnited States can reduce CO2 emissions by 20 to 35percent from 1987 levels over the next 25 years butonly with great difficulty. There are significantopportunities for reducing CO2emissions in allsectors. To achieve this reduction, a serious commit-ment and the implementation of a variety of techni-cal options and policy measures will be required.Emissions reductions may be costly, but no majortechnological breakthroughs are needed.

The implementation of C02 reduction measureswill have far-reaching effects on the U.S. economyand energy supply picture. The switch to low ornoncarbon fuels may revitalize the nuclear option,increase demand for natural gas, accelerate thegrowth of renewable, and limit production andconsumption of coal. Attempts to limit coal use willresult in significant social and economic impacts. Atthe very least, marginal, inefficient mines andcoal-fired powerplants will probably close. Unem-ployment in the coal industry will rise. This willexacerbate economic problems that already besetsome coal mining regions, especially Appalachia.Nevertheless, if we are serious about reducing CO2

emissions, coal is the place to start.

The increased use of natural gas can deplete U.S.reserves and strain the distribution system. Pricescould rise to very high levels. Also, the increased useof natural gas carries with it the risk of increasedmethane leakages.

These reduction measures will also result inancillary environmental benefits that include reduc-ing acid rain, urban smog, ozone depletion, ground-water contamination, and waste disposal. All ofthese environmental concerns can be addressed orare being addressed by regulations, so the advan-

tages may be marginal. For an indepth analysis oftechnical and policy opportunities for reducinggreenhouse gas emissions over the next 25 years, thereader is referred to the recent OTA report ChangingBy Degrees: Steps To Reduce Greenhouse Gases.

Another environmental concern is acid rain. Thecombustion of fossil fuels also produces sulfurdioxide and nitrogen oxide. As these pollutants arecarried away from their sources, they can betransformed through complex chemical processesinto secondary pollutants: sulfates and nitrates.These pollutants combine with water to form acidand fall as rain or other precipitation. Numerouschemical reactions-not all of which are completelyunderstood-and prevailing weather patterns affectthe overall distribution of acid deposition.

The best documented and understood effects ofacid deposition are to aquatic ecosystems. Thesensitivity of a lake or stream to acid depositiondepends largely on the ability of the soil and bedrockin the surrounding watershed to neutralize acid.When the waters of a lake or stream become moreacidic than about pH 5, many species of fish die andthe ecosystem changes dramatically. In addition tothe acidification of aquatic ecosystems, transportedair pollutants have been linked to harmful effects toterrestrial ecosystems. Broad forested areas sub-jected to elevated levels of acid deposition, ozone,or both have been marked by declining productivityand dying trees, although it is uncertain how muchof this is due to airborne pollutants. For an indepthdiscussion of acid rain, the reader is referred to theOTA report Acid Rain and Transported Air Pollut-ants: Implications for Public Policy.

The new Clean Air Act of 1990 caps utilityemissions of SO2 by the year 2000 at 8.9 million tonsper year, a 10-million-ton reduction from 1980levels. The new law also requires annual reductionsof nitrogen oxides. Midwestern utilities and thoselocated in Appalachia will be hardest hit by the cap.Most of the heaviest polluters are located in theseregions. The biggest cuts in the first 5 years will bemade by the heavy polluters. In addition, the lawprovides for a pollution credits trading system,which helps polluting utilities pay for acid raincleanup. Utilities can reduce SO2 emissions belowtheir required limit-receive credits. These credits canbe sold to other utilities and the cash used to defraycosts of emissions control technologies. Credits are


also given to “clean” utilities to grow beyond thecap.

The mandated emissions reductions will likelyresult in increased electricity costs to consumers,particularly in the Midwest, and may financiallystrain certain vulnerable utilities. Markets may bedisrupted by an increase in the demand for low-sulfur coal at the expense of high-sulfur coals. Thischange in demand will result in increased unemploy-ment in regions where high-sulfur coal is mined. Theextent to which utility and industrial users wouldshift to low-sulfur coal depends on the relative costadvantage of fuel switching as opposed to removingsulfur dioxide by technological means (scrubbers).It is hoped that by providing financial incentives(pollution credits) to defray the costs of pollutioncontrol equipment, utilities will not switch tolow-sulfur coal and thus save some high-sulfurcoal-mining jobs.

Obstacles to a Nuclear Revival

Public Acceptance of Nuclear Power

Over the years, public concerns about reactorsafety, costs, and waste disposal have had an impacton nuclear power will affect energy supply optionsin the future. The accidents at Three Mile Island andChernobyl dramatized the hazards of nuclear power.Poor operations at some plants, especially whenmishaps or small radioactive releases occur, serve asreminders. Nuclear reactors present risks to thepublic that are statistically much lower than othercommonly accepted facilities such as dams, but thepublic will not find that credible until safety is nolonger a controversial issue. Critics are unlikely tolet the controversy die down as long as majoraccidents cannot be incontrovertibly proved to be ofvanishingly small probability. Under present condi-tions, the public sees little reason to accept apotential risk for uncertain gains.

Utilities are very concerned over public accep-tance of nuclear power. Recent public opinion pollshave shown a resurgence in the fraction of peoplebelieving that nuclear energy will be essential.However, these polls do not tell the whole storysince they ask questions only about general approvalor disapproval. If a specific site were proposed for anuclear powerplant, it is likely that the majority ofpeople in the region would be opposed. Furthermore,public support would have to be widespread andwith only minor opposition before utilities could be

confident that there would be no reversal duringconstruction and the operating lifetime of the plant.

There are many ways in which the public canmake its opposition felt. Most directly, referendahave been held to shut down nuclear plants. One haspassed on the Rancho Seco Plant in California,though that seems to have been more related to theeconomics of a poorly operated plant than toconcerns over safety. Indirectly, the public alsoexerts pressure in courts, on local governments thatmust issue permits, and on state governments whichmust regulate rates of return on the investment andapprove emergency evacuation plans.

At this point it is simply not possible to say withany assurance whether there will be a nuclear revivalor what it would take to initiate one. If there is one,it will occur primarily because new plants are saferand cheaper than has been the recent norm andbecause alternatives are proving inadequate. How-ever, neither safety nor cost will be easy to establish.

If costs and safety of nuclear power can beconvincingly made favorable relative to otherchoices, a revival is quite possible, though by nomeans assured. This will not happen within the nextfew years, but by the mid-1990s demand growth islikely to mandate considerable new construction,and the industry will have had time to replace thememories of the present failures with a period ofreliable operation and declining costs. Under suchconditions, having the option of an economicalreactor that has been thoroughly reviewed to mini-mize the risk of cost escalation or operating prob-lems could prove attractive.

Financial Risks

The investment community provides anotherimportant disincentive for nuclear power. Investorsgenerally believe nuclear to be much riskier thanother options, based on the tribulations of utilitiessuch as Public Service of New Hampshire, LongIsland Lighting, the Washington Public PowerSupply System, and General Public Utilities. Tradi-tionally, regulated utilities provided limited profits,but also low risks. Some utilities have found theirmassive investments to be useless when they couldnot finish a plant because it proved to be unnecessaryor too expensive, or failed to get a license, or wereshut down for safety inadequacies. Some investorsnow refuse to buy stock or bonds in a utility building


a nuclear plant, while others demand a large riskpremium.

Very few people involved in operating nuclearpowerplants believe that nuclear plants represent asignificant hazard to the public, but failed construc-tion projects and plants damaged by moderatelyserious accidents, e.g., Three Mile Island, poseimportant financial risks for the utility.

Capital Costs—A recent industry study predictedthat a new nuclear plant would cost $1,400/kWecompared to $1,220 for a coal plant and $520 for agas combined cycle plant. The levelized costs for thepower would be 4.3 cents/kWh for nuclear, 4.8 forcoal, and 6.1 for gas.

117 These figures are notverifiable because no plant has been started recentlyor under the conditions assumed in the analysis. Inaddition, industry has been generally optimistic oncost estimation, sometimes spectacularly so. Never-theless, it suggests that nuclear power can still becompetitive if the problems of the past can beavoided.

Nuclear Waste Disposal

Concerns about nuclear waste disposal also willhave an effect on energy supply adequacy. The lackof proven technology and a known site for safelysequestering nuclear wastes has been one of themajor factors behind opposition to nuclear power.To many people, it seems irresponsible to buildreactors before we could be sure that waste productswould never be a threat. The period required beforethe radioactivity of spent fuel decays to completelyinnocuous levels118 is many times longer thanrecorded history, and no one can envision all theproblems that might arise so far in the future. Themany false starts, delays, and problems that havebeen encountered in the program to develop anuclear waste disposal facility underscore the uncer-tainty of success.

Nuclear proponents point out that the need forwaste disposal has always been recognized, and thatthe technical problems are not as formidable as theyappear. Nuclear wastes are difficult to containbecause they generate heat. The short- and mid-termcomponents that produce almost all the heat largely

decay within 200 years. After 1,000 years, virtuallyno radioactive material is left but plutonium andtraces of a few other long-lived components. Thewaste can be stored in geological formations thathave been stable for many millions of years, andeven if conditions change, any leakage will be veryslow (the long-lived wastes are largely insoluble inwater and too heavy to be easily windblown). Suchleakage should pose essentially no threat to peopleor the environment, especially in comparison tochemical wastes and other risks. In any case, theproblem must be solved whether we build morereactors or not, because of all the waste that has beenproduced already in the commercial and weaponsprograms.

Yucca Mountain, part of the Nevada Test Site fornuclear weapons, has been selected as the site for thefirst Federal high-level waste repository. The cli-mate is extremely dry, and the water table is about1,000 feet below the proposed waste storage level,limiting the likelihood of leaching. The area is verythinly unpopulated, minimizing the number ofpeople who could be at risk. Extensive testing anddetailed analyses necessary to validate this selectionare underway.

In addition to the natural protection of deep burialin a stable formation with little groundwater seepingdown through the site, various manmade barrierswill be applied to ensure protection, especiallyduring the earlier, rapid decay rate stages. Waste canbe blended into material, e.g., borosilicate glass,which hardens into a very stable mass. Vitrifiedwastes (or spent fuel) can also be encased in casksmade of materials impervious to any plausiblechemical or mechanical agent.

Other sites and different geological formations areprobably also feasible. Yucca Mountain was chosenas much for political reasons as for technical.119

Proposed nuclear waste disposal sites engenderintense opposition (though sometimes also localsupport for the considerable economic benefits theycan offer) which may be out of proportion to the riskentailed but can be just as difficult to overcome.Most experts are confident that nuclear waste can besafely contained, but a great many people are unwilling

117u.s. CO~Cil for Energy Awareness, “Advanced Design Nuclear Energy Plants: Competitive, Economical Electricity,” January 1991.118plutofi~ ~s a ~.life of about 24,)()() ~~, and about ei@t )lalf-lives or 20Q~ yeas me r~~~ to reduce the radioactivity to the level Of

the original ore.ll~u~m J. Ctier, ~U&arZmPemtiveS and Public Trust (Washingto~ DC: R~OWCeS for the FUtLU& 1987).


to accept these assurances. The risks to the localpopulation are small, but they are not zero. Carelesspractices in the past that resulted in releases ofradioactivity, and false starts such as the proposedsite at Lyons, Kansas, ensure that the public will notblindly rely on the experts. Siting will be mucheasier if the program can establish a reputation forfairness and responsiveness to local needs. Morehigh-level disposal sites will be needed, especiallyif nuclear power is to grow.

Disposal of intermediate and low-level radioac-tive wastes may prove to be more troublesome in thelong run because the volumes of materials are verymuch larger and the number of disposal facilities tobe licensed and monitored is much greater. How-ever, much of this material comes from research ormedical purposes, not nuclear powerplants. Thus itis imperative to solve the problem whether or notnuclear power resumes growth.

Electric and Magnetic Fields

If electric and magnetic fields do prove to pose arisk to human health, the implications for the electricpower industry will be great. Already, health effectsare one of the most prominent concerns raised bypeople living near existing or proposed transmissionlines. Several States have experienced increasingpressure to take regulatory action to protect citizensfrom the possible hazards posed by power frequencyfields. By January 1989, seven States (Montana,Minnesota, New Jersey, New York, North Dakota,Oregon, and Florida) had already set limits on theintensity of electric fields around powerlines. Flor-ida is the only State to adopt standards to limit theamount of both electric and magnetic fields.

Most of what we know today about the effects ofexposure to these fields comes from three types ofstudies or experiments: Cell-level experiments,whole animal experiments, and epidemiologicalstudies. Until relatively recently, there was little orno scientific evidence that electric and magneticpower frequency fields could pose a threat to humanhealth. However, laboratory studies have now dem-onstrated that fields have effects on living cells andsystems. Scientists are still investigating whetherthese effects have public health implications. Inaddition, several recent epidemiologic studies havesuggested an association between exposure to powerfrequency fields and cancer. While these epidemio-logic studies are controversial and incomplete, they

do provide a basis for concern about the effects fromexposure.

The research results to date are complex andinconclusive. Many experiments have found nodifferences in biological systems that have beenexposed to fields and those that have not. It still isnot possible to demonstrate that such risks exist, andthey may not. However, the emerging evidence nolonger allows one to conclude that there are no risks.

It is important to remember that exposure fromtransmission lines is one perhaps minor source.Exposure to local electric distribution lines, appli-ances, lighting fixtures, and wall wiring are morecommon and could play a more significant role inany public health risks. The OTA background paperBiological Effects of Power Frequency Electric andMagnetic Fields provides an indepth review ofexisting scientific evidence on biological effects anddiscusses policy responses to risk management.

Electricity Demand Uncertainty

Major shifts in electric power usage patterns havebedeviled utility planners and energy forecasterssince events of the 1970s and 1980s made previousassumptions about inflation, consumer behavior,and economic growth obsolete. Throughout the pastdecade, the electric power industry has been saddledwith expensive excess capacity as powerplantsordered in the 1970s came on line and demandgrowth fell below expectations. In the 1990s, theindustry’s problems with excess capacity appear tobe receding, and in some regions of the country,reserve margins are tightening to the point that someindustry analysts are warning of shortages.

overall reserve margins are expected to decreaseover the next 10 years. One of the results of lowercapacity margins is that some utilities will have lessflexibility in dealing with more severe situations.Another result could be greater reliance on olderunits, which in turn will increase maintenancerequirements and result in more outage time. Anumber of factors could easily change supplyadequacy or excess capacity into a shortage situa-tion. Among the most important of these are delayedcapacity additions and higher than predicted growthrates.

Among the analysts that have examined theseprospects, there is some disagreement about whenand where additional generation is needed. The


disagreements are rooted in uncertainty over futuregrowth in demand and the cost and performance ofexisting and planned capacity. In the face of theconsiderable uncertainties, conflicting views aboutwhich risks to take and who must bear those risks areinevitable. In recent years, few utilities have beenwilling to commit to construction of new baseloadcapacity, in spite of the continued aging of theexisting generating plant stock and predictions fromsome industry and government planners that thecountry faces possible shortages in the early tomid- 1990s. Meanwhile, the flow of new plantadditions by utilities entering service as a result oforders placed in the 1970s is slowing to a trickle,although capacity additions by nonutility generatorsare increasing.

Nonutility Generation

Increases in nonutility generating capacity havebeen significant in recent years. The growth incogeneration and small power production facilitieshas, to some extent, offset the slowing of utilityconstruction of new capacity. According to the

Edison Electric Institute, electricity sales to utilitiesfrom nonutility sources increased sixfold from 1979to 1986 and 33 percent in 1988 and 1989.120 Almostall of the sales have been to the investor-ownedsegment of the industry.

Also, nonutility generation is an important sourceof electricity in some States (California, Louisiana,Texas, Maine, Alaska, Hawaii) and is starting tobecome a national factor. Moreover, several regions,including New England and the Mid-Atlantic, willincreasingly depend on nonutility generation addi-tions to ensure supply adequacy or offset capacityshortfalls over the next 10 years.

A wide range of technologies can be used tocogenerate electric and thermal energy, e.g., steamturbines, open-cycle combustion turbines, combinedcycle systems, and diesels. Much of the investmentin new generating technologies, particularly cogen-eration, has come from nonutility generators. Formore information about cogeneration technologies,the reader is referred to the OTA report Industrialand Commercial Cogeneration.

l~wn El&tic Institute, op. cit., foomote 65.

Chapter 4

Potential Scenarios for FutureEnergy Trends

. .“

CONTENTSPage

P R O J E C T I O N S F O R T H E . . . . . . . . . . . . . . . . . . . . 112

Scenario 1: Baseline . . . . . . . 112

Scenario 2: High Growth . . . . . . . . . . . . . . . 114

Scenario 3: Moderate Emphasis on Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Scenario 4: High Emphasis on Efficiency . . . . . . . . . . . . . . . . . . . . . 121

Scenario 5: High Emphasis on Renewable Energy ● . 124

Scenario 6: High Emphasis on Nuclear Power . . . . . . . . . . . . . . . 127

Comparative Impact of Scenarios. . . . . . . . . . . 129

TablesTable Page

4-1. Baseline Energy Use and Supply . . . . . . . . . . . . . . . . . . . . 113

4-2. High Growth Energy Use and Supply . . . . . . . . . . . 115

4-3. Moderate Efficiency Scenario Energy Use and Supply . . . 119

4-4. Potential for Energy Demand Reduction From Base Case by 2015 . 119

4-5. High Efficiency Scenario Energy Use and Supply . . . . . . . . . . . . . . . 122

4-6. High Renewable Scenario Energy Use and Supply . . . . . . . . . * . . . . 125

4-7. High Nuclear Scenario Energy Use and Supply . . . 127

4-8. New Nuclear Plant Construction Schedule in High Nuclear Scenario . . . . . . . . . . 1284-9 Summary of Scenarios . . . . . . . . . . . . . . . . . . . . . . 130

4-10. Comparative Impact of Scenarios . . . . . . . . . . . . . . . . . . . . . . . 131

Chapter 4

Potential Scenarios for Future Energy Trends

Previous chapters have described historical en-ergy trends and identified the major components ofour energy future. The relative emphasis on thesevarious components will guide our energy futurealong one path or another. There is considerablevariation among the potential paths. In general, theNation can remain on a course that emphasizesconventional fossil supply patterns. Alternatively,an emphasis on high efficiency can reduce projec-tions of energy demand. Such a shift would entailradical changes in energy supply planning and use,and in their economic and environmental impacts. Ifconcern over global climate change increases, thenincreased emphasis on energy sources that do notproduce carbon dioxide (C02)--nuclear power andrenewable energy--could be necessary. These dif-ferent paths entail many choices, such as whichtechnologies to emphasize, and the technologieshave large differences in their impact.

Of all the factors influencing energy trends, threeof the most important are the growth rate of theeconomy (commonly measured by the gross domes-tic product (GDP)), the price of oil, and the status oftechnology. The GDP is a measure of the demand forthe goods and services that require energy. Prior tothe energy crisis of 1973-74, there was a generalassumption that energy growth was intimatelylinked to GDP. That assumption has been disprovedby the flat energy demand from 1972 to 1985 whilethe GDP grew by 39 percent in real terms.1 Hadhistorical trends held, U.S. energy use would havereached nearly 100 quads (quadrillion British ther-mal units) in 1985, up from 72.5 quads in 1972.Instead, only 74.9 quads were required that year.

Two factors accounted for this loosening of theconnection between economic and energy growth.Improvements in energy efficiency accounted foralmost two-thirds of the difference. Shifts in thestructure of the economy (e.g., decline in energy-intensive heavy industries and growth in servicesthat require relatively little energy) accounted for theremainder of the difference.

Since 1985, energy demand has resumed highergrowth trends, increasing 8 percent by the end of

1988. Low oil prices and strong economic growth(the latter partly a result of the former), particularlyin energy-intensive industries including steel andaluminum, appear to be responsible for this shift.

Neither economic growth nor the resultant effecton energy demand can be predicted confidently. TheU.S. Department of Labor’s moderate economicgrowth scenario for 1988 to 2000 assumes a2.3-percent rate, lower than the 2.9-percent rate ofthe previous 12 years. This is consistent with otherprojections, but growth could be substantially higheror lower. In any case, it can be assumed that as longas economic growth is a national goal, demand forthe services that energy provides will increasesubstantially.

..<The amount of energy that will be required to

perform these services is a function of the efficiencywith which it is used. As discussed in chapter 2, aparticular service (e.g., transportation in a car,heating a house, making steel) can be performed ina variety of ways, some of which use far more energythan others. If the cost of energy rises (or if otherincentives are applied), energy users will considerimproving existing processes (e.g., insulating theirhouse), buying more efficient equipment (e.g.,higher mileage automobiles), or altering their behav-ior. However, rising energy costs also reduce con-sumers’ ability to afford these investments.

Different forms of energy have different costs, butthe most variable is petroleum. The price of petro-leum is dependent to a large degree on political andmarket decisions that occur outside of the UnitedStates. The prices of other fuels are influenced bypetroleum but are not subject to such large swings.

Changing technology will affect energy use byproviding new options, especially as environmentalregulations and resource constraints eliminate olderoptions. For example, more stringent air emissionsrequirements could curtail industrial coal use, butemissions are easier to control in small facilitiesusing the emerging technologies of fluidized-bedcombustion and gasification. Improved technologyis necessary for widespread use of solar energy and

ITMS dis~ssion is drawn from U.S. Conwss, Ofilce of Technology Assessment Energy Use and the U.S. Economy, OTA-BP-E-57 (w~mto%DC: U.S. Government Printing Offke, June 1990).

–111–


may be important for nuclear power. As discussed inchapter 2, a variety of technologies are availablenow in all sectors to raise efficiency, and many morecould be developed and implemented.

PROJECTIONS FOR THE FUTUREAs discussed above, the qualitative aspects of the

energy situation are not by themselves very useful inprojecting future energy trends. Nor do they allowany quantification of the potential impacts of futurepolicy options. For such purposes, scenarios havebeen derived from the analyses developed for theOTA report on climate change.2 A simple account-ing model modified the results of the energy/economic model of the Gas Research Institute,which in turn was based in part on the DataResources, Inc. energy model, to estimate theeffectiveness of various technical options for lower-ing C02 emissions. The reader is referred to the OTAreport on climate change for a detailed explanationof the models used and the specific assumptionsinvolved. Two scenarios are modifications of one ofthese cases in order to explore a higher emphasis onsolar and nuclear energy. One additional scenario(number 2) involving higher demand was createdand analyzed for this study.

These scenarios reflect the major issues discussedin chapter 1 that energy decisionmakers are likely toconfront in the coming years: how to reduce C02

emissions to slow global climate change, should thatprove necessary, and minimize other environmentaland health impacts of energy use; how to reducedependence on imported oil; how to assure that areasonable diversity of supply options is available atthe lowest possible cost.

All the scenarios except high growth used thesame economic and energy cost assumptions: grossnational product (GNP) growth of 2.3 percent (amoderate projection); price increases of 3.7 percentper year for oil, 4.8 percent for natural gas, and 1.7percent for coal. These costs are based on productioncosts and do not necessarily reflect prices toconsumers, which may be affected by temporarymarket perturbations and various policies, includingenergy taxes. The baseline projection, which as-sumes no major policy changes and no majorconstraints, is shown under scenario 1. Higher

economic growth and lower energy prices areconsidered in scenario 2 to explore a future wherevery optimistic projections are realized. This sce-nario differs from the others in that a higher level ofgoods and services requiring energy are assumed.Scenario 3 is based on the moderate scenario in theOTA climate change report and emphasizes effi-ciency of energy use in order to reduce demand.Scenario 4 is based on the tough scenario andrepresents an intensification of the measures inscenario 3 to reduce energy demand. Scenarios 5 and6 are modified versions of scenario 3 that exploitalternative energy sources (renewable and nuclear)to reduce emissions of C02, in contrast to the majoremphasis on efficiency in scenario 4.

Collectively, these scenarios are representative ofthe main energy choices facing the country eventhough four of them were created to test C02

reduction decisions. Steps to reduce Co2 emissionsare largely congruent with steps to address the otherenergy issues. One notable exception is the develop-ment of synthetic fuels to reduce dependence onimported fuels, a topic discussed in scenario 2.

These scenarios should be viewed as guidelinesonly, not predictions. If one proves accurate, thatwill be largely accidental. Energy events of the lasttwo decades have been too capricious and turbulentto allow much confidence that all problems inmaking energy projections have been anticipated.Unexpected disruptions will almost certainly occur,and so may some pleasant surprises, e.g., technolog-ical developments that permit the economic extrac-tion of our vast domestic reserves of unconventionalnatural gas. The scenarios are sketches of plausibleenergy futures and what has to be done to get there.They provide a consistent framework for decision-makers to compare the desirability of differentenergy futures we could work toward, and theysuggest the costs and risks involved in the necessarydecisions.

Scenario 1: Baseline

This scenario assumes no major policy initiativesare undertaken and present trends are largely contin-ued. In particular, fossil fuel use continues to growbecause it is the most convenient energy sourceavailable and is still affordable under the priceincreases assumed here. Total energy use rises

~.S. Congress, Office of Technology Assessment Changing by Degrees: Steps To Reduce Greenhouse Gases, OTA-O-482 (Washington, DC: U.S.Government Printing Office, February 1991).

Chapter 4--Potential Scenarios for Future Energy Trends . 113

slowly from 83.9 quads in 1989 to 112.4 in 2015,about 1 percent per year. Demand for electric powerincreases at 2.3 percent per year, equaling economicgrowth, as has been the case in recent years. Thebreakdown by fuel and end-use sector is shown intable 4-1. Electricity is listed separately because it isan intermediate carrier, neither supply nor demand,and accounts for the largest single use of primaryenergy.

The baseline growth rate is slower than that of thepast few years but faster than the prior 15 years. It isconsistent with slowly rising energy prices and aneconomy that largely maintains its current mix ofactivities. Some improvements in efficiency areimplemented so that energy intensity (energy perdollar of GDP) continues to decline. Of particularinterest are the following:

The highest energy growth is in the commercialsector. Industrial sector energy growth is thelargest in absolute terms, but it remains modestfor this sector, primarily due to reduced manu-facturing growth. Transportation increases at aslightly slower rate than industry. The residen-tial sector is essentially flat, largely becausepopulation growth is low.U.S. oil production is expected to decline from9.73 million barrels per day (MMB/D) in 1990to 8.61 in 2000 and 6.94 in 2015.3 Even keepingto this schedule will require the discovery andexploitation of new fields, which are mostlikely to be offshore or in Alaska.Future domestic production of conventionalnatural gas resources will be supplemented bytight gas formations plus coal seam methaneand Alaskan gas. Predictions of total produc-tion are tentative, largely because the econom-ics of the unconventional resources are uncer-tain. This scenario projects a slowly risingproduction curve for about a decade, followedby essentially flat production.Coal remains the fuel of choice for electricpower generation because of its long-termavailability at low cost and the lack of majornew environmental restrictions. Nuclear powerdeclines after 2000 as plants are retired and nocompelling reason arises to start many foroperation before 2015.

Table 4-l—Baseline Energy Use and Supply(quadrillion Btu)

1989 2015Demand

ResidentialNatural gas . . . . . . . . . .Electricity a . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Renewable . . . . . . . . .Total . . . . . . . . . . . . . . .

CommercialNatural gas . . . . . . . . . .Electricity a . . . . . . . . . . .oil . . . .’.. . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

TransportationOil . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . .Electricity . . . . . . . . . . .Total . . . . . . . . . . . . . . .

IndustrialNatural gas . . . . . . . . . .Oil (fuel) . . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . .Electricity . . . . . . . . . . .Renewable . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

Total demanda . . . . . . . . .Electricity b

Coal . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . .Renewable . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . .

Supply Oil. . . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

10.9

2.72.70.7ne6.1

21.60.6ne

22.2

8.33.84.43.21.92.9

24.5

63.6

16.05.72.9

1.7/3.029.2

34.0Domestic . . . . . . . . . . . . (18.3)Imported . . . . . . . . . . . . (17.0)Exported . . . . . . . . . . . . ( 1.8)Synthetic . . . . . . . . . . . . (ne)

Gas . . . . . . . . . . . . . . . . . . 19.5Domestic . . . . . . . . . . . . (17.5)Imported . . . . . . . . . . . . ( 1.4)Synthetic . . . . . . . . . . . . (ne)

Coal . . . . . . . . . . . . . . . . . . 18.9Produced . . . . . . . . . . . . (21.2)Exported . . . . . . . . . . . . ( 27)Synfuel feed . . . . . . . . . (ne)

Nuclear . . . . . . . . . . . . . . . 5.7Renewable . . . . . . . . . . . . 5.8

4.24.01.10.11.5

10.9

3.45.20.90.19.6

27.50.7ne

28.2

7.7/5.05.75.33.54.6

31.8

80.5

29.13.86.3

1.6/5/746.4

41.8(12.0)(27.8)( 0.0)( 20) 22.3

(16.5) .( 5.8/ne

33.8c

(40.7)( 4.0)( 29) 3.8

10.7Total . . . . . . . . . . . . . . . . . 83.9 112.4

KEY: ne = negligible.a DWS not inclU& conversion losses at powerplants, Which make up about

two-thirds of the total consumed there.bAll fuel US~ for power, with hydroelectric and other nonthermal pOWer-

plants artificially rated at average thermal efficiency.c Note that a total of 40.7 quads of coal are mined, 2.9 quads of Which are

converted into 2 quada of synthetic fuel, which are included under oil.SOURCE: 1989 data-U.S. Energy Information Administration, AnmM/

Energy Review 1989, DOE/EIA-0384(89), May 24, 1990, tables1,2,3,4,5, 11, 17,25,88, and 99; Office of Technology Assess-ment, 1991.

sDeriv~ from tie U.S. Ener~ Information AdrniniStrstiOp AnnualEnergy Outlook 1990, DOE/EIA-0383), J~. 12, 1990, by Om for afofi~mupdate of its 1984 report U.S. Vulnerability to an Oil Import Curtailment: The Oil Replacement Capability.


●

●

●

Security concerns increase with oil imports, butimport growth rates are not so high thatadditions to the Strategic Petroleum Reserve(SPR) cannot keep up. By 2015, however, theMiddle East supplies a very large and risingfraction of U.S. imports. Depending on thegeopolitical environment at that time, the SPRmight have to expand to several times itscurrent size. The anticipated price of oil issubstantially higher, which seriously aggra-vates the balance of trade.CO2 emissions would rise almost 40 percent by2015. While no environmental constraints areenvisioned for the duration of this scenario,such a large additional contribution from theUnited States would pose a substantial risk ofaccelerating global climate change.The near doubling of coal consumption willaggravate problems in meeting local and na-tional air quality standards unless better tech-nology such as integrated gasifier, combined-cycle combustion becomes available.

Conclusions-This traditional approach is feasi-ble if several conditions are met: 1) domestic oil andgas reserves prove adequate to support the projectedproduction at reasonable prices; 2) chronic shortagesof imported oil do not develop; 3) the costs of renew-able energy become more competitive; 4) CO2 andother pollution problems are not so serious as torestrict the coal option; and 5) economic growthdoes not greatly exceed the assumed level. If theseconditions are not met, energy prices will rise withtighter supply, and demand will shrink to fit (as italways does in principle), but not without likelyeconomic penalties, e.g., increased inflation.

Scenario 2: High Growth

Scenario 1 does not represent an upper limit onenergy growth even though there are more potentialconstraints on supply (e.g., resource depletion, sitingdifficulties, regulations, etc.) than on demand. Infact, there is no absolute upper limit on energysupply growth that could be usefully defined at thistime.

Scenario 2 was created for this report to explorethe implications of higher energy growth. It is notfound in the OTA report on climate change.4 Thougheven higher growth could be envisioned, the as-

sumptions made for this scenario are sufficientlyoptimistic that higher growth is unlikely. Economicgrowth is assumed to be in the high range ofprojections, perhaps 3 percent, resulting in higherdemand for energy services. Energy costs have tostay low despite higher demand, either because oftechnological breakthroughs or unexpected resourcediscoveries. No major new environmental regula-tions are expected in this scenario.

A guiding principle behind this scenario is that theUnited States maintains an orientation toward en-ergy production rather than energy conservation.The result will be higher demand for energyservices, tempered by the faster replacement ofolder, less efficient facilities and equipment. Totalenergy demand grows 1.7 percent annually, reaching127 quads in 2015. Energy use in all sectorsincreases faster than in scenario 1. The industrialsector experiences 2-percent growth, consistent witha resurgence in manufacturing. The commercialsector rises faster at 2.7 percent, which is slightlyabove the rate assumed in scenario 1. Transportationenergy demand increases 1.2 percent annually overthe study period. Lower fuel prices provide lessincentive to purchase efficient automobiles, andcommercial traffic will be higher than in scenario 1.Residential sector energy demand grows at 1 percentwith demand for new and larger houses; no suchgrowth occurs in the base scenario. Table 4-2summarizes the details.

Electricity demand increases 3 percent annuallyin this scenario. However, it is important to note thatthe additional power, relative to scenario 1, isproduced with little additional fuel consumed.Under the conditions of this scenario-higher,sustained growth and greater confidence--utilitieswill be more willing to build new plants and replaceolder ones. New plants adopting modern technologyshould have significantly higher efficiency. Gasturbines should be over 50-percent efficient, andcoal plant efficiency may reach 45 percent for sometechnologies. Transmission losses should be re-duced as well, as a result both of new transmissiontechnology and because much of the growth will befrom small units close to load centers (e.g., cogener-ation plants on-site at manufacturing facilities),minimizing the need for transmission. The netdelivered efficiency assumed in this scenario is 35percent, compared to31 percent in the base scenario.

4u.s. con~~s, oftlce of Technology Assessmen4 op.cit., foomote 2.

Chapter 4--Potential Scenarios for Future Energy Trends ● 115

Table 4-2-High Growth Energy Use and Supply(quadrillion Btu)

1989 2015Demand

ResidentialNatural gas. . . . . . . . . .Electricity a . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . .Renewables . . . . . . . . .Total . . . . . . . . . . . . . . .

CommercialNatural gas. . . . . . . . . .Electricity a . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

TransportationOil including synfuel...Alcohol (biomass) . . . .

Natural gas. . . . . . . . . .Electricity a . . . . . . . . . .Total . . . . . . . . . . . . . . .

industrialNatural gas . . . . . . . . . .Oil (fuel) . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . .Electricity a . . . . . . . . . .Renewables . . . . . . . . .Coal . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

Total demanda . . . . . . . .Electricity b

Coal. . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Renewables . . . . . . . . .Total . . . . . . . . . . . . . . .

Supply Oil

D o m e s t i c . imported. . . . . . . . . . . .Exported . . . . . . . . . . . .Synthetic . . . . . . . . . . . .

Gas . . . . . . . . . . . . . . . . . .Domestic . . . . . . . . . . .imported . . . . . . . . . . . .Synthetic . . . . . . . . . . . .

Coalc . . . . . . . . . . . . . . . . .Produced . . . . . . . . . . .Exported . . . . . . . . . . . .Synfuel feed . . . . . . . . .

Nuclear . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

5.54.81.30.11.5

10.9

2.72.70.70.0

6 . 1

21.6

0.6ne

22.2

8.33.84.43.21.92.9

24.5

63.6

16.05.72.91.73.0

29.2

34.0(183)(17.0)(1.8)/ne

19.5(17.5)(1.4)/ne

18.9(21.2)( 2 2

5.75.8

83.9

13.2

3.65.50.90.1

10.1

32.60.51.50.7

35.3

10.95.66.56.43.85.3

38.5

97.1

27.48.27.0

1.6/5.549.7

48.5(140)(26.5)( 0 0 )(8.0)/28.5

(21.0) .( 3 5 )(4.0)32.9

(540) .( 4 0 )(17.1)

11.3129.4

KEY: ne=negligible.aDoesnotincludecxmversion Iossesat powerplants,which makeupabout

two-thirds of thetotal consumed there.bAflfue[ us~for~eLw~h hydroelectric and other nonthermal power-

plants artifiiiallyratedataverage thermal efficiency.cNotethatatotal of54.oquads ofcoalaremined, 17.lquadsofwhichare

convertedinto12quadsofsyntheticfue~which areindudedunderoilandgas.

SOURCE: 1989 dat*U.S. Energy Information Administration, AnnualEhergy Review 1989, DOE/EiA41384(89), May 24,1990, tables1,2,3,4,5,11,17,25,88, and 99; Office of Technology Assess-ment, 1991.

Twenty years ago, these energy growth rateswould have been considered unrealistically modest.Now they appear high, largely because we havelearned that it is easier to control energy growth thanto meet high demand growth. In addition, economicgrowth forecasts are lower and projected energyprices are higher. However, if energy prices remainat current levels (about $20 per barrel for petroleumand equivalent for other fuels), the higher growth ofthe late 1980s could continue. Energy prices signifi-cantly higher than those in scenario 1 would not beconsistent with high demand growth (except forimprobably high economic growth rates), becausethey would trigger efforts to increase efficiency ofuse.

Therefore, significant advances in energy produc-tion technology must be assumed for this scenario inorder to control costs. Moreover, the modest energyprice increases assumed here would be insufficientimpetus to spur these advances. As a result, Federaland private sector efforts--especially for research,development, and demonstration (RD&D)--wouldbe critical to achieving the supply outcomes. It mustalso be assumed for this scenario that CO2 emissionsare determined by policymakers to be a minorproblem.

A substantial number of electric vehicles (EVs)are postulated for this scenario, largely because oflocal air pollution problems. About 2.4 quads of fuelwould be required to produce and store the 0.7 quadsof electricity that EVs would consume. This electric-ity would replace about 3.5 quads of oil, becauseEVs are more efficient than gasoline-powered auto-mobiles. The use of natural gas in vehicles increasessignificantly as well.

In order to meet the supply projections, coal,natural gas, and nuclear energy would all have to beexpanded significantly. Domestic oil production isalmost certain to continue its decline, though im-provements in enhanced oil recovery techniquescould sustain production levels at existing fields.Exploration and development of presently protectedareas in Alaska and offshore are probably necessaryto keep the rate of production from declining fasterthan assumed here. Oil imports will rise consider-ably, unless synthetic fuel technologies are exten-sively applied. Renewable energy technologies arenot likely to be widely competitive with relativelylow cost conventional sources, but some penetration

116 ● Energy Technology Chokes: Shaping Our Future

Photo credit: Electrk Vehicles SA

Prototype electric minibus.

is likely, and technological breakthroughs are possi-ble.

Coal will be used both directly (primarily forelectric generation as it is now) and for syntheticfuels. The additional 300 gigawatts of electric poweroutput (GWe) of coal-fired generating capacityshould present no insurmountable technical orresource difficulties, even though most plants willuse relatively new technology (most probably inte-grated gasification combined cycle (IGCC)) to meetair pollution emission regulations. The efficiency ofnew plants should average about 40 percent, butsystem efficiency will be lower because of olderplants on line and increased use of storage to meetpeak loads.

Few coal plants have been ordered over the pastfew years, because utilities have shied away fromcapital-intensive, long leadtime investments due touncertainties about growth, capital availability, andregulatory treatment. This attitude is likely tochange in a period of sustained economic growth.Both utilities and independent power producers(IPPs) could favor coal-fired plants if they are thelowest cost options in the long run. Even now, somegas-fired facilities are being designed to accommo-date coal gasifiers should that prove more economi-cal. The costs of constructing generating facilitiesand purchasing coal are likely to remain relativelystable and predictable over the next several decadesunder the assumptions of this scenario.

Synthetic liquid fuels from coal or oil shale areunlikely to be sufficiently competitive with petro-leum by 2010 that much production capacity would

be built without government incentives. However,security concerns over high petroleum imports mayprovide compelling policy reasons to ensure at leasta modest level of such production. This scenarioprovides for liquid fuel production of 4 MMB/D by2015. As discussed in chapter 3, several liquid fueltechnologies could be used. At present, all of thesetechnologies raise significant concerns over envi-ronmental impacts as well as costs, so majordevelopment and demonstration programs will benecessary in addition to promotional programs.

The national security rationale is less pertinent tosynthetic pipeline gas, because foreign gas sourcesare more stable (Canada is the main supplier) and,unlike petroleum, the production of domestic naturalgas can be increased appreciably. In fact, thisscenario is largely contingent on an increasingsupply of relatively inexpensive gas. Natural gasproduction, however, is unlikely to be rising by2015, and may well be falling significantly. There-fore, the need for replacement sources may besubstantial. In addition, an industry that producessynthetic oil would find it simple to producesynthetic gas, so the costs may be reasonable.Therefore, this scenario assumes that about 4 trillioncubic feet (Tcf) of synthetic gas will be producedannually.

Nuclear energy could be important in this sce-nario if the problems that have immobilized it areovercome. In particular:

Costs must be predictable, stable, and competi-tive with coal;The institutions that build, operate, and regulatenuclear powerplants must perform their tasksmore efficiently than has been the norm; and

The public must be convinced that nuclearenergy is safe, environmentally benign (includ-ing waste disposal), and in their best interest.

If these conditions are met, virtually any numberof nuclear plants could be built. Yet the availabilityand competitiveness of alternatives to nuclear powersuggest it is unlikely that huge numbers of newplants will be built. The viability of nuclear powerwill have to be demonstrated anew before any majorcommitment to construction is made. Even ifrelatively familiar light water reactor (LWR) tech-nology is used, no reactor is likely to be orderedmuch before 1995 or completed before 2000.


Assuming a construction schedule of 5 years,5 onlythose reactors ordered by 2010 would be ready forelectricity generation by 2015. Since much of theindustry would have to be revamped, only a fewthousand megawatts of electric power output (MWe)per year could be supplied at first. Less familiartechnology, e.g., high temperature gas reactors, willrequire longer to develop.

This scenario optimistically projects the construc-tion of approximately 70,000 MWe to supplementexisting nuclear capacity (about 100,000 MWe) by2015. Accounting for existing plant retirements,total nuclear capacity of about 140,000 MWe wouldbe online by 2015. Only a major national commit-ment to nuclear energy could result in faster growth,but that would be a high risk strategy considering thehistory of nuclear power in this country. Such astrategy is discussed under scenario 6. If no nuclearplants are ordered, an equivalent amount of coal- andgas-fired capacity would have to be added to meetthe supply projections of this scenario.

Renewable supplies are only slightly higher thanin scenario 1. The lack of urgency to replace fossilfuels assumed here leads to slow development ofrenewable, and the low costs of fossil fuels limitcompetitiveness. Much of the renewable energydepicted in table 4-2 is hydroelectric power, butcontributions from wind, solar thermal, and pho-tovoltaics could become significant over this period.The transportation sector is assumed to consumeabout half a quad of alcohol from biomass. Alcoholfuel could become quite important in urban areas forenvironmental reasons, but it is not clear how muchwill be made from biomass instead of coal or naturalgas unless CO2 emissions are a limitation. There-fore, most of the synthetic fuel in this scenario isderived from coal. As with nuclear energy, renewa-bles have more promise beyond the timeframe of thisscenario.

Conclusions—Where scenario 1 assumed nomajor policy initiatives and no major energy supplysurprises, scenario 2 depends on several pleasantsurprises: costs stay low because fossil fuels areplentiful; domestic oil production declines moreslowly than some observers currently expect; naturalgas production increases because discoveries keepabreast of depletion; and technology advances in

these and other supply areas help keep these fuelscompetitive. In addition, features of the scenarioprobably would require policy measures to encour-age production (e.g., synthetic fuel initiatives tolimit imports and expanded offshore oil explorationand development). Finally, as noted above, it isassumed that no new major environmental con-straints emerge.

If these assumptions prove out, the nation’smid-term energy future will present few problems.Some of the assumptions are likely to proveaccurate, but depending on the entire package wouldbe extremely risky, and would do little to prepare thecountry for longer-term problems such as climatechange and the depletion of the lowest-cost fossilfuel reserves. Petroleum prices are almost certain tobe much higher by the mid-21st century when U.S.production will be considerably lower than now.Whether or not serious global climate changes areimminent, they are likely eventually, probably by2050. Rapid exploitation of fossil fuels wouldincrease that risk and make the transition to alterna-tive fuels more difficult and costly.

The energy system under this scenario is vulnera-ble to disruptions-petroleum import interruptions,environmental constraints, and increasing publicopposition to energy facilities. Hence, policy meas-ures encouraging production are likely to be required to ensure the supplies assumed in this scenario.Synthetic fuel to moderate reliance on importedpetroleum has already been mentioned. To compen-sate for the higher rate of imports, the SPR wouldhave to be enlarged. Nuclear power will requirepolicy leadership to rebuild public confidence.Additional Federal RD&D on clean coal combustioncould be necessary in order to reduce total emissionsfrom a greater number of plants if current effortsprove inadequate. Siting policies may also berequired to minimize delays to powerplants, trans-mission lines, and other facilities. Some of thesemeasures are likely to be expensive and controver-sial.

The costs involved in this scenario are difficult tocompare directly with the other scenarios, becausethe assumptions are not entirely consistent. Capitalinvestments are higher than scenario 1, because

5S~lm~~mmctors might be ins~edfmter~th concurrent on-site preparation and factory construction but this qproachintmduces additionaluncertainties related to economics and operability that would delay their introduction.


more energy must be produced, but higher economicgrowth supports the new construction.

Overall, this scenario is notable for its failure totake advantage of efficiency opportunities that makeeconomic sense even at fuel prices lower thanassumed here. In keeping with long-term past trends,efficiency improves, but only slowly because energycosts are a small portion of overall costs, andbecause relatively little attention is focused onefficiency. The one exception is the electric utilityindustry, where new generating technology isemerging with significantly higher efficiency.

Scenario 3: Moderate Emphasis on Efficiency

As has been noted several times in this report,many opportunities exist for reducing energy con-sumption in all sectors of the economy. Most ofthese opportunities require some investment. Someoffer compelling economic benefits, while others aretoo expensive to warrant consideration unless en-ergy costs rise considerably above expected levels.

This scenario explores the results if the policiesdiscussed in the next chapter are implemented toencourage investments that would yield net eco-nomic benefits when amortized over the expectedlifetime of the equipment, in the context of the fuelprice increases noted at the start of this chapter. Fewenergy users make their decisions on this basis. Mostconsumers, insofar as they consider energy costs atall, look for a payback of no more than a few yearson additional investment to reduce energy consump-tion, a rate of return greatly exceeding prevailinginterest rates. Industrial users are the most cost-conscious, but even well-run manufacturing compa-nies fail to make attractive investments to saveenergy for a variety of reasons, e.g., overall corpo-rate strategy, technical and economic uncertainty,and capital spending limits. Therefore this strategywill require significant policy changes even thoughall the steps are in the long-term interests of theindividual decisionmakers as well as the Nation.

Several significant advantages would accrue tothe United States from a higher level of energyefficiency:

•If global warming is confirmed as a seriousproblem, reduced emissions of CO2 would

●

●

●

●

become important. Higher efficiency will bethe most effective strategy to reduce carbonemissions over the next several decades. Evenwithout clear indications of significant warm-ing trends now, many analysts have argued thatefforts to offset carbon emissions would beprudent now. In addition, lower demand forenergy would reduce other environmental in-sults stemming from the production and use offossil fuels.The economy would benefit, especially in thelong-run, because energy inputs would be usedat a more nearly optimal level. Thus, U.S.products would generally become more com-petitive in world markets.Resources of low-cost premium fuels wouldlast longer because of the reduced demand forpetroleum and natural gas. The forced transi-tion to less convenient fuels could be delayedby a decade or more.Vulnerability to petroleum import disruptionswould be lessened, and the SPR could be keptsmaller.There would be less intrusion from energyfacilities on society, which often resists suchconstruction and operation.

The major drawback to this strategy is that theGovernment would have to induce people to dothings that apparently most have no particularinterest in doing. Tax credits, information programs,and other initiatives have had some impact, but thebiggest single motivation for efficiency improve-ments appears to have been higher prices.6

The major effect of implementing this scenario isto moderate the growth of energy demand. Table 4-3compares the energy supply and demand for thisscenario with that of scenario 1. Overall, demand isdown about 13 percent by 2015 from the base casebut still up about 10 percent from current levels.

The efficiency improvements that would be im-plemented and their potential effect on energyconsumption are listed in table 4-4. These measuresare described in chapter 2. The assumption here isthat each energy consumer always chooses theimprovements that are expected to repay theirincremental added costs with energy savings overtheir lifetimes. Considering the diversity of deci-

61n the united Shtes, the major exception to this general rule has been the corporate average fuel economy (CAFE) stitid for light-duty v*cl~.American made vehicles have nearly the same mileage as the equivalent models made in Europe or JaparL but the U.S. fleet has a lower average becauseAmericans buy bigger cars. One of the major reasons for this difference is that gasoline costs several times as much in most other countries.

Chapter 4--Potential Scenarios for Future Energy Trends 119

Table 4-3-Moderate Efficiency Scenario Energy Useand Supply (quadrillion Btu)

Table 4-4-Potential for Energy Demand ReductionFrom Base Case by 2015 (quad/year) a

1989 2015Demand

ResidentialNatural gas . . . . . . . . . .Electricity a. . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Renewable . . . . . . . . .Total . . . . . . . . . . . . . . .

CommercialNatural gas . . . . . . . . . .Electricity. . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

TransportationOil . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . .Electricity a. . . . . . . . . . .Total . . . . . . . . . . . . . . .

IndustrialNatural gas . . . . . . . . . .Oil (fuel) . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . .Electricity a. . . . . . . . . . .Renewables . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

Total demanda . . . . . . . . .Electricity b

Coal . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Renewable . . . . . . . . .Total . . . . . . . . . . . . . . .

Supply Oil. . . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

10.9

2.72.70.7ne6.1

21.60.6ne

22.2

8.33.84.43.21.92.9

24.563.6

16.05.72.91.73.0

29.2

34.0Domestic . . . . . . . . . . . . (183)imported . . . . . . . . . . . . (17.0)Exported . . . . . . . . . . . . ( 1.8)Synthetic . . . . . . . . . . . . (ne)

Gas . . . . . . . . . . . . . . . . . . 19.5Domestic . . . . . . . . . . . . (17.5)Imported . . . . . . . . . . . . ( 1.4)Synthetic . . . . . . . . . . . . (ne)

Coalc . . . . . . . . . . . . . . . . . 18.9Produced . . . . . . . . . . . (21.2)Exported . . . . . . . . . . . . ( 27)Synfuel feed . . . . . . . . . (ne)

Nuclear . . . . . . . . . . . . . . . 5.7Renewable . . . . . . . . . . . . 5.8

Total . . . . . . . . . . . . . . . 83.9

3.63.30.90.11.29.1

3.03.40.70.17.2

24.80.7ne

25.5

7.54.45.74.43.23.3

28.570.3

17.86.64.11.54.5

34.4

37.9(120)(249)( 00)( 1 . 0 )1 8 8

(17.0) .(1.8)/ne

21.1(2%5)(5.0)(1.4)

6.68.9

Moderate Highefficiency efficiency

Residential buildingsEnvelopes . . . . . . . . . . . . . . . . . . . .Heating and cooling . . . . . . . . . . . .Hot water, appliances . . . . . . . . . .Retrofits

Envelopes . . . . . . . . . . . . . . . . . .Lighting . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . .

Commercial sectorEnvelopes . . . . . . . . . . . . . . . . . . . .Heating and cooling. . . . . . . . . . . .Water heating . . . . . . . . . . . . . . . .Lighting . . . . . . . . . . . . . . . . . . . . . .Office equipment . . . . . . . . . . . . . .Cogeneration . . . . . . . . . . . . . . . . .Retrofits

Envelope . . . . . . . . . . . . . . . . . . .Lighting . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . .Transportation

New auto efficiency . . . . . . . . . . . .New light trucks. . . . . . . . . . . . . . .New heavy trucks . . . . . . . . . . . . . .Non-highway vehicles . . . . . . . . . .Public transit. . . . . . . . . . . . . . . . . .improved maintenance . . . . . . . . .Improved traffic flow. . . . . . . . . . . .Ride sharing, etc. . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . . . . .

IndustryCogeneration . . . . . . . . . . . . . . . . .Lighting . . . . . . . . . . . . . . . . . . . . . .Electric motors . . . . . . . . . . . . . . . .New processes . . . . . . . . . . . . . . .Process retrofits. . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . . . . .

0.960.070.89

0.590.44

1.480.371.41

0.670.59

2.89

1.700.741.551.180.070.15

0.590.37

4.51

2.961.152.221.550.071.41

0.590.37

6.29

0.590.370.300.370.150.220.890.30

3.11

0.590.440.892.221.415.62

10.36

2.701.921.770.892.590.301.040.74

10.73

4.070.712.856.071.48

17.06aBe~useoftheform ofthedata andtheconversion method, alivahsareapproximate andshould beusedforgeneralguidance only.Totalsarenotalways equal tothesum ofthe parts because maximum values maybeinconsistent, and otherfactors may reinvolved.

SOURCE: Derived from U.S. Congress, Changing byDegrees.-Sfeps ToReduce Greenhouse Gases, OTA-O-482 (Washington, DC:U.S. Government Printing Office, February 1991), tableA-3.

sionmakers and their different situations, this is ahighly artificial assumption. However, regulation(e.g.,fuel economy standards for automobiles) and

93.3 transfer of decisions to energy service companiesKEY: ne=negiigible.

aDoesnotinclude~nversion Iossesat powerplants, which makeupabouttwo-thirds of thetotal consumed there.

bA~fuelusedfor~er, with hydroelectric and other nonthermal pOWfer-plants artificiallyrated ataverage thermal efficiency.

‘The l.O quadof synthetic fuel made from 1.4 quads ofcoalis includedunder oil.

SOURCE: 1989 data-U.S. Energy Information Administration, Armua/Ehergy Review 7989, DOE/ElA43384(89), May 24,1980, tables1,2,3,4,5,11,17,25,88, and 99; Office of Technology Assess-ment, 1991.

(perhaps gas and electric utilities with incentives toincrease efficiency) could produce many of theneeded choices. In addition, unanticipated, im-proved technology is likely to appear that makespossible even greater savings. In general, therefore,this assumption provides a useful standard to com-pare the potential efficacy of policies, as describedin the next chapter.



In the residential/commercial sector, new build-ings require only 50 percent of the energy used incurrent new buildings for heating because of betterconstruction techniques, insulation, and windows.Improved lighting and equipment provide additionalsavings. For the most part, the technology for theseimprovements is familiar. Some of the gains dependon the commercialization of new technology, e.g.,heat pump water heaters, but none of the requiredadvances is particularly dramatic or risky. Nor areconsumers required to accept many technologiesthat would be significantly more difficult to managethan existing equivalents.

The uncertainties are primarily with the decision-making to implement the improvements, particu-larly what it will take to induce consumers to investin more expensive houses and appliances in order tosave on operating costs. In no case would theadditional investment be extremely high (e.g., anewhouse might cost a few thousand dollars morebecause of improved insulation and appliances).However, the decisionmaking in this sector has beenless predictable than in the others. Overall, energyuse in the residential/commercial sector could actu-ally decline by 2015 with these changes despite asubstantial increase in per capita wealth.

Electricity use increases in both the residentialand the commercial sectors. Natural gas declines inhomes because the average thermal efficiency ofhouses increases. Natural gas and electricity willdominate the supply of energy under any conditions.The balance between the two will depend on relativecosts and availability, as well as the success ofvarious RD&D and commercialization programs.Policy decisions will strongly influence the success-ful implementation of new technologies, and theimplications for the country of the various choicesare significant, as described in the following chapter.Oil is likely to continue its decline because of costand convenience considerations. Wood and otherforms of solar energy could be increased by variouspolicy initiatives but, as discussed in scenario 5, theinitiatives would have to be powerful for theadditional contribution to be large in this timeframe.In the long term, renewable could become veryimportant in the residential/commercial sector.


Energy use in the transportation sector is muchless likely to drop than in the residential/commercialsector, but the growth rate can be slowed. Cost-effective improvements in the mileage of new cars,trucks, and airplanes will reduce demand signifi-cantly, but the increase in miles traveled willoutweigh them. In the long term, improved mileagewill make a dramatic difference. With improve-ments to already existing technology, the fueleconomy of new automobiles in this scenarioincreases to 39 miles per gallon (mpg) by 2010, ascompared to 36.5 mpg in the base case and 27 mpgnow, using only evolutionary improvements toexisting technology, as discussed in chapter 2.However, over the next 20 years, nontechnicalmeasures, e.g., increased van pooling, improvedvehicle maintenance, and reinstatement of the 55mile per hour (mph) speed limit, will have moreimpact.

Achieving major fuel economy gains in thetransportation sector may be hindered by conflictingdemands. For example, reducing vehicular emis-sions often results in some compromise to fuelefficiency and vice versa. The expected growth ofalternative fuels resulting from the 1990 amend-ments to the Clean Air Act may reduce oil importsbut does not promise greater efficiency. Indeed, therecent revisions to the Clean Air Act mandateseveral changes that will affect how the transporta-tion sector uses fuel. Gasoline will still be thedominant fuel by 2015, but the large, powerful carsthat many consumers prefer now will be squeezedbetween demands for cleaner emissions and highermileage. In some metropolitan areas, alternativefuels, e.g., methanol and electricity, will be favored,but it is assumed here that their penetration is toosmall to be significant.

Industrial Sector

The diversity of the industrial sector complicatesany analysis of future fuel use. Several fuels, variousprocesses, and different industries with a variety offinancial situations must be considered. Over thepast 17 years, industry has made notable” strides inincreasing energy efficiency for economic reasons.More improvements are possible, particularlythrough electric motor improvements, process modi-fication, lighting, and energy management systems,and with processes specific to certain industries, butthe gains will be relatively modest. About 15 percent

Chapter 4-Potential Scenarios for Future Energy Trends ● 121

(4 quads) of the energy required in the base case issaved by these measures by 2015, but a net increaseof 4 quads over 1987 is still required.

Fuel shifting within the industrial sector is rela-tively easy for applications such as process heat andcogeneration (about 60 percent of all energy used inmanufacturing), but quite difficult or impossible forother categories. Many boilers and heaters incorpo-rate dual-firing capability to switch between oil andnatural gas as economics and emission regulationsdictate. Coal can also be a major energy source,actually surpassing oil by 2015 in this scenario.Policy incentives or disincentives focused on naturalgas and coal are likely to have more effect than thoseaimed at efficiency.

Electric Power Sector

The electric power sector consumes more primaryenergy than any of the three sectors discussed above.One of the main issues related to electric powerinvolves nonfossil energy sources, which are dis-cussed in scenarios 5 and 6. There are also someimportant options to raise the efficiency of the sectorthrough improved generation and transmission, butfew are implemented, because so little new generat-ing capacity is required. In this scenario, demand forelectricity is lower than in the base case because theefficiency of use increases. Demand rises from 2.7trillion kWh (kilowatt-hours) in 1987 to 3.4 trillionkWh in 2015, compared to 4.6 trillion kWh in 2015in the base case.

In the long term, new plants can be significantlymore efficient than existing ones. The efficiency ofnew technologies, e.g., fuel cells and intercooledsteam-injected gas (ISTIG) turbines, may approach50 percent, higher than any existing technology.Advanced pulverized coal or IGCC technologiesshould also have significantly higher efficiency thancurrent plants. The competitiveness of the newtechnologies will depend in part on environmentalconstraints. Tighter restrictions on sulfur oxides(SOX) and nitrogen oxides (NOX) will favor newtechnologies that can be cleaner as well as moreefficient.

Conclusions-There are two major reasons whypolicymakers might choose to move the countrytoward this scenario. One is economic: this is theleast cost scenario, and implementing it (or some ofits major features) would improve the economicwell-being of the country and its international

competitiveness. The other reason is environmental:reducing energy use generally, though not always,reduces emissions of pollutants from both the useand supply of energy. This scenario would providemany environmental benefits without drastic curtail-ments. It represents a moderate response to concernsover global climate change and reducing CO2

emissions, consistent with the conclusion that theproblem has not been verified at present but maybeserious in the coming decades.

As noted above, however, this scenario will notoccur by itself. There are too many constraints andmarket imperfections for people to make all thenecessary decisions that would be required toimplement this level of efficiency. Policy initiativesthat would help overcome these constraints arediscussed in the following chapter.

Scenario 4: High Emphasis on Efficiency

Extreme measures to improve efficiency could bejustified under some circumstances. Perhaps globalwarming will be confirmed as an imminent problemwith potentially devastating consequences, or inter-national political instability will severely threatenthe supply of petroleum. Even in highly efficientcountries, almost any activity consuming energycould be accomplished with much less. If energywere to become very expensive or limited inavailability, the number of viable, alternative ap-proaches to reduce energy use would increase. Thisscenario incorporates measures that are equivalent tothe most efficient that have been demonstrated todate and assumes that these are widely applied.Table 4-5 shows the energy use that results. Table4-4 lists the measures that are implemented.

Residential Sector

Energy use in the residential sector drops sharplycompared to the last scenario. Residential buildingsare constructed to such high standards that heatingrequirements in new northern homes are reduced 85percent from average existing stock, and air condi-tioning by 45 percent. These are extremely optimis-tic projections based on the assumptions that essen-tially every new house will match the most efficienthouses currently available and be maintained in thatcondition.

Superinsulation, including the latest develop-ments in windows (which are quite expensive) canachieve as much as a 75-percent reduction in


Table 4-5-High Efficiency Scenario Energy Use andSupply (quadrillion Btu)

1989 2015Demand

ResidentialNatural gas . . . . . . . . . .Electricity a . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Renewables . . . . . . . . .Total . . . . . . . . . . . . . . .

CommercialNatural gas . . . . . . . . . .Electricity a . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

TransportationOil . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . .Electricity a . . . . . . . . . . .Total . . . . . . . . . . . . . . .

industrialNatural gas . . . . . . . . . .Oil(fuel) . . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . .Electricity a . . . . . . . . . . .Renewables . . . . . . . . .Coal . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . .

Total demanda. . . . . . . . .Electricity b

Coal . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . .Renewables . . . . . . . . .Total . . . . . . . . . . . . . . .

Supply Oil. . . . . . . . . . . . . . . . . . .

Domestic . . . . . . . . . . . .imported . . . . . . . . . . . .Exported . . . . . . . . . . . .Synthetic . . . . . . . . . . . .

Gas . . . . . . . . . . . . . . . . . .Domestic . . . . . . . . . . . .imported . . . . . . . . . . . .Synthetic

Coal . . . . . . . . . . . . . . . . . .Produced . . . . . . . . . . . .Exported . . . . . . . . . . . .Synfuel feed . . . . . . . . .

Nuclear . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . .

5.03.11.80.10.9- —

10.9

2.72.70.7ne

6.1

21.60.6ne

22.2

8.33.84.43.21.92.9

2.92.60.8

ne/o.66.9

3.81.70.30.15.9

17.70.70.1

18.5

7.73.35.73.22.21.5

24.5 23.6

63.6

16.05.72.91.73.0

29.2

34.0(183)(17.0)1.8/ne

19.5(17.5)(1.4)/ne

18.921.2/2.7

5.75.8

54.8

5.36.85.30.25.2

22.8

27.8(120)(15.8)(0.0)/ne

20.3(1%5)(2.8)/ne

7.0(13.0)(6.0)/ne

6.88.0

83.9 70.0KEY: ne=negligible.

aDoesnot include conversion Iossesat powerplants,which makeup abouttwo-thirds ofthetotal consumed there.

bA~fuel usedforWwer, with hydroelectric and other nonthermal power-plants artificially rated at average thermal efficiency.

SOURCE: 1989 data-U.S. Energy Information Administration, Armua/EnergyRetiew1989, DOE/EiA0384(89), May24,1990,tables1,2,3,4,5, 11,17,25,88,and 99;OfficeofTechnologyAssess-ment, 1991.

residential heating. Exceeding 75 percent will re-quire meticulous attention to design, construction,and materials, and possibly, compromises on ap-pearance and lifestyle as well. For example, housesand their windows may have to be oriented towardthe sun (rather than toward the street), or the numberof windows could be reduced.

Very tight houses require ventilation systems tokeep indoor air pollution at tolerable levels. As airexchange is reduced by tightening shells, problemsarising from indoor air centaminants (radon, NOX

from natural gas cooking, vapors from buildingmaterials) and irritants (particulate, aerosols) willworsen unless countervailing measures are taken.Fireplaces and woodstoves would be incompatiblewith supertight houses, because they require contin-ual ventilation while in operation. Even with heatrecuperators, significant heat losses from ventilationsystems will interfere with the 85-percent heatreduction goal. As a result, multiunit buildings mayhave to be encouraged as an important alternative tosingle family homes in order to achieve the energyprojections for this sector.

Existing building shells are aggressively retrofit-ted in this scenario. Energy savings of 20 to 30percent are anticipated. This goal is less controver-sial than that for new houses.

In addition, appliances will have to be as efficientas currently feasible. Electric or gas-fired heatpumps or pulse furnaces would replace conventionalfurnaces in new construction. Electric heat pumpswould be at least 50-percent more efficient thanthose in use now. Water would also be heated withheat pumps. Lighting will be primarily with fluores-cent or halogen bulbs. Important appliances such asrefrigerators, ovens, and clothes dryers increasinglyare based on new technology that cuts energyconsumption dramatically.

These changes will add substantially to the cost ofbuying a home, perhaps $6,000 to $8,000 for thesupertight envelope. Total costs, including lostliving space because of thicker walls and efficientequipment would be higher (though heating andcooling equipment might be cheaper than in aconventional house because small units would beadequate). The energy costs of the buildings arequite low, but the savings may not be commensuratewith the additional capital costs if the price of energyto the consumer follows the assumptions listedearlier in this chapter.


Commercial Sector

Energy consumption in the commercial sectordrops 30 percent relative to the moderate projectionscenario. Buildings require 25 percent of the currentaverage for heating, and appliances are as efficientas the best available now. The most notable shift isthe replacement of purchased electricity with naturalgas, some of which is used in cogeneration.


The transportation sector produces large savingsrelative to the last scenario, mostly because mileagestandards on new automobiles are raised sharply.The previous scenario raised the 2010 average fromthe 36.6 mpg of the base case to 39.0 mpg, whichwould have little effect on consumer choice or cost.The increase to 55.0 mpg here would require anaggressive emphasis on new technology, such asadiabatic diesel engines, lighter materials, andcontinuously variable transmissions. Some shifttoward smaller cars in the fleet mix would berequired to meet this standard if the technologicalimprovements prove inadequate. Only one or twomodels on the market now are rated at 55 mpg, andthese are very small. In addition, there will have tobe a strong emphasis on car pooling, public transpor-tation, and advanced traffic control. The 55-mph-speed limit is reinstated under this scenario as well.

Although they are not emphasized here, alterna-tive fuels and electric vehicles could play a large roleunder the conditions of this scenario. If the concernis over CO2 emissions, then the replacement ofgasoline by methanol from biomass would havesubstantial benefits. Methanol from natural gaswould be beneficial (but less so), while syntheticfuels from coal or oil shale would be very counter-productive as an option to reduce CO2 emissions. Ifenergy security is the concern, any of these alterna-tive sources would serve to reduce imports ofpetroleum and so would be consistent with thisscenario. However, security is unlikely to be themajor issue driving this scenario, because it wouldbe cheaper and easier to enlarge the SPR. Alternativefuels and electric vehicles are discussed in the lasttwo scenarios.

Industrial Sector

Energy consumption in the industrial sectorwould decrease more than 25 percent from currentlevels under this scenario. The efficiency gains areeven greater than this, but economic growth offsets

many of them. Process changes provide the greatestenergy savings, followed by improved maintenance,more efficient electric motors, and cogenerationgrowth. Some of the new processes will requireresearch and development (R&D) and probablyGovernment support for demonstrations. Industry iswilling to accommodate changes to improve energyefficiency, but only if the changes are demonstrablycost-effective and of acceptable risk, suggesting thatan increase in the price of energy would be the mosteffective motivation. The major difference betweenthis scenario and the previous one is that the universeof acceptable technological options to save energyexpands, and increased use is made of technologiesimplemented in scenario 3. Some of the mostimportant changes are in industry-specific proc-esses, e.g., direct steelmaking and biopulping forpapermaking.

Widespread implementation of many of theseoptions would require major alterations to oldfacilities or the construction of entirely new ones.These major changes would not be done purely forenergy reasons, though the energy savings wouldrepresent a significant part of the economic benefits.Therefore, this scenario is most likely to be initiatedas part of an overall upgrading of much of theindustrial infrastructure in this country. Such anoverhaul is beyond the scope of this report, but itshould be noted that considerable promise exists formajor industrial gains in both energy efficiency andeconomic competitiveness.


Efficiency gains in the electric power sector areslightly greater than in scenario 3. Improved effi-ciency in the other sectors controls electricitydemand to the point where few (if any) newgenerating facilities are required. While this elimi-nates a source of higher efficiency, many generatingplants would have to be retired, and these are likelyto be the least efficient ones. Retrofits to existingplants would raise efficiency modestly. If furthergains are required in the electric power sector,existing plants could be replaced with new ones.

The motivation for much greater efficiency isimportant here. If the goal is to increase energysecurity, then replacing existing plants has littlevalue. Only 5 percent of the oil consumed in thiscountry is used to generate electricity, and mostgenerating plants burn coal, which is not a securityproblem. If the motivation is to reduce Co2 emis-


sions--generating stations produce over one-thirdof all the CO2 emitted in the United States-thenreplacements may be warranted. However, theenvironmental benefits of replacing an old coal plantwith anew one are much smaller than the benefits ofreplacing it with a nonfossil plant. This approach isconsidered in the next two scenarios.

Therefore the major assumption of the highefficiency scenario is that most existing coal plantsare retired by 2015. Coal consumption in the sectordrops by almost two-thirds. As noted below, thiswould have extremely serious economic conse-quences in some coal-producing areas. Most newconstruction is highly efficient combined-cycle,gas-fired technology. Some nuclear (5 GWe) andrenewable (15 GWe, mostly hydroelectric) energy isalso included. In addition, the improved operation ofexisting plants raises their efficiency by about 5percent, as in the previous scenario.

Conclusions-This scenario is notably moresuccessful in reducing energy demand than theprevious one, but it relies on measures that would beeven more difficult to implement. Housing andautomobiles would be significantly more expensiveto purchase, though cheaper to operate. Much newtechnology, particularly in the transportation andindustrial sectors, is assumed to be available andreliable. Industry may find more compensatingadvantages than consumers, but companies wouldstill find their planning processes heavily influencedby this major effort to reduce national energy use.

Therefore, this scenario is very unlikely to beimplemented unless driven by major nationalthreats. As noted above, the only threats that appearsufficiently ominous over the next 25 years aresevere oil import disruptions and global warming.By itself, this scenario would not solve eitherproblem, but it probably represents a practical upperlimit for national demand reduction efforts.

The two remaining scenarios are alternative,though not necessarily incompatible, approaches tomitigating the threat of global warming. In the longterm (before the end of the 21st century), some of themeasures outlined in these three scenarios may benecessary merely from the worldwide depletion ofpetroleum if synthetic fuels prove too expensive toadopt on a wide scale. Whether any threats justify

this level of action is a judgment that cannot bedetermined analytically at this point.

Scenario 5: High Emphasis onRenewable Energy

Renewable energy sources (solar and geothermal)have considerable appeal from an environmentalperspective. In most cases, the energy already existsnaturally, and there are few harmful emissions fromits use. However, with some exceptions, renewablecurrently are not economically competitive withfossil fuels or nuclear energy. As discussed inchapter 3, some renewable technologies show con-siderable promise for near-term competitiveness ona wide scale. Policy intervention could assure amuch more rapid penetration than assumed in theprevious scenarios. The impetus could be concernover global warming, other environmental issuessuch as air quality, or energy security.

However, it does not appear that any of theseoptions will ever seem inexpensive by currentstandards. Hence, a high dependence on renewableenergy should start with an economy that has builtin as much efficiency as practical. This scenariobuilds on the energy distribution in scenario 3(moderate efficiency) but shifts some of the supplyfrom fossil to renewable sources. Table 4-6 outlinesthe supply and demand. As each sector will adoptrenewable for unique functions, they are discussedseparately.


The major direct use of renewable in the residen-tial/commercial sector would be passive and activesolar heating. As in the previous scenario, whereverpossible, buildings would be oriented toward the sunand designed to maximize capture of solar energy inthe winter while excluding it in the summer. Activepanels to collect solar energy for both heat and hotwater would become common. The use of firewood(now the dominant use of renewable energy inbuildings) would also increase, but environmentaland safety considerations suggest that firewoodshould not be a favored energy source. Processedfuels from biomass should be more benign. By 2015,the solar contribution could be displacing 1.0 quadof fossil or electric heating in buildings, andgeothermal another 0.5.7 In addition, biomass could

7~e v~u= ti tis sw~on ~e dtived from SOlm Ener~ Research Institute et al., The Potential of Renewable Energy; An Medaborutory WhitePaper, prepared for the U.S. Department of Energy, SERI/TP-2@3674, DE90000322 (Ooldeu CO: Solar Energy Research Institute, March 1990).


be increased by 0.5 quad. The total additionalrenewable contribution to the two sectors is 2 quads.

Commercial buildings may be less appropriatethan residences for solar heating, because most aretoo large for on-site collectors. Furthermore they useheat for unique functions and often extended periods(hospitals, restaurants). However, commercialbuilding owners can also arrange for service compa-nies to supply heat or cooling from off-site solarstations.

The size of the solar collector industry hasdecreased greatly since the 1970s from the loss of taxcredits and the drop in fossil fuel prices. Rapidgrowth would risk repeating the experience of the1970s, when inadequate designs and unskilled ordishonest installers plagued the industry. The tech-nology is much better now, but controls to ensurethat the solar contribution is achieved efficientlywould be prudent.

Other applications for renewable energy includeelectricity generation and the replacement of naturalgas with hydrogen, which could be produced byphotovoltaics. Alternatively, synthetic gas could beproduced from biomass. These options also apply tothe sectors discussed below.


The transportation sector would use fuels derivedfrom biomass. If advances in plants, cultivation, andprocessing are successful, methanol from wood orherbaceous crops is the most likely fuel though someof the ethanol technologies are promising. By 2015,as much as 1.2 quads could be supplied, displacing0.6 MMB/D. Moving toward methanol would re-duce air pollutants such as ozone, though handlingwould have to be stringent to minimize toxicexposure. Energy security would be well served,because most of the feedstock would be domestic.

However, the long-term transition to a biomass-derived, methanol-fueled fleet would be very diffi-cult. If biomass is not to interfere with foodproduction, presently unused farmland or forestswould have to be cultivated. As much of thefarmland would be marginal, environmental prob-lems, e.g., erosion, could be potentially serious. Amajor industry for fuel processing and distributionwould have to be established. A dual distributionsystem for methanol and gasoline would be requiredfor many years. Automobiles would be eithermultifueled, which is less efficient, or limited to one

Table 4-6-High Renewable Scenario Energy Use andSupply (quadrillion Btu)

1989 2015Demand

ResidentialNatural gas . . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

CommercialNatural gas . . . . . . . . . . . . . . .

Electricity a. . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . .

TransportationOil . . . . . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . .

IndustrialNatural gas . . . . . . . . . . . . . .Oil (fuel) . . . . . . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

Total demanda . . . . . . . . . . . . .Electricityb

Coal . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

SupplyOil . . . . . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

3.32.80.7ne2.3

10.9

2.72.7

ne/0.7ne

9.1

2.73.00.90.50.1

6.1

21.60.6nene

22.2

8.33.84.43.21.92.9

7.2

23.60.71.2ne

25.5

6.73.75.74.44.83.2

24.5 28.5

63.6

16.05.72.91.73.0

29.2

34.019.518.95.75.8

83.9

70.3

12.14.32.71.2

11.3

31.6

35.316.015.44.3

20.5

91.5KEY: ne = negligible.aDoes not include conversion losses at powerplants, which makeup abouttwo-thirds of the total consumed there.

bAll fuel USed for power, with hydroelectric and other nonthermal power-plants artificially rated at average thermal efficiency.

SOURCE: 1989 data-U.S. Energy Information Administration, Armua/Energy Review 1989, DOE/EIA-0384(89), May 24,1990, tables1,2,3,4,5,11,17,25,88, and 99; Office of Technology Assess-ment, 1991.

type of distribution, as are diesel cars now. Problemssuch as starting the engine in cold weather wouldneed to be solved. The transition would be eased ifmethanol is first introduced as an additive to “


gasoline, and then as a pure fuel for urban fleets,before individuals are expected to purchase cars thatburn only methanol.

An alternative is cars powered by solar-generatedelectricity. Electric cars have even more environ-mental advantages than methanol cars, emittingalmost no pollution when the electricity is producedcleanly. However, significant storage improvementswould be necessary before electric cars couldexpand beyond small niche markets. In this scenario,the penetration of electric vehicles is assumed to besmall relative to methanol. (The following scenarioreverses this assumption.) Solar electricity is dis-cussed below. If the technology can be developed,powering cars with hydrogen produced from solarelectric plants might be superior to using theelectricity directly. The infrastructure required forhydrogen would be quite different, but the overallenvironmental, economic, and social impact proba-bly would be about the same.

Industrial Sector

The industrial sector already uses substantialamounts of biomass, primarily through combustionof wood wastes by the forest products industry.Biomass use could be expanded about 1.5 quads by2015.

Industry uses primary energy mainly as processheat. Most process heat requires temperatures fargreater than that produced by flat solar panels, butsuch high heat is easily obtainable by the type ofcollectors used in solar thermal electric plants.Industry could replace a significant fraction of itsfossil fuel use with solar energy, but only iflong-term storage technology is perfected as well.No company would risk plant shut downs fromsomething as common as several cloudy days.Backup energy supplies can be arranged, but theywould add considerably to costs and complexity,which could deter many companies from adoptingthese technologies at all.

Penetration of these technologies is likely to beslow, because most industrial energy consumptionin 2015 will be in facilities that have already beenconstructed and that are not necessarily appropriatefor solar energy. This scenario assumes that indus-trial solar energy use will be small in 2015, thoughit could expand considerably beyond the time frameof this scenario.

Photo credit:Aian T Crane

Parabolic dishes focused on a Stirling engine to produceelectricity. This assembly was designed and built in the

United States and exported to France.


If solar energy is to supply a large fraction of U.S.energy requirements, it will be achieved only withconversion to electricity (with storage) or perhapshydrogen. Direct applications of solar energy aremodest, and most solar technologies lend them-selves to electricity generation. Hydroelectric poweris the largest renewable energy source and willremain so for many years. Photovoltaics and windproduce electricity directly. Solar thermal and geo-thermal facilities produce high-grade heat that canbe used in several ways, including processing otherfuels, but electricity would be the easiest to deliverand use in the foreseeable future. Biomass alreadyfuels a small amount of electrical generation, largelyin the forest products industry, and many moreopportunities could be created. Hence a commitmentto solar implies increased electrification, just as acommitment to nuclear power does in the nextscenario.

This scenario projects renewably generated elec-tricity supplies to grow from 3.0 to 11.3 quads by2015, an increase of 6.8 quads compared to themoderate efficiency scenario. Most of the potentialhydropower presently economic or close to it(considering environmental constraints) is devel-oped for an additional 32 GW (yielding 1.5 quads).Biomass for electricity increases 1.7 quads. Solarthermal and photovoltaics together could supply 2.1


quads and wind 2.2 quads. Geothermal increases 0.5quads. Solar electricity could displace some directfossil fuel use, but that is not assumed in thisscenario. In fact, electricity generation drops 2.9quads from displacement by the direct use ofrenewable energy.

Conclusions-The largest uncertainty for thehigh renewable scenario is whether the technologycan be improved sufficiently to provide a reliable,affordable energy source. Only a few renewabletechnologies are now competitive and most of theseonly in special situations. Furthermore, as theseintermittent sources begin accounting for largerfractions of electricity generation, improved storagewill become essential. Cost projections suggest thatat least several technologies will be competitive, butthat is not yet certain. If the projections provecorrect, renewable could grow very rapidly. Someadaptation by individuals and companies might berequired to make the most effective use of renewableenergy (e.g., revising energy demand profiles totrack more closely solar energy availability, andincreased installation of backup power equipment).In addition, wide-scale exploitation of renewableenergy is likely to cause some conflicts withenvironmental goals (e.g., farming practices forbiomass, aesthetics of solar collectors). Overall,however, if the economics are solved, renewablewill follow with considerably less difficulty.

Scenario 6: High Emphasis on Nuclear Power

Twenty-five years ago, the total capacity of allnuclear powerplants in the United States was lessthan 1200 MWe, about the size of one large modernplant. Today there are over 100,000 MWe inoperation, producing almost 20 percent of the powerin this country. Over the next 25 years, nuclearpower could grow by several hundred thousandMWe, or it could shrink. No domestic energy sourceexcept coal has the potential to grow as much in thistime interval, but none evokes as much oppositionand distrust. The amount of nuclear power capacitythat is built in the future depends almost entirely onpolitical decisions and economic factors, but verylittle on resource constraints or industrial capability(although the latter would be a constraint to veryrapid growth).

This scenario assumes that a major commitmentto nuclear power is deemed essential, most probablybecause of global climate change. Table 4-7 shows

Table 4-7—High Nuclear Scenario Energy Use andSupply (quadrillion Btu)

1989 2015Demand

ResidentialNatural gas . . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

CommercialNatural gas . . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

TransportationOil . . . . . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

IndustrialNatural gas . . . . . . . . . . . . . .Oil (fuel) . . . . . . . . . . . . . . . . .Oil (nonfuel) . . . . . . . . . . . . .Electricity a. . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . .

Total demanda . . . . . . . . . . . . .

Electricityb

Coal . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . .Oil . . . . . . . . . . . . . . . . . . . . . . .Renewables . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . .

SupplyOil . . . . . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

3.43.40.8

ne/1.5

10.9

2.72.7

ne/0.7ne

9.1

2.83.50.30.50.1

6.1

21.60.6nene

22.2

8.33.84.43.21.92.9

24.5

7.2

23.40.70.70.7

25.5

7.24.25.74.63.63.2

28.5

63.6

16.05.72.91.73.0

70.3

12.112.05.01.37.6

29.2

34.019.518.95.75.8

83.9

38.0

35.919.115.412.013.796.1

KEY: ne = negligible.aDoes not include conversion losses at powerplants, which make up abouttwo-thirds of the total consumed there.

bAll fuel US~ for power, with hydroelectric and other nonthermal power-plants artificially rated at average thermal efficiency.

SOURCE: 1989 dat&U.S. Energy Information Administration, Annua/Energy Review 1989, IXX3EIA-0384(89), May 24,1990, tables1,2,3,4,5,11,17,25,88, and 99; Office of Technology Assess-ment, 1991.

the energy supply and demand figures. Under thisscenario, initial orders are placed by 1994 forupdated LWRs, the only proven, commercial nu-clear technology. A revival of orders probably


would involve a consortium of utilities, manufactur-ers, and architect-engineers implementing a preli-censed design. Under circumstances leading to highnational priority, at least two separate consortiawould be likely, each building a reactor of about 600MWe. These initial reactors would require about 7years to attain commercial operation, which wouldbe in 2001.

If progress during construction of these test casesis reasonably smooth, subsequent orders might beplaced in 2000. Some risk would be involved inordering before completion of the construction,regulatory, and operational demonstrations, but thesituation is not analogous to the premature orders inthe sixties and seventies. Now the technology ismuch more familiar and stabilized. However, utili-ties are likely to be cautious, so only two more plants(1200 MWe total) are ordered in 2000, and four in2001. These and following reactors are built on a5-year construction program.

Alternative technology, in particular the high-temperature gas reactor (HTGR), would be availableslightly later, but the net effect on this scenariowould be small. Ironically, one of the major advan-tages suggested of advanced reactors, improvedpublic acceptance, would not apply in this scenario,because public acceptance of conventional reactorsis already assumed. However, alternative reactorsshould still have safety advantages. The type ofaccident that occurred at Three Mile Island, whichentailed serious financial and public relations dam-age, though releasing only trace amounts of radioac-tivity, becomes a significant risk if hundreds ofLWRs operate for decades. Since this type ofaccident would again damage the prospects fornuclear power, conversion to more resilient technol-ogy probably is necessary at some point. Thus, ahigh nuclear scenario should include an emphasis onimproved technology, even though the risk of amajor accident that would harm the public is alreadymuch lower than other commonly accepted risks.Rising uranium prices by 2015 may also improve thecompetitiveness of the liquid metal reactor, but abreeder/plutonium recycle would not be necessaryuntil several hundred GWe have been built.

Table 4-8 shows the progression of orders andcommercial operation assumed in this scenario.Reactors are assumed to average 600 MWe each.The rate of starts is low at first, grows rapidly, andthen levels out as the number of plants in the

Table 4-8-New Nuclear Plant Construction Schedulein High Nuclear Scenario

Plantsstarted Total new Operating

Year in year starts capacity ( MWe)

2000 . . . . . . . . . 2 4 02001 . . . . . . . . . 4 8 1,2002002 . . . . . . . . . 8 16 1,2002003 . . . . . . . . . 12 28 1,2002004 . . . . . . . . . 16 44 1,2002005 . . . . . . . . . 20 64 2,4002006 . . . . . . . . . 22 86 4,8002007 . . . . . . . . . 24 110 9,6002008 . . . . . . . . . 26 136 16,8002009 . . . . . . . . . 28 164 26,4002010 . . . . . . . . . 30 194 38,4002011 . . . . . . . . . 32 226 51,6002012 . . . . . . . . . 34 260 66,0002013 . . . . . . . . . 36 296 81,6002014 . . . . . . . . . 38 334 98,4002015 . . . . . . . . . 40 374 116,400SOURCE: Office of Technology Assessment, 1991.

construction process becomes large. By 2015, theadditional operating capacity is 116,000 MWe andgrowing rapidly. The existing 103,000 MWe can beexpected to decline by about 19,000, for a grand totalby 2015 of 200,000 MWe, producing 12 quads. Evenfaster growth could be envisioned; in 1975, projec-tions called for 1,000,000 GWe in 2000, 10 timeswhat we shall have. However, the rapid growth rateat that time was the source of many of the industry’sproblems. This more controlled rate should giveindustry time to acquire qualified workers and buildan adequate infrastructure. By 2015, however, thecapacity reaches the levels ordered in the earlyseventies, so the industry may again becomestrained. In addition to the reactors, several enrich-ment plants would be required, probably using thelaser technology now being developed, whichshould be cheaper and much more energy efficientthan present mass diffusion enrichment technology.At least two high-level waste repositories will alsobe needed.

In addition to nuclear, substantial amounts ofgas-fired, hydroelectric, and municipal solid wastecapacity are built in this scenario. The total capacityby 2015 would be 740,700 MWe. Most coal plantswould be retired to reduce C02 emissions. Despitethe additional energy generated by nuclear reactors,the net output of the electric power sector is onlymarginally higher than in scenario 3, largely becauseof the relative inefficiency of nuclear plants.


Relying on nuclear power will change the natureof the energy system, but not as greatly by 2015 asafter. This scenario uses nuclear energy more as ameans to reduce coal combustion than as an effort toincrease electricity production. The use of nuclearreactors to produce industrial process heat has beenproposed, particularly using HTGRs, but that is notassumed in this scenario.

The transportation sector will be especially diffi-cult to convert to electricity, because batteries areunlikely to improve sufficiently by 2015 for EVperformance to match that of present vehicles. EVswill become widespread after 2000 in this scenario,but the motivation assumed here centers on localenvironmental benefits rather national efforts toreduce fossil fuel use. Electricity and biomass eachsupply 0.7 quads in the transportation sector (table4-7). The biomass component would be moreassimilable, but the electricity will power about fourtimes as many vehicles. Alcohol or other biomassfuels must be burned and converted to work atrelatively low efficiencies (generally much lowerefficiencies than at large, stationary powerplants),whereas the electricity is used directly.

Industry would be unlikely to shift its bulkprocess heat to electricity because of the cost, unlessindustrial heat pumps prove effective. Industry willenjoy the greatest benefits from electrification ifprocess redesign exploits electricity’s controllabilityand cleanliness.

Conclusions-Nuclear power will not solve ei-ther the C02 problem or energy security concerns by2015, but it can make a major contribution thatwould grow rapidly thereafter. Before this scenariocould be implemented, however, the factors thathave immobilized the nuclear option must beaddressed. Utilities, their customers, local residents,State rate regulators, investors, and the generalpublic must be convinced that nuclear power ingeneral, and specific proposed plants in particular,are necessary and in their interests.

It is not clear exactly how this consensus wouldemerge. Global climate change is the issue mostlikely to improve acceptability. The negative effectsthat have been suggested for climate change greatlyexceed even very pessimistic projections of nuclearaccidents. However, the nature of the problems arevery different, and people will not necessarily accepta nuclear plant in their area in order to reduce globalC02 emissions.

This scenario is impossible unless the industrycan demonstrate mastery of the technology withexisting as well as new plants. Furthermore, afunctioning waste repository must be a near-termprobability before many new plants are ordered, andproliferation risks must be strictly minimized. Inaddition, at least initially, nuclear power must besignificantly less expensive than renewable optionsor fossil-fired plants for utilities to consider choos-ing nuclear.

All of these conditions are possible to meet, butthe likelihood of meeting all of them is uncertain.The nuclear industry retains a strong commitment toa revival, but strong policy leadership will berequired to convince the rest of the country, at leastat frost.

Comparative Impact of Scenarios

The six scenarios discussed above are summa-rized in table 4-9. They represent different assump-tions about the problems and opportunities facingthe Nation. It would be quite difficult to specifyexactly what impact would result from the imple-mentation of any of them, because that woulddepend on additional assumptions, e.g., regulationof emissions and interest rates. Furthermore, thevalue of scenarios 4, “5, and 6 depends to a largeextent on how crucial it becomes to reduce C02

emissions, which cannot be determined at this time.However, major types of impacts can be identified.

The three major parameters for the design of thescenarios were: 1) how to minimize environmentalimpacts, especially global warming; 2) how tominimize vulnerability to energy disruptions; and 3)how to minimize economic costs to society. Successin meeting these three goals, assuming the scenariosare implemented successfully, is the first type ofimpact to be considered. This has been discussed foreach scenario above. As summarized in t ab le 4 -10 ,the high growth scenario worsens environmental andsecurity impacts relative to the base scenario andleaves economic impacts about the same, largelybecause of the assumption that the scenario isimprobable unless fuel prices stay lower thanassumed in the other scenarios. The remainingscenarios reduce environmental impact and securityrisks. The moderate efficiency scenario shows astrong positive economic impact because it is theleast-cost path. High efficiency and high nuclearshould not cost much more than the base scenario


Table 4-9-Summary of Scenarios

2015 2015 2015 2015 20152015 High Moderate High High High

1989 Baseline Growth Efficiency Efficiency Renewable Nuclear

DemandResidential

Natural gas. . . . . . . . . . . . . . . . . . . .Electricitya . . . . . . . . . . . . . . . . . . . .Oil. . . . . . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . .Renewable. . . . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . . . . . .

CommercialNatural gas,... . . . . . . . . . . . . . . . .Electricitya . . . . . . . . . . . . . . . . . . . .Renewable. . . . . . . . . . . . . . . . . . .oil . . . . . . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . . . . . .

Transportationoil . . . . . . . . . . . . . . . . . . . . . . . . . . .Natural gas . . . . . . . . . . . . . . . . . . . .Renewable. . . . . . . . . . . . . . . . . . .Electricity. . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . .

IndustrialNatural gas..... . . . . . . . . . . . . . . .Oil-fuel . . . . . . . . . . . . . . . . . . . . . .Oil--non-fuel . . . . . . . . . . . . . . . . . .Electricity . . . . . . . . . . . . . . . . . . . .Renewable. . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . .Total . . . . . . . . . . . . . . . . . . . . . . . . .

Total demanda . . . . . . . . . . . . . . . . . . .Electricity b

Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . .oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Renewable. . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

supplyoil . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . .Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nuclear . . . . . . . . . . . . . . . . . . . . . . . . .Renewable . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.03.11.80.10.9

4.24.01.10.11.5

5.54.81.30.11.5

3.63.30.90.11.2

2.92.60.8

ne/2.3

3.32.80.7

ne/1.5

3.43.40.8

ne/1.510.9

2.72.7

ne/0.7ne

10.9

3.45.2

ne/0.90.1

6.1

21.60.6nene

9.6

27.50.7nene

22.2

8.33.84.43.21.92.9

24.5

63.7

16.05.72.91.73.0

29.2

34.019.518.95.75.8

28.2

7.75.05.75.33.54.6

31.8

80.5

29.13.86.31.65.7

46.4

41.822.333.8

3.810.7

13.2

3.65.5

ne/0.90.1

10.1

32.61.50.50.7

35.3

10.95.66.56.43.85.3

38.5

97.1

27.48.27.01.65.5

49.7

48.528.532.9

8.211.3

9.1

3.03.4

ne/0.70.1

7 . 2

24.80.7nene

25.5

7.54.45.74.43.23.3

28.5

6.9

3.81.7

ne/0.30.1

5 . 9

17.70.7

ne/0.1

18.5

7.73.35.73.22.21.5

23.6

9.1

2.73.00.90.50.1

7 . 2

23.60.71.2ne

25.5

6.73.75.74.44.83.2

28.5

9.1

2.83.50.30.50.1

7 . 2

23.40.70.70.7

25.5

7.24.25.74.63.63.2

28.5

70.3

17.86.64.11.54.5

34.5

37.918.821.1

6.68.9

54.9

5.36.85.30.25.2

22.8

27.820.3

7.06.88.0

70.3

12.14.32.71.2

11.331.6

35.316.015.44.3

20.5

70.3

12.112.05.01.37.6

38.0

35.919.115.412.013.7

83.9 112.4 129.4 93.3 70.0 91.5 96.1KEY: ne=negligible.aDoesnot inc[ude transmission and disribution lo.ssesnor conversion losses atpowerplants, which is abouttwo-thitdsof the total consumed there.bA~fuel us~forpoweL with hydroelectric and othernonthermal powerplants artificialiy rated at average thermal efficiency.

SOURCE: Referencefor1989data-U,S. Energy lnformationAdministration, Armua/E nergyRev/ew1989,D OE/EIA-0384(89), May 24, 1990,tablelsl,2,3, 4, 5, 11, 17,25,88,and99; Office of Technology Assessment 1991.

because they use relatively familiar technology that another scenario. Some scenarios involve consider-s competitive or nearly so now. Renewable costs able uncertainty regarding resource availability orpresently are higher, and projections of reductions technical progress, and some introduce additionalare somewhat speculative. uncertainties for unpredictable events, e.g., nuclear

However, other factors will be crucial in deter- accidents or major climatic events that reduce solarmining the national impacts of committing to one or energy significantly. Resilience of the scenarios to


Table 4-10-Comparative Impact of Scenarios

High HighImpact Base Growth Efficiency Efficiency Renewable Nuclear

Environmental . . . . . . . . . . . . . 0 – – + ++ ++ +Security . . . . . . . . . . . . . . . . . . 0 — + ++ ++ ++Economic . . . . . . . . . . . . . . . . . 0 0 ++ o — oResilience . . . . . . . . . . . . . . . . 0 —— + ++ + 0Implementability

Infrastructure. . . . . . . . . . . . 0 ++ — —— — +Public acceptance . . . . . . . 0 0 + — +

Sustainability. . . . . . . . . . . . . . 0 --—

+ ++ ++ +KEY: O = about the same as the base case;+ . somewhat better or easier; ++ - much better; – = somewhat worse

or harder; – – = much worse.SOURCE: Office of Technology Assessment, 1991.

uncertainties includes both the probability of suc-cess and the consequences of failure and depends inpart on the technologies involved. The high growthscenario has particularly uncertain assumptions. Thehigh efficiency scenario is most immune againstnegative surprises and vulnerable principally toimprobably low energy prices.

The ability to implement any of the scenariosdepends on several factors. Public acceptance is oneconsideration. Some technologies (e.g., solar) arequite popular with the public (in the abstract), andpromotional policies are likely to be widely sup-ported. Conversely, the level of public involvementrequired to implement these technologies may behigh, which increases the difficulty of implementa-tion. Demand-side measures in particular requirepeople to focus on energy decisions (purchasing andoperating equipment) more than has been experi-enced to date. Some solar options also involve usersmore intensively than does the purchase of conven-tional energy. Industrial readiness to implement thescenarios also varies. The fossil and nuclear indus-tries already exist. The solar and conservationindustries would have to expand greatly.

Finally, there is every reason to believe that in thenext century, U.S. energy supplies will have to shiftfrom fossil fuels toward a more sustainable system.Significant changes to the energy system can takedecades to accomplish, but some scenarios wouldmake these changes faster and more efficiently thanothers.

Some factors are not considered here because theyare too complex. In particular, employment underthe different scenarios will vary in numbers, types ofjobs, and geographic location. One of the most

notable shifts would be the decrease in coal fieldemployment under scenarios 4, 5, and 6. Compen-sating increases could be found elsewhere, but theyare unlikely to help the coal miners or their regions.Nor are changes in energy demand and supply dueto global warming (other than those changes deliber-ately implemented out of concern over climatechange) considered here, even though such warmingcould be detectable (though probably not large) by2015 under scenarios 1 and 2.

Table 4-9 evaluates these factors qualitativelyrelative to the base scenario. The scores cannot beaveraged to determine totals because the six factorslisted do not represent all important considerations,nor would they be equally weighted. However, itdoes appear that scenario 3, moderate conservation,has most of the advantages and few of the disadvan-tages of the others.

overall, it is clear that no one subset of energytechnologies is going to solve all the problems theNation will have to confront eventually. Eachscenario has drawbacks as well as advantages, anddifferent circumstances could invalidate any ofthem. We do not know: how much of the Nation’shuge unconventional gas resources can be developedat reasonable cost; what technology breakthroughswill change the relative economics of the variousenergy sources; what new sources of demand willemerge; how serious global warming will be; orwhat external events will occur to change the way wethink about energy.

Furthermore, if the Nation decides that globalwarming is a serious problem, then even the interimgoal of a reduction of 20 percent in C02 emissionswill be much too small. Even 50 percent could be


modest under some conditions, but such a goal could This argues strongly for assuring that a wide rangeonly be achieved by strenuously combining scenar- of technologies is available in the future, and that noios 4, 5, and 6. option be discarded prematurely.

Chapter 5

Policy Issues

CONTENTSPage

INTRODUCTION .......... + . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135BASELINE SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137HIGH GROWTH SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137MODERATE EFFICIENCY SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139HIGH EFFICIENCY SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143HIGH RENEWABLES SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144HIGH NUCLEAR SCENARIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146COMPARING SCENARIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

FigureFigure Page5-1. DOE Conservation R&D Budgets, Budget Requests, and Appropriations . . . . . . . . 137

TableTable Page5-1. Summary of Policy Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Chapter 5

Policy Issues

INTRODUCTIONThe previous chapter describes six alternative

views of the Nation’s energy future presented asdivergent scenarios of U.S. energy supply anddemand by 2015. This chapter explores policy issuesconcerning each of these energy futures. The optionsare considered as they relate to the three major goalsbehind energy policy discussed in chapter l—economic competitiveness, environmental health,and energy security. These three goals are alsorecognized as preeminent in the Presidents NationalEnergy Strategy (NES).l

As mentioned earlier, the scenarios in this reportare not predictions. Their purpose is to conveyoutcomes for six alternative energy futures based onvarying assumptions about the implementation ofdiffering technologies that could affect energysupply and demand by 2015. This chapter is notmeant as a general description of energy policy noras a quantitative assessment of policy options. Withfew exceptions, the scenarios are developed withouta priori assumptions about the exact nature andextent of policies used to attain the technologicalimplementation assumed in each. Those decisionsare left to policymakers and are not directly relevantto conveying the technological promise theoreticallypossible under each scenario.

Only the first case, the base scenario, could beimplemented without altering existing Federal statu-tory and regulatory policies. The other scenarios, tovarying degrees, draw on the following categories ofpolicy initiatives: standards; financial mechanisms;energy taxes; information management; research,development, and demonstration programs; andFederal programs.

standards can be designed to promote energyefficiency, pollution reduction, or improvements inenergy-using behavior. Automobile fuel economy,appliance efficiency, pollution control, and buildingcode standards can improve the energy performanceof new equipment or processes and can eliminate the

manufacture or construction of the least efficientequipment or stock in the marketplace.

Although not typically conceived as such, pollu-tion limits have the potential to save energy as well.If properly designed, pollution standards canencourage manufacturers, utilities, and consumers toincrease their level of goods or services per unit ofenergy consumed, or per unit of emissions gener-ated. For example, pollution standards that encour-age the use of industrial wastes as feedstock or theimplementation of cogeneration systems would leadto direct gains in energy efficiency.

Along with efficiency and pollution standards, athird type of requirement can induce energy-savingsthrough behavior modification. For example, amandated national speed limit of 55 miles per hour(mph) would slow average highway speeds and savea considerable amount of energy in transport.2

Financial mechanisms can increase the competi-tiveness of energy efficient measures, technologies,or fuels not otherwise economical or preferred byconsumers. Financial mechanisms include incen-tives such as tax credits, low-cost loans, or directpayments by Government or, in the last two in-stances, by utilities. Financial mechanisms canestablish a level field for competing goods orservices by eliminating indirect subsidies that dis-courage energy conservation or by creating subsi-dies that encourage energy conservation. For exam-ple, consumer appliance efficiency rebate programscan spur energy-saving retrofits while reducingutility load requirements.

Other kinds of financial mechanisms use themarket directly to improve energy use, e.g., tradableemissions permits. Tradable permits have beenauthorized under the U.S. Clean Air Act (CAA) toreduce emissions of sulfur dioxide (S02) at coal-fired electricity generating plants, and the conceptcould be extended to carbon emissions. By enablingfirms to profit from exceptional emissions reduc-tions, tradable permit systems provide an incentive

llVatio~/ Energy strategy: powe@d Zdeasfor America, 1st ed. 1991/1992 (Washington DC: U.S. Government mting ~1% FebW 1991).2A 1985 study on tie effect Of vehicle speeds Orl riutornobile fuel consumption found that the average fuel economy 10SS Of tested Vcticlcs Wm akut

18 percent when average speed increased from 55 to 65 mph. See Stacy C. Davis and Patricia S. Hu, Transportation Energy Data Book: Edition 11,ORNL-6649 (Oak Ridge, TN: Oak Ridge National Laboratory, Janumy 1991), p. 3-68.

–135–


for polluting industries to reduce emissions beyondmandated standards, which by themselves offer nobenefit or incentive for polluters to surpass once theyare in compliance.

With the tradable permit system created under theCAA, utilities have been given a strong incentive toincrease their energy production per unit of S02

emissions as a means of generating additional profit.Technologies now or nearly available, e.g., inte-grated gasification combined cycle (IGCC) andsteam-injected gas turbines (STIG), offer both lowemissions and high efficiency, and they may becomemore widespread as the new provisions of the CAAare implemented.

Thus, appropriately designed incentives couldguarantee that energy efficiency becomes an integralrather than confounding feature in efforts to reduceemissions. Marketable emissions permits for carbondioxide (C02) in the industrial and utility sectorswould be even more useful than those for sulfur inpromoting energy savings.

Energy taxes have the potential, if set highenough, to reduce energy consumption and petro-leum imports, while encouraging investments inenergy efficient equipment and technologies. En-ergy taxes may apply directly to energy purchases,e.g., gasoline taxes, or they may apply to the initialpurchase of energy-using equipment, e.g., gas guz-zler taxes for the least efficient vehicles in the newlight-duty fleet market. A currently discussed alter-native, a tax based on carbon emissions, would alsoimprove the competitiveness of renewable andnuclear technologies, while reducing C02 emis-sions.

A disadvantage of energy taxes is that they aregenerally regressive, burdening lower incomegroups disproportionately. In the short term at least,energy taxes would reduce some economic activityand have an inflationary impact on the economy.These effects would be partially offset by a growthin energy efficient technologies and services. Thegeneral economic effects of energy taxes, however,would shrink as the economy became less energyintense in response to the price increases brought onby taxes. Finally, energy taxes would directlyincrease Treasury revenues and reduce the Federaldeficit, but these benefits would be indirectly offset

to some degree by reduced economic activity, atleast in the short term, which would lower Federaltax revenues from other sources.

Information management—in the form of pub-lic or professional education, training, workshops,information dissemination, or program evaluation—educates consumers and professionals about optionsto improve energy efficiency and conservationpractices.

Research, development, and demonstration(RD&D) programs develop new options or advancecurrent options toward commercial availability. Thelast element, demonstration, can be vital, becauseresearch and development (R&D) programs oftenfail to demonstrate the practical applications of newor improved technologies or fail to improve theprospects of their commercial availability.

Promising energy technology R&D projects areshown in tables 2-1 and 3-1. Budget increases willbe needed for many of these technologies to achievewidespread commercial availability. Reversing thedrastic cuts in U.S. Department of Energy (DOE)R&D conservation budgets that began in 1982would be an important step to improving thecommercial prospects of these technologies (figure5-l).

Federal programs can increase energy conserva-tion and efficiency in the Government and othersectors or increase energy supplies. A recent OTAreport describes in detail the progress and prospectsof improving Federal Government energy effi-ciency. 3 In addition to lowering Federal and Stateenergy costs, Government programs can help new orexperimental energy technologies reach the market-place. Additionally, Federal efforts to push exportsof domestically manufactured energy efficient tech-nologies can improve their economies of scale inproduction, with the prospect of expanding themarkets for these goods both domestically andinternationally.

On the supply side, Federal policies determineareas available for oil, natural gas, renewable, andother supply source exploration and development.This category includes decisions about whether newareas, e.g., the Alaska National Wildlife Refuge,

3U.S. cov~~, Office of TW~olou A~~~~~ent, Ene~~Y Efi&?ncY in the Federal Govern~nt: Govern~nt by Good Example? OTA-E-492(Washington, DC: U.S. Government Printing Oftlce, May 1991).

Chapter 5--Policy Issues ● 137

Figure 5-l—DOE Conservation R&D Budgets, BudgetRequests, and Appropriations

Millions of 1982 dollars

4 0 03 5 0 + I

11<

.?300 , ‘ “,.250 “I,2ooj \ I150- +

,100-

“. ,‘. /‘. /. ‘. /\ ~ - . . . . . . . . . . -50- . /. ,‘,/.,

0 I I 1 1 1 1 I 1 1 1

80 81 82 83 84 85 86 87 38 89 90 91Fiscal year

+ Cong. appropriations ----- Admin. budget requests

SOURCE: U.S. General Aeeounting Office, Ene@y F/&D-ConservationPlanning and Management Should Be Strengthened, GAOIRCED-90-195, July 1990.

should be open to development. Federal programsalso include the Strategic Petroleum Reserve (SPR).

At varying levels of implementation, these policyoptions are discussed below for the six scenariosgiven in this report. Each scenario covers the period1989-2015.

BASELINE SCENARIOThe first scenario assumes that no major new

energy-related policy initiatives are undertaken. Inthis scenario, fossil fuels remain the cheapestavailable energy source, and they continue to drivethe economy. Total energy consumption climbsalmost 1 percent per year, reaching 112.4 quads(quadrillion British thermal units) in 2015.

The baseline scenario is not meant to suggest thatno energy policy changes will be implementedduring the period 1989-2015. As national andinternational developments occur in this period,energy-related policy changes are likely to follow.The recent Gulf War suggests how quickly attentionto energy policy is revived. Moreover, energylegislation proposed in the 102d Congress—including the proposed NES—promises to alter

national energy policy in the near term. For thepurposes of this scenario, however, we assume nochanges that would significantly alter the frameworkunder which energy decisionmaking takes placetoday.

Even without major policy changes, some energyefficiency improvements are expected. Under theconditions described in chapter 4, this scenariopredicts modest efficiency improvements by 2015through normal upgrading and equipment turnover.Use of available shell improvements will allow the35 million new homes and apartments projected tobe built between 1995 and 2015 to require 15-percent less heat and 8-percent less air conditioningthan current new homes. Without changing currentFederal fuel economy standards, new cars areprojected to average 36.5 miles per gallon (mpg) by2010. The appliance efficiency standards under theNational Appliance Energy Conservation Amend-ments of 1988 (NAECA), Public Law 100-12, areassumed to remain in effect as well.

Under this scenario, U.S. oil import dependencewould reach unprecedented levels, about two-thirdsof consumption by 2015.4 The prospects of climatechange would worsen as well, and urban air qualitywould remain poor from continued transportationenergy growth.

HIGH GROWTH SCENARIOGovernment policies in this scenario focus on

expanding supply rather than on diminishing de-mand to fuel a period of high economic growth. Thehigh growth scenario envisions total U.S. energydemand rising to 127 quads by 2015, a growth rateof about 1.7 percent annually. Energy demand in thisscenario exceeds that of the base scenario for allsectors. Like the base scenario, this scenario requiresa plentiful supply of relatively cheap fossil energyduring a period that introduces no major newenvironmental constraints that might induce con-trols on energy demand.

To meet the supply projections under the highgrowth scenario, coal, natural gas, and nuclearenergy would all have to be expanded significantly.Efforts to bolster domestic oil production would also

dRec~t U.S. Departmmt of Energy (DOE) projections of U.S. petroleum import dependence suggest that foreign sOurCes could reprewnt overtwo-thirds of U.S. supplies by 2010 under their reference (base) case. The DOE reference case assumes nearly the same level of economic growth (2.1percent) used here (2.3 percent). Annuu2 Energy Outlook 1991: With Projections to 2010, DOE/EIA-0383(91) (Wasbingto~ DC: U.S. GovernmentPrinting OffIce, March 1991), pp. 3,43.


be necessary to keep domestic production fromdropping too sharply by 2015. Policies would haveto encourage increased domestic production of thesesources, while protecting against supply disruptionsto prevent shortages and drastic energy price rises.

The options to expand supply in this scenario echothe proposed NES. For example, the developmentand use of advanced oil recovery technology toextract currently unrecoverable domestic reserves inthe range of 300 billion barrels would be important.Also, increasing exploration in offshore and otherunexplored areas, such as the Alaska NationalWildlife Refuge, would help meet the supplyprojections in this scenario. To expand domesticsupply exploration and development, a variety ofenvironmental concerns would have to be addressed,but they could not raise the cost of the final productsby much or they would not be competitive under thislow-price scenario.

If coal is to be used in the quantities assumed here,stricter SO2 and nitrogen oxide (NOX) emissionscontrols may be necessary to avoid violating airquality standards. Though coal remains abundantand cheap under this scenario, tighter emissionsstandards could not raise the price of energysignificantly, or the low-price, high-growth condi-tions of this scenario would be compromised, andprices would rise and demand would shrink accord-ingly. Thus, expanding Government support forRD&D to improve combustion (e.g., fluidized bedor gasification in combined cycle plants) would helpenhance generating efficiency while offsetting theemissions increases that are a major feature of thisscenario. In addition, a tradable emissions permitsystem (broader in scope than that created under theClean Air Act Amendments of 1990) could stimu-late technological improvements in emissions con-trol for coal burning or motivate an increase in theenergy intensity of electricity generation beyond thelevels expected under current legislation.

Heavy reliance on fossil fuels will negativelyaffect urban air quality (particularly in carbon

monoxide and ozone nonattainment areas).s Inresponse, this scenario assumes that the use ofelectric vehicles (EVs) becomes more widespread,which would require Government incentives toinduce manufacturers to produce such vehicles on alarger scale. This option is an element of the NES,and some areas (e.g., California) are already begin-ning to incorporate EVs in their environmental andtransportation planning. However, EVs are expen-sive and suffer from poor performance. GovernmentRD&D and incentives are likely to be required ifthey are to be important contributors to urban airimprovement in the short to medium term.6

To maintain low electricity prices, increasingcompetition could be vital. Changes to the PublicUtility Holding Company Act of 1935 (PUHCA)could ease the financial and other constraints onutilities that service customers in more than oneState. Though amending PUHCA could have agenerally positive effect on competition, the fulleffects of any PUHCA changes need to be under-stood before major amendments are made to preventeither small or large generators from enjoying unduecompetitive advantages or disadvantages.

The large diversion of coal (one-third of produc-tion) to synthetic fuel production under the modestprice rises assumed for oil and natural gas in thisscenario is not probable absent price incentives andexpanded RD&D, both of which the Governmentwould have to provide. Concerns about rising levelsof petroleum imports, which are assumed in thisscenario and likely in any event, would be the likelyimpetus for synthetic fuel production of this magni-tude.

To expand domestic natural gas supplies, in-creased RD&D for gas recovery in tight sand andother unconventional formations would be neces-sary to exploit the greater part of U.S. reserves atreasonable cost. As noted in chapter 4, this scenariois largely contingent on the increased supply ofrelatively cheap natural gas and, without govern-ment help, domestic natural gas production is likely

5For the period Iglll’-gg, the U.S. I?nvironmen@ Protection Agency (EPA) determined that 96 areas (mOStly -JOr metrOpOliti me=) f~led to m~tthe Federal ozone standard, and 41 areas failed to meet the Federal carbon monoxide (CO) standard in the period 1988-89. The total population in theareas violating these health-based standards was an estimated 66.7 million in 1989 for the ozone areas alone. Furthermore, the comection between theseareas and transportation emissions is strong; in 1989,65 percent of national CO emissions were from transportation sources, while 35 percent of nationalvolatile organic compound emissions, the precursors of ground-level ozone formatioq were from transportation sources. U.S. Environmental ProtectionAgency, National Air Quality and Emissions Trends Report, 1989, EPA-450/4-91 -O03, February 1991, pp. 3-17,3-27,4-1,4-5.

6A de~l~ ~SeSSmmt of we Prospwts for ~crew~g the use of ~t~mtive fiels in the transpo~~on s~tor is fowd in U.S. CO~SS, OffIM OfTechnology Assessment Replacing Gasoline: Alternative Fuels for Light-Duty Vehicles, OTA-E-364 (Washingto~ DC: U.S. Government PrintingOffice, September 1990).


to be waning by 2015, because the price assumptionsused in this scenario would be insufficient to spurnatural gas exploration at the levels projected here.As proposed, the NES supports R&D to improvenatural gas production, as well as regulatory reformto prevent delays in building new pipeline capacity.Both of these steps would be important in thisscenario.

Additional RD&D for enhanced oil recovery inexisting fields may be required, as well as improvedexploration and drilling techniques, especially off-shore. Increasing both imports and domestic produc-tion also suggests that improved safeguards againstoil spills would be necessary. To reduce the potentialfor oil supply and price disruptions under the highgrowth scenario, exploiting protected areas inAlaska and off-shore would help prevent domesticoil production from diminishing too quickly. Evenwith expanded exploration of this kind, however,domestic oil production is expected to continuedeclining. For further protection against supply orprice disruptions, the SPR would have to be en-larged.

To expand nuclear power, attention to RD&D,regulatory treatment, waste disposal, and decommis-sioning would be necessary, as well as a visibleeffort by the Government to restore public confi-dence in the industry. Standardizing designs andsimplifying licensing are crucial ingredients for arevival. Proapproval of designs, and perhaps sites,might be possible. However, it could be verydamaging to public acceptance if a streamlinedlicensing process is viewed as steamrolling opposi-tion. Along with an improved regulatory environ-ment, the nuclear industry itself would requireimprovement in financial and facility performancefor nuclear power to expand to the 70,000 megawatts(MW) by 2015 assumed here.

Part of the effort to restore the credibility neededfor the nuclear industry to gain wider public supportwill require faster progress on a waste disposalfacility. OTA believes that the construction of newnuclear facilities will be limited until major progresstoward an operable waste disposal facility is visible.In addition, public acceptance of expanded nuclearpower is not likely to improve as long as the

availability of cost-effective efficiency improve-ments remains great. Suggestions in the proposedNational Energy Strategy to improve the acceptanceand use of nuclear power fail to indicate how toaddress potential public concern about nucleargrowth at a time when many options to implementcost-effective demand control are available.

The nuclear R&D program has been decliningsince the cancellation of the Clinch River BreederReactor in 1983. Increased RD&D for alternativereactor designs and processes could lead to technol-ogy that could more easily recapture public trust.

MODERATE EFFICIENCYSCENARIO

Improved efficiency has been the major energysuccess story since the first oil crisis in 1973. Hadthe pre-1973 trends in the growth of U.S. energyconsumption continued unabated, total energy usehere would have been 32 quads higher in 1986 thanthe actual 72 quads consumed that year. For theperiod 1973-86, this resulted in a cumulative savingstotaling 171 quads, valued at over $950 billion (1986dollars).7 Despite these large gains, there are vastopportunities for further improvements.

In contrast to the previous scenario, therefore, thefocus of the moderate efficiency scenario switchesfrom increasing energy supply to reducing energydemand. As noted in chapter 4, this scenarioassumes that available cost-effective, energy-savings opportunities are fully exploited due todirect policy intervention. 8 While this optimal levelof cost-effective investment would theoreticallybenefit consumers and the Nation as a whole, itwould be unprecedented, requiring the eliminationor reduction of significant market, institutional, andbehavioral barriers that prevent the full use ofcurrently available cost-effective energy-savingsopportunities.

A combination of policy options (energy taxes,standards, financial mechanisms, information pro-grams, RD&D) would best serve the efficiencytargets in this scenario, because each exerts uniqueeffects in overcoming the barriers to optimal energyefficiency and conservation actions. The NES advo-

W.S. Department of Energy, Energy Conservation Trends: Understanding the Factors That Aflect Conservation Gains in the U.S. Economy,DOE/PBO092 September 1989, p. 5; and Annual Energy Review 1989, DOE/EIA-0384(89), May 24, 1990, p. 7.

8~~ maximum number is based on the energy price projections noted inch. 4, and it considers only investments that yield net positive eeonomicbenefits when amortized over expected equipment life.


cates strongly only the last three options, whilepostponing or dismissing consideration of revisingstandards or broadening energy taxes. Nonetheless,a significant, broad-based energy tax is perhaps thesingle most effective means of improving efficiencyin this or other scenarios. A gasoline tax in the rangeof $0.50 per gallon, with equivalent increases forother energy sources, would have a major impact onhow consumers make energy-related decisions. Forexample, a recent OTA report suggested that asustained increase in gasoline prices of 50 percentcould lessen gasoline demand 8 percent (between 5and 20 percent),9 but the gasoline price elasticityassumed in this estimate is an extrapolation ofempirical data. In other words, estimating gasolineprice elasticity at such high prices is uncertain,because the United States has not experiencedsustained gasoline price rises (in real terms) of thismagnitude.

Across the board energy taxes would increase thelevel of energy efficient construction and manufac-turing for residential and commercial stock, vehi-cles, appliances, and other equipment. In the indus-trial sector, energy taxes could motivate the wideradoption of adjustable-speed drive (ASD) and othermotor efficiency improvements to save 10 percent ofthe energy projected for use by motors in the basescenario in 2015. Of course, taxes would have to behigh enough to motivate improvements but lowenough to allow consumers sufficient investmentcapital to afford such equipment and conservationmeasures.

Energy taxes could also be applied to the initialpurchase of energy-using equipment. These taxescould be scaled in a way that would raise the cost ofthe least efficient equipment the most in order toproduce a level field for similar products in con-sumer markets. Taxes on carbon emissions orimported oil would have similar but more selectiveresults. These taxes could be justified as efforts tocapture the environmental and social externalities ofproviding energy or they could be levied in an effortto reduce the Federal deficit. Raising prices throughenergy taxes to capture these externalities would beconsonant with the combination of economic, envi-

ronmental, and energy security goals outlined inchapter 1.

Of course, there are social costs to raising energytaxes significantly. In particular, energy taxes wouldbe regressive; lower income individuals and familieswould experience a greater marginal burden if suchtaxes were imposed, because energy costs consist-ently account for a higher fraction of income inlow-income households.10 This report does notanalyze social equity issues such as this. It merelynotes that one of the most efficient ways to induceeffective energy-saving decisions is to raise the costof energy.

Barriers to maximizing cost-effective, energy-saving investments are not merely price-oriented.Reliable information on energy-saving opportuni-ties needs to increase in all sectors. Most people, forinstance, are aware that measures such as insulatingresidences or driving high mileage cars will saveenergy, but few are aware of the full range ofinvestments that can profitably save money bysaving energy. Information programs such as appli-ance labeling can be useful, but only if consumersare aware of them and understand them. The scopeand clarity of Federal energy information programscould increase to assure consistent and meaningfulinformation for appliances, building energy ratingsystems, and other energy-using equipment or stock.

Passive programs that simply supply some infor-mation, or supply information only when asked, willnot reach a high proportion of consumers. Otheractors that can aid or influence consumer decisionsabout energy use-builders, lenders, landlords,manufacturers, utilities, and the media-shouldparticipate to ensure that appropriate decisions aboutenergy use are made. The assumed level of buildingretrofits in this scenario implies a key role forinformation programs, because the first step inretrofitting programs is generally informational.

Buildings, vehicles, and appliances possess awide range of energy efficiencies. Stringent stand-ards can eliminate the least efficient. Moreover,standards would correct a problem unique to build-ings: many decisions about investing in energy

90ff1c. of Tm~~l~~ Assessment, c~nging @ ~egree~: Steps To R~uce Green~~u~e Gases, OTA-O-4$2 (Washington, ~: U.S. @velllIIlentPrinting Office, February 1991), p. 165.

l~or exmple, ~ 1984, low.~come ho~sehol~ (&Jow $5,~) tit us~ automobiles spat about $’770 (1s percent) per yw fOr mOtOr fuel Onaverage. Households earningmore than $25,000 per year spent about $1,140 formotorfuel, or less than5 percent of income on average. U.S. Departmentof Energy, “Energy Security: A Report to the President of the United States,” DOE/S-0057, March 1987, p. IL6.

Chapter 5-Policy Issues . 141

efficient design are made by builders and landlords,rather than subsequent buyers or renters. Unlikeappliances and vehicles, the decision about whetherto invest in energy efficient building design is madefor the consumer in advance. Standards would helpcorrect this basic problem.

In the moderate efficiency scenario, standardscould be raised significantly in all sectors and stillmeet the criterion of life-cycle paybacks used in thisscenario. The NAECA standards, for example, couldbe strengthened; at present, the method for revisingthese standards may effectively encourage the wide-spread use of three-year payback periods,11 but theopportunity for efficiency gains typically increasewhen longer paybacks are used in setting standards.To be sure, there is no current requirement underNAECA to set standards at levels that would ensurepaybacks strictly determined on a life-cycle basis.

Mandatory Federal building standards are cur-rently restricted to Federal buildings, and they arenot enforced strictly. Under this scenario, thesestandards could be strengthened to require high, butstill cost-effective, efficiency levels, expanded toinclude residential and commercial structures, andenforced. State energy grants disbursed through theFederal State Energy Conservation Program (SECP)and other DOE and U.S. Department of Housing andUrban Development (HUD) programs could berestricted to States that have adopted the nationalBuilding Energy Performance Standards (BEPS) orother building codes, such as the Council of Ameri-can Building Officials “Model Energy Code”(CABO “MEC”). One way to bolster enforcementprograms is to attach major fries for noncomplianceor encourage States and localities to deny occupancypermits to new buildings failing to meet efficientdesign requirements. Even if strictly voluntary, anaggressively promoted Federal standards programfor buildings could dramatically improve energyefficiency in new residential and commercial struc-tures.

Arguably, increasing energy prices might be moreeconomically efficient in improving energy use inbuildings compared to setting rigid standards for

efficiency performance. However, estimating theeffects between taxes and standards in the buildingssector is complicated by the diversity and uses ofbuilding types. Comparing the effects of taxes andstandards for vehicles, on the other hand, is lesscomplicated. Meeting the fuel economy targetsgiven in this scenario might be achieved mostefficiently through energy taxes, but experience inother industrialized nations suggests that such a taxwould have to be high, as much as two to three timesthe current U.S. price.

Strengthening fuel economy standards directly isan alternative approach to taxes that appears to havebeen effective in the United States with lower cost toconsumers. However, raising prices through energytax increases would affect all vehicles, not just newones. Raising energy prices and strengthening fueleconomy standards together would encourage thescrappage of older, less efficient vehicles at a timewhen new vehicle fuel economy was rising. Theeffect would be to raise the efficiency of the entirefleet much more quickly than we have experiencedin the United States with just new vehicle standardsworking by themselves.

In fact, fuel economy standards in this scenariowould not need to increase much over levelsexpected in the base scenario to achieve significantenergy savings. Year 2015 new auto fuel efficiencyof 39 mpg and new light truck efficiency of 35.5 mpgcould be achieved if regulations raised the fueleconomy of these vehicles only about 10 percentabove that already predicted by the base scenariowhere no regulatory changes occur. Along withreinstating the 55-mph speed limit, improving trafficflow in urban areas, and several other measures,growth in transportation energy use could be halvedrelative to the base scenario if existing vehicleefficiency standards were raised to the levels sug-gested above. While small increases in vehiclestandards would not eliminate gas guzzlers, whichtend to be the most expensive personal passengervehicles, they would raise the fleet average.

The additional purchase cost (also known as firstcost) of energy efficiency measures commonly

II( qf~e DE] swre~ finds that the additional cost to the ~~ erof purchasing aproductcomplying with an energy conservation standard levelwill be less than three times the value of the energy savings during the fiist year that the consumer will receive as a result of the standard, as calculatedunder the applicable test procedure, there shall be a rebuttable presumption that such standard level is economically justi.iled. A determination by theSecretary that such criterion is not met shall not be taken into consideration in the Secretary’s determina tion of whether a standard is economicallyjustMed.”42 U.S.C. 6295(l)(2)(J3)(iii). There are varying interpretations of how this requirement for determining economic justification will play outbu~ under the conditions of the moderate efilciency scenario, this requirement would have to be strengthened to meet the condition of exploiting alllife-cycle payback opportunities.


prevents firms or individuals from acquiring them.Financial mechanisms could soften or eliminate thefirst cost barrier. Tax credits applied, for example, toefficiency investments, conservation measures, orboth could be set atminimal losses to the FederalTreasury while helping to reduce the flow of oilimports. Moreover, revenues lost from Federal taxand other incentive programs could be offset byincreasing energy taxes to achieve no net effect onGovernment revenues.

Tax credits could also be applied to equipmentusing renewable energy sources (solar, wind, geo-thermal). The Federal Government has experiencewith both types of credits in the residential, commer-cial, and industrial sectors, particularly under theEnergy Tax Act of 1978 (ETA), Public Law 95-618,and the Windfall Profits Tax Act of 1980 (V/PTA),Public Law 96-223. Tax credits would lower FederalTreasury revenues directly, but they would indi-rectly raise some of these revenues by stimulatingeconomic activity that might not otherwise haveoccurred but for the incentives.

The marginal benefits that tax credits actuallyprovided the industrial sector under the WPTA wasuncertain, because many firms may have made theirefficiency investments regardless. Other mecha-nisms, e.g., low-cost loans and direct payments,might be targeted and administered more effectivelyby States and utilities, as they can often evaluatebetter fuel use, load, and cost changes in balancewith projected demand and supply growth, but theFederal Government could go far to ensure that suchprograms are created and reach a wide audience.

Accelerated capital depreciation is also a financialmechanism that has been cited as an option toencourage investment in new equipment. The effectof accelerated depreciation can be mixed, however.By reducing the period in which businesses canwrite off investments, companies lower their taxbills, presumably leaving more for investment, butU.S. Treasury receipts are lowered as well.12

A vigorous RD&D program could accelerate thecommercialization of new or emerging efficiencytechnologies. Most of the options listed in table 2-1would improve efficiency. For example, compactfluorescent light bulbs are economical under someconditions but are too costly and bulky for wide-

Photo credit: Southern California Edison Co.

A 500-kW wind turbine mounted on a vertical axis inCalifornia.

spread application. As these problems are solved,more of these bulbs should become interchangeablewith incandescent. Most efficiency RD&D pro-grams could be usefully increased, which wouldimprove the chances of implementing this scenarioeven though existing technology is nominally suffi-cient.

Many of the policy measures noted here couldalso be valuable on the supply side. In particular,energy taxes, regulatory changes, financial mecha-nisms, or some combination of them could expandthe fossil and nonfossil supply base. Any of thesemechanisms could be used singly or in combinationto meet the moderate growth in energy supplyassumed in this scenario. These tools could be usedsingly or in combination to expand the contribution

and incentives be U.S. Congress, Technology Assessment Energy Use, OTA-E-198 DC: U.S. Government Printing Office, June 1983), pp. 56-58.


of renewable sources of energy, which are assumedto cover 40 percent of new electricity demand by2010. In addition, these tools could achieve theextensive use (70 percent) of cogeneration in newand replacement industrial steam boilers by 2015.

Federal energy use could be improved throughmandatory building, equipment, and fleet efficiencystandards; retrofitting existing shells and lightingsystems; and participating in local utility demand-side management efforts. Furthermore, committedFederal efforts to invest in cost-effective energyefficiency technology through serious procurementefforts would be essential to bolster Federal credibil-ity if major national programs are created to reduceU.S. energy use. Federal legislation or executiveorders may be well-intentioned but have experi-enced poor results historically. To ensure that suchefforts attain their desired results, financial support,enforceable provisions, appropriations contingen-cies, or some combination of these could be used toachieve Government efficiency and conservationimprovements that maximize cost-effective options.Revisions to Federal procurement and leasing guide-lines and requirements could also promote newdemand- and supply-side technologies.

There are three general reasons for pursuingenergy savings through some or all of these policies.First, maximizing cost-effective energy savingsreduces the cost to produce U.S. goods and servicesin the domestic and international markets, therebymaking those goods and services more competitive.Second, energy savings under this scenario woulddampen U.S. reliance on imported petroleum.

Finally, energy savings of the kind noted herewould soften the local and global environmentalimpacts of providing and using energy, includingreductions in combustion emissions by raising thelevel of delivered energy services per unit ofemissions. In fact, the environmental rationale mayprove the most compelling if the magnitude ofglobal climate change is as serious as some analystspredict. On this last point, achieving this scenariowould limit the growth of U.S. CO2 emissions 20percent by 2015 relative to base scenario projec-tions.

HIGH EFFICIENCY SCENARIOThis scenario incorporates many energy effi-

ciency investments that are beyond the level atwhich life-cycle paybacks would be realized. This

scenario, therefore, is more difficult to justify thanthe moderate efficiency scenario under currenteconomic, security, and environmental conditions.For this scenario to become a national goal, extremethreats to energy security or the global environmentwould probably be necessary.

Serious climate change would probably serve asthe strongest rationale. This scenario represents amajor effort and investment to back out coal use. Nonew coal-fired generating capacity would be in-stalled; new supply requirements would be coveredby a combination of renewable, nuclear, and naturalgas technologies. Some coal-freed plants are closedand carbon emissions at others are lowered bynatural gas co-firing. Existing fossil fuel plantswould have to be retired entirely after 40 years(rather than the typical 60). While the natural gas,renewable, and nuclear industries would growslightly, the coal industry-and coal states inparticular-would suffer abrupt economic declinesunless adequate State and National contingencyplanning were conducted successfully in the shortterm.

Tax incentives (e.g., a 2- to 5-cent per kilowatthour (kWh) credit for renewable electricity genera-tion), accelerated plant depreciation schedules, andinformation programs could encourage the use oflow- or no-carbon fuels, cogeneration, or help speedthe retirement of coal-fired generating plants. How-ever, in an aggressive demand-side effort such asthis scenario implies, information programs andconsumer-oriented financial mechanisms are lessuseful policy tools: more coercion than convincingor consumer financial assistance would be required.For example, eliminating the construction of newcoal-fried capacity would be a basic regulatoryrequirement under this scenario. Moreover, theGovernment would have a major role in coordinat-ing activities within and among the sectors to makethe transition to such a highly energy efficienteconomy as smooth as possible, especially as theeffects of such policy changes are likely to besubstantial.

Higher taxes, aggressive efficiency standards,other regulatory changes (e.g., requirements disal-lowing the installation of new coal-fried generationcapacity), and sustained, high levels of RD&Dfunding together would be the most valuable policytools in such a scenario. In this regard, the highefficiency scenario would require an intensification


of the same policies suggested in the moderateefficiency scenario. Accordingly, this scenario andthe policies that would be needed to implement itare, for the most part, a major departure from theNES.

In combination with other policies, higher taxeswould be essential, probably at least double the costof energy, which would still leave U.S. energy priceslower than in some other countries. A carbon tax inthe range of $75 to $150 per ton would encouragefuel switching and conservation. A tax of thismagnitude would make natural gas more competi-tive than coal at many electricity generating facili-ties.13 To offset the potential economic effects ofincreasing prices through energy taxes, the FederalGovernment could lower other taxes on individualsand firms.

High-efficiency standards would be a major partof this policy package. Buildings and applianceswould be required to meet the highest efficiency nowachievable. As a result of such standards, newresidential units by 2015 could require 85-percentless heating and 45-percent less air conditioningthan the average home today, and retrofits could beaggressively applied to all buildings such that theirenergy needs drop 30 percent. In the transportationsector, as part of an intensification of the otherdemand-curbing measures given in the moderateefficiency scenario, fuel economy standards for newautos would rise to 55 mpg (holding the current fleetsize mix and performance characteristics constant).With a shift to smaller vehicles, which is likely withhigh fuel costs, the average fuel economy of the newcar fleet could rise to 58 mpg by 2010. Withstandards this aggressive, the first costs for theseconsumer products are expected to increase, andconsumer choice would be reduced, as fewer prod-ucts would be available in the market that meet thesetough standards, at least in the short term.

RD&D would be essential to expand the menu ofavailable technological options. As noted, thisscenario assumes that technologies expected to beavailable in 10 years are widely implemented by2015. Expensive projects such as automobile en-gines and transmissions would have a high priority.The total estimated net cost of this high-efficiency

package could be nearly as high as 1.8 percent ofgross national product (GNP), or could result in a netsavings of a few tenths of a percent of GNP. Thiscompares with total current U.S. environmentalGNP costs of 1.5 percent and the total current GNPcosts of direct fossil fuel and electricity consumptionof roughly 9 percent.14

A key part of a high-efficiency scenario is FederalGovernment energy use. In several ways, Govern-ment efficiency lags behind other sectors, which isnot only expensive but diminishes credibility .15 Useof standards, changes in procurement guidelines,and realistic energy performance goals are some ofthe major ways the Federal Government can reduceits energy use if policymakers determine that thisshould be a priority. Although specific changes inGovernment energy use are not a defined element inthis scenario, such improvements would be neces-sary to achieve the goals outlined here.

In addition, the Government would need toincrease expenditures for improving transportationand industrial infrastructure. Increased mass transitfinding is assumed in this scenario to improvehigh-speed intercity rail systems enough to curbinterurban car travel by 5 percent and air travel by 10percent.

HIGH RENEWABLES SCENARIOThe high renewable scenario represents a major

but less aggressive effort than the high efficiencyscenario to back out coal use to reduce quicklyCO2 emissions. Implementing policies for ahigh level of renewable could be easier thanefficiency measures, because the need to influencedirectly individual consumers would be reduced. Inlarge part, the development of renewable energysources-specially for electricity generation—would require policies targeting utilities and indus-try. Financial incentives could be the most importantpolicy tool in this scenario, because each sector willrequire investments in technological supply optionsthat simply are not competitive in current markets.Historically, tax incentives in particular have has-tened the commercial availability of renewabletechnologies, and they appear to have had the addedeffect of encouraging private sector RD&D when

ISU.S. Comss, Wlce of Technolo= Assessment, op. cit., footnote 9, P. 26.

14u.s. ConWss, OffIce of Technology Assessment, op. cit., footnote 9, pp. 10-1 L 321.15u.s. Conmss, Office of Technology Assessment, op. cit., footnote 3.


Federal Government RD&D support sharplydropped beginning in 1982.16

As a result, the Government might consider taxcredits, low-cost loans, or direct payments to subsi-dize the growth of solar, wind, and geothermalelectricity generation, as well as the increasedproduction of biomass fuels (such as ethanol fortransportation). Accelerated capital depreciationschedules coupled with investment credits thatfavored renewable could also speed the wide-scaleadoption of renewable supply technologies by en-couraging their acquisition more quickly and easilythan the market generally would by itself.

Financial incentives would clearly help correctthe current inability of renewable energy sources tocompete with fossil fuels, the sources that arecurrently cheaper (and that are likely to remain so ina price system that consistently fails to captureenvironmental externalities). To pay for such incen-tives, and to help create a level field between moreexpensive renewable and less expensive nonrenewa-ble energy forms, some energy taxes could beestablished (e.g., carbon emissions) while otherscould be increased (e.g., gasoline). The combinedeffect of incentives and taxes has the potential topush the expansion of the renewable energy supplybase further than either option would alone.

The most expeditious way of promoting large-scale, renewable energy use would be assured bydirect regulatory intervention. If the use of renew-able technologies to generate electricity, for in-stance, was favored as a first option by regulation,the need for additional incentives or energy taxescould possibly be eliminated.

The efficiency standards used in the moderateefficiency scenario are assumed to be implementedhere. In addition, changes in the efficiency standardsrequired of qualifying facilities (QFs) under thePublic Utility Regulatory Policies Act of 1978(PURPA), Public Law 98-617, could be made thatwould discourage the expansion of fossil-fuel-basedgenerating capacity while promoting the adoption ofmore efficient and less polluting systems, e.g.,cogeneration or IGCC technologies. A special cate-gory of PURPA qualifying facilities could becreated that allowed more favorable treatment of

generators that actually operated solely on renew-able sources, but the contribution of such generatorswould probably be small (absent price or otherregulatory incentives) in the timeframe of thisscenario. Under our current regulatory system,merely increasing the PURPA size qualifications forQF status will have the effect of encouraging moregas-fired (rather than renewable source) electricitygeneration, because gas is the cheaper option. As itis currently written, PURPA grants QF status tomany small, fossil-fried generators, which are com-monly more efficient but not necessarily driven byrenewable sources.

As suggested in the NES, efforts to expandhydropower would be eased if regulations governingsiting, permitting, and environmental review werestreamlined, but such regulatory changes could notsimply cloak efforts to reduce or effectively elimi-nate adequate public review of the licensing process.The enhancement of existing hydropower capacityalso is an important option.

To expand the market for alternative transporta-tion fuels (whether produced from biomass, coal, ornatural gas), their use as gasoline additives could bemade required practice, but the environmental trade-offs would have to be evaluated. Similarly, therequired use of alternative transportation fuels inU.S. fleets would increase their production anddistribution but at an undetermined cost. At aminimum, their adoption in Federal fleets for allnonmilitary and select military use would be appro-priate if the Government decided to promote orrequire their increased use.

RD&D is essential for this scenario. Many renew-able technologies remain too expensive to competewith conventional fuel technologies, but many showconsiderable promise for improvement. In addition,intermittent energy sources, e.g., photovoltaics,solar thermal, and wind, will not develop as signifi-cant contributors to online electrical capacity untilimproved storage technologies are developed.

The high costs of this scenario, occurring at a timewhen conventional sources remain relatively inex-pensive, suggest why the demand-side measuresimplemented in the moderate efficiency scenario areretained here to balance supply and demand forces

IG~ extended analysis and di~ussion of the role of financial mechanisms, e.g., tax incentives, to encourage renewable energy pm is ~ntainedin U.S. Congress, OffIce of Technology Assessmen~ New Electn”c Power Technologies: Problems and Prospects for the 1990s, OTA-E-246(Washington, DC: U.S. Government Printing Offke, July 1985). See especially pp. 290-294.


together. Efficiency measures meeting the originalcondition of achieving life-cycle paybacks will helpmoderate the need for what are currently the moreexpensive energy sources (renewable).

HIGH NUCLEAR SCENARIOThe high nuclear scenario assumes that a major

commitment to nuclear power is deemed essential,most probably because of global climate change. Asa result, this scenario exploits nuclear power asmuch to reduce coal combustion as to increaseelectricity production. Most coal plants would beretired to reduce U.S. CO2 emissions, one-third ofwhich currently derive from electricity generatingplants. Unlike renewable sources, the amount ofnuclear power capacity that is built in the comingdecades depends more on political decisions and lesson resource constraints or industrial capability.

Like the high renewable scenario, the highnuclear scenario assumes that expensive efforts toexpand the supply base will be matched by the samelevel of demand-side controls called for in themoderate efficiency case. Thus, these three scenar-ios assume the same level of end-use energy demandby 2015, and the demand control options discussedin the moderate scenario would all apply here.

Reviving nuclear energy as a viable option wouldrequire a major change in public acceptance, whichcould be induced by serious global climate changesor intense Government efforts to improve the safetyand public acceptance of this power source, such asimposing stricter standards on plant design andoperations. In the absence of serious global climatechange, Government efforts to revive public accep-tance of nuclear power would mirror those men-tioned in the high growth scenario: regulatoryimprovements, expedited waste disposal (includingresolution of the national disposal facility issue), andexpanded RD&D.

Previous Government and industry programs toimprove public acceptance of nuclear power havehad mixed results. To meet the high growth ofnuclear capacity assumed here, these programswould need to demonstrate the safety and necessityof the new reactors. Nuclear technology and man-agement have improved considerably, and con-trolled growth would present fewer risks to societythan previously, but the case has to be madecredibly.

As discussed under scenario 2 (high growth), alarge part of the problem is waste disposal. Since thisscenario envisions even faster growth, faster prog-ress is necessary. Waste siting is difficult but mustbe done with sensitivity to local needs, addressingthe technical difficulties is also urgent.

As noted in the high growth scenario, standardiza-tion of designs and stable licensing are crucial for arevival. Proapproval of designs, and perhaps sites,might be possible. However, it could be verydamaging to public acceptance if a streamlinedlicensing process is viewed as steamrolling opposi-tion.

In the short term, a revival of nuclear power doesnot depend on new reactor technology RD&D.Instead, good design, public acceptance, and imple-mentation of existing technology are more importantto achieve the sharp growth in nuclear generatingcapacity for this study period. RD&D will be moreimportant over time. As noted in chapter 4, currentlight water reactor technology may not be adequateif hundreds of reactors are installed. Even if it is, theeconomic advantages in diversifying design ap-proaches would probably outweigh the costs ofdeveloping new reactors, e.g., the high-temperaturegas reactor. In this regard, a decision is to be madein 1991 on which technology will be used for thetritium production reactor for the weapons program.This report has not examined the question of whichtechnology is best for production, nor does itrecommend which technology should be used in thatmilitary application. However, it is clear that thedecision over which technology is used for militarytritium production could have implications forcivilian nuclear energy supply options in the future,particularly if the gas reactor technology is used.R&D will also be important in resolving theremaining safety issues, waste disposal, enrichment,and other areas.

COMPARING SCENARIOSThe six scenarios used in this report contain

different assumptions about economic growth, en-ergy supply and demand, and environmental con-straints that the U.S. could face in the period1989-2015. The scenarios are not meant as predic-tions, nor do they contain all the potential elementsof what our energy future may look like. However,the varying assumptions in the scenarios are acollection of plausible outcomes. Because the sce-

Chapter 5-Policy Issues ● 147

narios vary greatly, the best policy packages forachieving them vary as well. As a result, comparingthe major features of the scenarios will convey theirrelative merits and suggest which policies could bethe most appropriate or valuable in the future. Thepolicy issues most relevant to all scenarios (exceptthe baseline) are summarized in table 5-1.

Scenarios 4,5, and 6 are extreme outcomes basedon the growing chance of an extreme problem:global climate change. These scenarios rapidlyreduce the use of coal in electricity generation,despite our large resource base, in order to reduceC02 emissions. A somewhat different package ofsuch extreme policy measures could be warranted ifsevere threats to energy security develop. The costof implementing any of these three scenarios couldbe high, but the cost of not implementing them ifglobal climate change proves as disrupting as someanalysts predict would be higher .17

Scenarios 4, 5, and 6 assume that major policydecisions and Federal budget commitments aremade long before the problem that would precipitatethese changes—serious climate change--is likely tooccur. This fact, however, does not diminish thevalue of considering these scenarios, their policyrequirements, and their effects to counter globalclimate change (or severe threats to energy security);it merely postpones their provable urgency. Ourcurrent understanding of the lagtime in atmosphericresponses to changes in trace gas concentrations,e.g., C02, suggests that the urgency of makingpolicy decisions similar or identical to the last threescenarios could be appropriate now.

The base case requires no policy changes. Itassumes no major changes in environmental condi-tions (e.g., global climate change), U.S. energysupply security, and U.S. energy demand growth.This future is plausible but risky. At a time whenU.S. production of natural gas and oil has slowed ordropped, political stability in the Middle East is asuncertain as ever, the prospects for large contribu-tions from alternative and renewable energy suppliesare on a capricious and lingering threshhold, and thesteady buildup of atmospheric CO2 continues una-bated, the probability that the availability, price, andsupply of oil fuels will all remain stable is not high.

Scenario 2 is even more optimistic. That scenarioassumes that continued fossil fuel use will not becurbed by domestic or international concerns aboutglobal climate, that fossil fuel reserves will actuallyexpand, and an uninterrupted level of economicgrowth not seen in two decades will be fueled byabundant and relatively inexpensive energy.

Scenario 3 is a moderate effort to curb U.S. energydemand, but it would require an unprecedented useof cost-effective investments and success in energyefficiency and conservation. Though it requires lessextreme measures than the high-efficiency measuresin scenario 4, it would still require a prodigiouseffort by Government and citizens to be realized.

Scenario 4 adopts the same approach as scenario3 (demand control), but its measures and outcomeare more extreme. This is the only scenario thatactually results in lower total energy demand at theend of the study period. Such an outcome wouldrequire many investments in energy efficiency thatwould exceed life-cycle paybacks suggesting thatextreme threats to the global environment or energysecurity would be necessary to impose policymeasures this economically severe.

Scenarios 5 and 6 entail aggressive supply-oriented measures, but they exploit the same level ofdemand-side measures as scenario 3 and thusprovide an illustrative lesson about mixing supplyand demand-side measures in an energy policy.

Any of these scenarios could be the right choicedepending on the resolution of several critical butpresently unknowable factors. In particular, thespecter of climate change could invalidate the frostthree scenarios, technical developments could makethe last three much more feasible, and unexpectedresource discoveries could lead to the high growth ofscenario 2. Prudent policymaking will protect soci-ety against negative outcomes while maximizing thepossibility of positive developments. The valuejudgments and risk assessments that determine thedecisionmaking ultimately guiding the countryalong its actual path are beyond the scope of thisreport. It is hoped that the above discussion providesa background for understanding where decisionsabout the nation’s energy future fit in the overallcontext of the national goals of economic well-being, environmental quality, and security.

17A~ mentioned ~alier, the e~~ted net ~o~t of the hi@ efficiency sc.e~o done co~d be a positive sever~ tenti of 1 percent of GNP to M muchas a negative 1.8 percent of GNP. Depending on its magnitude, the cost of climate change could be as great or greater; it could also be lower.

b

Table 5-l-Summary of Policy Options

Scenario Financial mechanisms Taxes Info management RD&D Standards Federal programs

High growth Credits, loans and pay-ments for synfuels;tradable permits for coalemissions; incentives forelectric vehicles.

Moderate Tax credits and acceleratedefficiency depreciation for quicker

equipment turnover;tradable permits foremissions reductions,(industry and utilities),coupled with tougheremissions standards.

Tough efficiency Similar to moderate effi-ciency scenario, but at ahigher level.

High renewable Renewable investment taxcredits for electricity gen-eration & biomass fuelsproduction; low-costloans; accelerated capi-tal depredation for exist-ing fossil-powered sys-tems; same demandcontrols as moderate ef-ficiency scenario.

High nuclear Accelerated depreciationschedules for utilitiescommitted to investing innuclear plants; invest-ment tax credits for newnuclear construction;same demand controlsas moderate efficiencyscenario.

No change from baselinescenario.

Energy taxes; gasoline taxin the range of 50 cents;other energy taxesraised accordingly; car-bon tax of at least $75 to$150/ton; added taxeson inefficient equipment.

Energy taxes and espe-cially carbon taxes of atleast $150/ton; purchasetaxes that Ievelize pricesof equipment with vary-ing efficiencies.

Energy taxes on fossil fueluse only; carbon taxesas an alternative; sameas moderate efficiencyscenario.

Large carbon tax on utilitiesto encourage nucleargrowth.

No change from baseline Clean coal technologies; ad-scenario. Improve vanced oil and gas re-public acceptance of covery; synfuels; fluidizednuclear power. bed and IGCC; electric ve-

hicles.

Increase Government Vigorous for all sectors.and utility efforts to im-part life-cycle opportu-nities (retrofits & newequipment).

Same as moderate effi- Extremely aggressive; tech-ciency scenario. nologies available by 1999

implemented by 2015.

Same as moderate effi- Especially for storage tech-ciency scenario. nologies.

Same as moderate effi- RD&D needed for advancedciency scenario. lm- reactor designs; modularprove public accep- components; waste dis-tance of nuclear posal technologies.power.

No changes needed in en-ergy performance stand-ards; emissions reduc-tions in utility and trans-portation sectors proba-bly necessary.

Raise building and equip-ment performancestandards (NAECA,BEPS); CAFE to 39 mpg;tradable permits; 55-mph speed limit; HOVsand carpooling pro-grams; and utility de-mand-side managementprograms.

CAFE 55 mpg; most energyefficient design for build-ings and equipment;stronger utility emissionsreductions; ban newcoal-fired generatingplants.

Same as moderate effi-ciency plus standards forgenerating plants thatfavor renewable.

Same as moderate effi-ciency; also higherstandards for non-nuclear plants.

PURPA/PUHCA revisions toexpand resource base, in-crease competition; easedplant siting to keep costsdown; OCS/ANWRopened; SPR increased;improved nuclear licensingand waste disposal facility.

Aggressive FEMP; increasedfunding for urbanhterdtyrail; Federal procurementand technology transferare key.

Aggressive retirement of coalplants; natural gas cofiring;stronger DSM programs;aggressive FEMP; highnational priority tied to in-frastructure funding.

Favorable regulatory treat-ment encouraging renewa-bles; fleet use of alterna-tive fuels; extended andimproved hydro (existingcapacity).

Streamlined licensing; wastedisposal facility.

ABBREVIATIONS: BEPS . Building Energy Performance Standards; CAFE = Corporate Average Fuel Economy Standards; DSM = Demand-Side Management; FEMP - Federal EnergyManagement Program; HOVS = High Occupancy Vehicle lanes; IGCC = Integrated Gasification Combined Cycle; NAECA = Nationai Appliance Energy Conservation Act;OCS/ANWR = Outer Continental Shelf/Arctic National Wildlife Refuge; PURPA/PUHCA = Public Utility Regulatory Policies ActiPublic Utility Holding Company Act; RD&D =Research, Development, and Demonstration; SPR = Strategic Petroleum Reserve
