Download - Energy Transformation in the United States -- Houston Conference May 2011

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Page 1: Energy Transformation in the United States -- Houston Conference May 2011

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4th Annual Power & Alternative Energy Law

Conference Houston, Texas

Achieving Energy Transformation in Electricity and

Transportation: From Innovation to Deployment

Presented by:

Robert H. Edwards, Jr.

Deputy General Counsel

for Energy Policy

United States Department of Energy

12 May 2011

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• The Energy Challenge – U.S. Perspective

• Energy Transformation is Challenging and Complicated

• Private Sector Investment, Innovation and Recovery Act Jump Start Energy Transformation – Economics of new technologies must eventually prevail without subsidy

– Business and finance models must provide for return of and on capital

• Challenges to Keep Energy Transformation Going

– Capital for infrastructure investments

– Managing risks and returns

– Cross industry solutions

Overview

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Investment in Renewable Energy and Clean Technologies is Needed Now to Create 21st Century Energy Technology Industries and Jobs, Reduce

Dependence on Foreign Oil and Reduce Greenhouse Gas Emissions

• The U.S. sends $1 Billion per day overseas to purchase foreign oil

• While the U.S. manufactured more than 40% of the world’s solar cells in the mid-1990s, today we produce just 7%

• When the Recovery Act passed, there were only two small advanced battery facilities in U.S., and 98% of production was based in Asia

• Long-term results of current deficiencies in our energy system include:

• Loss of leadership in energy innovation • Oil-driven recessions • Environmental degradation

• National security problems • Increasing CO2 emissions • Trade deficits

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Events During the Recent Past Have Increased the Need for Accelerated Energy Transformation

to Improve U.S. Energy Security and Economic Performance

• April 2010: The Deepwater Horizon Oil Spill

• Developments in the Middle East and North Africa

• March 2011: Earthquake and Tsunami in Japan

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Our Energy Challenge

• Electric Sector

– 100 year old architecture and technologies

– Relies heavily on old coal burning power plants

– Industry is fragmented

– Industry regulatory structure leads to slow adoption of new technologies

• Transportation Sector

– Relies almost exclusively on oil

– Dependence on foreign oil has increased over the decades

– Oil prices are volatile and trending upward

– Existing infrastructure makes transformation to alternative fuels difficult and slow

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Prudent Development of the Full Range of United States Energy Resources Is Important

• The Administration has made clear that prudently increasing U.S. domestic oil production is an integral part of the solution

• Recent technology innovations have given us the opportunity to tap large reserves of shale gas

• Environmentally sound development of shale gas can assist in accelerating energy transformation

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ENERGY TRANSFORMATION IS

CHALLENGING AND COMPLICATED

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Energy Change Is Slow

Source: EIA

US ENERGY SUPPLY SINCE 1850

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1850 1880 1910 1940 1970 2000

Renewables

Nuclear

Gas

Oil

Hydro

Coal

Wood

1880 – Edison Long Lasting Lightbulb 1908 – Model T 1918 – GE Starts Gas Turbine Division 2008 – Tesla EV Roadster 1950s – Nuclear Power Plants Come Online

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IT Moves Much Faster Than Energy

• MP3/MP4 Players

– Sales CAGR (2004-2009): 30.2%

• Google

– Sales CAGR (2004-2008): 61.7%

• Facebook

– Value CAGR (2005-2009): 182%

SALES OF PERSONAL AUDIO/VIDEO SINCE 2000

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Why is Energy Change Slower than Information Technology Change?

• Infrastructure

– Existing energy delivery systems for oil (pipelines, gas stations) create barriers to entry for fuels unable to use the existing infrastructure

– Disruptive technologies may require major infrastructure investments (charging infrastructure for electric vehicles)

• Legacy Assets

– Fully depreciated old coal fired power plants make it challenging for renewables and clean coal to be cost competitive

• Utilities and Public Utility Commissions – “The Gordian Knot”

• 50 State PUCs + Federal Energy Regulatory Commission (FERC)

• Historically regulation has properly focused on reliability and cost

• Fragmented and slow regulatory structure slows innovation

• Need regulatory innovation to allow for roll-out of

• Smart Grid

• Utility Scale Battery Storage

• New services and business models

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How Can We Make Energy Transformation Faster?

• Pathways to Scale

– Technological Innovation/Acceptance/Adoption

– Financing Innovation/Infrastructure/Consumer

• Sector/Industry Organization

– Industry incumbents or new entrants to take on new roles – Electric vehicles – utilities and auto manufacturers share the same

customers

– Smart Grid – who will own customer?

• Government Policy

– Coherent and stable government policy – Clean Energy Standard

– Consistent tax credit support for new technologies

– Public utility commissions

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ENERGY TRANSFORMATION

IN THE ELECTRIC SECTOR

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Our Current Electric System, Technologies, and Architecture are 100 Years Old

Central Power

Stations

Edison Would Recognize Most of the System

Alternating Current

High Voltage Transmission

Lines

Distribution Companies

End Users

• Transmission congestion and constraints • Need more transmission for renewables

• 3,100 Utilities • Southern Co. serves 4.4M customers • Altamaha EMC rural electric co- op serves 19,648 customers in Lyons, GA

• 100% availability • Lowest ¢/kWh • Unaware of potential of smart grid

Solar, Geothermal,

>1% Wind 2%

Hydro 6.6%

Liquids 1%

Natural Gas 21%

Nuclear 20%

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The Challenges are Further Complicated as Different Regions of the United States Use Different Fuel Mixes to Generate Electricity

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In Addition, There Is Not a Single National Grid: Approximately 60% of the U.S. Electric Power Supply is Managed by ISO/RTOs While the Southeastern Region

Remains Regulated and Vertically Integrated

Source: ISO/RTO Council

Published by: U.S. Energy Information

Administration

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A Green and Sustainable 21st Century Electric

System Will Have Many of the Following Features….

Electric & Plug-In Hybrid

Vehicles

Smart Consumers

Renewable Generation

Robust Transmission

Capacity

Smart Transmission

Utility Scale Storage

Smart

Storage

Smart Grid

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Renewables and Distributed Generation Percent of Total Generation in 2030

Charles River Associates 16%

Environmental Protection Agency 16%

Union of Concerned Scientists 24%

National Renewable Energy Laboratory 30%

Google.org 67%

How Fast Can Renewables be Integrated into the Electric Grid?

• “Expert” Projections Vary Widely

Let’s look at the electric grid on an end-to-end basis to understand how we can increase the rate of penetration of renewables. . .

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To Accelerate Transformation in the Electric Sector the Administration has Deployed Resources Through

a Range of Tools

• Recovery Act Tax Credits and Other Incentives

– Extension of the production tax credit (PTC) through December 31, 2012, and the innovation of the § 1603 “Cash Grant In-Lieu of Tax Credit,” for electricity produced from renewable energy sources

– The § 1603 program, which allows clean energy producers to monetize tax credits in the form of a cash grant which becomes available as soon as a renewable energy project is “Placed In Service”

• As of April 6, 2011:

– total number of projects funded = 7,957

– total § 1603 funding = $6.9 Billion

– total private and federal investment in § 1603 projects = $23.2 Billion

– total installed capacity of funded projects = 10.4 GW (91% wind, 4% solar)

– total estimated electricity generation from funded projects = 27.5 TWh

Renewable Generation

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Selected 2010 & 2011 Loan Guarantee Projects Accelerate Deployment of

Renewable Generation…

• Solar Generation – Abengoa Solar, Inc., $1.446 billion (250 MW) - Arizona

– Agua Caliente, $967 million (290 MW) - Arizona

– BrightSource Energy, Inc., $1.6 billion (392 MW) - California

– Solar Trust of America (Solar Millenium), $2.105 billion (484 MW) - California

• Wind Generation – Caithness Shepherds Flat, $1.3 billion (845 MW) - Oregon

– Kahuku Wind Power, LLC, $117 million (30 MW) - Hawaii

– Record Hill Wind, $102 million (50 MW) - Maine

Renewable Generation

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US Solar Electric Installations: 2007-2010

0

500

1000

1500

2000

2500

2007 2008 2009 2010

CSP Cumulative

PV Cumulative

Cu

mu

lati

ve M

W

Year

Solar PV installations in 2011 are expected to be twice

2010 levels.

Data source: SEIA

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US Wind Installations: 2007-2010

0

5000

10000

15000

20000

25000

30000

35000

2007 2008 2009 2010

Cu

mu

lati

ve M

W

Year

The U.S. wind industry has contributed over 35% to all new power

generating capacity created in the nation over the past four

years.

Data source: AWEA

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Robust and Reliable Transmission and Distribution Networks Are Essential to the Development, Integration, and Delivery of

Renewable Resources in the Electric Sector . . .

• Bonneville Power Authority (BPA) – McNary-Day Transmission Line

– When energized in early 2012, loan guarantee project will allow BPA to provide 625 MW of transmission service, including 575 MW of new wind energy

• Western Area Power Authority (WAPA) – Montana-Alberta Tie Limited Project (MATL)

– WAPA’s first Recovery Act project will bring new transmission capacity online to support 300 to 600 MW of wind energy, enough to power 150,000 to 300,000 homes

• Southwest Intertie Project (SWIP) – Loan Guarantee Program

– Transmission project that will carry approximately 2,000 MW of electricity and enable wind and solar resources in Wyoming, Idaho and Nevada to power the Southwest and California markets

Robust Transmission

Capacity

Smart Transmission

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Robust and Reliable Transmission and Distribution Networks Are Essential to the Development,

Integration, and Delivery of Renewable Resources in the Electric Sector (cont’d). . .

• Nine-Agency MOU

– October 2009 agreement will expedite the siting and construction of qualified electric transmission infrastructure in the U.S.

• Office of Electricity Delivery and Energy Reliability (OE) – Transmission Planning

– Six Recovery Act awards will promote collaborative long-term analysis and planning for the Eastern, Western and Texas electricity interconnections, representing the first-ever effort to take a collaborative, comprehensive look

across each of the three transmission interconnections

Robust Transmission

Capacity

Smart Transmission

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Advanced Batteries & Storage

• Kahuku Wind Power, LLC

– Advanced batteries used to smooth energy production from major wind farm being integrated into a closed loop transmission grid.

• Flywheels: Loan Programs Office (LPO) – Beacon Power

– Technology focused on grid frequency regulation, with flywheels helping to maintain the necessary balance between energy supply and demand by effectively “recycling” electricity.

• Compressed Air Storage: Advanced Research Project Agency – Energy (ARPA-E)

– At utility scale, energy generated during periods of low energy demand (off-peak) can be released to meet higher demand (peak load) periods.

• Advanced Batteries: Vehicle Technologies Program

– Rechargeable batteries used for propulsion of advanced vehicles

– As a result of ARRA investments, the U.S. will have the capacity to produce up to 20 to 40 percent of the world’s advanced batteries (prior to the Act, 98 percent of all production was in Asia).

Utility Scale Storage

Smart

Storage

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Recovery Act Investments Matched By Private

Sector Investment Jumpstarts Smart Grid

Office of Electricity Delivery and Energy

Reliability

$

Millions

Smart Grid Investment Grant Program; ≤3 years $3,400

Smart Grid Demonstrations; 3-5 years $615

Interoperability Framework Development by NIST $10

Resource Assessment and Interconnection-Level

Transmission Analysis and Planning $80

State Electricity Regulators Assistance $50

Enhancing State Government Energy Assurance

Capabilities and Planning for Smart Grid Resiliency $55

Workforce Development $100

Smart Grid

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Recovery Act Smart Grid Investment Grants

Transform Electricity Delivery

Smart Grid Systems and Equipment

Numbers of Units

(self-reported estimates)

Improvements Impacts

Networked Phasor

Measurement Units

877 • Near-nationwide coverage

• 6X the 166 existing networked

PMUs

Enhanced situational

awareness and electric

system reliability and

resiliency

Smart Transformers 205,983 • Enables preventative

maintenance

Automated

Substations

671 • 5% of 12,466 transmission and

distribution substations in the

U.S.

Load Control

Devices

176,814 • Enables peak demand

reductions

1444 MWs of peak demand

reduction per year

(self-reported estimates)

Smart Thermostats 170,218 • Enables peak demand

reductions

Smart Meters 18,179,912 • 13% of the 142 million

customers in the U.S.

Transformational changes in

consumer behavior and

energy consumption In-Home Display

Units

1,183, 265 • Enables customer empowerment

PHEVs/Charging

Stations

12/100 • Accelerates market entry Begins the path toward

energy independence

Smart Grid

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Cross Industry/Horizontal Relationships Can Speed Change

Electric Vehicles Will Depend on Smart Grid Technology, And in Turn Increase its Value

Smart Grid Technology Will Enable the “Smart Charging” Needed to Support Electric Vehicles, for example:

Peak Load Management to deal with the “5PM Surge” when every one returns home and plugs in

Consumer information to incentivize off -peak charging at night

The systems integration and IT challenges are enormous when we consider the end-to-end requirements of the electric grid

Smart Grid

Solar, Wind

Hydro

Geothermal

Battery

Super Conductors

Recloser Controls

Sensors

AMI

Mesh Networks

WiMAX

Broadband

Home Area Networks

Energy Displays

Meter Data Mgt (MDMS)

CPP and TOU Pricing

Automated Demand

Generate Transmit Distribute Consume • Optimized Energy Demand

• Efficient Supply

• Integrated Multiple Low

Carbon Energy Sources

Advanced

BatteriesEV/PHEVsCharge Point

Integration with VehicleIntegration with Grid

Grid Impact &

Load MgmtEnergy Storage

Infrastructure &

Technology

Consumer

Adoption

Electric & Plug-In Hybrid

Vehicles

Smart Consumers

IT IS ALL CONNECTED . . .

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ENERGY TRANSFORMATION

IN THE TRANSPORTATION SECTOR

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Corporate Average Fuel Economy Standards (CAFE)

• In January 2009, President Obama signed a memorandum instructing the U.S. Department of Transportation (DOT) and the National Highway Traffic Safety Administration (NHTSA) to finalize a rule - published in March 2009 - prescribing increased fuel economy for model year 2011 cars and light duty trucks, increasing CAFE standards for the first time since 1990

– Cars and Light Duty Trucks: In May 2010, DOT and EPA published additional amendments to CAFE that will significantly increase mileage requirements by 2016 to 35.5 mpg, a 40% improvement over current standards

– Medium and Heavy Duty Trucks: In October 2010, DOT and EPA proposed fuel efficiency and global warming standards for these vehicles for the first time, which have the potential to reduce GHG emissions by nearly 250 metric tons and save 500 million barrels of oil over the life of vehicles sold between 2014 and 2018

• Improving efficiency of internal combustion engines

– Advanced Technology Vehicle Manufacturing Loan Programs

– EERE Vehicles Technology Program

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Through Recovery Act and Other Programs DOE is Supporting Biofuels from Demonstration to

Commercialization

• As part of the Recovery Act, DOE has awarded cost-share grants to 19 integrated biorefinery projects throughout the U.S.

• Projects will accelerate the construction and operation of pilot, demonstration, and commercial scale facilities

• Biofuels and bioproducts produced through these projects will displace petroleum and accelerate the industry's ability to achieve production targets mandated by the Federal Renewable Fuel Standard (RFS).

• The nearly $564 million in Recovery Act funding for these projects will be matched with more than $700 million in private and non-Federal cost-share funds, for total project investments of almost $1.3 billion

• DOE is leveraging its national laboratories, universities, and the private sector to help improve biofuels reliability and overcome key technical challenges, with the goal of creating third-generation biofuels such as green gasoline, diesel, and jet fuels

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The Renewable Fuel Standard:

A Framework for the Biofuels Industry

• The original RFS program (RFS1) was established under the Energy Policy Act of 2005 and required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012.

• RFS2 was established under the Energy Independence and Security Act of 2007 (EISA) and increased the volume of renewable fuel required to be blended into transportation fuel from 12.5 billion gallons by 2012 to 36 billion gallons by 2022.

• On December 9, 2010, EPA issued final regulations for the volume requirements that will apply under the RFS2 program in calendar year 2011.

Applicable Volumes for 2011

Statutory Volume for 2011

Final Actual Volume for 2011

Cellulosic Biofuel 250 mill gal 6.6 mill gal

Bio-mass Based Diesel

0.80 bill gal 0.80 bill gal

Advanced Biofuel 1.35 bill gal 1.35 bill gal

Renewable Biofuel 13.95 bill gal 13.95 bill gal

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Recovery Act: $2.4 Billion Directly Benefitting Vehicle Electrification

$1.5 Billion in funding to accelerate the manufacturing and deployment of the next generation of U.S. batteries $500 Million in funding for electric-drive components manufacturing $400 Million in funding for transportation electrification

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DOE Initiatives: Electric Vehicles and Plug-in Hybrids

• $8.4 Billion from DOE’s Advanced Technology Vehicle Manufacturing (ATVM) loan program and $4 Billion in Recovery Act funding, is supporting a broad portfolio of clean energy transportation technologies.

• Products and technologies range from plug-in hybrids and all-electric vehicles to natural gas vehicles, advanced biofuels, as well as improvements to improve internal combustion engine efficiency.

• DOE is providing critical long-term financing to:

– Ford Motor Company, $5.9 billion

– Nissan - $1.4 billion

– Tesla Motors - $465 million

– Fisker Automotive - $528.7 million

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How Fast Can the Market Share of Plug-In Hybrids and Electric Vehicles Grow?

“Expert” Projections Vary Widely

Comparison of 2020 Global EV /

PHEV Sales % Forecasts

Key Forecast

Differences Emanate

from Differences in:

• Component Cost

Reductions (Primary

Difference)

• Energy Cost

Forecasts

• Future Environmental

Policy

• Consumer

Acceptance

*Includes HEV, PHEV, and EV

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Electric Drive Vehicle Battery and Component Manufacturing Initiative

Company Project Location

Johnson Controls, Inc. Holland, MI Lebanon, OR (Entek)

A123 Systems, Inc. Romulus, MI Brownstown, MI

KD ABG MI, LLC (Dow Kokam)

Midland, MI

Compact Power, Inc. (on behalf of LG Chem, Ltd.)

St. Clair, MI Pontiac, MI Holland, MI

EnerDel, Inc. Indianapolis, IN

General Motors Corporation Brownstown, MI

Saft America, Inc. Jacksonville, FL

Exide Technologies with Axion Power International

Bristol, TN Columbus, GA

East Penn Manufacturing Co. Lyon Station, PA

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Vehicle Technologies Program: Advanced Technologies for

High Efficiency Clean Vehicles

Hybrid Electric Systems • Advanced Batteries • Power Electronics • Inverters • Controllers & Motors • Systems Analysis and Testing • Aerodynamics, Rolling Resistance & Accessory Loads • Validation

Advanced Combustion Engine R&D

• Low Temp. Combustion R&D • Emission Controls • Light- & Heavy-Duty Engines • Solid State Energy Conversion • Health Impacts

Fuel Technologies • Bio-Based Fuels • Clean/Efficient Combustion

Fuel Characteristics • Fischer-Tropsch Fuels &

Blendstocks • Advanced Lubricants

Materials Technology

• Lightweight Structures • Composite Development • Processing/Recycling/

Manufacturing • Design Data Test Methods • High Temperature Materials Laboratory

Tech Introduction • EPAct/EISA • Rulemaking • Deployment • Student Competitions • Graduate Automotive Technology Education • Education • Safety, Codes, & Standards

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Some Examples of Progress . . .

• “Ford introduced the new Focus, not at an auto show but at the Consumer Electronics Show in Las Vegas, a symbolic break in tradition for a car company eager to supercharge a field crowded with plug-in competition. For Ford, it's a back-to-the-future story. Henry Ford's wife drove an electric car back in 1914, and now their great grandson Bill Ford will drive an electric vehicle they couldn't have imagined.”

• ABC World News, January 7, 2011

• “*Nissan is+ expanding its production of the Leaf to meet an almost insatiable demand for the electric car. . . . The company said it is on track to deliver 20,000 Nissan Leaf cars to people who have reserved them by September.”

• GreenBeat, May 3, 2011

• “*Tesla+ CEO Elon Musk said the company may raise additional funding for its third electric car, the Model X electric sports utility vehicle, according to reports Thursday. . . . Tesla is currently working on its second car, the Model S sedan, which is aimed at first-time electric car buyers. That model is expected to hit the market in the summer of next year.”

• Silicon Valley / San Jose Business Journal , May 5, 2011

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Some Examples of Progress (cont’d). . .

• “The *A123 plant opening+ was heralded as a sign that manufacturing isn't dead in Michigan, that public-private partnerships are the answer in today's global marketplace and that America is on its way to ending the country's dependence on foreign oil.”

• Zlati Meyer (Detroit Free Press), September 14, 2010

• “Nissan’s massive new lithium-ion battery plant is continuing to take shape in Smyrna *Tennessee+. . . . The facility is being built next to Nissan’s existing Smyrna plant, which is being retooled to manufacture the all-electric Leaf. Production of the Leaf is scheduled to begin in Smyrna in late 2012, requiring the battery plant to be operating about three months prior. At full-capacity, the plant will be capable of producing 200,000 lithium-ion batteries per year.”

• Nashville Business Journal, March 18, 2011

• “Johnson Controls Inc.'s fiscal second-quarter earnings climbed 29 percent on higher revenue as all three of its business segments reported double-digit sales increases amid a recovering global economy.”

• Manufacturing.Net, April 25, 2011

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CONCLUSION

• Our Energy Challenge

– Old infrastructure

– Heavily dependent on fossil fuels

– Transformation is slow

• We Can Accelerate Change

– Technological innovation

– Financing innovation

– Innovation in business models

– Working the verticals

– Integration across the horizontals

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DISCUSSION

THANK YOU

Robert H. Edwards, Jr.

Deputy General Counsel for Energy Policy

United States Department of Energy

Tel: +1-202-586-6758

[email protected]

12 May 2011