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Overview and Summary of America’s Energy Future: Technology and Transformation

Energy has long played a critical role in our nation’s national security, economic prosperity, and environmental quality, and today concerns about how the United States produces and consumes energy are at the forefront of public attention. Political instability in primary energy-producing regions around the world, rapidly rising global demand for energy, especially in developing countries, and a growing awareness of the impact of fossil fuel use on global climate change have contributed to a new sense of urgency about the role of energy in ensuring security and U.S. well-being in the 21st century. Awareness is steadily growing that the United States must fundamentally transform the ways in which it produces, distributes, and consumes energy. Understanding and deciding exactly how and at what rate U.S. energy use and sources of energy supply should or will change have become among the most difficult and complex challenges of our time.

For more than three decades, America’s capacity for technological innovation has been a cornerstone of national strategies for dealing with energy policy issues. Now a renewed sense of urgency has raised the stakes and the scale of the challenge. Although new technology alone is unlikely to be sufficient to meet the nation’s energy challenges, developments in science and technology will substantially affect our ability to shape future energy options. New energy technologies hold considerable promise for enabling more-efficient energy use; for providing cleaner energy and safer, more-efficient recovery and use of traditional sources of supplies such as oil, coal, and natural gas; and for leading to a post–fossil fuel era of more secure and environmentally benign energy sources.



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Overview and Summary of America’s Energy Future: Technology and Transformation E nergy has long played a critical role in our nation’s national security, eco- nomic prosperity, and environmental quality, and today concerns about how the United States produces and consumes energy are at the forefront of public attention. Political instability in primary energy-producing regions around the world, rapidly rising global demand for energy, especially in develop- ing countries, and a growing awareness of the impact of fossil fuel use on global climate change have contributed to a new sense of urgency about the role of energy in ensuring security and U.S. well-being in the 21st century. Awareness is steadily growing that the United States must fundamentally transform the ways in which it produces, distributes, and consumes energy. Understanding and deciding exactly how and at what rate U.S. energy use and sources of energy supply should or will change have become among the most difficult and complex challenges of our time. For more than three decades, America’s capacity for technological innova- tion has been a cornerstone of national strategies for dealing with energy policy issues. Now a renewed sense of urgency has raised the stakes and the scale of the challenge. Although new technology alone is unlikely to be sufficient to meet the nation’s energy challenges, developments in science and technology will substan- tially affect our ability to shape future energy options. New energy technologies hold considerable promise for enabling more-efficient energy use; for providing cleaner energy and safer, more-efficient recovery and use of traditional sources of supplies such as oil, coal, and natural gas; and for leading to a post–fossil fuel era of more secure and environmentally benign energy sources. 

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 America’s Energy Future Despite the promise of new technology, however, the transformation of tra- ditional patterns of energy supply and use is inevitably complicated—by the close interconnections of energy supply and use with economic interests nationally and in various regions; by the relative cost-effectiveness of new technologies; by the extent of disruption that might be caused to major stakeholders, both domesti- cally and abroad, from the emergence of new resources and technologies; and by the broad scale and scope of the work of reducing greenhouse gas emissions while maintaining access to affordable energy. Some of these challenges are not new for the United States, but the urgency of addressing all of them simultaneously is unprecedented. America’s Energy Future: Technology and Transformation,1 a report pre- pared by the Committee on America’s Energy Future (the AEF Committee) and published in 2009, explores potential technology pathways for fundamentally transforming U.S. patterns of energy supply and demand. The result of a project initiated in 2007 by the National Academy of Sciences and the National Academy of Engineering, the 700-page volume—the lead report in the America’s Energy Future (AEF) series—focuses on technologies that exist now or that should be ready in the near future and could be deployed extensively to bring about fun- damental improvements in the U.S. energy enterprise. That report assesses the readiness of technologies for use, estimates how quickly over time they might be deployed, and outlines potential costs as well as barriers to and ultimate impacts of their adoption. It thus provides a technology assessment as a foundation for ongoing work by policy analysts. This Oeriew and Summary highlights key findings presented and major topics discussed in America’s Energy Future: Technology and Transformation and also reflects results presented in three reports prepared by three separate study panels appointed, along with the AEF Committee, to carry out the AEF project. The three panel reports in the AEF series include the following: • Electricity from Renewable Resources: Status, Prospects, and Impediments; 1National Academy of Sciences-National Academy of Engineering-National Research Coun- cil, America’s Energy Future: Technology and Transformation, The National Academies Press, Washington, D.C., 2009.

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Overview and Summary  • Liquid Transportation Fuels from Coal and Biomass: Technological Status, Costs, and Enironmental Impacts; and • Real Prospects for Energy Efficiency in the United States.2 In preparing the reports in the AEF series, the AEF Committee and the study panels used the vast existing energy-related literature and conducted additional analysis to help fill gaps and resolve or address conflicting conclusions. The AEF reports compare estimated results of an accelerated effort to phase in prospective technologies from now until 2035 against “business-as-usual” reference scenarios prepared by the U.S. Energy Information Administration (EIA).3 The reports do not forecast or judge which technologies or combinations of technologies will or should be implemented. They also do not consider the substantial energy savings that could be achieved through behavioral or lifestyle changes that might occur, nor do they recommend specific policy actions. Rather, the AEF series focuses on the potential benefits from deployment of currently available and emerging technology options that can contribute to meeting pressing U.S. energy challenges through 2035. Key findings from America’s Energy Future: Technology and Transforma- tion are summarized in the section below. An overview is then presented of the following topics: energy use in America; the nation’s energy efficiency potential; energy-supply options, including electricity from renewable resources, nuclear energy, and fossil fuel energy; future electricity generation costs and the develop- ment of transmission and distribution infrastructure; and alternative liquid trans- portation fuels. Unless indicated otherwise, statistics cited and tables and figures included in this overview and summary are documented in America’s Energy Future: Tech- nology and Transformation and in the other reports in the AEF series. 2The AEF series of reports—all published by the National Academies Press, Washington, D.C.—also includes The National Academies Summit on America’s Energy Future: Summary of a Meeting, 2008. 3See Annual Energy Outlook 008, DOE/EIA-0383(2008), U.S. Department of Energy, En- ergy Information Administration, Washington, D.C., 2008.

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 America’s Energy Future SUMMARY OF KEY FINDINGS The AEF Committee concluded that with a sustained national commitment, the United States could obtain substantial energy efficiency improvements, develop new sources of energy, and realize reductions in greenhouse gas emissions through the accelerated deployment of existing and emerging technologies in a diverse-portfolio approach to help meet the nation’s energy challenges. However, mobilization of the public and private sectors, supported by sustained long-term policies and investments, will be required for the decades-long effort to develop, demonstrate, and deploy these technologies. Actions taken between now and 2020 to develop and demonstrate several key technologies will also largely determine the options available for many decades to come. It is imperative that the development and demonstration of key technologies be started very soon, even though some will be expensive, not all will be successful, and some may be overtaken by better technologies. Additional AEF study findings include the following: • Energy efficiency potential. The deployment of existing energy effi- ciency technologies is the nearest-term and lowest-cost option for moderating the U.S. consumption of energy, especially over the next decade. In fact, the full deployment of cost-effective energy efficiency technologies in buildings alone could eliminate the need to construct any new electricity-generating plants in the United States except to address regional supply imbalances, replace obsolete power generation assets, or substitute more environmentally benign sources of electricity. Accelerated deployment of these technologies in the buildings, transpor- tation, and industrial sectors could reduce energy use in 2020 by about 15 percent (15–17 quads),4 relative to current projections, and by about 30 percent (32–35 quads) in 2030. • Electricity supply options. The United States has many promising options for obtaining new supplies of electricity and changing its supply mix during the next two to three decades, especially if renewable- 4A quad equals 1 quadrillion British thermal units (Btu) of energy. The United States currently uses about 100 quads of energy annually. A barrel of crude oil = 5,800,000 Btu; a gallon of gaso- line = 124,000 Btu; a cubic foot of natural gas = 1,028 Btu; a short ton of coal = 20,169,000 Btu; and a kilowatt-hour of electricity = 3,412 Btu.

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Overview and Summary  electric-power technologies, carbon capture and storage (CCS), and evolutionary nuclear technologies can be deployed at sufficient scale. Renewable energy sources could provide an estimated additional 500 terawatt-hours (TWh) of electricity per year by 2020 beyond current production of electricity from renewable energy sources and about an additional 1100 TWh per year by 2035. Coal-fired plants with CSS could provide as much as 1200 TWh of electricity per year by 2035 through repowering and retrofits of existing plants, and as much as 1800 TWh per year by 2035 through the construction of new plants. In combination, the entire existing inventory of coal-fired power plants could be replaced by CCS coal power by 2035. If current plants were modified to increase their power output and new plants were con- structed, nuclear plants could provide an additional 160 TWh of elec- tricity per year by 2020, and up to 850 TWh by 2035. The generation of electricity from natural gas could be expanded to meet a substantial portion of U.S. electricity demand by 2035. The deployment of any new supply technologies is very likely to result in higher consumer prices for electricity. • Modernizing the nation’s power grid. Expansion and modernization of the nation’s power grid—the electric power transmission and distribu- tion systems—are urgently needed. This would cost (in 2007 dollars) $175 billion and $50 billion respectively for concurrent expansion and modernization of the transmission system, and $470 billion and $170 billion respectively for concurrent expansion and modernization of the distribution system. • Continued dependence on oil. Petroleum will continue to be an indis- pensable transportation fuel through at least 2035. Maintaining current rates of domestic petroleum production (about 5.1 million barrels per day in 2007) will be challenging. Despite limited options for replacing petroleum or reducing its use before 2020, more substantial longer- term options—including improved vehicle efficiency, use of biomass and coal-to-liquid fuels, and increased use of electric or hybrid-electric vehicles—could begin to make significant contributions in the 2030– 2035 timeframe. • Reduction of greenhouse gas emissions. Substantial reductions in greenhouse gas emissions from the electricity sector are achievable over the next two to three decades. Displacing a significant proportion of

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 America’s Energy Future petroleum as a transportation fuel to achieve substantial greenhouse gas reductions will require a mixed strategy involving the widespread deployment of energy efficiency technologies, alternative liquid fuels with low carbon dioxide (CO2) emissions, and technologies for electrifi- cation of light-duty vehicles. • Technology research, development, and demonstration. Although there are technologies that can increase energy efficiency and supply new energy for the next decade, research and development (R&D) are needed to fill the pipeline with new technologies to be implemented after 2020. To meet this need, both the public and the private sectors will need to perform extensive research, development, and demonstra- tion over the next decade. • Barriers to accelerated deployment. Formidable barriers could delay or even prevent the accelerated deployment of the energy-supply and end-use technologies described in this overview and summary and in the AEF series of reports. Examples of such barriers include the level of investment that will be required for widespread technology deploy- ment, the low turnover rate of the energy system’s capital-intensive infrastructure, or the lack of energy efficiency standards for many prod- ucts. Policy and regulatory actions, as well as other incentives, will be required to overcome these barriers. ENERGY USE IN AMERICA America’s energy system evolved over the past century in response to rapidly growing demand for energy, advances in technology, diverse public policies and regulations, and powerful market forces integral to economic growth and global- ization. That system is currently a vast and complex set of interlocking technolo- gies for the production, distribution, and use of fuels and electricity (Figure 1). As a result, the U.S. energy system’s technologies and production assets are of many different vintages and often rely on aging and increasingly vulnerable infrastructure. In the United States, cheap and readily available energy obtained from the burning of fossil fuels has driven economic prosperity since the end of the 19th century. Today, fossil fuels produce 85 percent of America’s energy. Coal and

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Overview and Summary  Net Electricity 0.10 Imports Solar 8.41 0.08 12.67 7.04 27.77 Electricity Nuclear Generation 8.41 Rejected 40.46 20.83 2.44 Energy Hydro 58.47 2.46 2.28 4.74 0.31 Wind Residential 0.31 9.14 0.07 0.31 11.43 Geothermal 0.02 1.28 0.35 0.46 4.84 1.69 4.58 0.01 Natural Commercial 6.78 Gas 8.47 Energy 23.63 3.08 0.63 Services 0.02 43.04 4.96 3.43 0.06 0.10 8.00 Coal Industrial 19.87 22.76 24.84 9.52 1.86 0.42 2.00 Biomass 21.77 0.02 3.61 0.62 0.66 0.66 Trans- portation 27.71 Petroleum 29.03 7.25 39.81 FIGURE 1  Delivery of energy (in quads) in the United States: Shown on the left are the  primary fuel sources of energy delivered in the United States in 2007; on the right, the  R01203 figure shows how that energy was distributed throughout the economy for use in the  1-1 Main Report residential, commercial, industrial, and transportation sectors. natural gas provide almost 75 percent of electricity, and petroleum fuels 95 per- cent of transportation (Figures 1 and 2). However, the burning of fossil fuels has a number of deleterious environmental impacts, among the most serious of which is the emission of greenhouse gases, primarily CO2. At present, the United States emits about 6 billion metric tons of CO2 per year into the atmosphere. Despite decades of declining energy consumption per dollar of gross domestic product, the United States still has a higher per capita consumption of energy than either the European Union or Japan. And, despite improvements in energy efficiency the United States remains the world’s largest energy consumer by a wide margin, and its dependence on energy imports continues to rise. The United States is almost completely dependent on petroleum for transportation—a situation that entails unique energy-security challenges. The nation relies on coal, nuclear energy, renewable energy (primarily hydropower), and, more recently, natural gas for gen- erating its electricity.

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8 America’s Energy Future Biomass 3% Other Renewables 1% Hydro 2% Nuclear 8% 70 60 Quadrillion Btu (Quads) 50 Fossil Fuels 86% 40 Total U.S. Consumption = 101.6 Quads 30 20 10 0 Petroleum Natural Gas Coal Nuclear Hydropower Biomass Other Power Renewables Energy Source FIGURE 2  Sources of the energy used in the United States in 2008.  R01203 Main Report 1-2

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Overview and Summary  At the same time, U.S. domestic oil and gas reserves are being depleted;5 aging but currently operating nuclear plants were constructed largely in the 1970s and 1980s, and many coal-fired plants are even older; electrical transmission and distribution systems depend on infrastructure and technologies built in the 1950s. Renewing or replacing these assets will take decades and require investments totaling several trillion dollars. There is growing recognition that the U.S. energy system as currently con- figured is unsustainable over the long run. World competition for fossil fuels continues to grow unabated. Prices of fossil fuels have been volatile; over the past 2 years, petroleum has ranged from $32 to $147 a barrel, and natural gas from $4 to $13 per thousand cubic feet. Concerns continue to mount with respect to the environmental impacts of burning fossil fuels, particularly their emission of greenhouse gases and influence on climate change. As noted earlier, the United States annually produces more than 6 billion metric tons of CO2, a major green- house gas. And economists have predicted that if the country continues “business as usual,” its dependence on fossil fuels will continue to grow. The AEF Committee concluded that with a sustained national commit- ment, the United States can develop and deploy a portfolio of existing and emerging energy technologies at an accelerated pace. These efforts could result in substantial energy efficiency improvements, new sources of energy, and reductions in greenhouse gas emissions. Over the next 25 years, the technical potential of efficiency and of new sources of energy could substantially decar- bonize the electricity sector. Over the same time period, the prospects in the transportation sector as a result of increased energy efficiency and use of alter- native fuels are more limited but nonetheless substantial. In the near term, energy efficiency is the lowest-cost option for reducing U.S. consumption of energy, especially over the next decade. In the future, a variety of 5The rate of resource depletion depends on assumptions about the domestic resource base. Revised estimates of the resource base for natural gas in North America were issued by the U.S. Energy Information Administration after the publication in late 2009 of America’s Energy Future: Technology and Transformation. Those estimates (e.g., according to Annual Energy Outlook 00 Early Release, DOE/EIA-0383(2010), December 14, 2009) now assume a larger resource base for natural gas in North America relative to previous estimates; the revised as- sumptions are based on a reevaluation of the potential for shale gas and other resources and on the prospects for bringing new resources into production at a more rapid rate, based on observa- tions of the industry’s current capability.

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0 America’s Energy Future TABLE 1 U.S. Electricity Generation: Current Fuel Sources and New Options for 2020 and 2035 (in terawatt-hours) Fuel Technology Options 2008 2020 2035 Renewables Current generation 340 Options for expansion 500 1100 Coal-fired power plants Current generation 2000 (conventional coal) Coal with CCS retrofits 0 1200 New coal plants with CCS 74 1800 Nuclear power Current generation 800 (existing power plants) Nuclear power plant uprates 63 63 New nuclear power plants 95 790 Note: Estimates are not additive. CCS, carbon capture and storage. options for electricity generation will be available and could potentially replace all coal-fired power plants lacking carbon capture and storage (Table 1). Achieving substantial reductions in CO2 emissions from the electricity sector is likely to require an approach involving the accelerated deployment of multiple technologies enabling improved energy efficiency, the accelerated deployment of renewable sources of energy, new technologies for the burning of coal and natural gas with CCS, and the installation of evolutionary nuclear technologies. To enable this portfolio approach in the electricity sector, the viability of two key technolo- gies must be demonstrated during the next decade to allow for their widespread deployment starting around 2020: • It must be demonstrated whether CCS technologies for sequestering the carbon produced during the generation of electricity from coal and natural gas are technically and commercially viable for application to both existing and new power plants. Construction will be required before 2020 of a suite (approximately 15–20) of retrofit and new dem- onstration plants with CCS featuring a variety of feedstocks, generation technologies, carbon capture strategies, and geologic storage locations. • It must be demonstrated, by constructing a suite of about five plants during the next decade, whether evolutionary nuclear plants are com- mercially viable in the United States.

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Overview and Summary  A failure to demonstrate the viability of these two key technologies during the next decade would greatly restrict options to reduce the electricity sector’s CO2 emissions in succeeding decades and would likely require a major shift to natural gas for electricity generation. This is so because natural gas plants can be built relatively quickly and inexpensively, and their electricity prices could be more attractive than those of other low-carbon energy-producing technologies such as electricity production from renewable energy sources with energy storage. For transportation, new power systems and improvements in the efficiency of vehicles could save 1 million barrels per day of petroleum equivalent by 2020 and 4.1 million barrels per day by 2030. By 2035, emerging liquid transportation fuels, including cellulosic ethanol and coal-and-biomass-to-liquid fuels with CCS, could replace about 15 percent of current fuel consumption in transportation. At the same time, coal-to-liquid fuels with CCS could replace another 15–20 percent of the transportation fuels consumed currently. However, the annual harvesting of up to 500 million dry metric tons of biomass and an increase in U.S. coal extrac- tion by 50 percent over current levels would be required to provide the necessary supply of feedstock for this level of liquid fuel production. ENERGY EFFICIENCY POTENTIAL America’s potential for increasing energy efficiency—that is, reducing energy use while delivering the same services—is enormous. Technology exists today, or is expected to be developed before 2030, that could save about 30 percent of the energy used in the buildings, transportation, and industrial sectors while saving money. Potentially, the use of energy efficiency technologies could lower energy consumption by about 15 percent (15–17 quads) in 2020 and an additional 15 percent (32–35 quads) in 2030, compared to the EIA reference case. In fact, the potential savings from increasing energy efficiency in buildings, transportation, and industry could more than offset the EIA’s projected increases in U.S. energy consumption through 2030. Energy Efficiency—Buildings Sector Residential and commercial buildings account for about 73 percent of the elec- tricity used in the United States. A number of diverse studies have assessed this sector’s potential for energy savings and are remarkably consistent with each

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 America’s Energy Future To continue the use of fossil fuels in a carbon-constrained world, govern- ment will have to develop, in addition to current policies, a regulatory structure for large-scale deployment of CCS between 2010 and 2020. This regulatory struc- ture should address a number of issues, including CO2 pipeline-transport safety and land use, the stability and leakage of carbon stored underground, and public acceptance of such storage. FUTURE ELECTRICITY GENERATION COSTS AND THE DEVELOPMENT OF TRANSMISSION AND DISTRIBUTION INFRASTRUCTURE Estimating Future Costs of Electricity Generation Although their potential is promising overall, new sources of electricity supply will likely result in higher electricity prices. Estimates of the levelized cost of electric- ity for new baseload and intermittent generation of electricity in 2020 are shown in Figure 6, which indicates a range of LCOE values for each technology and also shows that the ranges for many different technologies are overlapping. The LCOEs for most of the new sources of electricity in 2020 shown in Figure 6 are higher than projected wholesale costs. The clear exceptions are nat- ural gas combined-cycle generation with low gas prices, coal without CCS, some biopower for baseload generation, and onshore wind for intermittent generation. However, biopower can provide only limited new supplies of electricity, and wind power can incur large transmission and distribution costs for electric power gen- erated by sources that are spatially distributed. Additionally, the generation of electricity using natural gas and coal without CCS might not be environmentally acceptable, and the price for electricity from natural gas could increase substan- tially, of course, if there were large price increases for this fuel. Future electricity costs will also be affected substantially by the rate of deployment of energy efficiency improvements. The cost of the energy saved through efficiency, however, is considerably lower than the price of residential and commercial electricity. For example, a sizable fraction of the 30–35 percent reduc- tion in energy use potentially achievable with existing energy efficiency technolo- gies includes a substantial deployment of technologies at a cost that is a quarter of current retail electricity prices (although regional and other differences in cost are considerable).

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Overview and Summary  Levelized Cost of Electricity for New Baseload Sources Biopower (8–10) (10) Geothermal (6–13) Nuclear (10–16) NGCC (High) (14–21) NGCC-CCS (High) (4–7) NGCC (Low) (7–10) NGCC-CCS (Low) (5–9) Coal Energy Source (9–15) Coal - CCS 0 5 10 15 20 25 30 2007 Cents per Kilowatt-hour Levelized Cost of Electricity for New Intermittent Sources (5–18) Wind (Offshore) (4–10) Wind (Onshore) (14–30) Solar PV (8–20) Solar CSP 0 5 10 15 20 25 30 2007 Cents per Kilowatt-hour FIGURE 6  Estimates of the levelized cost of electricity for new baseload and intermit- R01203 tent generating sources in 2020. The vertical shaded bar shows the approximate range of  Main Report 2-10 average U.S. wholesale electricity prices in 2007; the dashed vertical line shows the aver- age value in 2007, which was 5.7¢/kWh.      Electricity Transmission and Distribution The U.S. electric power transmission and distribution system—the vital link between power-generating stations and customers—is in urgent need of expan- sion and upgrading. But with an investment only modestly greater than the cost of adding transmission lines and replacing vintage equipment, new technology could be incorporated that would improve the reliability of power delivery, enable the growth of wholesale power markets, allow integration of renewable energy sources into the power grid, improve resilience against blackouts and other disrup- tions, and provide better price signals to customers through “smart” metering.

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8 America’s Energy Future Distributed Generation Real-time & Storage Monitoring & Control Energy Custom Storage Power FACTS Devices Microgrids Substation High-voltage DC Transmission Outage Detection & Management Smart Advanced Sensors Meters & Communications Self-generation & Two-way Power Flow FIGURE 7  Technologies for modernizing the U.S. transmission and distribution of elec- tricity. Flexible Alternating Current Transmission System (FACTS) devices include technol- ogy for improving control and enhancing the steady-state security of transmission and  3 R0120 Main Report 9-8 distribution systems. Transmission and Distribution—Emerging Technologies Advanced power electronics, which have been used in limited applications, would provide increased control for both transmission and distribution, and high- voltage direct current (HVDC) lines offer the potential for more-efficient long- distance transmission and grid operation (Figure 7).16 Some DC lines are already 16HVDC systems can be cheaper than traditional alternating current systems under some con- ditions, such as when lines must be placed underground or underwater.

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Overview and Summary  in operation in the United States, and additional high-voltage long-distance lines and substations could be deployed by 2020. In addition, cost-effective electric- ity storage would help smooth power disruptions, prevent cascading blackouts, and accommodate intermittent sources of renewable energy. Prospects for the expansion of traditional electricity storage technologies, such as pumped-storage hydroelectric dams, are quite limited in the United States. Some advanced storage technologies, such as compressed-air energy and perhaps advanced batteries, will likely be ready for deployment before 2020, although significant development is still needed. Modern electricity transmission and distribution systems would also gather, process, and convey operational data far more effectively than can be done now. Sampling voltage, frequency, and other important factors many times per second would give operators a much clearer picture of changes in the system and enhance their ability to control it. Improved decision-support tools with sophisticated images of the grid would help operators quickly understand problems and the options available, and could also strengthen long-term planning by helping to identify potential vulnerabilities and solutions. To achieve maximum benefit, technologies to modernize the transmission and distribution systems must be implemented systematically and nationwide. Most of the necessary technologies are already in limited use and their deployment could be expanded now, but additional research and development will be useful for reducing costs and further improving performance. Advanced communica- tions and control software, for example, which differ between transmission and distribution, could benefit from further development but should be ready by 2020, as should improved decision-support tools. The cost to develop and install these technologies will be significant, but full deployment of modern transmission and distribution systems could be achieved by 2030. Transmission and Distribution—Costs Modernization and expansion are estimated to cost about $225 billion for the transmission system and $640 billion for the distribution system over the next 20 years; expansion alone, without modernization, would cost $175 billion and $470 billion, respectively, for the transmission and distribution systems. Such estimates are complicated and contain an element of uncertainty, given the size and interconnected nature of the overall U.S. electricity system and the difficulty of determining development costs.

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0 America’s Energy Future Transmission and Distribution—Barriers to Deployment Significant barriers hinder the development of modern transmission and distri- bution systems. Many of the necessary technologies are expensive and present some risk. For utility companies, which tend to avoid risk, it is more costly in the short term to develop modern systems than to expand the current systems. In general, adequate incentives for investments by utilities and customers are lacking, a barrier that legislative and regulatory changes could address. Short- ages of trained personnel and equipment could pose another barrier, especially in the near term. The ownership, management, and regulation of transmission and distribu- tion systems are highly fragmented, complicating the development of a clear vision for the modern grid that will be needed for utilities, regulators, and the public to understand the benefits and accept the costs. Collaboration will be required and investments will be needed in locations and jurisdictions that do not directly benefit. For transmission, a comprehensive plan envisioning modernization that involves all the interests in the planning of new transmission lines might help expedite construction. Clear metrics that measure benefits and progress, as well as the costs of not following this path, should be part of the strategy. In contrast, distribution can be modernized on a regional level, and some elements are already appearing. Enhanced Transmission and Distribution Systems—Impacts Modern electricity transmission and distribution systems will provide substantial economic benefits by correcting the inefficiency and congestion of the current sys- tem. Easier to control and better able to allow for more efficient use of dispersed sources of electricity, these systems will also reduce the number and length of power disruptions. The environmental benefits of modern transmission and distri- bution systems include reduced carbon emissions as a result of the greater penetra- tion of intermittent renewable sources; improved ability to accommodate tech- nologies that match demand to the production of electricity; integration of electric vehicles; and increased efficiency. Finally, modern transmission and distribution systems will enhance safety because improved monitoring and decision making will allow for quicker identification of hazardous conditions and will also reduce unexpected maintenance. However, the overlay of computer-driven communica- tions and control will require that cybersecurity become integral to modernization.

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Overview and Summary  ALTERNATIVE LIQUID TRANSPORTATION FUELS The U.S. transportation sector consumes oil at a rate of about 14 million bar- rels per day (bbl/d), 9 million of which are used in light-duty vehicles. Total U.S. oil consumption is 20 million bbl/d, about 12 million of which are imported. Although petroleum will continue to be an indispensable transportation fuel for several decades, substantial longer-term options could start to make sig- nificant contributions between 2030 and 2035. By producing alternative liquid transportation fuels from domestic resources, the United States could reduce its dependence on imported oil, increase energy security, and reduce greenhouse gas emissions. Fuels from Coal and Biomass Coal and biomass are two abundant resources with substantial potential for pro- duction of alternative liquid transportation fuels. U.S. recoverable reserves of coal are more than 200 times the 1 billion metric tons currently produced annually, and additional identified resources are much larger. Biomass can be produced con- tinuously, but the natural resources required to support production can limit the amount produced at any given time. Conversion technologies must reach commer- cial readiness before industry can transform these resources to liquid transporta- tion fuels. Biomass Supply Biomass for fuels must be sustainably produced to avoid excessively burdening the ecosystems that support its growth. Because corn grain is used for food, feed, and fiber production and also requires large amounts of fertilizer, the AEF Committee considered corn grain ethanol to be a transition fuel to cellulosic ethanol (using nonfood feedstocks) and other biomass-based liquid fuels (biobutanol and algal biodiesel). Using today’s technology and agricultural practices, farmers could potentially produce about 365 million dry metric tons of cellulosic biomass sustainably per year from dedicated energy crops, agricultural and forestry residues, and munic- ipal solid waste. Production from dedicated fuel crops grown on idle agricultural land in the Conservation Reserve Program would have a minimal impact on U.S. food, feed, and fiber production and the environment. By 2020, the production of biomass could reach 500 million dry metric tons annually.

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 America’s Energy Future It is likely that producers will need incentives to grow biofeedstocks that do not compete with other crops and to avoid land-use practices that cause sig- nificant net greenhouse gas emissions. To ensure a sustainable biomass supply requires a systematic assessment of the resource base that addresses environ- mental, public, and economic concerns. Conversion Technologies Biochemical conversion and thermochemical conversion can be used to produce liquid fuels from biomass and coal. Biochemical Conversion The biochemical conversion of starch from grains to ethanol has already been used commercially. Although production of grain-based ethanol motivated the initial construction of infrastructure, advanced cellulosic biofuels have a much greater potential to reduce oil use and limit CO2 emissions (Figure 8), and they have a minimal impact on the food supply. Biochemical processes to convert cel- lulosic biomass into ethanol are in the early stages of commercial development. Improvements in the technologies are expected to reduce the nonfeedstock costs of cellulosic ethanol by about 25 percent by 2020, and 40 percent by 2035. Because ethanol cannot be transported in oil pipelines, an expanded infra- structure would be required for cellulosic ethanol to reach its full potential. Studies are needed to identify the ethanol infrastructure required and to address the challenges of distributing and integrating this fuel into the U.S. transportation system. Biochemical conversion technologies for creating fuels more compatible with the current distribution infrastructure might also be developed over the next 10–15 years. With all the necessary conversion and distribution infrastructure in place, 500 million dry metric tons of biomass could be used to produce up to 30 bil- lion gallons of gasoline-equivalent fuels per year (or 2 million bbl/d). However, the actual supply is unlikely to meet this full potential soon. When the produc- tion of corn grain ethanol was commercialized, U.S. production capacity grew by 25 percent annually over a 6-year period. Assuming that cellulosic ethanol plants are built at a rate twice that of corn grain ethanol plants, up to 0.5 million bbl/d of gasoline-equivalent cellulosic ethanol could be produced by 2020. By 2035, up to 1.7 million bbl/d could be produced—an amount equal to about 20 percent of

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Overview and Summary  1.20 Tonnes CO2 Equivalent per Barrel Gasoline Equivalent 1.00 0.80 0.60 0.40 0.20 0.00 –0.20 –0.40 –0.60 –0.80 BTL CFT CBFT CFT-CCS CMTG CMTG-CCS Corn Ethanol Cellulosic Ethanol BTL-CCS CBFT-CCS CBMTG CBMTG-CCS Gasoline CTL Ethanol BTL CBTL Energy Source R01203 FIGURE 8  Estimated net life-cycle greenhouse gas emissions for the production, trans-2-16 Main Report portation, and use of alternative liquid transportation fuels. An estimate of negative  CO2-equivalent emissions indicates removal of CO2 from the atmosphere on a net life- cycle basis. The precise value of CO2 emissions from CBTL depends on the ratio of biomass  to coal used. BTL, biomass-to-liquid fuel; CBFT, coal-and-biomass-to-liquid fuel, Fischer  Tropsch; CBMTG, coal-and-biomass-to-liquid fuel, methanol-to-gasoline; CBTL, coal-and- biomass-to-liquid fuel; CCS, carbon capture and storage; CFT, coal-to-liquid fuel, Fischer- Tropsch; CMTG, coal-to-liquid fuel, methanol-to-gasoline; CTL, coal-to-liquid fuel. the 9 million bbl/d (140 billion gallons per day) of the fuel currently used in light- duty vehicles. Thermochemical Conversion Technologies that convert coal into transportation fuels could be used on a com- mercial level today, but life-cycle emissions of greenhouse gas would be more than twice the CO2 emissions associated with petroleum-based fuels (see Figure 8).

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 America’s Energy Future Fully commercializing this technology requires the use of CCS, which has not been adequately demonstrated on a large scale in the United States. But if CCS is ade- quately demonstrated, the geologic storage of CO2 would have a relatively small impact on engineering costs and the efficiency of coal-to-liquid plants. Liquid fuels produced from thermochemical plants using only biomass feedstocks are more costly than fuels produced from coal. But they can have life-cycle CO2 emissions that are close to zero without geologic CO2 storage or that are highly negative with geologic CO2 storage. However, there must be a sig- nificant economic incentive for reducing CO2 emissions to make such fuels cost competitive. Co-feeding biomass and coal to produce liquid fuels allows for a larger scale of operation and lower capital costs than would be possible with biomass alone. If 500 million dry metric tons of biomass are combined with coal (60 per- cent coal and 40 percent biomass on an energy basis), production of 60 billion gallons of gasoline-equivalent fuels per year (4 million bbl/d) would be feasible. That amount represents about 45 percent of the current volume of liquid fuel consumed by light-duty vehicles in the United States. Moreover, co-fed biomass and coal involves fewer life-cycle CO2 emissions than does coal-to-liquids alone, because the CO2 emissions associated with coal are countered by the CO2 uptake by biomass during its growth. Without geologic CO2 storage, combined coal-and- biomass-to-liquid fuels have life-cycle CO2 emissions similar to those of gasoline. With geologic CO2 storage, these fuels have close to zero life-cycle CO2 emissions. Whether thermochemical conversion involves coal alone or a combination of coal and biomass, the viability of CO2 geologic storage is critical to its commercial implementation. If CCS demonstrations are initiated immediately and geologic CO2 storage is proven viable and safe by 2015, the first commercial thermochem- ical conversion plants could be operational by 2020. Given the vast amounts of coal in the United States, the actual supply of coal-to-liquid fuel will be limited by its market penetration rather than by the availability of coal. In 20 years, if two to three coal-to-liquid plants are built each year, up to 3 million bbl/d of gasoline equivalent could be produced annually from about 525 million metric tons of coal. However, this would require a 50 percent increase in coal production, along with the accompanying social, environmental, and economic costs. Because coal-and-biomass-to-liquid fuel conversion plants are much smaller than those that convert coal and will probably be sited in regions close to coal and biomass supplies, build-out rates will be lower. The AEF Committee estimates that

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Overview and Summary  at a 20 percent growth rate, combined coal-and-biomass plants could produce 2.5 million bbl/d of gasoline equivalent by 2035. This production would consume about 270 million dry metric tons (300 million dry tons) of biomass per year— tapping less than the total projected biomass availability—and about 225 million metric tons of coal. Alternative Liquid Fuels from Coal and Biomass—Costs, Barriers, and Deployment Using a consistent set of assumptions, the AEF Committee estimated the costs of cellulosic ethanol, coal-to-liquid fuels with and without CO2 storage, and coal-and-biomass-to-liquid fuels with and without CO2 storage (Figure 9). These estimates are not predictions of future prices, but they allow comparisons of fuel costs relative to each other. Coal-to-liquid fuels with CCS can be produced at a cost of $70/bbl of gasoline equivalent and are competitive with $75/bbl gaso- line. In contrast, fuels produced from biomass without geologic CO2 storage cost 180 Dollars per Barrel Gasoline Equivalent 160 150 140 140 115 115 120 110 100 100 95 80 75 70 65 60 40 20 0 Crude Oil Crude Oil CTL CTL - CCS Corn Cellulosic BTL BTL - CCS CBTL CBTL - CCS @ $60 @ $100 Ethanol Ethanol per Barrel per Barrel Gasoline CTL Ethanol BTL CBTL Liquid Fuel Supply Source FIGURE 9  Predicted future prices for a number of liquid fuel feedstocks. Estimated costs  R01203 are in 2007 dollars and are rounded to the nearest $5. CTL, coal-to-liquid feedstocks;   Main Report 2-14 BTL, biomass-to-liquid feedstocks; CBTL, coal-and-biomass-to-liquid feedstocks; CCS,  carbon capture and storage. 

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 America’s Energy Future $140/bbl for biomass-to-liquid fuels produced by thermochemical conversion. Cellulosic ethanol produced by biochemical conversion costs $115/bbl of gasoline equivalent. The costs of coal-and-biomass-to-liquid fuels with CCS and cellulosic ethanol become more attractive if the price includes a CO2 price of $50 per met- ric ton. Realizing the potential production of each of these fuels will require the permitting and construction of tens to hundreds of conversion plants with the associated transportation and delivery infrastructure. Given the magnitude of U.S. petroleum consumption and its expected growth, a business-as-usual approach for deploying these technologies will be insufficient to significantly reduce oil consumption. The development and demonstration of technology, construction of plant, and implementation of infrastructure require 10–20 years. In addition, investments in alternative fuels must be protected against fluctuations in crude oil prices. Because geologic CO2 storage is key to several of these technologies, com- mercial demonstrations of coal-to-liquid and coal-and-biomass-to-liquid fuel technologies integrated with CCS need to proceed immediately if the United States is to deploy commercial plants by 2020. Moreover, detailed scenarios for biofuel and coal-to-liquid fuel market-penetration rates must be developed to ensure the full utilization of feedstock. In addition, current government and industry programs must be evaluated to determine whether emerging conversion technologies are capable of reducing U.S. oil consumption and CO2 emissions over the next decade. Other Transportation Fuels Technologies for producing transportation fuels from natural gas have been deployed or will be ready for deployment by 2020. But only if large supplies of natural gas are available at acceptable costs will the United States be likely to use natural gas as a feedstock for transportation fuel. Hydrogen has considerable potential, as discussed in previous National Research Council reports.17 Hydrogen fuel-cell vehicles could yield large and sus- tained reductions in U.S. oil consumption and greenhouse gas emissions, but it will take several decades to realize these potential long-term benefits. 17See, for example, National Research Council, Transitions to Alternatie Transportation Technologies: A Focus on Hydrogen, The National Academies Press, Washington, D.C., 2008.