2011 Miriam Hamilton Keare Policy Forum: Toward a Rational Energy Policy

[00:00:00] Speaker 1: The policy forum that is historically there for our annual dinner tonight. We've assembled a great and distinguished panel. I will introduce only the chair of the panel and let him take our work. But before I do, two things. I want to tell you that we've been doing this at Yale. I say that like I know. We've been doing that at this at Yale for 15 years. And it really comes from Marian Care, who actually donated money, who was really a strong contributor to high-level education, wanted forums like this to occur. And we've been doing it every year for, again, well over a decade. And I want to honor, because her son is here, right in the front row, Doug here. Doug, would you stand up? And also, we have with us another distinguished guest. I say that because he hired me. So that, I think, makes him distinguished. But the chairman of our board, Bill Eichbaum, who during his day job is vice president for marine and arctic policy of the World Wildlife Fund. Bill, wherever you are, will you raise your hand so people that know you're here? So this is the CARE Forum. And it's going to be led by a great moderator. Jason Grumet is the founder and president of the Bipartisan Policy Center, but he's had many other jobs. He directed the National Commission on Energy Policy. He's been an executive director for Northeast States for Coordinated Air Use Management. And he's a terrific individual. Jason, take over. [00:01:50] Jason Grumet: Well, thank you very much. Nice to be here in some comfortable chairs with all of you. We have a terrific panel. I had the real pleasure of having had the chance to work with each of them in the past. But, you know, when you read somebody's bio, you learn some new things. And so I'm going to just share a little bit about who you had the pleasure of hearing from, and then we will get started. To my immediate left is Sudene Kelly, who is a partner at Putten Boggs, where she's the co-chair of the firm's Policy and Regulatory Department. Sudene is a former FERC commissioner, which I expect most of you know. She served three terms and was nominated both by President Bush and President Obama. As a bipartisan guy, I find that very impressive. She has tremendous expertise in the issues we're going to talk about today, electric power markets, natural gas markets. She also led some important efforts looking at smart grid and opportunities to integrate renewable power into the national system. Sudene also spent some time working across town in the big marble buildings as an aide to Senator Bingaman. So she has a nuanced understanding of what it takes to actually move things through those structures, and we'll be hopefully talking about that a bit. John Rowe is a dear friend. He is on my board, so I have to be particularly lovely. But as most of you know, John is the CEO of Exelon Corporation, which is one of the nation's largest utilities and, by a significant degree, the largest fleet of nuclear power companies. They serve over 5 million customers in Illinois and Pennsylvania. John has been a utility CEO for nearly three decades, which I believe is unprecedented in the field. In that time, he has distinguished himself both as a really tremendously effective business leader, and his shareholders can attest to that, but also as a real leader on national policy and regional policy. He has been deeply engaged in the energy policy debates of the last several years, and we will take advantage of that. But John's not just a, you know, regular old stay-in-his-land utility guy. The breadth of John's interest and curiosity is reflected both by anyone who knows him, but also by his many hobbies and philanthropies. He and his wife, Jean, founded and support two charter schools in Chicago. Among many other things, John has endowed a number of professorships, including professorships in architecture, sustainable energy, kind of on point, virology, Greek history, and my personal favorite, but if you know John, you'll appreciate this, Byzantine history. So that is just a little bit of a sense of what we will hopefully be drawing from John. Kateri Callahan is the President of the Alliance to Save Energy. She has been in that role since 2004. The Alliance employs a truly incredible staff of over 50 folks who are focused on both the technical issues and the policy issues of advancing an energy efficiency agenda. It is one of the most collaborative and effective organizations here in Washington. She's the Chief Spokesperson for the Alliance, Kateri appears everywhere, TV in front of Capitol Hill, and I learned before the United Nations. I think it was right after Ahmadinejad, so she brought it down a little bit. Before that, she ran the Electric Drive Transportation Association and was an attorney at Van Ness Feldman, and really is one of the people in town who can combine the technical policy and political aspects of the work that many of us do. And finally, fresh off the plane from Paris, a committed public servant, David Sandalow is the Assistant Secretary for Policy and International Affairs at DOE. In that role, David does a lot of everything. He helps coordinate overall agency policy. He's responsible for managing the international portfolio and activities at the department. This is by no means David's first stint in public service. He was the Assistant Secretary of State for Oceans. He was the Senior Director for Environment and Energy at the National Security Council and the Associate Director for Global Environment at CEQ. In the middle, he spent a few years at Brookings, where he was a senior scholar and actually took the time to write a book entitled Freedom From Oil, which seems like it could be relevant to our discussion. So because I'm the moderator, I get to have notes, which is really kind of fun. [00:06:07] Speaker 3: It's not fair. [00:06:08] Jason Grumet: Yeah, well, you'll see how productive this is. You know, I'm a big fan of Aspiration. The title of this panel is Towards a Rational Energy Policy, which I actually think is, in fact, an achievable or at least reasonable goal. And so I'm going to start out with a couple of broad-based questions, then maybe throw a few specific questions. And then there's supposed to be a period where the panel chats with itself. We'll see how that goes. But just to start out and maybe just kind of ask the question down the line. So this notion that we should have a rational energy policy obviously begs the question of what are the irrational aspects of our current energy policy? And just ask each of you, just a big, small, medium, but what's an aspect of today's energy policy that you think is irrational? And if you have any suggestions, how might we change it? [00:07:02] Speaker 4: He didn't tell us that he was going to ask us that question. [00:07:06] Speaker 5: So we're all intimidated. [00:07:08] Speaker 4: Right, right, right. [00:07:10] Speaker 5: Now, I'll be against type, and the government guy can jump right in with the first answer. Jason, the first thing that I thought of when you were asking that question, which was just said you didn't warn us, you had asked, is Winston Churchill's famous statement about America always does the right thing after it's exhausted all the other options. And that's particularly useful to keep in mind these days, I think. The second thing that came to mind, just to, I think, get it right out into our discussion, when you look at something that is irrational in our current energy dialogue, I would have to say some of the recent dialogue about climate change. I mean, I am just back from abroad, and not just in Europe, but also when I travel in Asia, the notion that Americans are still debating whether or not the science of global warming is real just takes people kind of by surprise. And they don't understand it. They quiz us on it. You know, I think, in fairness, when I talk to Europeans about this, I just had this conversation last night. We don't have a monopoly on a lack of respect for science. In Europe, there's been a debate about genetically modified organisms, which has been pretty detached from the science of GMOs for the past decade. But here in the United States, we are having a discussion, which is sadly divorced from the science of climate change, and that's the problem. [00:08:26] Speaker 3: I'll jump in, too. I think one of the reasons I was intimidated by the question when I first heard it was, gosh, only one thing that's irrational. There -- I was reading some news clips before I came over here, and the University of Texas at Austin released a survey today of 3,400 Americans. And it should come as no surprise to anyone in this room, but 86 percent of those folks feel that the country is in the wrong direction on energy policy. And then asked to take a look at who's doing the right thing. They look at themselves first and say, well, I am in my home on energy efficiency. Last on the list, last on the list, with 81 percent dissatisfied with what they're doing was the Congress. So I think that, you know, it's very telling. There's a lot that we're not doing right, a lot that's irrational, a lot that needs to be fixed, and unfortunately, right now, very little happening. [00:09:17] Jason Grumet: The 19 percent that is satisfied on energy that was higher than the overall congressional. Oh, yeah. [00:09:23] Speaker 3: They don't -- people are not real pleased with our Congress right now, I think. Joe. [00:09:27] Speaker 6: Well, I could make a long list of things that are irrational, and you might get tired of listening to it. But you ask for one, and it's really quite simple. We have a situation where Congress refused, and it's now obvious will not for a number of years, to enact either a cap-and-trade or a carbon tax, which would deal with the climate question in an efficient way. Indeed, they refused to enact one that had a $25 a ton cap. But at the same time, in every state and in both political parties, in the name of cleaner energy or more independent energy or climate change or some other god, political leaders are requiring utilities to buy power at costs which range from $100 to $200 a ton of avoided carbon. So it's just fascinating why we watch people ignore the low-hanging fruit on the tree and try to race to the top of the tree where it's really expensive just because they can hide the cost up there. [00:10:52] Speaker 4: I think the one irrational policy that I would add to the three that I agree with that have already been discussed is one that's near and dear to Kateri's heart, and that is energy efficiency. It's irrational that we can't achieve energy efficiency, in large part because achieving energy efficiency doesn't hurt anyone. There's nobody on the other side of that argument saying that energy efficiency is bad. Obviously, there are many reasons why we can't. But I think that's the hardest one for me to accept. [00:11:32] Jason Grumet: That's good. I'll come back to some of that for a future warning. All right, so that's kind of the negative. Let's talk on the aspirational side. Let me just suggest that I think when the administration came to town, there was, I think, a real enthusiasm to change the caricatures on energy policy, to not just be, you know, Democrats for, you know, renewables and conservation, Republicans for production. And I saw kind of a four-part plan to try to build a different kind of consensus. One was investment in technology, which took the form of the stimulus. Another was market-based approaches, particularly to climate change. The third was support for domestic oil production. And the fourth was support for the next generation of domestic nuclear. So let's run the list. Stimulus, not so bipartisan. Cap-and-trade, as John said, kind of a disaster. Set back the brand of this effort at least several years. Macondo and Fukushima, right? So maybe these were not all the four pillars, but at least four of the pillars that was the basis of this new foundation have been knocked over, which causes me to see the challenge of creating a narrative for energy policy that can at least start to build a good fight, let alone a resolution. And I think the broad question number two is, what are the ideas that any of you could see kind of retreading this discussion in a more productive way, and how could you see that unfold in the next couple of years? [00:13:03] Speaker 4: I think you have to let the politics play out for a while. I think those concepts are still as valid today as they were two years ago. I think if energy policy had been President Obama's number one priority instead of number three, we'd have it. And I think that the economy and politics intervened after health care reform and financial services reform. And I think we'll get back to it. It's valid. It'll just take a couple of years. [00:13:36] Speaker 3: I guess I think, and obviously I'm an advocate for energy efficiency, but I do believe that the foundation for taking us back to rational energy policy will be energy efficiency, for the reasons that Sue Ellen mentioned. It's -- as Sudeen mentioned, excuse me. It's something that we will do not just for environmental reasons, but for economic reasons, for national security reasons. And it's something that has proven to be an issue that not just is non-partisan, but that can attract the very polar ends of the political spectrum. So we have very conservative members of the Republican Party, for example, serving on our board of directors alongside very liberal Democrats. And so it is an issue where I think we can come together because it does so much good. And as Sudeen said -- sorry, Sudeen, I don't know why I keep doing that. Sudeen said, there's -- it really doesn't harm anyone. So it's a win-win-win solution and something we can do right now. I think building that bridge back in then to bipartisanship and looking at energy policy in a rational framework, it helps us to get there. [00:14:48] Speaker 6: Well, I've spent, as Jason said, almost three decades running utilities, a field that I got myself into partly because I wanted to have some impact on energy policy. Now, I can say with some confidence that my shareholders have done pretty well. I can actually prove that. I can say with some confidence that I've kept the lights on and improved the service. I can say that I've made my companies somewhat greener. And I certainly say I've made them more diverse in their management. So I feel pretty good about a lot of things. But I have had no impact on energy policy whatsoever. We didn't have one when I started, and we don't have one now. And I'm going to spend next year teaching history to kids in a slum, because I think that's more promising than the search for a rational energy policy. But just to try to be constructive, let me say that all of our efforts to forge one have been trumped by three things. Two are bad. One is good. [00:16:04] Speaker ?: The two that are bad. [00:16:05] Speaker 6: The two that are bad are anger. If you compare the '08 and '10 elections, what you see is anger in both cases, but you don't see positive direction. The second is the recession and its tendency to dominate all issues. Those are the two bad ones. The good one is simple. It's natural gas. Gas is queen for a decade. My own guess is that it may be queen for two. It is cleaner. It is domestic. It is cheaper than all the other energy sources. And it's here. And just once in a while, we should stop bemoaning our lack of a rational energy policy and fall down on our knees and thank our lucky stars that we fell into this one. [00:17:03] Speaker 5: I agree with most of what my three fellow panelists have just said. Maybe not all of it. One statement I would single out for vigorous disagreement is John Rowe's statement that he has had no impact on U.S. energy policy. I can attest to the contrary for the good of the nation. Let me add two things. I'll make two comments. One is I think to your question, Jason, about aspirations and what could be a foundation, I would point to diversifying the nation's fuel supply in our transportation fleet. If you poll Americans, one of the few questions that routinely gets above 90% agreement across the spectrum is reducing dependence on foreign oil. And reducing import dependence is extremely, extremely important. The really fundamental issue there is that 95% of the fuel in our cars and trucks comes from one source, from petroleum. And that doesn't even seem strange to us because we've grown up with that. Our parents grew up with that. Our grandparents grew up with that. But it's actually, I mean, it's strange. If I was thirsty and I wanted, you know, didn't want a soda, I could have orange juice or Coke. If I was hungry, I could have a hamburger, hot dog or salad. Why is it that if I want to move anywhere in a vehicle today, basically I have one choice, and that's petroleum. And I think there are tremendous opportunities in changing that and reducing that figure from 95% over the course of the next several decades. And that's something that can unite the Americans and bring them together. And it actually ties into the second point I wanted to make, which is a vigorous agreement with what John was saying about natural gas. Just at the International Energy Agency ministerial meeting in Paris where there was no topic that was hotter than natural gas. I think that's true at almost every energy conference I go to for the past year or so. The IEA is putting out a report, I guess yesterday, about the golden age of gas around the world. It's a revolution that started right here in North America that's going to have profound impacts on geopolitics, on the environment around the world. It's a huge potential there and huge issues to be managed, of course. Just a final point on this. And natural gas, on the one hand, when it displaces coal, has very beneficial impacts on carbon dioxide emissions. It's critically important for balancing renewables when it comes to load leveling in some places. It also, as John can talk about with a lot more authority than any of us, will undercut nuclear and undercut some renewables in the years ahead. And so it makes the development of those types of electricity generation more challenging. [00:19:37] Speaker 3: I guess if I could just add one thing to take issue, and I'm reluctant to do so, but I feel compelled to. You made this statement, John, that it is basically the least expensive of the resources, of energy resources available. And I think I just want to say that if you consider energy efficiency as a resource, as a way to meet our needs, it's delivered much cheaper. And I only make the point because I agree with you that we are very lucky with what's happened with natural gas. But it's going to be an all of the above for quite some time. And I think that to the extent that we can keep highlighting energy efficiency as the cheapest way to go, and the first step we ought to take, that then we will hopefully drive policy a bit more in that direction. [00:20:23] Speaker 6: I have no doubt of that. As you know, because you've heard Ralph Kavanagh and I do this schtick before, Ralph and I have an endless debate on whether energy efficiency is a supply resource. And I have pointed out to him again and again that the signs for the indecent activities you could purchase at the brothel in Pompeii does not include abstinence. But he seems to find that that's less than constructive on my part, whereas I think it's absolute genius. But the point is that I'm making under the lewd flag is that energy efficiency is perhaps more important, but it's very different than the conventional supply sources. I've spent a lot of time on energy efficiency, many of it -- much of it with Kateri's organization. And there are four ways to get it, and they are in rank order of importance: technical innovation, a la the late Mr. Jobs. If one can come up with things that are more efficient that people want, that's the best of all solutions. The second way to get it is probably government standards. If it's really this important for reasons external to the market, there are worse things than requiring it. The third way to get it -- and I would have put this second, but the self-interest would have been bleating -- is to let the price go up. The fourth way to get it is to have utilities subsidize it. There's Dallas a place for all four, but the reason it's important to think that way is that there are reasons why customers aren't doing what it is in their economic interest to do. And some of those reasons are inertia, some of them may be lack of capital, but some of them is that they have different priorities than we want them to have. And it's important to remember that. I mean, I have been told that if I take one more circle light home, it will be screwed in my left ear. And, you know, it seems that the consumer in my house is buying something other than energy. And I learned that that is not unique, and it is not confined to upper-income houses. And so it goes. [00:23:19] Speaker 4: I wanted to take a branch off of a point that David made earlier, and that is that Americans are looking for diversity in their energy resources. And I think, well, first of all, America is blessed in that we have every energy resource. We have, naturally, an abundance of diverse energy resources. In the past, that has been bad in some ways. I think that that diversity has been a barrier to our achieving an energy policy. But that's because, in the past, we tried to achieve an energy policy that anointed an energy resource as queen for the day or the decade. We tried to pick renewables or nuclear. That works in a country that doesn't have resources because they have to pick something. But in our country, that's hard for a variety of reasons, including political and vested interests and economic entrenchment, et cetera, et cetera. But one of the reasons that I think that your point, the first point you started out with is valid, is putting a price on carbon is, in many ways, brilliant. Because it eliminates that problem. Because we don't anoint one. We allow them all to coexist at their price. And so I still have hope and believe that, eventually, that's where we'll go. It just seems to be the most rational. [00:24:57] Jason Grumet: So I want to keep talking about natural gas and energy innovation. And one other just broad frame to put out before we kind of dig down on some other questions is, you know, I share very much the collective sense that natural gas is one of the principal forces that's now going to shape energy policy. Kind of one of the boundary conditions for the next decade or so. I think there's one other, which is that we've got no money. We've got a lot of natural gas, no money. Right. $14 trillion. The next president -- the president in the beginning of the next term is going to have about an $18 trillion deficit. The whiplash from stimulus to austerity is affecting all kinds of things, energy policy, you know, certainly being among them. And just, you know, kind of general reflections on to what extent does this austerity challenge, which will be with us for a while, undermine what we'd like to achieve with energy policy? And to what extent might it actually provide opportunities? [00:25:57] Speaker 4: Did you want to tie that to gas in particular? [00:26:00] Jason Grumet: You could take that to natural gas if you'd like or, you know, broadly to just the question of how we, in fact, address the desire for security and diversity without -- [00:26:10] Speaker 3: I think it's hard to tell right now how much of an impact when you've got the super committee looking. And we're working hard to make sure that the budget axes don't swing too hard on energy efficiency activities because we can demonstrate that they're actually returning more to the economy than it's costing the government, and therefore the taxpayers, to make those investments. It looks like the Department of Energy is in a bit of agreement with that. We've just issued this last month a Quadrennial Technology Review, the first one. And they're looking at trying to prioritize those activities that are near-term, investments in smart grid, investments in energy efficiency. And so I'm hoping that we can hang on at least in those areas, but it's going to force hard decisions, and somebody's got to lose. And every time, you know, we go and ask for reasonable legislation with any price tag at all, the energy efficiency bill that Shaheen and Portman put up and that went through the committee only cost a billion dollars. But a billion dollars had to be offset before it could even get out of the committee. So I think that the choices are going to be really difficult. And my hope, again, is that if we can at least continue those investments to have technological innovation, to help people to improve their lives, to lower their energy or manage their energy bills, that we can at least continue those kind of investments. And it's going to be hard even with that. [00:27:33] Jason Grumet: David, I know you think a lot about energy innovation. How do you see the new fiscal realities affecting that? [00:27:40] Speaker 5: So there is an old saying, markets go up and markets go down. And the same thing is true of budgets. If you look over time, budgets go up and budgets go down. And each swing of the pendulum creates both challenges and opportunities. And the challenges are more vivid when budgets are coming down. But there are opportunities there too. And I think an opportunity is to focus on what the priorities are. And it forces choices and it forces hard thinking about what the priorities are. And the report that category points to is one I would commend to anybody who's interested in this area. It's a very serious effort led by our Under Secretary for Science, Steve Coonan, and by Secretary Chu. It's called the Quadrennual Technology Review. And it's a very serious look at what are the technologies in the energy space over the course of the next years and decades that are going to make a difference. And I think it's a good guide to prioritization. Secretary Chu, I have to say, has been a remarkable leader. I mean, it's been -- I came to the department with him, so I wasn't at the Department of Energy before he was there to know what it was like. But it has been very interesting to watch people defend their budgets to a Nobel Prize winner who undoubtedly knows more about the topic that they're briefing him on than they do. And he has really brought a sense of intellectual rigor and a passion for innovation and a passion for figuring out how do we innovate in the energy area. And the ARPA-E program, I think, has been a signal success. There have been some other successes. And I think they've also been quite bipartisan, some of those programs. And so I think, you know, those are areas that it's extremely important to continue investing in the years ahead. [00:29:17] Speaker 6: I just would like to be a little more iconoclastic on that point. I think in this area, it's a good thing that the government is out of money because I think it's time to take a rest on subsidizing a lot of energy technologies. Now, there are a lot of other areas where it's a very bad thing that the government is out of money. I don't want to sound like I'm in favor of burning the house down. No utility executive ever is. But I want to give you a couple examples. We have $18 billion in loan guarantee money for new nuclear plants. I think that's good. I think that's important. I don't think 36 or 72 would be better. Right now, as David suggested, new nuclear plants are out of the money. I would say by a factor of two to three. We don't need to do more than four or five to see where we are on the technology for the future. Gobs of money have been put into wind and solar. It doesn't need more subsidies in the short run. And writ larger, we are not out of money. It's the government that's out of money. We're all governments that are out of money. Money can be raised for natural gas projects. Money can be raised for pipelines. Money can be raised for electric infrastructure projects. And I think for a while at least, the market is closer to right than many of us are. Now that's not meant to be some sort of laissez-faire paion. I've never existed in an utterly free market myself. And I suspect the only one that exists is the bazaar among thieves. But I do think this combination of an unanticipated resource of vast scale and what the markets are doing in electricity and gas is telling you some very important things. And whether it be conservatives who want more nuclear or coal gasification or liberals who want wind and solar, you know, a little, fine. But the market is saying right now we need a shift toward gas. And I think the market has got that right. And I say that even though cheap gas has driven my company's stock from 92 to 42. I mean, like Injun Charlie, I believe that what's good for Exelon is good for America. But in this case, cheap natural gas is very good for America. It just happens to be a bitter pill for Exelon. You know, we need to keep working on 50-year technologies. Secretary Chu is better at that than thinking that way than I would ever be. But for 10 years, for 15, we know how to do mixes that are both cleaner and more economic. And we should kind of let that happen. And I would ardently agree with all my colleagues up here, but especially David for this point. You know, we need more energy efficiency. I think we'll keep getting it. We need to see natural gas play a bigger role in transportation. You wouldn't be shocked to know that I like the idea of electric cars. You might be more shocked to know that when we look at hybrids, we find most of the environmental advantage comes from the conventional hybrid, not from adding the plug-in component to it. So we want you to have a plug, and we want you to keep it plugged in quite a lot. But we can't find an environmental rationale for telling you to do that. And so it goes. [00:33:55] Speaker 4: I think that you can look at the discovery of shale gas and fracking and unconventional drilling and unconventional otherwise believed to be exhausted gas reservoirs as a post-recession, non-governmental stimulus fund. And it's doing things that we wanted our stimulus funds to do, and that's good. It's stimulating jobs and energy independence and lower prices for energy, including all forms of energy, including electricity, significantly. Sorry, John. And it's a new market. You can look at it as a newly discovered market. It's a chance for America to pursue its technological goals. And we're seeing now LNG terminals that were receiving terminals applying for export licenses. So it is a product that America has that it can now export. And that's pretty exciting. And it produces good things. It has the power, though. It's not all good. And I think we have to be not caught up in the headiness of it all and think about those things that could go wrong. We could get so exuberant about it that we don't regulate it appropriately. That we overlook the environmental -- the adverse environmental impacts. That could happen. And as we become more and more dependent on natural gas, we have to look at what that means. Although it can be good, it could also potentially lead to less reliability. If we move it more and more into the electric industry, and the predictions are that over the next, I believe, 20 years, it's likely that 60% of our new generation will be gas fired, it's going to set up a dependence on gas in our electric generation. And that's going to have its reliability problems that need to be recognized and need to be tackled. But overall, I think you can look at it as a new stimulus. [00:36:26] Speaker 5: David? Come in on a couple of points. First, I want to tie together the points on innovation and today's shale gas revolution. In the 1970s, 1980s, hydraulic fracturing and horizontal drilling technologies were pretty well known to the industry. They were extremely expensive. The Department of Energy invested in that technology in bringing the costs down throughout the '70s and '80s. By the end in the '80s and early '90s, was doing some cost-share programs with industries. And 20 years later, we have the shale gas revolution. It's extremely important to look at technologies today like batteries, which are still expensive for cars, like small modular reactors, which are still expensive, and others. And think about where are we going to be 20 years with these and what's the government's role. So we need to protect innovation expenditures in order to get there 20 years from now. Second, John raised the point about the environmental benefits of plug-ins, of plug-in electric vehicles. I'd say -- I'd make the following points. First, big local environmental benefits. I mean, if you have a city that's driving with lots of plug-ins in it and don't have emissions coming out of the tailpipe, you have less conventional pollution in the city. Second, actually greenhouse gas benefits too, particularly if you move towards greening the electric fleet. The more renewables, the more nuclear you have out there, the more you're running your cars without carbon emissions when they're plugged in. And third, even if you plug a car, a plug-in car, today's generation plug-in car, directly into a coal plant, you're still actually generating less in the way of CO2 emissions than you are running the average car today in the United States on oil. So there are real benefits, and then beyond the environmental benefits of plug-ins, big strategic benefits from decoupling our transportation sector from its reliance on oil. And then third, let me just quickly jump in on a really interesting point John was making on free markets. I think too often in this town there is a discussion that's framed as is the government going to participate in this, or are they going to let the free market control in the energy area? Ladies and gentlemen, that is a myth. Around the world, governments are participating in the energy markets. The issue -- and many of the energy decisions they were making are fundamentally relating to global trade and energy products. The issue is not whether or not we're going to leave the energy business to the free market. The issue is whether the U.S. government often is going to help its people compete in global markets for energy goods and services. And then as a second and related point here, for a century and, you know, in decades, other, you know, many forms of energy have benefited from subsidies. An interesting report out recently from a woman named Nancy Fund, who did some research and found that over the course of the past century, there have been about ten times as much in the way of oil and gas and coal subsidies as we've had renewable subsidies today. And I think there was about four or five times as much nuclear subsidies. So current new technologies are competing both against the global market forces and against the history of subsidies for incumbent industries. So I want to talk about infrastructure a little bit. [00:39:43] Jason Grumet: And Sudene, your FERC history certainly puts you in a position to help out here initially. Natural gas boom creates all kinds of interesting challenges for natural gas infrastructure. FERC has a renowned history of being very efficient when it comes to pipeline siting and then being part of this, you know, malaise of horror when it comes to transmission siting. And I wonder if you could say a little bit about that, you know, frame if you agree with it. And then also just a little bit for the rest of the group. What's it going to take to build new stuff? Since new stuff, almost no matter what it is, is generally better than old stuff. Do we have the ability as a nation to lay down the new stuff? [00:40:27] Speaker 4: We're going to build new pipelines. There's just no doubt about it. And it's going to be driven by the market. It's not going to need stimulus because where we're finding the shale gas, a lot of the places where we're finding the shale gas in the Marcellus, in the Utica, West Virginia, Pennsylvania, New York, Ohio, we haven't had gas there in 100 years. And so our existing pipeline system isn't designed to take that shale gas and move it. So we're going to -- it's driving infrastructure and will continue to. The shift in production from -- it was 80% of our gas came from the Gulf to -- I don't know what the number is now. Maybe, do you know, David? But it's significantly less already. And it's going to shift even more. It's leading to looking at the existing infrastructure and having to redesign it. And I'll tell you one reason that you know that we're going to have -- that gas infrastructure is going to be important is Kinder Morgan's recent proposed acquisition of El Paso at $21 billion. Rich Kinder knows what he's doing. He knows that there's a market in gas infrastructure. On electricity -- the reason that FERC can get gas pipelines cited is because FERC has jurisdiction to get gas pipelines cited. You get a laser pointer. The reason FERC can't get transmission lines cited is because FERC doesn't have jurisdiction to site transmission lines. If FERC did, it would. And I think that's where the malaise, if you will, or the fact that -- well, also -- and John will speak to this much more eloquently than I -- it's a little more difficult to put together the whole value chain in electricity that enables the investment in transmission to happen. You have to have -- you're taking an electricity, unlike gas or oil, where there's a central place of production. There's multiple places of production. And multiple producers who are competing with each other. And to build -- and then there's load. And the load or the demand is in cities around America. To get -- to hook those two up requires an awful lot of coordination. But that has to be done before you can build a transmission line. So it's much more of a challenge economically, business-wise, as well as just -- as well as transmission citing authority in the states versus the federal government to get transmission lines built. [00:43:14] Jason Grumet: So if we can stipulate, Kateri, that increased energy efficiency would diminish the need to build these terribly difficult projects, recognizing we're still going to have to build some to connect, you know, other power sources into the grid, to stabilize the grid. John, anything about the world of transmission citing and building? Gee, you set her up and then you threw me the ball. I knew that if we only talked about transmission that Kateri would feel honor-bound. I know, I know. You have to put that in. [00:43:43] Speaker 3: But let me just add something there, then, because you can do an awful lot. And if you look at the work by the McKinsey Global Institute, and they're not efficiency advocates, as I am, but they believe that if you make the investments in energy efficiency and investments that have an internal rate of return of 10% or more, you could essentially flatten the growth in electricity demand in the United States over the course of the next 15 years or so. Now, even if that has some inflation, there's a lot that can be done. But that doesn't deal with the old fleet that we have, and it doesn't deal with population centers moving. So I'll pitch the ball back over to John at that. But I do think that there's a lot that can be done, and we can save a lot of money by investing in efficiency over transmission lines. [00:44:25] Speaker 6: The recession has taken care of growth in electricity demand very nicely. Most of us are guessing we'll be back to '07 levels by '14 or '15. I mean, one of the things that's going on is we are in a no-demand growth environment, and we don't know how long that's going to last. Efficiency actually has something to do with that, but the recession has more, I think. You know, I've seen all sorts of estimates on how much effect efficiency can have. And usually one-third to one-half of load growth seems to be that number, but they're all just guesses. But on a more profound point here, utilities want to put in new infrastructure. We like doing that, and only a utility executive can wax rhapsodic over the curve of the transmission catenary. We like building these things. The needs for modernization are great. I mean, big interstate transmission lines with their effects on renewables sing in some ways. smart grid sings in others, just let me replace more 60-year-old cable and pipe, and I'll be happy. The issue, though, is it's a combination of two things. First, this is an area where FERC has been very good. I mean, I know few utility executives who would have anything but positive things to say about FERC's commitment to giving you a decent rate regime to make transmission investments. But the good thing about being in the electricity business is everyone wants your product. The bad thing is no one wants the things that make or deliver that product. And that's as true of large transmission lines as it is true of large generating plants. And then add to that that replacing underground cable that went in the '40s or the '50s or the '60s or '70s eats money like crazy. It's very expensive. It needs to be done. But state commissions are only willing to support so much of it at time, particularly in a recession. And I think the principal objection to new interstate transmission lines is the siting difficulty. While I think a FERC preemptive jurisdiction would help, I don't think it would make it easy like gas pipe for the simple reason gas pipe is underground. And it's still not even close to economic to put much interstate transmission underground. I mean, you want to make wind too expensive, require the transmission that serves it to be underground. So, I mean, I think the challenges to renewing the infrastructure are very complicated and very much related to the proposition that the electricity business has about as big an environmental envelope or footprint as it's going to be permitted to have. [00:48:05] Jason Grumet: David, I wanted to come back on the idea of energy security and transportation fuel diversity. You had made the point just a few moments ago that the technology investments 20 years ago were critical to enabling shale gas. And the country made two pretty big policy investments in 2005 and 2007. Energy bills that were passed, you know, with two-thirds of the support of the Congress. And I know that, you know, that, in addition to the administration policies, created a moment here, maybe a little bit of recession thrown in, where we were producing more oil than we had produced before and importing less. That, in fact, what had seemed to be kind of this inexorable course to be increasing and increasing our dependence had actually shifted. What do you see as that dynamic and what the opportunities are in terms of domestic energy production to also enhance that diversification? [00:49:03] Speaker 5: Enormous. Enormous. Enormous opportunities here. We've spoken about shale gas. One point that hasn't been made is that there are a number of pathways to use natural gas in the transportation fleet. There is compressed natural gas and liquid natural gas, which get a lot of attention. Methanol is also a very interesting pathway for use in the transportation fleet. Methanol is produced in industrial quantities today. It's got -- I mean, it's a little bit more corrosive than ethanol, about half the energy content of petroleum. But it can be used as a transportation fuel. And I think there's going to be -- Israel is looking at this pretty seriously because they've got a lot of natural gas. So one interesting conversation is how to use our domestic natural gas in our transportation fleet. And there are a number of different pathways. But then, very significantly, the same technologies that are giving us the shale gas revolution also have the potential to dramatically enhance domestic oil production. We're already seeing that in North Dakota, where we have 400,000, 500,000 barrels a day, I think, now, of production using the same type of technologies and shale oil being produced. So there's really enormous potential there. And, of course, we have enormous potential from, you know, offshore sources as well. We had, you know, a historic problem in Macondo with the Macondo well. But we are now recovering in the Gulf. We have a system now for permitting in the Gulf. And there's going to be tremendous opportunities for domestic oil production as well. Did I ask him a question? [00:50:38] Speaker 4: Of course. So, David, what do you think is the biggest barrier to moving our transportation -- moving our fleets to natural gas or electricity? And do you think that we will move it to one or both at any point? [00:50:55] Speaker 5: I absolutely think we will. I think there is enormous momentum in this direction, both from technology, from popular opinion, from, you know, from fundamental drivers in oil prices. I mean, if you look at the projections for increasing oil demand and then investments in increasing oil supply globally over the course of the next several decades, I think most experts who do that predict that oil prices are going to stay high, if not -- and probably get higher. And so there's going to be, you know, real move towards finding alternatives in the transportation sector. At the same time, we have, I mean, I think the biggest opportunities with electric vehicles that have ever been there. We have now -- these vehicles are all over the world starting to emerge from the auto shows onto the streets of cities in particular. I mean, in the United States, we've now got tens of thousands that are out there, and that curve is going to be climbing dramatically in, you know, in the years ahead. So I think that's going to be transformational, and I think natural gas will also. [00:51:54] Speaker 3: I'd like to make a comment on that just from my background in working on electric vehicles. And I think that it's true. I agree with you, and I'm delighted that we're making this transformation and moving into new vehicles. I am a bit skeptical about how fast we can do it, and that's just based on, if you look at what happened with the hybrid technology and how long it's taken and how long it takes to turn over our fleet of vehicles. So I think that, you know, I know the President has a goal of a million electric vehicles on the road by 2015. I would love it if we could meet that goal. But, again, if you look at what the situation is now, and I think still with new car sales in the U.S., it's less than 3% are hybrids, even with high prices of gasoline, even with that technology having been on the road for 11 years. So I think the transformation will happen. I think that the projections by the Electric Power Research Institute, the goals that are out there by the governments and others, may be a bit optimistic as to how fast we can do that. [00:52:52] Jason Grumet: So I'm about to kick this to a crowd of hungry lawyers and a few media. Before you give it to them, let me throw in one more thing on that subject. [00:53:03] Speaker 6: I mean, I can't state the famous Moore's Law quite accurately, but fundamentally it suggests that in computer processing, about every 18 months, the capability of a certain size machine to do the job doubles. And there is this lust to want to think that Moore's Law somehow will apply or can apply to the kinds of investments we're talking about up here. But the laws of physics that apply to microwatts and milligrams are not the same as the laws that apply to megawatts and megatons. And the transitions in our business happen much more slowly. They tend to be in decades rather than 18-month cycles. If I were asked to name the two major transitions that have happened in my three decades, they would be first the gas combined cycle generating plant and second the shale gas fracking technology. I think third would be the improvements that have come in solar energy, but it would be a distant third. And perhaps fourth is the ability of digital equipment to smarten the grid, although that's a very complex subject. You know, the point I'm making is that when you're involving huge quantities of energy or materials, things that take three to ten years to build and three to ten years to license, the turnovers are just inherently much slower. This is Kateri's point about the existing automobile fleet. I mean, people might want to change. They might even think they would like to change, but you're reluctant to toss that old car out. We did some looking comparing the plug-in hybrid to the all-electric. And again, I defer to David on the technical answers. But our first cut said the all-electric makes more sense than the plug-in hybrid if you use it for commuting. But that means if you're going to be a normal, what we consider a normal life, you need two cars in the family. I ran this by my friends at Edison International, and they said, "Yep, that's what our numbers say, too." Except then our numbers go on to say, "But the people will buy the plug-in hybrid," where they won't buy the all-electric because they want one car that will do both things. And that's more important than the narrow econometric analysis. The point I'm just trying to leave you with is that when you're dealing with these big things, they don't happen at the rate of evolution from iPhone 1 to iPhone 4. Right. [00:56:17] Speaker 5: John and Ketteri are 100% right about the length of energy transitions. And to tie it back to your first question, Jason, this is an irrationality in our political system and in our popular culture when it comes to energy. We expect changes at a pace that are not consistent with all the dynamics that both John and Ketteri have been talking about. And they're not consistent with political cycles, which is particularly challenging. [00:56:37] Jason Grumet: Right. All right. Now, I got 16, 17 more questions here, so you all don't feel pressure. But here's a nice opportunity to broaden the conversation. Does anybody have -- if you could stand up and let us know who you are. Mics are coming. And thanks for breaking the ice. [00:56:55] Speaker 7: Everyone takes the first go. Always happy to do it. Hi, I'm Victor Flatt. I'm an environmental law professor and the head of our Center for Law Environment Adaptation and Resources at the University of North Carolina. And I get to be working with ELI for a couple of weeks on some projects. So I'm glad to be here. I wanted to go back to your discussion about letting the market do what it's doing and move -- particularly moving towards natural gas. One of the pillars, if you want to call it, of energy policies has always been environmental protection. And that is a huge driver in a lot of what comes out of policy. I would love to hear your reaction a little bit to the barriers to creating more natural gas cycle electric power, particularly as it replaces grandfathered coal plants. So as an example, you know, EPA just put out their transport rule. Texas has filed a lawsuit, even though they could easily meet this by transfer of a -- you know, shut down a grandfather plant and move into a new cycle gas fire plant and still meet the requirements to produce the power. But, you know, it's kicking and screaming, I guess. And that's when the law is telling them they have to do it. So how do you see us making that transition if, in fact, it is on the market, from the market? [00:58:24] Speaker 4: I think we're going to make that transition. And I think we're going to make it relatively easily in spite of the crying wolf. If you look at how electric generation is priced, it's in one of two ways, depending on where you live. It's regulated. If it's regulated, there's not risk in moving. Right. Now, that doesn't mean that regulators today want to -- in the recession, want their rate payers to take on the cost of retiring an old coal and putting in a new gas. They do on the one hand. On the other, they're worried about the increases in cost in rates to the rate payer. So I think part of the call for having EPA extend the time for compliance comes out of that desire and of that understanding that it's political and it will take time for the regulators to get their arms around it. But it's also in the interest of electric utilities who otherwise aren't going to see, as John explained, an increase in demand. And so it provides a new investment opportunity. So we'll see if John agrees with me. So I think it's going to happen in regulated environments. In unregulated environments, it's also going to happen because it's a transition to a more competitive source of electricity. So if you are in a bid-based auction market where the price is being set by anything, almost, coal is going to compete. So as an entrepreneur, an independent, you're looking -- I mean, gas is going to compete -- you're looking, I think, favorably upon gas fire generation. [01:00:23] Speaker 6: I agree with nearly everything Sudin said. I would shift the emphasis just a tad. First, I believe that it will happen, but every lobbyist I can find is trying to help make my belief come true. I am a conservative. Somebody told me I was on this panel as the Republican. I can assure you right now there are a lot of Republicans who don't feel I deserve the name. But I agree with Sudin that it is going to happen. I hope in the 12 to 15 timeframe pursuant to the existing law. If not, I'm quite certain within a couple of years from that. The one place where I see it slightly differently than Sudin is I think it happens in the unregulated sectors first. We sold most of our coal fleet 11 years ago. Now, why did I do that? One, I needed cash. Two, I had to fix a nuclear fleet and couldn't do both at the same time. And three, I thought all these things were coming and it was good to sell the things while they were worth a lot of money. But it was a strategic bet that the new rules and the climate change issue were real and wouldn't go away. And that distinguishes me from much of my industry. But probably the bigger force on that decision, and certainly the bigger force on the fact that we shut down two coal plants in Pennsylvania over the course of this year. We're about to get them shut down as soon as PGA months is. Is that they're in the market. When you're in the market, you make the decision in a very cold-blooded way. If those plants were in regulated utilities, the decision to shut them down or not would have been much more a political one. And it would have been the following question. Would the regulator rather I shut them down and save some money and ran a natural gas plant more. Or would the regulator rather that I kept those jobs for another two years. It's not an easy decision for the regulator. It's not such a clear decision for the regulated utility. One of the reasons Exelon is very toothsome on this set of issues is we believe the old coal plants are not only hiding behind the grandfather rules. We believe they're hiding behind regulatory walls and we want to smoke them out of those walls. [01:03:32] Jason Grumet: Subtle as usual, John. In the front, we have a couple of questions. [01:03:47] Speaker 8: I expect that a lot of people who have been to a lot of these forums will agree with me that this is, I think, by an order of magnitude, been the best discussion of issues we've had in a long time. And I found that slightly frustrating because I was only able to get my mind around at most half of what you all said. But I'm waiting for Steve Dujak to do a good job as he always does of summarizing the tape version. The one thing that I would not agree with was Susan Kelly's remark that we have to wait for the politics to sort themselves out. Despite some of the encouraging things you said about natural gas and partly because of some of the very wise things you've said about how long transformation, even if we have good technologies, drive out irrationalities, how long the transformation is going to take. I don't think we -- I think we have to find a way to try to tweak the political situation. And I'm just going to throw out three inchoate ideas and I'd like to get a response. The first one is that we have to reverse what I would call the Gresham's law of journalism in this country. Bad stuff has been driving out good stuff across the board. And we have to discover smarter ways to get the good stuff having the time of day. And serving as a challenge to outlets like Fox News who are only too glad to dream up some new bad stuff. The second thing is that we have to find an antidote to the anti-tax hysteria that has been drummed up. And since Grover Norquist is probably not going to have the good graces to remove himself from the scene, I'd say yes that maybe we ought to be drumming an anti-subsidy drum, which will start to help eliminate some of the irrationalities from the system and make the market start to function a bit better. The third thing is supposing he has a chance for a second term or might even use this to help ensure a second term. While I wouldn't necessarily agree again with Susan about Obama's priorities in the first term, I wonder if she would agree that tackling real fiscal reform across the board, which would involve getting some price on carbon, would be an effective strategy either as his swan song or as the entree to the second term. And finally, Tom Friedman had a very interesting article on Rahm Emanuel in Sunday's New York Times. And I'd really like to hear whether John has read it and would agree with it, because it looks to me like he's starting out to do a better job of governing Chicago than he did of hurting the Democratic cats in Congress. [01:07:32] Jason Grumet: So I'll remind everybody that this session is on the record. All right, so we've got fixing news, reforming markets, Rahm, and big picture. And I think the last question really goes back a little bit to something we talked about a while ago, which is to what extent does austerity create an opportunity for broad-based tax reform? Can I ask? [01:07:55] Speaker 4: No problem. [01:07:56] Speaker 3: You can take care of that. Yeah, no problem. Let me -- on the good news, bad news, and getting Fox and things, I don't know how many of you -- well, let me ask. How many have heard the ridiculous debate that's going on about the phase-out of the incandescent light bulb, that Uncle Sam's going to come in and take away your favorite light bulbs? How many of you have heard that? [01:08:11] Jason Grumet: You are the nanny state, Kateri. [01:08:13] Speaker 3: Okay, yeah. So we have been in this country putting appliance and equipment standards in place since the 1970s. So your refrigerator today costs 60% less than the one you bought in the '70s. It only uses the energy, and it's 20% bigger. We've done this. It hasn't been a problem. The light bulb comes along. We're going to do the same thing. Technology-neutral standards, they're still going to be incandescents for sale. They're just going to be more efficient incandescents. And we're having this huge debate. This is something that the manufacturers hammered out with the advocates. It was put in law in 2007. There are 27 other countries that have essentially the same kind of law. And we're having a debate, and even up on Capitol Hill right now, they're trying to put an un-germane amendment onto an appropriations bill to roll back the standards. And that's been driven largely by pundits who I understand having a bigger and a broader debate about how big government should be, how much regulation. But I think we've gone to a point where there's this knee-jerk reaction that all regulation is bad regulation. And, you know, that anything that you do in that field is just something that should be anathema to every American. And it's really a disservice to the Americans. I'll go back to the light bulb. I mean, people will be able to save between $50 and $100 a year. They're going to have light choices galore. And it's just -- it's a silliness that's there. And it's holding up a whole series of 15 other appliance standards, again, that have been negotiated. The manufacturers don't know what to do in terms of turning over their plants and their production lines. And we can't get this through. We can't even get these bills brought up before the Congress because everyone's afraid that they're going to be labeled as, you know, pro-big government, pro-bad regulations, anti-Americans, if they put it forward. So I think that that is something we really have to work on and work with the press on. [01:10:10] Speaker ?: Okay, John. [01:10:11] Speaker 4: I can see your thinking. [01:10:13] Speaker 6: Well, I was wondering if you were going to pick up on your part, but I'll take mine. First, Rahm Emanuel has been my friend for 10 years. And I think he's off to an absolutely fantastic start as mayor of Chicago. But let it be said that he faces the same massive obstacles of a state that is in much worse shape fiscally than the United States. I mean, Illinois is a new Greece. And the obstacles of very powerful public employee unions to reforming a city, these are real millstones for him to carry. But I think he's off to a fantastic start. And let me say that saying that even though I am a conservative, I'm a daily Republican. So, you know, I think Rahm had to follow a really exceptional person. So that's my views on Rahm. On the larger things that you raise, hard though it may be for you to believe those of us in the utility industry are more comfortable listening to Fox than to CNBC or NPR. Those other stations don't seem to like us. And one tends late at night to listen to things that don't scare you so you can sleep well. Particularly at my age when sleep is a very valuable commodity. I do think you're onto something that's, in fact, of greater importance than which television networks make which of us most angry. I think the need to have a long-term fiscal settlement, one that probably will involve some tax increases, and I am an ardent low tax person. But one that also involves some retrenching of entitlements to a significant degree is the single most fundamental thing that Washington could do to help the economy. I'm going to go way beyond my area of expertise. I think we're beyond Keynes. I think we're beyond Hayek. I think we're beyond Friedman. I think we have used fiscal and monetary tools to the point that they are all of very low continuing marginal utility. I believe what the economy needs is some sense that we have fiscal stability for the long run. I wish I knew if Boehner and Obama were as close to a deal six weeks ago as some people said they were. I don't know and don't even know who to believe. But in my opinion, if the public believed and the business community believed that the group of 12 were able to pull themselves together on a package that was both humane and pro-growth, but very much toward solving our long-term fiscal instability, it would be the largest possible contribution to the well-being of the economy and the polity. [01:14:17] Jason Grumet: We have time for maybe one or two more questions. We have a reception where you can continue to have this conversation. We've had someone up front here for a while. [01:14:32] Speaker 9: Hi, my name is Kim Smith. I'm a law student at Arizona State University living in Washington for this semester. Everyone seems to draw a strong consensus on the value of natural gas and I don't know who here would largely disagree with that, but it has a number of obstacles. It's not a sustainable long-term solution and it requires a massive upfront investment and change in the infrastructure that we have right now. What is the justification for putting so much time and energy into a valid solution that will land us in the same position we're at now in another 30 years? [01:15:12] Jason Grumet: Who wants to talk about the benefits of buying three decades? [01:15:16] Speaker 6: Well, Kane said in the long run we're all dead. But let me try to answer a sober question soberly, which is not necessarily my strength. There is a book that I commend to you, even though it's the most boring thing that anyone will ever commend to you. By a man named Aaron Wildofsky on risk management. And his fundamental point, which you can get from the preface and spare yourself the boring text, is that risk mitigation is not a matter of finding one riskless solution. It's a matter of finding chains and webs of actions that have a directional tendency to reduce risk. I would respectfully submit that that is why gas is so important in sustainability and that that's the real issue on sustainability. The things that most people want to believe are truly sustainable are not economic in today's marketplace. My companions at Exelon think the answer is nuclear. You might not. I happen to think it's out of the money by a factor of two to three. So is wind. Solar by a factor of four to six. Coal gasification with carbon sequestration, in my view, by a larger factor yet. And I have very soberly asked the much smarter than I fellow who runs my planning department to go give me two scenarios for the second decade. Because I know the only answer economically for the first decade is gas. But I have said, are our nuclear people right? Do we have to go back to nuclear in the second decade? Or can you draw a scenario for me for the decade of the '20s? That is a mix of wind, solar, and gas that works. And he came back to me and said, yes, John, I can if it's 80% gas. That was not the answer I was looking for. It's not the answer your question implies that you're looking for. [01:17:59] Speaker 4: How about storage? [01:18:01] Speaker 6: Well, you get good storage, as you know, Sudene. That revolutionizes things. Solar and wind get much more economical if you can crack the storage hurdle. Yeah. [01:18:13] Speaker 4: But is that where government should be putting its money? Should we be subsidizing? [01:18:17] Speaker 5: I think Secretary too is. It's where we are putting our money, among other places. Look, 20 years ago, shale gas was way out of the money. Today, as John says, it isn't. And it's in the money compared to these other technologies. Right now at the Department of Energy, we have a program called SunShot, which is looking at how to bring down the cost of solar energy delivered by a factor of four. And that's revolutionary if it can be done. And it's going to take sustained commitment and resources. But I think there's a lot of optimism about our potential for doing that. We need to keep on investing in that and other technologies, including storage, which is absolutely critical in order to make that work. I just want to come back also to your question on shale gas to highlight two things that haven't been brought out in this conversation. First, let's be clear. There are risks to groundwater associated with shale gas drilling. That's exactly why Secretary Chu and members of the administration, if commission reports on this and studies. Secretary Chu asked his advisory board to do a report on this, which I commend anybody to read. And I think it's fair to summarize the conclusions as being that those risks are manageable, but those risks are real. And so we need to pay attention as we pursue shale gas to make sure that the local environmental risks are addressed. Second, natural gas is not a long-term solution to the climate problem. If we're relying on gas in the second part of this century, there's no way that we're going to be hitting targets like 450 parts per million or 2 degrees centigrade, which are often out there as kind of widely accepted goals. So we need to think about natural gas in part as a transition towards zero carbon energy. [01:20:08] Speaker 4: You know, you raise a very good question. And in part, when you look back to the OPEC embargo and you see what happened with the OPEC embargo. So we drove the price of oil up very high. It spawned a rethinking of our energy policy. We started investing in alternative efforts to develop alternative fuels and efficiency. And then the cost of oil came down. And that was that. And we moved on to oil. And I think partly what you're saying is if the cost of gas comes down, if the cost of energy comes down and continues to drop, are we going to lose the momentum that path that we had been on of developing more of our renewables that suddenly become comparatively more expensive? And are we going to drop storage? And is this going to, are we going to just be here again in 30 or 40 years? So you raise a good point. [01:21:14] Jason Grumet: So we, I have threatened these folks with a lightning round, which we're not going to have time for. But we do have time for, for one last question and brief responses. [01:21:27] Speaker 10: I'm a law student as well at the University of California, Davis. I'm currently interning at the American Gas Association. Could you just speak real briefly to what you see the impacts of FERC's recent Order 1000 to be and tangential to that, the role of distributed generation? [01:21:49] Jason Grumet: It's all you, Sudeen. [01:21:51] Speaker 4: No, I have some help here. For those of you who don't follow FERC's Order 1000 press, FERC recently issued Order 1000 with several, several goals in mind. Bottom line, FERC's looking to, through this order, to facilitate more integration, integration of more renewables into the, into the electric industry. And so through Order 1000, it, it's seeking to overcome some of the barriers that exist to that. And so what FERC tried to do in one instance was, frankly, mandate broader regional planning. Because renewables are in one place and the load is in another place. So if you're going to plan, you got to have a region that encompasses both of them if you're going to get those renewables to market. And I think that's a, a very positive advancement for a number of reasons, not only to integrate renewables, but because we should be, we should be planning, um, more broadly and across regions to eliminate all kinds of seams. Um, FERC also, um, thought that it would be helpful to have the business of building transmission lines opened up to independent transmission companies. Um, traditionally, uh, historically, it's been done by this, the utility that has the franchise in the neighborhood where you're building the transmission line. In other words, there hasn't been competition in transmission. Um, and so FERC, uh, made an inroad. FERC didn't mandate competition in transmission. Um, talk, talk about transitions that are going to take a while to, uh, to occur. That's one of them. Um, and there are those, uh, independent transmission, um, developers who would argue that FERC didn't go far enough. Um, but I think that we will see potentially, it depends on how it gets implemented. We potentially will see change and we, we potentially will have more competition in transmission and like more competition in everything. And it will probably drive more development of transmission and lower the costs. Um, and, and the other thing that FERC is seeking to do is to spread the costs of transmission more broadly. In part because building transmission to reach renewables requires longer transmission lines and they're more costly. And so if you only charge, um, the people of the city of Phoenix for the transmission line that brings, uh, Wyoming wind down to Phoenix, um, it's going to be really expensive. And therefore it's probably not going to happen. Um, so FERC, uh, this is probably the most controversial of, of the three reforms, if you will, in that order. Um, although FERC didn't define how costs would be allocated. So it's going to be implemented on a region by region basis. And so I think the proof of the pudding is how it gets implemented. All right. [01:25:14] Jason Grumet: Well, with that, I want to thank you all for your attention. Thank what I agree was a terrific panel. It was a terrific panel. [01:25:21] Speaker ?: . Thank you.