[Senate Hearing 115-495]
[From the U.S. Government Publishing Office]
S. Hrg. 115-495
THE DOMESTIC AND GLOBAL ENERGY
OUTLOOK FROM THE PERSPECTIVE OF
THE INTERNATIONAL ENERGY AGENCY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 16, 2018
__________
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
LAMAR ALEXANDER, Tennessee MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
BILL CASSIDY, Louisiana TAMMY DUCKWORTH, Illinois
ROB PORTMAN, Ohio CATHERINE CORTEZ MASTO, Nevada
SHELLEY MOORE CAPITO, West Virginia TINA SMITH, Minnesota
Brian Hughes, Staff Director
Patrick J. McCormick III, Chief Counsel
Brianne Miller, Senior Professional Staff Member and Energy Policy
Advisor
Mary Louise Wagner, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Scott McKee, Democratic Professional Staff Member
C O N T E N T S
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OPENING STATEMENTS
Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska.... 1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
Washington..................................................... 2
WITNESS
Birol, Dr. Fatih, Executive Director, International Energy Agency 4
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Birol, Dr. Fatih:
Opening Statement............................................ 4
Written Testimony............................................ 9
Responses to Questions for the Record........................ 32
Cantwell, Hon. Maria:
Opening Statement............................................ 2
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
THE DOMESTIC AND GLOBAL ENERGY.
OUTLOOK FROM THE PERSPECTIVE OF
THE INTERNATIONAL ENERGY AGENCY
----------
TUESDAY, JANUARY 16, 2018
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:10 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI,
U.S. SENATOR FROM ALASKA
The Chairman. Good morning, everyone. The Committee will
come to order as we begin our first hearing in what promises to
be a very busy 2018.
I would like to provide specific welcome this morning to
our new member, Senator Smith. It is good to have you as part
of the Committee. I think you will find that this is a
committee that does good work. We like to focus on policy, and
we like to do things in a bipartisan way every now and again. I
am looking forward to starting the new year off on that good
foot.
We do not have Senator Capito with us this morning, but she
is also returning to our Committee, and I look forward to
welcoming her and her ongoing contributions.
We do have a lot on our agenda today. Our broad bipartisan
Energy and Natural Resources bill, again, we are looking
forward to continuing that as the year progresses, as well as
our efforts to increase our nation's mineral security, our need
for a wildfire funding fix paired with forestry management
reforms, park maintenance backlog, energy innovation, electric
reliability, islands and territories. We have a wide range of
public lands legislation. Those are just a few of the things
that we have on deck for this new year.
We are probably going to have a lighter attendance this
morning. I think many members are still returning to Washington
ahead of this evening's vote. But I truly thank you, Dr. Birol,
for your attendance this morning.
I think, as I mentioned to you, we look to the
International Energy Agency (IEA) for its guidance, for its
forecast, for better understanding of what is happening around
the world. And so, you being here this morning to help set the
stage for the year and provide your agency's perspective on the
domestic and global energy outlook is greatly, greatly
appreciated.
The good work done by the IEA helps to identify market
trends and provides valuable information to guide policy
decisions, both here in the United States and around the world.
IEA's insight and analysis helps us move our policies in the
right direction. In turn, our work helps the IEA with its core
mission--promoting energy security, cooperation, and stable
markets.
We cannot emphasize too strongly how significantly the role
of the United States has evolved in recent years. As Dr. Birol
notes in his prepared statement, ``The United States has become
the undisputed global oil and gas leader.''
During my time here on the Committee, both as Ranking
Member and as Chair, we have gone from discussing the needs to
site LNG import terminals all along our coasts to now
expediting LNG export terminals. And we have gone from
lamenting our reliance on foreign oil and the steep price of
that oil, to the United States being the world's swing producer
in an era of abundant energy.
Technology innovation and the shale revolution have led the
way and the Administration is working hard to reduce barriers
to energy development. Allowing for increased exploration and
production in the United States, as we did at the end of last
year with the opening of Alaska's 1002 Area, will provide for
our long-term security and allow us to extend our influence in
world markets.
At the same time, we know that these markets are cyclical
and that prices could rise substantially in the future if we do
not take proactive steps to spur investment and supply. Just
last March, the IEA warned that global oil supply could lag
after 2020 if new investments are not made in the near-term.
That is a warning for all of us. I know the IEA has continued
to conduct significant research on this matter and I look
forward to delving a little bit deeper into that this morning.
Although the IEA was established on the premise of
cooperative oil security, the agency has also evolved and
expanded its mission to cover a wide range of energy-related
topics. These include energy efficiency, the digitalization of
energy, and one that I am particularly interested in and that
is the cost reduction in renewable technologies which portend
major shifts in how we generate and use energy.
Our Committee has examined these topics largely through a
domestic lens. So today we have the benefit, again, of an
international perspective, a broader view that ties together
world trends and events. We certainly look forward to it.
Again, Dr. Birol, thank you for taking time this morning to
come and testify. We know that your schedule is very, very busy
when you travel from Paris and we appreciate your willingness
to share your expertise and the work of the IEA with our
Committee.
With that, I turn to Senator Cantwell for her opening
comments.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Madam Chair and thank you for
scheduling today's hearing, although, I think I did suggest at
one point in time we visit Dr. Birol instead.
The Chairman. Yes, we will work on that.
Senator Cantwell. But we were not able to do that.
But I so appreciate him being here today and for the
discussion on the IEA's primary focus on increasing energy
security for its member nations and I appreciate its continued
focus on expanding the definition of energy security as well
because energy security means more than just oil and gas
flowing in and out and across borders.
It also means protecting critical infrastructure from both
physical attacks and the cybersecurity attacks that have been
much the subject of a lot of the past Administration's focus on
the Quadrennial Energy Review and what we need to do to upgrade
that and upgrade the security of our nation. We must take
action to protect our critical infrastructure from
cybersecurity attacks and ensure the security of energy. Our
grid and energy networks are under constant cyberattack. From
2012 to 2016 reported cyber incidents against U.S. critical
infrastructure more than doubled.
Now that our vulnerabilities have been exposed by various
attempts, including Russians, to hack into our electricity
grid, the cyber threat is no longer just a threat. We have been
hacked and we must take additional steps to protect our energy
infrastructure.
I very much appreciate the Chair, last year, traveling to
the Pacific Northwest to see some of the latest and greatest,
both technologies and approaches to cybersecurity. She and I
have worked on legislation that we passed out of the United
States Senate. We are just hopeful that sometime our colleagues
in the House will make this a priority and move forward on
working on a bicameral basis on cybersecurity since its
infrastructure is so important.
Obviously, diversifying our energy mix is another key part
of the energy security puzzle and security means minimizing the
potential consequences of climate impact which threatens our
well-being at home and around the world as well. Investing in
renewable energies and moving away from fossil fuels and moving
into energy efficiency and ways to help drive down costs--we
have seen great examples of the fact that the energy savings
from energy efficiency is a continuous flow of investment into
business that makes them even more competitive which then
allows them to stay ahead on a competitive basis.
So those numbers on energy efficiency, as we look at
everything from the Bullitt Foundation building to a focus on
how to make more of these developments worldwide--very, very
exciting technology that we are very proud of from the Pacific
Northwest.
According to the IEA's World Energy Outlook, renewable
energy will make up two-thirds of the global investment in
electricity as they become the cheapest sources in new
generation. The IEA finds that the costs of new solar PV have
come down 70 percent, wind by 25 percent and battery costs by
40 percent.
Energy efficiency, as I just mentioned, is also a key on
the energy security side. The total energy use would have more
than doubled, according to IEA, without energy efficiency. So
this has been saving us in so many ways. As you noted, I think
it is one-third the cost to save a kilowatt than to develop it.
It is so important that we continue that.
While we are discussing so-called energy dominance and
energy security, I hope we will hear a lot less about just
these exporting issues. Although, again, we worked hard here on
the Committee to come up with strategies that clarify what our
national policies were on that and focus on what we can do to
drive the cost of energy. Whoever has the most cost-effective
energy solutions is going to continue to win in the
marketplace.
I look forward to hearing your comments on that today. And
again, thank you for being here.
The Chairman. Thank you, Senator Cantwell.
Dr. Birol, welcome, again, to the Committee.
For those who are not familiar with Dr. Birol, he took
office as IEA Executive Director in September 2015 after 20
years with the agency itself. Previously, Dr. Birol held the
position of Chief Economist with responsibility for directing
the flagship World Energy Outlook publication. He has been the
founder and the Chair of the IEA Energy Business Council. He
has a whole series of accolades and awards that have been
conferred upon him over the years.
Again, Dr. Birol, we appreciate the insight that you will
provide for us and the good work of your team at the
International Energy Agency. We welcome you, and we invite your
comments this morning.
Typically we ask those who are testifying before the
Committee to try to limit their comments to five minutes, but
because you are the sole panelist before us, I welcome your
extended remarks and then we will have an opportunity to query
you with regards to other issues.
Thank you and good morning.
STATEMENT OF DR. FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL
ENERGY AGENCY
Dr. Birol. Madam Chair, Ranking Member Cantwell,
distinguished members of the Committee, thank you very much for
the opportunity to appear before you today and present the
International Energy Agency's outlook for global energy
markets.
Let me also join Madam Chair to wish everybody a Happy New
Year.
For the International Energy Agency, 2017 was a very
successful year, a year of growth and continued success. One of
the highlights of our successful year, 2017, was that in
November our ministers across the world came together to do a
bit of business and to discuss the global energy issues,
challenges, how they see the challenges in different countries
and to provide guidance to International Energy Agency. And I
would like to, here, thank the U.S. Government, especially
Secretary Perry, for his personal engagement to our Ministerial
meeting.
There were also several businesses joining our meeting, at
least part of it. Several CEOs from the United States joined
us, CEO of Exxon Mobil, CEO of General Electric, CEO of Dow
Chemicals and also other CEOs, Shell, Total Energy, renewable
companies across the world. We had a wonderful ministerial
meeting with a very good discussion and I would like to reflect
some of the discussions to you today.
Before going to some of our thoughts and findings, I would
like to, just very briefly, Madam Chair, if I may, tell you
what the IEA is all about. We were founded in 1974 in the wake
of an oil crisis, basically by Mr. Henry Kissinger, himself and
several other statesmen across the world, and we are now 43
years old. The motivation of the IEA was oil security, to look
after the oil security issues, providing an oil security
mechanism across the world. But throughout these years our
mandate has evolved, as Madam Chair mentioned. We look at the
oil, gas, renewables and energy efficiency and alignment issues
and investments and we look at all the technologies. IEA is a
unique organization which looks at all the technologies and
their implications for the markets and our well-being.
We have several member governments in all the continents
and energy, Madam Chair, is a very hot topic in many
governments, in many countries. So we try to bring some factual
information for the governments, for the decision-makers, to
discuss, to debate and come up with, hopefully, good solutions
for the countries and for their citizens.
Now, to provide a basis for our discussion, I would like to
tell you how we see the global energy markets in the next years
to come, and I will highlight four major trends which will
affect all of us. I would like to say that countries--even the
United States, one of the most important energy countries in
the world--even the United States is not an energy island. What
happens in other countries affects all of us and what happens
in the United States, as I will show in a minute, will affect
everybody else.
So, therefore, these four major trends, or pillars we call
them, will affect all of us in the next years to come given the
size of these changes and also the speed of those changes I
think it is important for all of us to take note of them. What
are these four major upheavals which are going to transform our
energy markets and some of the definitions, discussion, we used
to know, but perhaps we need to change now?
Number one, Madam Chair mentioned, the United States is set
to become the undisputed leader of oil and gas production for
many years to come with huge implications. This is number one.
Number two, the cost of renewable energies is going down so
significantly that they are becoming the first choice of new
power plants in several countries across the world. And these
choices are not necessarily driven by the environmental
concerns only, but only for the cost concerns because they are
becoming very cheap. When I say renewables, this is mainly
solar and wind. This is number two.
Number three, China. China recently changed its economic
policy, namely moving from being an industrial workshop,
workhouse, manufacturer, slowly but surely, to a lighter
economy and with the new motto, ``making the skies of China
blue again,'' China is moving in the direction of clean energy,
which will have major implications for all of us given the
sheer size of the Chinese energy markets. When I say clean
energy, this is gas, renewables, nuclear power and others.
Fourth, and the last, upheaval is that within the energy
system, we use energy, the share of electricity is growing very
strongly. Electricity consumption is growing much faster than
oil and gas and coal, everything else, and our lives, our
social lives, our economic lives, are becoming much more
connected and electricity has a critical role.
So, these are the four major upheavals that we see as very
important. If I can elaborate on them a bit. I'll put you in
the U.S., perhaps the most important one to the end of these
four important upheavals starting with the clean energy
technologies.
As Senator Cantwell mentioned, the cost of solar PV fell
down substantially. In the beginning, several countries,
especially European countries, subsidized the solar. But now,
after emerging countries, especially China, pushed the solar PV
and there is a concept in the economy, learning by doing. The
more you do something, the better you do it and the cheaper you
do it and the cost of solar is now going to very, very low
levels.
The second, wind. The cost of wind is also going to go
down. It's going down and in addition to the industrial
countries, major growth of renewables is coming from today,
emerging countries, especially China and India are the leaders.
China is, today, the number one country in terms of solar and
number one country in terms of wind, worldwide.
And when we look at the future we see that the cost of
solar and wind continue to decline and they are going to
compete very soon, without the subsidies and competing with the
traditional sources of electricity. This is something important
and why China and others are pushing solar. It is not
necessarily, as some people may think, for a primary reason is
not climate change. The primary reason is because it is cheap
and the second is that another environmental issue, especially
in China and in India is the city--local pollution in the
cities. To reduce the local pollution, those countries are
pushing solar and wind substantially and they are becoming
cheaper and cheaper.
We are seeing a big growth of solar and wind in the next
years to come. And if I can give you one number--the forecast,
only in 2016, of the old power plants built in the world, solar
alone was more than 50 percent--solar; other 50 percent--other
renewables, plus coal, plus oil, plus gas, plus nuclear put
together, 50 percent. The other 50 percent, solar capacity
alone. So this is something that we need to take into
consideration.
I should also mention that the renewables, especially solar
and wind, also has a shortcoming--namely, they are very much
bound to the weather conditions. In India, when the family
comes home in the evening from work, the first thing they do is
turn on the air conditioner, turn on the television, when there
is no sun, when the sun sets. So it is difficult to, it is not
very easy I should say, to match when there is sun and when the
electricity market is very high. And there are some
technologies that we are working, and others are working on
that. But to sum up, clean energy technologies are coming and
coming strongly and cheaper.
Another point is on electricity. As I said, electricity is
going very strongly everywhere. The electricity consumption
grows two times faster than the overall energy consumption. As
our lives are becoming more and more of the electrical
advances, industrial processes are becoming more and more
electrified and the cooling needs, air conditioners, are
becoming a major driver across the world.
This is important to note and, therefore, what kind of
power plants we're going to build is a key question and at the
same time since electricity will be more used, will be more
dominant in our social and economic lives, the electricity
security becomes a critical issue.
In the case of electricity supply disruption, our entire
economic, social life and the communication processes will be
paralyzed. So therefore, it is an area that the International
Energy Agency is working on, the issue of electricity security.
Third, China. Third upheaval. China is, today, the largest
energy consumer of the world by far, and last year at the
Chinese Communist Party Congress, President Xi said, ``we want
to make the skies of China blue again.'' Once again pushing the
Chinese energy prospect into cleaner direction--lots of support
for renewable energies, lots of support for energy efficiency,
lots of support for natural gas and electric vehicles.
China is, today, in terms of coal markets, to give the
size--half of the coal in the world is used in China; the other
half, everybody else put together. And China, today, is putting
a cap on the coal consumption in order to limit the pollution
in the cities, basically.
And China is, with the new policy, replacing coal with
renewables, but also with natural gas. And if I may come back
to what I said in the beginning, that no country is an energy
island. China is poised to going from coal to gas in a very
short period of time and it is a major LNG imports of China.
And it is out of that, within one year of time, the LNG process
in Asia Pacific jumped from $6.00 to $11.00, almost double,
because of China's new policy. So this will affect everybody,
exporters and others. China is going to be the largest oil
consumer very soon, overtaking the United States.
Another area which I would like to bring to your attention
is the nuclear power and China. China, today, is the country
which is the most engaged with the nuclear power industry, and
we see that more than one third of all nuclear power plants
under construction today will be in China. And looking at
what's happening in the United States, our numbers show that in
10 years of time Chinese nuclear capacity will overtake the
United States, and China will be number one and the United
States will be number two in terms of nuclear capacity, if the
current policies do not change.
But, in general, China's policies are changing. Ten years
ago, we may remember as a result of the Chinese boom, there was
an impact on the oil markets, coal markets, emissions. Now
another China and other policies on clean energy, electric
energy, and this will also affect the energy markets.
My final point, Madam Chair, is about the United States--
the fourth and perhaps another critical, as we call it, big-
time nation of the energy markets. What we say is that as a
result of the shale revolution, the U.S. is becoming the
undisputed leader of oil and gas production worldwide.
In terms of oil, oil production is going very strongly and
will continue to grow. All of our expectations are in that
direction and we think that this growth is unprecedented--the
size of the growth and the pace of the growth. We have seen
such a big growth in the history of oil only once when in the
four and a half decades ago Saudi Arabia expanded their very
famous Ghawar oil field. It's the biggest oil field in the
world.
In terms of natural gas, the United States, again, is out
of shale gas increasing its production strongly and going to
bring a lot of LNG to the markets. And we expect the U.S. will
be the largest LNG exporter of the world in the year 2020.
Both of these developments have implications for the
prices, for energy security worldwide, trade, investments and,
of course, for the U.S. economy. This is definitely good news
for the U.S. economy, both in the developments on the gas and
the oil side. And our projections show that this leadership of
the United States, in terms of oil and gas, will continue for
many years to come, especially if it is combined with the right
domestic policies at home.
So these are the four major upheavals we see, Madam Chair,
namely the cost of renewables are going down substantially and
they will be a mainstream fuel. They have been considered as a
``romantic fuel'' in the past and they are not anymore, so they
are mainstream fuel now. Second, we see that electricity is
becoming a very important fuel in our society now, in our
economic lives, in our social lives with a lot of efficiency
gains, but also bring a lot of challenges, especially in the
context of the electricity security picture. Third, China is
changing up its energy policies going from a coal-based, heavy
industry economy slowly but surely to clean energy technologies
and making more and more use of natural gas. And fourth,
perhaps the most important, the United States is becoming the
undisputed leader of oil and gas for the years to come.
So I would like to finish my words, Madam Chair, that the
International Energy Agency is following the developments in
the United States and across the world. We are talking with all
the governments around the world, and we are trying to bring
the best advice based on effects, analysis and data. And we
are, today and anytime, at your disposal to answer your
questions and requests.
Thank you very much.
[The prepared statement of Dr. Birol follows:]
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The Chairman. Thank you, Dr. Birol.
A great deal to think about here this morning and, again,
to understand how the United States has assumed this role, as
you say, to be the undisputed leader, certainly when it comes
to oil and gas, but recognizing the nature of how we got there
and how quickly we have assumed this position.
It is certainly something to consider, but also recognizing
what you have shared with us, the role that China is playing
and how that, too, will not only impact energy production and
consumption around the world but, more specifically, to us here
in the United States.
You have mentioned with regards to oil and gas production
here in the United States that this is good news for the U.S.
economy and for our trade especially, and I am quoting you
here, ``especially if combined with the right domestic
policies.'' When you make that statement are you referring to
tax policies, are you referring to energy policies? Is it a
combination of all of that? If you can go just a little bit
more into that I'd be curious.
Dr. Birol. Of course.
Now the United States is a very fortunate country because
you have oil, gas, renewable energy resources and you have a
very innovative business here. So by the improvement of the
technology you will get more and more oil and gas from the
existing resources, if the right incentives are provided to the
industry. This is number one. Number two, I believe the U.S.
has huge potential to make more use of renewable energies,
solar and wind especially, and I was very happy to see that the
current support for the renewable energy policies are
continuing in a strong way.
The Chairman. The Production Tax Credits?
Dr. Birol. Exactly.
Third, there is one concept in the United States which is
very important--the independence, energy independence. And that
independence is based on two factors: one is increasing the
production a lot, domestic production; and second, keeping the
consumption at a certain level and not to waste energy, mainly
energy efficiency.
So, I think, when I mentioned domestic energy policies, I
believe in addition to the supply side policies, production
side policies have to increase oil and gas. We must also put
emphasis on using energy efficiently so that we don't waste
energy but have the same results and the same productivity from
the system.
So all in all I think the U.S. energy system is going in
the right direction, a lot of resources, but domestic policies
need to help them.
The Chairman. I appreciate that.
Let me ask you a question specific to the Arctic. I focus a
lot in these spaces and not just the U.S. Arctic, but the
Arctic broader. Last year I had an opportunity to visit the
Melkoya LNG facility in Hammerfest, Norway, where a significant
amount of natural gas is processed and shipped to Europe. Of
course, over in Russia we are seeing that on the Yamal
Peninsula and elsewhere as they are exporting their LNG across
the world, including to China.
What role do you see the energy resources from the Arctic,
whether it be oil, whether it be gas--and this is not just
looking at the United States but the bigger energy picture--
specifically coming from these Arctic northern countries?
Dr. Birol. Thank you very much.
We have huge deposits of oil and gas in the Arctic region
across the world. There are two challenges there. The one
challenge is the economic challenge--and then we have a lot of
shale oil, whether or not they will be able to get the
investors. And second, some of the Arctic resources may pose
environmental questions. These are the two issues.
Moving from there, I would put oil and gas differently. In
terms of oil, it's actually a huge U.S. Geological Survey. We
have huge deposits and if you look at, especially, the ANWR
area, the Arctic National Wildlife Refuge Area, we see that
there is a very important attractiveness there--namely, the
availability of the TransAlaska pipeline which is underutilized
today substantially. And you have the chances of, if the
production was to take place, we have the chances or the
possibility of transporting it in a very easy way. This is
definitely an advantage.
The challenge, however, is that in terms of oil again the
economic attractiveness in the current price and the plan of
the shale oil context and therefore, we think that with the
current context, it will be difficult to believe that a
substantial amount of oil production will be coming from that
region before 2030, unless we see some surprises in the
markets. Having said that, if significant resources and the
production comes from there, this would be good news for the
economy and employment in Alaska.
Coming to LNG, it's a different story. The gas in the very
region and we know that to unlock the oil we have an issue of
the infrastructure here and the main bottleneck, I believe, is
the infrastructure--building the pipelines here and the LNG
plants--but I see here significant marketing chances,
especially for Asia, also given the geographical advantage.
If I may bring it to the point I said a few minutes ago,
Madam Chair, today China is moving in the direction of gas.
They are going to import a lot of LNG to replace their coal,
basically, and I see that there's a lot of opportunity in China
and Japan.
I often visit Japan and meet with the Japanese government,
Madam Chair. You may well know that they are thankful to you
after Fukushima, bringing LNG to the Japanese government when
they were in a very, very difficult situation. And as you know,
Japanese people, they never forget this good gesture coming
from your government.
So, to sum up, I see from an LNG point of view, significant
chances to provide gas to a gas-hungry Asian region.
The Chairman. Very good. Thank you very much.
Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair.
On that point, I think that the Chair would note that I
have, many times, suggested to her that that should be a good
focus for Alaska, natural gas, as opposed to the more recent
discussion on the ANWR.
As you point out, China being the huge market opportunity
for the future poses--with a shift in policy, as you clearly
noted, to a bluer sky--being the largest market opportunity for
the U.S.
I wanted to ask you about what policies on that clean
energy front do you think we need to continue to focus on here
that would help us in looking at Asia more as a market for U.S.
leadership?
I say that both on the energy efficiency side and the
nuclear policy side. Energy efficiency in the context of, I
think you have stated well, we are saving so much and we need
to continue to move forward. I look at it as everything from
the efficiencies that we have achieved within our region to
some of the technologies that are now being used in other
countries. For example, I think one of our Northwest companies
has provided metered energy in South Africa so that they can
just buy the power that it takes to turn the lights on when the
kids come home from school.
So energy efficiency is making our businesses competitive
and it is also reaching the marketplace. What else do we need
to be doing to focus on energy efficiency and other export
policies on the clean side?
Dr. Birol. Thank you very much.
Now first of all, the U.S. is becoming an exporter, gas
exporter, to China and Asia in general--I mention China but I
should have mentioned another country which is very important
in the region and growing very strongly, which is India. India
is also very important because their economic growth is very
strong and they have a very, in my view, wise, sound energy
policy. And both of these countries use gas at the minimum
level. Globally, their share of gas in the global energy mix is
about 25 percent and in both these countries it is less than or
around five percent only. So there's a big gap between the
world average and them.
And they, both of them, both of these countries are facing
major challenges in terms of environment--namely, local
pollution in the cities. And this is an issue for, in many
countries, both of these countries and others, a reason for
social unrest, in fact.
So one solution to that is replacing coal by natural gas
and that will get the gas markets--when you see that the U.S.
is coming very strongly, in terms of LNG exporter, being an LNG
exporter.
And this is good news for everybody, to be honest with you
because, I should say almost everybody except for the 12
traditional pipeline exporters in Europe because the U.S. is
also providing alternative to Europeans vis-a-vis the major
established pipeline exporters and making the hands of
Europeans stronger in terms of their negotiations of the price
with the pipeline exporters when they make new contracts. Even
if they don't import one BCM of U.S. gas, the fact that they
can import U.S. gas is a very strong card in their hands.
Coming to China, I think----
Senator Cantwell. And on that point, could you just
elaborate on the Russians as well because aren't they trying to
play in this marketplace?
Dr. Birol. Yes, in fact the Russian government, as a result
of the U.S. shale boom. The Russian government is less stronger
when it comes to the contract negotiations with the European
customers because if the European customers negotiate and try
to bring the price down, if the Russians would say no, then
there's an option, which is the U.S. gas coming there.
So in the past, in the district there was only one shop in
Europe which is Russia. They need to go and buy the gas from
that shop. Now, there is another shop open which is the United
States. They, the Europeans, can choose which one is cheaper,
which one has the better conditions, which one provides better
opportunity for the energy and maybe, in some country's cases,
the security and foreign policy.
So U.S. gas is providing an alternative to Europeans vis-a-
vis the Russian gas. And this is, I think, very important both
in terms of energy security, but also the competitiveness of
the gas and the contracts in Europe.
It is out of that many European countries really negotiate
success with their existing contracts and bring the price of
gas down as it is out of the new opportunities coming from the
United States and elsewhere.
In terms of China and India, huge opportunity for U.S. gas.
It is going to, in the next five years, be a big amount of LNG
coming from the United States, and I am sure Asian region will
be the primary destination for the U.S. LNG.
And there's a huge opportunity to make money for the U.S.
and for those countries to diversify their energy system and
make gas part of the energy system and make it much more
flexible. And for the Europeans, diversify the source of
imports and provide, again, minimizing the economic, social
and, maybe, political risks.
Senator Cantwell. Well, I see my time has expired, but I
thank you, Dr. Birol, for elaborating. I think what some people
may not fully understand about what the Russian issues are, as
it relates to Europe and to us and to why some of these things
are so important, people in the Administration and conflicts
and everything else.
So I thank you for that.
I wanted to thank my colleague and welcome her to the
Committee. I failed to do that in my opening remarks. I am
going to turn my portion over to her in the next round and let
her continue on my behalf.
Thank you so much for your testimony, and I so appreciate
Senator Smith joining our Committee, along with our returning
colleague from West Virginia, so it will be great to have her
back. This must be a record number of women on the Committee,
so that's a good thing.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Cantwell.
Let's go to Senator Cassidy.
Senator Cassidy. Hey, sir. Thank you. Great testimony. I am
intrigued by the electrification of transportation, if you
will.
But let me ask you to comment on this. Yesterday, the CEO
of Fiat Chrysler was quoted saying, ``I don't know of a
business that is making money selling electric vehicles, unless
selling at a very, very high end of the spectrum.'' And this
was made at the Detroit Auto Show.
How do you, kind of, position that versus your very bullish
statement that within a relatively short period of time we are
basically going to transition to a primarily, or almost
equally, electric car marketplace? Your thoughts?
Dr. Birol. Thank you very much, Senator.
I think the electric cars, the number of electric cars will
grow, but our numbers show that even two decades from now the
biggest chunk of the cars we are running will be the existing
internal combustion engines, the traditional cars. But electric
cars will grow, especially in some regions. For example, in
Europe there is a lot of incentive and subsidy for the electric
cars. In China, lots of support for electric cars. And with the
declining cost of batteries for electric cars, plus the very
generous government subsidies in some countries, we see that
the electric cars are increasing substantially.
Having said that, some people say, you say that electric
cars will increase, but at the same time you think that there
is a need for oil. How does it combine? It isn't following, Mr.
Senator. The cars are not the biggest part of the oil demand
growth. Oil demand growth today in the world is driven by
trucks, jets, ships and, most importantly, the petrochemical
industry. Even if there would be a lot of electric cars coming
into markets, running in the streets of the world, we will
still see that there is a need for new oil production.
Senator Cassidy. Let me ask you this then.
Dr. Birol. Of course.
Senator Cassidy. There has been a move afoot to transition
diesel vehicles, boats or trucks, to natural gas-powered
vehicles. Do you see that impacting what you just said or will
oil continue to dominate?
Dr. Birol. Oil will continue to dominate, but as long as
the cost of gas remains low or moderate we see, especially in
the long-haul trucks, there's a big chance of substitution of
oil by natural gas. And also, not only for trucks, but also for
the ships.
Senator Cassidy. Now, you say a big opportunity, but you
have made specific projections regarding the percent of
electric vehicles with a number. Have you done a similar
analysis of what will be the rate of conversion of long-haul
vehicles or barges or towboats to natural gas?
Dr. Birol. Yeah, it was the expectation that they will
increase at least three times compared to today, but still the
big portion will be coming from the oil products.
Senator Cassidy. Okay.
Dr. Birol. Namely, diesel.
Senator Cassidy. Now, I don't have it here in your
testimony--you speak of the ``sustained'' model which I--or
something such as that, with the word ``sustained'' in there--
and I gather that would be compatible with a low-carbon
mandate. The degree to which we achieve that, to what degree is
that conversion of coal to natural gas or nuclear, and to what
degree is that the deployment of renewables?
Dr. Birol. If I can give a very few headline figures. We
have different scenarios. One is with the current policies,
where do we go? The other one, as you mentioned, sustainable,
to keeping a close eye on the environment, especially climate
change. In all of them natural gas does increase. Natural gas
is a winner, increasing, it is a role in all of them.
Renewables are growing very strongly in all of them, especially
with the sustained one, especially for solar and wind.
And coal will be depending on whether or not we can use
coal in a cleaner way, especially in the context of carbon
capture and storage. This is, for me, an extremely critical
technology and this is an area that I mentioned at our
ministerial meeting, Secretary Perry and myself run a
ministerial session on carbon capture and storage.
Senator Cassidy. But let me ask, continuing on natural gas
and renewables, in your current policy and the sustained
policy, what is the relative growth of renewables and not only
the relative growth, but by 2040 what is the percentage of the
international energy mix that would be held by either the
renewables or the natural gas?
Dr. Birol. The share of natural gas will stay as it is now,
about 20 percent, but the volume is going to increase.
In terms of renewable generation, it will grow also
substantially, electricity coming mainly from solar and wind,
but coal will be a significant loser unless we can make use of
carbon capture and storage technologies.
One particular technology, again, is nuclear power. Nuclear
power is a technology which can produce electricity without
giving any emissions, but this will be also depending on the
policies of the governments, whether or not they would like, to
see nuclear play a more important role in the region.
Senator Cassidy. Thank you.
I am over. I yield back.
The Chairman. Senator Smith.
Senator Smith. Thank you, Madam Chair.
I am really so pleased to be here and be a part of this
Committee and I must say, as a former resident of Alaska and
actually a person who worked on the TransAlaska pipeline when
it was first being constructed, this has always been a matter
of great interest to me. So I am very pleased to be here.
Dr. Birol, it is very interesting to have a chance to visit
with you and I am quite struck by your conversation about the
transformation that we are seeing around the world in advancing
renewables and also energy efficiency.
In Minnesota, my state, this has been a focus of our energy
policy, a bipartisan focus of our energy policy and today we
get about 21 percent of our energy from renewables and are well
on our way to hitting our goal of 25 percent which, I think,
could be even higher. And this means jobs for Minnesota, 57,000
clean-energy jobs in Minnesota. So I think a lot about the
benefits of this kind of strategy.
You know, also, my business background has taught me that
diversification contributes to risk management and to security.
And so, I am quite interested to hear you talk a little bit
more about how more affordable renewables and energy efficiency
contributes to our overall energy security which is, sort of,
the primary focus of the IEA.
Dr. Birol. Thank you very much, Senator Smith.
Now, this is huge oil, gas, coal, renewable sources and it
is very important that we make the most out of it in: A, a
cost-effective manner; B, secure energy; and C, along in a
sustainable manner. I think this is important, these three
important parameters. We see a growing chance of the U.S.
making more use of renewable energies as their costs are coming
down. And as Madam Chair mentioned, after the tax reform we see
that the incentives, the support for the renewables, are still
there.
One area that we need to, in my view, pay attention to is
the efficiency. When we say U.S. will soon not need to import
any single barrel of oil, this is for two reasons. One is the
biggest access of the shale oil boom which is extremely
important and it's a big success story of the U.S. Government,
U.S. industry, the shale oil boom production will go. And the
second is that, in my view, the CAFE standards. The CAFE
standards in the United States keep the gasoline diesel
consumption for cars and other vehicles at a certain level and
save oil at home. If you didn't have the efficiency standards
we would use more oil at home; therefore, the import needs will
be higher.
Therefore, in addition to oil, gas, nuclear, I see that
there is also a role for renewables and energy efficiency so we
have a diverse and sustainable mix for the U.S. Government, for
the U.S. energy sector, which should make the economy also very
strong and resilient.
Senator Smith. Thank you.
Let me just ask you. Where are we headed in terms of
overall cost reductions for renewables?
Dr. Birol. I think we expect that around the year 2020 most
of the renewables in the world may not need any more subsidy.
They can be competitive with the traditional sources of energy,
unlike 10, 15 years ago. Ten, 15 years ago in order to compete
with natural gas, with coal, with the others, they needed to
get a lot of subsidies and sometime soon, in five years or so,
we may see in many countries, most countries I should say,
especially for solar and onshore wind, we may not need
subsidies. Maybe for offshore wind, we need a longer time
horizon, but the main message is they are becoming cheaper and
cheaper. They are becoming the mainstream fuel in many
countries.
Senator Smith. Thank you.
Dr. Birol. Thank you.
Senator Smith. Thank you, Madam Chair.
The Chairman. Thank you, Senator Smith.
I have so many things.
[Laughter.]
Boy, this is fascinating this morning. I so thank you.
As you know, a couple years ago we reversed a 40-year
policy that we had here in the United States that banned the
export of oil. We were successful in lifting that in December
2015 and there was some speculation at the time that not much
would change in terms of the volume of oil that is exported
from the United States due to the price of oil, the need for
infrastructure improvements and other global supply factors.
We have not necessarily seen that. We have not seen the
price impacts. We have not seen the supply shortages that some
claimed. Can you discuss how the export of U.S. oil has changed
the world dynamic?
You referenced earlier in response to the question from
Senator Cantwell, how with more LNG that the United States has
put on the global market, how that has impacted not only
Europe, Russia, but can you speak to the role that we are
playing in the world energy markets now that we are able to
export?
Dr. Birol. Of course, Madam Chair.
So December 2015 you took this, in my view, very good
decision to----
The Chairman. Thank you.
Dr. Birol. ----lift the U.S. oil export ban because as we
look at the global energy security, and I just say--very
positive contribution to global energy security.
So it came and 2016 was a year that the U.S. oil industry
had a difficult year because the low prices, low oil prices,
for that year we have seen the exports were just under 600,000
barrels per day.
But 2017, last year, we saw an increase in the exports--it
was about one million barrels per day most of the time; but
certain weeks, about two million barrels per day--a significant
contribution.
The important area here is that not only the size but the
quality of the oil is very important that you are exporting. It
is light and sweet, the quality which is very much in demand
and, therefore, it can be used in many countries. Again, one of
the major buyers is China today.
So looking at the years from now, 600,000, one million
barrels per day in 2017, with the increasing U.S. oil
production and increasing global oil markets, we expect U.S.
crude oil exports will play an important role, even though we
are not there compared to natural gas, LNG, but it makes also a
significant and important contribution both in terms of size
and in terms of good quality.
The Chairman. Interesting. When you think about where we
have been historically with world conflict that comes about
because of the virtual advantage that some nations have when it
comes to energy resource, whether it is the Middle East, or
other parts of the world.
Well, you have given us, kind of, a new view of where we
are going with energy and energy worldwide, all that is coming
on with regards to renewables. This means that countries that
might not have fossil fuels at their disposal have other ways
that they, too, can achieve their own level of energy
production.
When we think about the potential hot spots for conflict
that comes about over energy--we have had presentations here in
this Committee, in the years that I have served on the
Committee, and it always seems to have been focused around who
has the capacity when it comes to those sources of fossil
fuels.
Do you see this changing now that the broader world energy
portfolio is a greater mix, whether it is what you are saying
China is looking to with regards to nuclear, the price
competitiveness and the advent as renewables are truly becoming
more viable solutions?
How do you see things changing or am I over-simplifying
things with my example and we still have the same, kind of,
historical energy hot spots?
Dr. Birol. An extremely important issue, Madam Chair, if I
may say so.
Now there are two important changes happening in terms of
geopolitics of energy. One of them is the coming of
renewables--it is important. It is for some countries more
important than others. But if I may, the renewables we are
using mainly for electricity generation; but for
transportation, for home heating, for industry, we still use a
lot of gas, natural gas; in some countries, coal; in some
countries, electricity and others.
Therefore, the renewables changing the geopolitics of
energy in a big way is not something I would agree. It makes a
small dent, but it is not going to change the geopolitics of
energy which is centered on oil and gas currently.
But the second change on the geopolitics of energy in the
world is coming from the United States. This change, the
geopolitics of energy, the U.S. coming as a major oil and gas
country, being a major exporter, changes a lot of thinking,
changes a lot of issues. Let me give you one example. Several
years ago, the United States was importing a lot of oil from
Middle East. Very soon, or perhaps nowadays, it is zero or
close to zero. This is something very important. Another thing,
U.S. is competing with Russia for European gas markets. The
U.S. today is exporting gas to Poland, for example, whereas
Russia--it has changed the dynamics significantly there.
And from a U.S. perspective, I am sure Secretary Tillerson,
in the international negotiations with his counterparts, is
sitting on his chair much more comfortably compared to his
predecessors representing a country with a lot of oil and gas
potential.
Having said that, if I had to pinpoint one vulnerability in
our world in terms of oil and gas it is the following. Many
countries in the Middle East and also some major Eastern
European countries, their economies are single-product
economies--oil, in some cases, gas. When the price of these
commodities goes down or as we just discussed with Senator
Cassidy here, in the very near future if the electric cars one
day become a major, major part of transportation, they may
seriously suffer their economies and they are not prepared for
that.
Their entire economy and social life is based on oil
revenues. This is a major vulnerability, especially today when
the oil prices will be, we expect, more and more volatile and
technology may have big surprises.
Therefore, at the International Energy Agency we are going
to focus in our next energy outlook on the vulnerabilities of
these countries and if you are Chair, Madam Chair, I will be
very happy to come and report to you which countries, which
vulnerabilities and what measures can be taken there.
But once again, geopolitics of energy has been redefined as
a result of the developments in the United States in big times,
but also in the introduction of renewable energies in some
countries.
The Chairman. Very interesting. Thank you for that.
Senator Smith.
Senator Smith. Thank you, Madam Chair.
Dr. Birol, I was really interested in the information in
your report about how global energy usage we expect to increase
by, I think it is 30 percent by 2040, which is the equivalent
to adding another China and India to global demand. Also, I
remember reading that yet there are still significant portions
of the world where people do not have access to electricity at
all. So there is, sort of, this dramatic kind of dichotomy in
terms of where people are.
I would like to hear your views on what countries can do to
take advantage of this growth in demand, I mean, from a
competitiveness perspective, position themselves and their
economies. This relates, I think, to what you were just talking
about. What countries can do to position themselves and their
economies so that, literally, the trillions of dollars that are
going to be invested in technology that, you know, the
countries can be well-positioned to be competitive in that
arena.
Dr. Birol. Thank you very much.
So when we look at the investment trends in the next years
to come, we see huge investment opportunities, especially in
the electricity generation and transmission and distribution.
Asia and sub-Saharan Africa are key areas for investment
opportunities. And here, of course, as you implied, the U.S.
companies can play a very important role, both in terms of
building the power plants, providing capital and also providing
leadership in those countries.
Having said that, those countries, especially in China,
India, and African countries, they have their own energy
policies, they have their own targets. And when I look at those
policies, they are geared at having energy at the lowest
possible cost, keeping an eye on the environment and also
diversification of the energy, as you rightly mentioned. I
think those countries would welcome the investment
opportunities from the U.S. and elsewhere if the investments
are in line with these three goals, namely the energy security,
affordability of energy and at the same time the environmental
production. And many U.S. companies are already working in
those countries, but the demand for energy projects are huge
across the world, huge infrastructure needs, especially in Asia
and Africa.
Senator Smith. And what about this question of research and
technology and innovation? How do you see that in terms of how
we can encourage that kind of innovation and research on new
technologies?
Dr. Birol. We made an analysis of how much the governments
and the private sector is putting money in research and
development in new technologies, clean technologies. To be
honest with you, despite all of the discussions and rhetoric in
the last five years, in real terms, there was almost no
increase in the R&D in clean energy technologies across the
world.
What surprised me also is when we're talking about, we
think about the R&D, the research and developments in clean
energy, I personally thought before the analysis the bulk of
R&D is coming from the private sector and less from the
governments, but our analysis just showed the opposite. The
bulk of R&D for clean energy comes from the governments, 80
percent, and 20 percent coming from the private sector.
So there's a need for the private sector to be a bit more a
part of the game to push the clean energy technologies and,
therefore, energy efficiencies.
Senator Smith. Great.
Dr. Birol. Thank you.
Senator Smith. Thank you, Madam Chair.
The Chairman. Thank you, Senator Smith.
Let me just follow up on that just to make sure I
understood. Your statement that the R&D in clean energy around
the world----
Dr. Birol. Around the world.
The Chairman. The vast majority of the funding, 80 percent,
comes from government, 20 percent from industry?
Dr. Birol. Exactly.
The Chairman. That is worldwide. What about here in the
United States? Is that breakdown still about the same, about an
80/20, that we are not seeing the R&D in clean technology
development?
Dr. Birol. I need to come back to you for that, Madam
Chair, but worldwide it was, for me, surprising as well.
The Chairman. Yes, that is.
Dr. Birol. Because I thought when I read the interviews of
the business leaders and so on, I thought the biggest part was
coming from the industry and less from the public, but public
was the main driver of the R&D in clean energy.
The Chairman. Well, that is very interesting. If you learn
otherwise and particularly on the U.S. side, I would be curious
to know about that because that is not what typically we would
think.
You have referenced energy security many times here and we
think about the security that comes with abundance of supply
and how we can provide security that way. You have also
referenced the electrification that we are seeing around the
world.
You highlight in your testimony the increasing
digitalization of power systems and, again, that can assist
with levels of efficiency that, I think, is important. But I
think we also recognize that with these opportunities it can
bring challenges, certainly, when it comes to the issue of
cybersecurity. You haven't really mentioned the role that plays
with these interconnected energy systems. Can you just speak a
little bit as to how you think digitalization provides levels
of benefit but also vulnerabilities?
Dr. Birol. In fact, it's an area that we just started to
work, Madam Chair, very important because digitalization and
energy, they are becoming more and more involved when we
certainly made the report and Dave Turk, the former U.S.
government official who recently joined our organization, was
leading that work.
What we have seen is that digitalization provides a lot of
benefits by increasing the efficiency of our systems. We save a
lot of money, we save a lot of activity, and we need to build,
for example, less power plants than otherwise would be needed
as it is out of digitalization, that we are reducing the demand
and improving our power systems. This is very good; this is
something that will continue. It would help us to make, for
example, the most out of the renewable energies as well.
I mentioned there is a mismatch between when the sun and
wind are available and when the electricity demand is the
highest. So digitalization will help to adjust this mismatch as
well.
Now this is very good that our energy systems, our economic
systems are becoming more and more digital, more and more
interconnected to different devices, but this also raises the
issue of cybersecurity as the surface attack is becoming much
bigger in terms of the unexpected assumptions.
So it is an area that we are working with our governments,
how we can increase the resilience of our electricity systems
in order to minimize such attacks. What kind of measures,
regulatory and technical measures, need to be taken in order to
minimize the undesired effects of digitalization in terms of
making our systems more vulnerable?
This is a serious issue with the electrification and
digitalization of our electric systems, Madam.
The Chairman. It is something that we focus a lot on here
because as we work to enhance our systems and truly make them
more efficient, make them more cost-competitive, you realize
that you are also building in another level of vulnerability,
if you will.
One more area of vulnerability that I want to bring up and
I speak to a lot here in this Committee. Some years ago, when
we were more reliant on other nations for our sources of oil,
we talked about that vulnerability. And it was not only energy
vulnerability, but vulnerability from a security perspective,
national security perspective. Well, as you have pointed out,
we are in a much better situation now, certainly, with regards
to oil and natural gas and that undisputed position that you
now refer to around the world coming from the United States.
But there is another area where I see a growing
vulnerability on others and that is as it relates to our
critical minerals and our resources, the resources that we need
to help build out, whether it is wind turbines, whether it is
the lithium for the lithium ion batteries. The reality that
whether it is lithium, graphite, cobalt or nickel, these are
what will allow us to help build out the battery, the storage
capacity, that when we are talking about electrification moving
to EV, electric vehicles, we have to have these sources.
I view that as a bottleneck, a potential bottleneck that
will allow us to make this transition or move to these other
areas that you have referenced--you referred to them as
upheavals with what we are seeing with renewables. Can you
speak a little bit about that aspect of vulnerability and where
you see the direction or the trend here?
Dr. Birol. Another excellent point, Madam Chair, if I may
say so.
With the traditional fuel sources, oil and gas, the energy
security is, more or less, well understood and mechanisms are
there for oil and gas. We--IEA--have been working many, many
years, and especially for natural gas, with the G7 meeting in
Japan. We were asked by Prime Minister Abe to look after the
gas security issue, which we are doing and electricity sector,
I mention to you, very important, cybersecurity, we are working
on that.
Yet, another security issue, indirectly, but also very
important in terms of energy is the raw materials for the clean
energy technologies. This goes from aluminum to copper, copper
to lead, to lithium, manganese and it happens that, again, like
the issue of the traditional sources several years ago, these
are consumpted at only a few number of countries. And again
here, concentration of the resources, some of them are in Latin
America, some American countries here, Chile, Peru, Bolivia.
But China happens to be a country with a lot of reserves in
that context.
So, it is, when we're talking about the clean energy
technologies, this is very good. This is good for the
environment, good for the domestic production, but one has to,
perhaps, go one step further to think about where those raw
materials will come from and what kind of security mechanisms
we can develop in order to, I guess, if some undesired problems
arise, as the raw materials of those technologies are
consumpted in a few number of countries. It's very important.
The Chairman. Does IEA, not concentrate necessarily, but do
you factor in these vulnerabilities as you look to your world
forecasts?
Dr. Birol. We mainly look at the vulnerabilities in terms
of energy sources: oil, gas, electricity and renewables; but
these are also an important area and it needs further
attention.
The Chairman. Thank you. I appreciate that.
Senator Smith, further questions?
Senator Smith. I do not have any further questions. I would
just like to thank you very much.
Thank you very much, Dr. Birol, for your comments. This is
quite interesting and I am very happy to be a part of this
Committee.
The Chairman. Well, we are delighted that you are a part of
the Committee.
I have one final question for you, Dr. Birol, before we
conclude. And again, I thank you for your time this morning.
I have long maintained that nuclear in this country and
part of our energy portfolio is significant, important, and we
have seen the United States and our role with nuclear, in my
view, slack off in recent years. We have one remaining
construction project in nuclear, the Vogtle Plant in Georgia,
but you have indicated in your comments here this morning that
China is coming on in a quite considerable and a substantial
way.
We have the traditional nuclear in the global marketplace.
We also have the role of advanced nuclear. I think we are
seeing some positive signs coming out recently in terms of
these emerging technologies and how they might factor in to the
energy marketplace. But can you just share with the Committee
your view of how nuclear here in the United States factors in
these out years, whether it be traditional nuclear or the
advanced nuclear opportunities?
Dr. Birol. Thank you very much, Madam Chair.
I think nuclear is a technology worldwide which can provide
electricity, uninterrupted without emitting carbon emissions,
but after Fukushima it became a challenge in many countries to
be near nuclear power plants.
The challenge is not only there, the challenge is also in
the financing part of the equation to be near nuclear power
plants and even in some countries, like in the United States,
where electricity demand is low, where the gas prices are low,
where the renewables are growing, to find even getting
electricity generation from nuclear is a big challenge, unless
governments don't take any measures.
So for the new builds, in my view, it will be very
difficult to go with the traditional nuclear power plants.
Small, modular reactors can provide the opportunity to address
the project management risks and the financing problems. So
this can be a solution.
If I go from, and I believe nuclear can play in the U.S.
and in the countries where it is accepted, can play an
important role for energy security and, also for the
environmental issues, can make a positive contribution.
There is one more issue globally. As I said, as you also
mentioned, in the U.S. we are building one, only, nuclear power
plant. In Europe, the situation is similar, in Japan it is
similar.
These countries were the main nuclear technology exporters
until recently. But since they don't build any nuclear power
plants they are forgetting how to build it and China and Russia
are building a lot of nuclear power plants and they will not
only build nuclear power plants at home, but they may well be
the countries who are exporting the nuclear technology to other
countries which is either important from not only from energy
perspective but from other perspectives as well. So we have to
look at the nuclear also, perhaps, from that angle as well that
the established nuclear technology exporters such as U.S. and
Europeans and others are facing a strong challenge from China
and Russia for the other countries to build nuclear power
plants.
The Chairman. When you think about where nuclear has
dominated and, again, here in the United States and Europe,
certainly in Japan, that reversal in a very, very short order,
really, in terms of the energy spectrum worldwide. And now
moving that over to China and Russia where we had not seen that
much of a significant presence. It is really, kind of, an
interesting phenomenon that it has moved as quickly and as, I
would say, dramatically, as it has in terms of moving the
energy portfolios around.
I wonder whether--and I am just talking off the top of my
head here--but I wonder if an increased role and presence in
Russia, in China particularly, will promote or spur the United
States to renew its efforts within the nuclear space or whether
we continue to cede and take a back seat.
It is not something that I think has been good. I greatly
appreciate the role that nuclear plays in providing for not
only a reliable power source, but a clean power source. And I
regret that we are losing the skilled workforce, the level of
leadership that we have played, not only from the production
perspective, but how we then export the technologies and the
smart people that come behind them.
Do you think that we change or with low natural gas prices,
we just continue in the direction that we are?
Dr. Birol. I think natural gas is, of course, very good. It
is cheap. Renewables are also getting cheaper. But in my view
having a diversification and nuclear, the position of nuclear
in the U.S. is a strong one, to keep that position is wise
policy. I wouldn't let it go.
The Chairman. No.
Dr. Birol. But, of course, up to your government that they,
yourself, to proceed a policy, but it will be regrettable, in
my view. The United States has been one of the leaders of
nuclear technology for years and years. Industry has been
developed in this country in 1980's. To give it up, that
position, may not be the best way, in my personal view.
The Chairman. Do you see Europe going back to more nuclear
or is that an irreversible direction?
Dr. Birol. I think in many countries, irreversible
direction, but I think Japan is going back slowly to nuclear
power, but the biggest development is coming from China and
India. More than 90 percent of the new nuclear power plants
coming in the future in the next years will come from China and
India. And the Russians are building in Europe as well, several
nuclear power plants. As by building a lot of nuclear power
plants, they bring the costs down and making it cheaper,
accessible to emerging countries.
So it is, in my view, an energy issue, but maybe not only.
The Chairman. One last question.
I said that my last one was going to be nuclear, but you
prompted another and that is in regards to India.
Dr. Birol. Yes.
The Chairman. You have focused a lot of your comments today
on the role that China is playing in the world energy markets.
Will India move more toward natural gas, toward coal, toward
nuclear? Where do you see their energy portfolio?
Dr. Birol. I think India chooses a policy which is all-of-
the-technologies type of policy, and they are pushing,
especially, natural gas strongly and, once again, to replace
coal. But coal is also growing because in India, Senator Smith
mentioned, people having no access to electricity in India,
almost 200 million people have no access to electricity. They
have to build some power plants from coal, but also more and
more natural gas, renewable energy and nuclear. They are
pushing in all fronts.
And to be very frank, the Modi government is pursuing an
energy policy which is very good for their people because in a
very short period of time, almost 11 years, they are bringing
electricity to about 500 million people. It's a big, big, big
achievement. And they are using gas. They are using coal. They
are using renewables. All of those technologies, much more
diverse and I expect the share of gas will increase
significantly in India in the next years to come.
The Chairman. Well, very interesting. I will look forward
to learning more from this report that you referenced earlier
that will focus on those nations that perhaps have greater
vulnerabilities because they are more reliant on a single
energy resource, either for production or for their consumption
and what that means.
It is interesting to hear that with India it truly is one
of those all-of-the-above approaches to energy.
Dr. Birol. Exactly.
The Chairman. I truly appreciate what you have shared with
the Committee. It is always good, it is very important for us
to understand what is happening with the global energy and the
trends out there.
As one who has been a strong proponent of U.S. energy
production, certainly within oil and gas, it makes me feel
pretty good, actually, to hear you say that of the four
upheavals that you have referenced, the first one is the U.S.
being a leader in oil and gas production.
As I say, just in the few years that I have been here in
the Senate and serving on this Committee, we have gone from a
perspective of discussion about LNG import terminals to now
export terminals, to a vulnerability and a reliance for our oil
on countries that we do not like and they do not like us and
now we are truly in the driver's seat. So that is significant.
But I think it also is very important for this Committee to
hear very clearly the other areas that you have identified: the
cost of renewables are moving quickly, and the direction that
is being taken and the advances in solar and wind, the fact
that they are getting to that point where they can stand on
their own and be cost-competitive, that factors in mightily in
terms of the direction that we move from a policy perspective.
And paying attention to what is happening in the world, the
leadership of China. It has been very easy for us to say that
China is the big polluter out there, but when they are
advancing policies that are really keyed in on cleaner energy
and energy sources and whether that is, again, importing LNG
that may come from a place like Alaska or from elsewhere, but
to recognize their leadership in nuclear. And then also, your
fourth point about the share of electricity growing faster than
the other sectors and the implications that portends.
So a lot to think about as we begin the new year, but thank
you for your insight, for your guidance. We look forward to
learning more from you about these very important geopolitical
issues in the energy space. You have been most helpful. You
have been generous with your time. We wish you safe travels
back when you return to France.
Thank you very much.
Dr. Birol. Thank you very much, Madam Chair.
The Chairman. Thank you.
With that, the Committee stands adjourned.
[Whereupon, at 11:40 a.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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