Good afternoon and thank you for the kind introduction

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Good afternoon and thank you for the kind introduction Powered By Docstoc
					               The Virginia Energy Plan and Future Directions for Energy Research
                                   Remarks of Stephen Walz

                                         Virginia Tech
                                       November 13, 2007

Introduction

I am honored to be at Virginia Tech, joining the dialog you have been having on campus and in the
community on energy and environmental issues. I am glad to add on to a long history of working
with Virginia Tech through a long list of cooperative projects with the Department of Mines,
Minerals and Energy. To give an idea of the breadth of this work, just some of these joint efforts
include:

      Mine safety, mining and energy efficiency at the Center for Coal and Energy Research,
       including the Virginia Energy Patterns and Trends site.
      Long-term energy education efforts with the cooperative extension office.
      Membership on the Dean’s Biofuels Working Group and assisting Tech’s biofuels research
       and development.
      Work with the Brooks Forest Products Center and Department of Wood Science and Forest
       Products on use of wood wastes for energy.
      A green-roof project here at Tech currently under development.
      Support for the Virginia Tech solar house solar decathlon entry.
      Numerous projects at the Powell River Project in Wise County.
      Work with the Advanced Research Institute in Arlington on wind power, geothermal heat
       pumps, and other topics.
      Forming the Hydrogen Learning Centers and hydrogen education efforts.

This can serve as a model of how different organizations in the state can work together on energy
research and development and policy issues.

A great pleasure about coming to Virginia Tech is to see the opportunity each of us has to make a
difference in the world. Whether students or faculty, I see exciting work that leads to
improvements in people’s lives – from having no coal mining fatalities in over two years in
Virginia, to energy efficiency improvements in industrial establishments and people’s homes, to
energy technologies such as demonstrated in the Virginia Tech solar decathlon house.

Turning to energy, we should first address the scope of the problem we are facing in Virginia and
then look at goals and recommended actions set out in the Virginia Energy Plan, particularly with
energy research, development, and deployment.

Scope of Energy Issues

The first questions we need to address when looking at the context for energy and environmental
issues is the scope of the problem that we are facing and why should we be concerned. While this
may seem obvious today, it was only recently that these issues came back to the forefront. These
issues have also risen and receded from public consciousness over the years. Knowing the context
of our current situation will help us understand where our energy future should go.

                                          -1-
We must understand that energy underlies our economy. Today, our energy economy is centered
around fossil fuels, particularly with electricity and liquid petroleum fuels. We have been able to
achieve an unprecedented quality of life due to our energy supplies. There are studies that show a
direct correlation in countries around the world between life expectancy and electricity
consumption and a country’s economic output and electric consumption. While this may be related
in many parts of the world to actions such as being able to refrigerate medicines and produce clean
water, these actions rely on the availability of reliable, affordable energy supplies.

In the United States, much of our quality of life is predicated on having low-cost energy available
to move us by single-passenger vehicle and allow us to live in wherever we wish, to move goods
by truck and train, and to have the appliances, computers, big screen televisions, air conditioners
and other products that make our lives more comfortable and convenient.

In Virginia, energy is the foundation for many parts of our economy. This includes coal and
natural gas supporting the economy in the coalfield counties, to localities such as Surry County and
others whose tax bases are supported by large electric generating plants, to here in Blacksburg
where Virginia Tech supplies electricity to much of the community, to Norfolk Southern carrying
coal across the state to our export terminals, to new Virginia businesses such as GridPoint, which
offers peak electric control equipment, opening this month in Arlington County, to the low-cost
electricity supporting so much economic activity.

We also now have a better understanding the correlation between energy use and climate change –
a topic I will focus more on later.

Energy Security

We have been reminded over the last few years how vulnerable we are to disruptions in our energy
supplies and energy infrastructure. While nothing can, or should, take the focus away from the
hardships faced by residents of the Gulf of Mexico region from the 2005 (and other) hurricanes,
they did show how disruption in supplies affects our lives in Virginia.

While we are a net exporter of coal and produce a significant amount of natural gas, Virginia is at
or near the end of the pipelines carrying natural gas and petroleum products from the Gulf of
Mexico north. I have heard Hampton Roads called the largest energy cul-de-sac in the world.

We continue to import increasing amounts of our petroleum supplies – not just crude oil but also a
significant percentage of refined gasoline and diesel fuel imported into East Coast markets. The
ships carrying these fuels are extremely price sensitive, turning around in mid course to respond to
price signals.

While imports of gasoline helped the East Coast after the shortages and price spikes from the 2005
Gulf of Mexico hurricanes and the current stability in European gasoline inventories have helped
dampen gasoline price increases in recent weeks, ships could just as easily be diverted away from
the United States and hurt our supplies. We have seen this pattern with liquefied natural gas, with
ships being diverted to markets in Europe and Asia with higher market prices.




                                           -2-
We also have had to expend significant military muscle to protect energy supplies. While James
Woolsey will cover this in considerable detail in his December 4th speech on “Energy, Security,
and the Long War of the Twenty-First Century,” I will make a few points here.

There has been a long history of military action and energy needs. Daniel Yergin, in his epic book
on the history of petroleum entitled “The Prize”, tells us that Britain became involved in the
Middle East when it decided to switch its navy from coal to oil. While not the only reason we
remain militarily engaged in the Middle East, oil is a significant factor.

Today we are also seeing the link between energy and military action in numerous other areas –
and not just involving the United States. For example, one basis of the unrest in Niger is control of
uranium deposits. We see violence in the Nigerian oil-producing delta. We have seen movement
of troops around the oil bearing region near the China-Russian Pacific border. While not just for
energy, we have recently seen the U.S. Navy take action against ocean-based piracy near Somalia.
If we add areas where climate factors are leading to unrest, this list lengthens.

Energy is a critical part of our military operations in Asia. Two pictures that the director of the
Institute for Defense and Homeland Security has shared illustrate how vulnerable energy and other
supplies can be for our troops. The first shows a typical fuel transport vehicle and the second
shows a material convoy in Afghanistan. In Iraq, the United States military must transport 2.4
million gallons of fuel each day.




We probably think much of this is to fuel military vehicles, but a large amount fuels generators
keeping tents air conditioned and electronic equipment running – necessary to keep our modern
military operational. The military speaks of being tethered to its fuel lines – maybe a parallel to the
old phrase that an army travels on its stomach. Today, the military is actively looking for options.
This clearly is an opportunity for new energy research and development at Virginia Tech and
elsewhere.

Whether you subscribe to peak oil theories or not, it cannot be argued that the remaining reserves
are harder and more expensive to extract and refine. Additionally, there are fewer, larger refineries
producing our gasoline, diesel, and aviation fuels, working at near capacity. With little excess
capacity or margin, a problem even at one refinery sends ripples through the marketplace.

Lastly on oil, one of our primary suppliers, Venezuela, produces a large amount of heavy oil.
There are few refineries in the world other than on the United State’s Gulf Coast able to handle this
heavy crude. However, Venezuela is funding construction of refineries elsewhere to handle this
crude. When Venezuela has more flexibility where it can ship its crude, we will be at additional
risk of supply disruptions from this quarter.

                                            -3-
Energy Exports - Economic Impact on Virginia

We export capital every day to other states and countries through energy imports that could remain
in Virginia’s economy. The Governor’s Ethanol Coalition reports that the United States can save
168 million gallons of imported petroleum for every 100 million gallons of locally produced
ethanol. At $90 per barrel, this is worth over $15 billion in our trade deficit.

We calculated for the Virginia Energy Plan that displacing just one percent of the petroleum now
imported into Virginia with a Virginia product or through conservation and efficiency would keep
$114 million inside the state’s economy.

Virginia Energy Supply and Consumption

Let’s look at where Virginia’s energy supplies comes from and where it is used?

We are a net importer of all types of raw energy sources energy except coal. We import almost
100 percent of our petroleum, 100 percent of uranium for nuclear power, and about 60 percent of
our natural gas. About half of the coal mined in Virginia is used in state for electricity generation
and manufacturing. We only produce about 2 to 3 percent of our electricity from renewables. We
produce only a few million gallons per year of biodiesel, hardly a drop in our consumption bucket.

                                  Virginia - Net Energy Importer


                          1,500
           Trillion BTU




                          1,000
                           500
                             0
                          (500)
                                   Coal




                                                                                         Total
                                          Natural


                                                    Petroleum


                                                                Nuclear


                                                                           Electricity
                                           Gas




Looking at electricity, in 2005 we generated about 45 percent of our electricity from coal, 35
percent from nuclear, 10 ½ percent from natural gas, about 5 ½ percent from petroleum, about 3
percent from renewables, a net 0.1 percent from hydro (1.9% hydro less 1.8% pumped storage).
This generated about 71 percent of our needs, with the remaining 29 percent imported from other
states. These numbers will be important when we talk about climate change.




                                                                          -4-
Looking at consumption (at its end use point to have an apples-to-apples comparison – at the meter
for utilities, or at the pump or delivery truck for liquid fuels) shows that 43 percent of the energy
we use in Virginia is used for transportation. The other pieces of the consumption pie are 25
percent from industrial, 17 percent from residential, and 15 percent from commercial. These
percentages might change some if we measured energy back to the well or mine, but the key point
still is the large amount used for transportation.




When we think of taking energy efficiency actions, we often think of in our homes and businesses.
We need to concentrate much more on transportation – both looking at energy efficiency and
climate change.

Our energy use has been growing steadily. Historically, change in energy use has followed the rate
of economic growth or decline. Virginia also is experiencing land development patterns that
increase the rate of energy use. We have experienced significant sprawl, resulting in the amount of
vehicle miles traveled growing at three times the population growth rate.

                        800

                        700

                        600

                        500
         Trillion Btu




                        400

                        300

                        200

                        100

                        -
                              1960          1970         1980          1990           2000

                                     Residential   Commercial   Industrial    Transportation



Additionally, northern Virginia is home to about 25 computer data centers. There are at least 20
more under some level of development. With this growth, these data centers would account for
close to 10 percent of the total electric use in the Commonwealth!

What is Virginia’s actual energy growth rate? The compound growth rate for energy in Virginia
from 1993 to 1998 was 2.2% per year. This rate slowed some from 1998 to 2003 to 1.4%.
However, Virginia’s energy use grew by over 5% from 2003 to 2004. With the past growth in
energy, we are now the 26th state for per capita energy use. This leads to a dichotomy – where we
want economic growth but want to control energy use growth. Our challenge, one that we can


                                                                              -5-
meet, is to decouple economic growth from energy consumption growth through efficiency and
economic growth through renewable energy business development.

Our energy picture also affects our business environment. For Virginia’s businesses, energy may
be a tale of two sources.

We have been fortunate to have lower electric costs than states we compete with for economic
development. This remains true even with recent increases. Additionally, the State Corporation
Commission is now empowered to consider the competitiveness of electric costs with other
Southeastern states when it sets utility rates.

On the other hand, natural gas prices in Virginia and the mid-Atlantic region are typically 10 to 20
percent higher than in the Rocky Mountain and Gulf regions. This is reflective of our distance
from our primary sources of supply.

Our natural gas costs also are higher than in many other countries. This has driven some
businesses, particularly chemical and fertilizer manufacturers, overseas. This is of particular
interest in Virginia as we are the home, in Hopewell, of what is reported to be the largest industrial
consumer of natural gas east of the Mississippi that produces over 1.5 million metric tons of
ammonium sulfate fertilizer per year. In order to remain competitive, the plant is now served by an
23-mile pipeline delivering landfill gas, which when fully operational will be able to provide over
1/5 of the natural gas used by this plant.

One point I hope is clear from this litany is that the issues affect a wide breadth of our lives and
that it has taken us a long time to get where we are. Unless there is someone sitting in this room or
a similar hall with a break-through technology in something like fuel cells, fusion, or something we
have never thought about, there will not be any quick or easy fixes.

The Virginia Energy Plan

So, this takes us to the first rule of being in a hole (except if you are in a mine or drilling a well).
What should we do is to stop digging. Then, we need to figure out how we turn the situation
around and climb out of the hole. This, particularly the impact of natural gas price jumps on
manufacturing in Virginia, is what led to the 2006 energy policy legislation and the Virginia
Energy Plan.

In order to get our hands around this complex subject when putting together the Energy Plan, we
broke the energy picture into five areas:

    1.   Energy consumption and supply
    2.   Energy efficiency and conservation
    3.   Energy infrastructure
    4.   Energy and the environment
    5.   Energy research and development and economic development




                                              -6-
                       Virginia Energy Plan

                1.    Introduction and Executive Summary
                2.    Virginia Energy Resources & Consumption
                3.    Energy Efficiency & Conservation
                4.    Energy Infrastructure
                5.    Energy and the Environment
                6.    Energy Research & Development
                7.    Recommendations




Then we asked ourselves what our goals were for the next ten years. We established four broad
goals:

   1. Increase the level of our energy independence through reducing the rate of growth of our
      energy use by 40 percent and increasing in-state production of energy by 20 percent.
   2. Expand energy education to help overcome the barriers faced by consumes to make
      efficient energy choices.
   3. Reduce greenhouse gas emissions by 2025 to 2000 levels, requiring a 30 percent drop in
      what we otherwise would have by 2025.
   4. Target research and development in four areas where Virginia has a strategic advantage,
      including renewable liquid fuels, nuclear technologies, coastal energy, and carbon capture
      and storage in unminable coal seams.


                        Virginia Energy Plan

                 1.    Introduction and Executive Summary
                 2.    Virginia Energy Resources & Consumption
                 3.    Energy Efficiency & Conservation
                 4.    Energy Infrastructure
                 5.    Energy and the Environment
                 6.    Energy Research & Development
                 7.    Recommendations




Let’s start with the first three goals, and then take more time to address energy research and
development.

Virginia Energy Plan Goal 1 – Energy Efficiency as the First Priority

For the first and most important goal, we have to ask ourselves how can we better control energy
consumption to reach level per capita energy use in Virginia.

The first step is to break the growth curve of electric use. We have increasing numbers of energy
gobbling appliances in our homes and workplaces. Just look at televisions. A new plasma
television uses much more power than what it is likely replacing. How many of you could tell me
how much more energy a new big-screen plasma television uses compared to current televisions or


                                                                 -7-
to other flat screen technologies such as LED? Maybe even more important, how many nome
electronics salespeople could tell customers, or would tell customers, this information?

This points us to the benefits of Virginia’s Energy Star sales tax holiday. Consumer education is
probably the best reason to have the Energy Star sales tax holiday. Overall consumer awareness
grows, making it more likely that consumers will purchase Energy Star appliances without the
incentive. Additionally, consumers can save due to the sales tax holiday from reduced sales taxes
paid but more importantly from using the Energy Star appliances.

Another factor we need to overcome is that as our economy moves from manufacturing to service-
based jobs, we shift our energy use from other fuels to electricity. Just remember the earlier
example of the electricity demand from the computer data centers.

What will it take to break this electricity growth curve? The General Assembly, working with
Governor Kaine, set out a goal to reduce electricity use by 10 percent of 2006 levels by 2022. This
has been subject to study by the State Corporation Commission over the summer. The
Commission’s report on whether this can be done is due December 15. It is critical that we meet,
or exceed, this target in order to meet the Virginia Energy Plan’s conservation goal.

We also need to achieve efficiencies in how we use natural gas, fuel oil and transportation fuels.
Based on what has been cost-effectively achieved in other states, we believe we can reduce natural
gas use by over 7 percent, fuel oil use by 10 percent and transportation use by 5 percent.

How to reach these targets will drive interesting policy debates such as whether Virginia should
decouple natural gas distribution income from payments based on the amount of natural gas
consumed.

What will affect whether we can meet these targets? First, we will need to improve our energy
efficiency technologies and delivery systems – certainly an area for energy research, development
and deployment. This will include improving vehicles and buildings and better understanding
consume behavior. Virginia Tech has researchers looking at energy use in structures and vehicles
and at consumer behavior. I mentioned the data centers. You have researchers that can show how
to run these data centers at half the typical energy use.

One challenge we face is how to transfer the results of research into the hands of people outside of
the university community, both practitioners and policy makers, in a form that they can readily use.
Decision makers need information in clear, concise forms, available at the time they are faced with
the decisions. This is true for people making decisions affecting how much energy they use and for
policy makers faced with the need to address energy issues. One great example of moving
university expertise into the community is the recently announced partnership in Washington DC
that will bring $500 million dollars in energy improvements to the region’s buildings over 5 years.

Another information transfer method we would like to set up for the small commercial and
manufacturing sectors is through energy assessment centers. The regional planning district in the
Roanoke Valley would like to start such a center using retired engineers together with students and
experts from Virginia Tech to provide energy audits and management advice to small commercial,
institutional, and industrial concerns.



                                           -8-
In another area with a large energy use impact, Virginia will have to do a better job addressing land
use, looking at the cost of sprawl from energy, environment, and life style points of view. We need
to address how your architecture and planning departments can provide decision makers with the
needed information to reach this end.

This need for information transfer from the academic community to decision makers is a
significant challenge. You will need to overcome the view that academics are out of touch with the
realities faced by decision makers.

If you believe this is needed, it will require better integration of those in the academic community
with industry and government decision makers, and an understanding that many decisions are made
among shades of gray, not being black and white as they sometimes may look from the shelter of
the university community.

Virginia Energy Plan Goal 1 –Energy Production

Turning to our energy production target, the Virginia Energy Plan calls for increasing in-state
energy production by 20 percent over the next ten years. Besides keeping money moving through
our state’s economy, this will provide for greater diversity of supply and will lessen the impact of
energy supply disruptions.

This is where research here at Virginia Tech, and elsewhere, will be critical. For example, the
Energy Plan envisions 300 million gallons of ethanol and 120 million gallons of biodiesel per year
produced in state (equivalent to just over 27,000 barrels per day).

Meeting this target will be a challenge. Virginia, as a grain importing state, cannot sustain this
production with in-state grain resources.

Let’s consider the results of a study released this past March, titled “Virginia Biofuels Facility
Business Model and Action Plan”. It looked at the biofuel production potential of Virginia
agricultural sector. One promising feedstock for ethanol is hulless barley. If we were to
theoretically say that all land now used for hulled barley and wheat production in Virginia were
converted to hulless barley and all corn acreage not now planted with a winter cover crop were
planted with hulless barley, this could produce about 72 million gallons of ethanol, far short of our
200 million gallon target.

If Virginia were to use 100 percent of its in-state soy production for biodiesel, we could only
produce 24 million gallons, again far short of our target. This means we must either import
feedstock or develop alternate herbaceous or woody crops grown on hay land, idle land, or
marginal lands.

We will also need significant growth in other types of energy production besides biofuels, coupled
with a stabilization of in-state coal production. We include a projected increase in production from
Virginia’s only petroleum refinery in Yorktown of 40,000 barrels per day. The new owners of this
plant are assessing the plant’s performance and how they can increase production. We certainly
encourage increased production at this plant.

We also believe that there will be increases of in-state electricity production, including the Virginia
City Hybrid Energy Station in Wise County burning Virginia coal and biomass, and new gas-fired

                                            -9-
plants in Warren and Caroline counties. We do not include any production from a new North Anna
3 nuclear power plant within the term of this plan, but believe it will be under development during
the term of this plan.

We also foresee continuing growth in natural gas production in Virginia. I mentioned when talking
about energy supplies that Virginia imports about 60 percent, in net terms, of its natural gas. The
other 40 percent comes from Southwest Virginia’s natural gas fields. More than 80 percent of
production is produced from coal seams. This has grown five fold in the last 25 years. We expect
coalbed methane production to continue to increase but do not have the historical experience to
know at what point this production this will plateau and decline.

This could hit close to home here in Blacksburg. There has been some coalbed methane
exploration in the Valley coal basin just west in Montgomery and Pulaski Counties. Virginia Tech
may own property holding natural gas reserves. This might be a good opportunity for joint
research with the natural gas industry.

A few Virginia producers are also beginning to look at deeper shales for natural gas, similar to
deep shale production in the northern Appalachians and Texas. These operations will need to use
technologies such as horizontal drilling for efficiency and to minimize environmental impact.

I mentioned a stabilization of coal mining in Virginia. Virginia’s coal production peaked in 1990
at just under 47 million tons per year, and now is around 30 million tons per year. We believe that
in state coal production will stabilize at about 25 million tons per year through the ten year term of
the Virginia Energy Plan as surface mining lessens in importance due to depletion of surface
mining resources and underground mining remains close to current production.

A key to future coal production is to address carbon capture and storage when coal is used.
Virginia Tech has been leading the efforts of the Southeastern Carbon Sequestration Partnership to
address carbon capture and storage in unminable coal seams. I was very glad to see Friday’s
announcement that Dominion Resources is investing $500,000 to support the near-term work of
this project. We have the potential to tie geologic storage in Southwest Virginia to carbon capture
at Dominion’s new Wise County power plant, at Appalachian’s power plant in Russell County, and
from any new coal to liquids operations.

What about using renewable forms of energy as an alternative approach? Renewable energy
production must be expanded. Virginia has started down this path through creation of its
renewable portfolio standard in 2007 utility legislation. This set a goal of producing, by 2022,
renewable electricity equal to 12% of non-nuclear 2006 electric sales.

Utilities are not mandated to reach this goal, but are given incentives to produce electricity from
these renewable resources. This has already led to increased investments in renewables by
Virginia’s electric utilities. However, we have a long way yet to go.

We also will need to decide if we are willing to pay higher costs, certainly higher up front costs and
maybe higher long-term costs, for renewable sources. A good example of this choice is what
people in Delaware are faced with. Calculations by the Delaware public utility commission staff
show that the proposed 480 MW Blue Wind offshore wind project would increase electric bills by
$55 per month. That would be more than a 50% increase in electric bills for a typical Virginia
consumer in this area.

                                           - 10 -
Appalachian Power’s recent proposed electric price increases in electric rates, which were less than
half this amount, generated over 20 thousand complaints at the Virginia State Corporation
Commission. Could you imagine the complaints from a $55/month increase? Even with the
Virginia Energy Plan’s conservation goal, calculations in the Plan show that the state is projected
to need over 1,200 MW of power by as early as 2016.

Energy Infrastructure

All of this points to the reason I believe that we will have to add new energy infrastructure to meet
Virginian’s energy needs.

There has been considerable debate over new electric transmission lines, with the latest focused
around a line proposed by Allegheny and Dominion to cross Northern Virginia. Conservation and
efficiency have a critical role in reducing the demand for this new infrastructure. However, I think
some new transmission construction will be needed if we are to keep our lights, computers, air
conditioners and appliances on.

We are also facing the need for new natural gas pipelines to serve the southern Hampton Roads
area, and will face the need for more pipeline or peak storage capacity in other growing areas of the
state.

New infrastructure will be needed for renewable fuels. One limiting factor to use of biofuels today
is the lack of regional and local distribution and retailing networks. Many of our oil terminals do
not have room for substantial new tanks. Siting a fuel distribution facility, greenfield or brownfield,
is a very difficult task due to land use conflicts and needed environmental protection requirements.
Anyone who has searched for E-85 or biodiesel knows there are very few retail outlets available.

One interesting model, developed with support from Virginia Tech, is found in Southside, where a
biodiesel plant is being developed to serve a local truck stop, with the biodiesel produced from
locally grown canola.

Can conservation obviate the need for this new infrastructure? Many people draw the choice
between investing in conservation or new infrastructure. Duke Power’s CEO even calls
conservation the fifth fuel. Others say sufficient conservation could be purchased with the capital
that would be spent on a new power plant. The answer to this question will be driven by whether
we are willing to change the basic economics of our utility systems.

Today, utility investors and stockholders rely on the utility’s ability to receive a return on its
investment in generation, transmission, and distribution lines through electricity sales. It would
take a huge change in our utilities’ business structure to build future investment and income more
around conservation. Making this change will require putting conservation on at least equal
footing with supply side options. There will be significant debate whether the utilities will have to
make this change or cannot make this change to remain viable.

I have spent the last number of minutes painting a challenging picture. Do I think we can meet
these challenges? Yes, I have no doubt that we can – if Virginians support investment of resources
needed to overcome the market and societal barriers to conservation, if they make the life-style


                                           - 11 -
choices to reduce energy use, if we develop new approaches to energy conservation and production
through quality research and development, and if we support needed new infrastructure.

Virginia Energy Plan Goal 2 – Energy Education

Virginians have not implemented many cost-effective energy efficiency and energy supply options.
The National Action Plan for Energy Efficiency identified a series of barriers to consumers making
these investments. These include two caused by lack of information – customer barriers from lack
of information on energy savings opportunities and lack of funding for up front investments; and
program barriers – which limit investment due to lack of utility or regulator knowledge about the
most cost-effective energy efficiency program portfolios or technologies.

Virginia has put limited resources into consumer energy education. This has lead to a disjointed
message to consumers. They hear from energy product, equipment, and appliance sales staff –
often calling us at dinner to sell goods – from utilities – sometimes competing for the consumer’s
business – from cooperative extension agents, from various agencies in the federal and state
governments, from friends, from contractors, and others.

We also need to do a better job of crafting our energy messages to consumers. Virginia is home to
numerous nationally-recognized marketing and advertising companies. Researchers at Virginia
Tech are also studying consumer behavior towards energy use and efficiency. We should tap this
expertise in developing our message.

Virginia needs to craft a better coordinated energy education program to provide consumers with a
clear message, delivered at the time they are considering a purchase that will affect their energy
use. To help make this happen, the Virginia Energy Plan recommends development, by mid-2008,
of an energy education plan.

Virginia Energy Plan Goal 3 – Climate Change

Now, I am going to double this challenge. As I perhaps glossed over earlier, we now have a better
understanding the relationship between energy use and climate change, and recognize the need to
take more action to address this problem. The recently released fourth Intergovernmental Panel on
Climate Change (IPCC) report includes found with a high level of probability that there is a
connection between manmade actions and global warming.

This leads to the debate whether we should do something, and if so, what and when.

A very interesting report recently issued by a group of retired senior military leaders, “National
Security and the Threat of Climate Change,” talked about the need to plan based on how likely an
event is to occur and the consequence of the event. They point out that as military leaders, they
have to plan for high-consequence events even if there is a low likelihood of the event.

They point to the cold war as one parallel. We spent, really are still spending today, billions of
dollars on actions to prevent a nuclear attack. We as a society believed this was a good investment
even though there was a low likelihood of nuclear attack. These leaders believe we must now
address climate change, pointing to the high consequences and increasing scientific certainty that
human actions are a leading cause of climate change.


                                          - 12 -
The Virginia Energy Plan sets out a goal to reduce greenhouse gas emissions by 30 percent by
2025. This will bring us back to the level of emissions in 2000. We estimate that the conservation
and renewable targets in the Virginia Energy Plan will only get us about ½ of the way to this goal.
We will have to go beyond loud rhetoric and make substantial changes in how we produce and use
energy.

This will require careful planning and strong support by the majority of Virginians. The Virginia
Energy Plan proposes formation of a Climate Change Commission to help start us on this path.
The Commission would have four charges:

      Calculate the size of and contributors to Virginia’s carbon footprint
      Address the effects of increasing atmospheric greenhouse gas concentrations on Virginia
      Identify what Virginia needs to do to prepare for the likely consequences of climate change
      Identify what actions are needed to meet the 30 percent goal for reducing greenhouse gas
       emissions.

A first step to help us answer the first charge to the Commission would be to require greenhouse
gas emission reporting. Virginia joined The Climate Registry, so far on a voluntary basis, to
provide a common protocol across states (39 states have signed on so far) how to measure and
report greenhouse gas emissions.

Today, the Registry provides the protocols have users report direct emissions from energy
consumption, indirect emissions from electric use, and emissions from central fleets. Protocols for
reporting emissions from transportation and other uses are being developed. This is one area that
researchers from Virginia Tech could be involved.

The Virginia Energy Plan also recommends that greenhouse gas emission reporting be made
mandatory, using The Climate Registry protocol, to help provide the information needed to answer
the Climate Change Commission’s first charge.

Virginia Energy Plan Goal 4 – Energy Research and Development

Lastly, I would like to turn to energy research and development – and add deployment. Virginia
Tech undertakes more energy research and development than any university in Virginia. We will
need to expand this research and development, and address deployment issues, as we move
forward.

To decide where to put resources first, we looked at four areas where Virginia has a strategic
advantage. In setting these priority areas, we had to leave a lot of research out. We cannot do
everything we might like to do with energy research and we cannot achieve this growth all at once.




                                          - 13 -
                           Virginia Energy Plan
                         Research & Development

           • Consistent energy R&D funding
              – Nuclear, biofuels, coastal energy, carbon capture & storage
           • Virginia Energy Research and Development Organization
              – Public energy R&D governance
              – Government, university, business involvement
           • Join Association of State Energy Research and Technology
             Transfer Institutions (ASERTTI)
           • Sponsor Virginia/Mid-Atlantic energy technology showcases for
             venture capital
           • Include energy R&D in energy technology parks




This is not to say that the other areas, whether it is energy conservation, energy policy, fuel cells,
coal processing, or other, won’t have a place and deserve resources, it is just a recognition that we
have to prioritize the limited resources available through the state budget.

The first area is with biofuel production. Virginia, particularly in Southside, is a sweet spot for
cellulosic fuel production. We also have a great opportunity to look at reclaimed mined lands in
Southwest Virginia for cellulosic crop production.

We also are developing the systems and technology to cost-effectively use these resources.
Virginia Tech holds a key place here. I believe one key is to develop a system that fits in with the
rural nature of Virginia’s agricultural areas and can efficiently handle the large volume of biomass
for energy production. Add to that the technology to efficiently – from both an economic and an
energy point of view – produce biofuels, and we will be able to meet our biofuel production
targets.

But, to get there, we need to get these technologies and systems off of paper and bench models
through pilot scale production and deployed in the marketplace. Today, the Virginia Tobacco
Indemnification and Community Revitalization Commission is funding a pilot biodiesel operation,
but we still have not identified the resources for the ethanol technologies.

We also need to build bridges between the researchers here at Tech and at other universities such
as JMU and UVA to enhance and not compete for our research dollars.

Our second area of strategic advantage is with nuclear technologies. Virginia posses considerable
knowledge and experience with nuclear technologies through BXWT and Areva in Lynchburg,
Dominion operating nuclear power plants, and the nuclear Navy and shipbuilding in Hampton
Roads.

Virginia’s universities have cut back on nuclear programs over the last few decades. Now it is time
to turn this back. It is promising to see Virginia Tech work with the Lynchburg nuclear companies
and the Center for Workforce Development & Continuing Education to provide for R&D and
student education to meet the companies’ needs.

We also have seen new interest in mining uranium in Pittsylvania County. Virginians will need
assurance that such mining can be completed safely – both to humans and the environment – before
it would be allowed. Research, such as reflected in the Virginia Tech doctoral dissertation on the
origin of uranium mineralization at Coles Hill, will be critical in this analysis.

                                                                              - 14 -
The third area is related to coastal energy. The Virginia Coastal Energy Research Consortium is
undertaking research on algae as a biodiesel feedstock and on offshore wind. Virginia Tech’s
Advanced Research Institute is the leader on the wind research – as well as research on wave
energy.

The fourth area of strategic advantage is carbon capture and storage in unminable coal seams. This
work, lead by the Virginia Tech Center for Coal and Energy Research, has promise to lead the
nation in assessing carbon storage in coal and to bring needed economic activity to Southwest
Virginia. It has the secondary advantage of generating additional production of natural gas from
the coal seams, with its greenhouse gas advantages.

I have mentioned the need for energy R&D cooperation and coordination among Virginia’s
universities. A great example of this need was shown through your own internal efforts to
coordinate energy research. Your offshore wind researchers were unaware of the research on
coastal bird populations until you completed your 2006 inventory of energy research.

Developing the cross-university inventory of energy R&D for the Virginia Energy Plan highlighted
other areas where research needed to be shared. We need to expand this effort to strengthen ties
between R&D at our universities and Virginia’s businesses.

The Virginia Energy Plan proposes to establish a framework for this cooperation and coordination
– through what would be called the Virginia Energy Research and Development Organization.
Based primarily on the model used for the New York Energy Research and Development
Authority, or NYSERDA, this would bring together representatives from Virginia universities and
businesses to provide prioritization of state investment in energy research and a forum for sharing
resources. This group could also serve to bridge researchers and businesses with venture capital
through energy R&D forums.

This new governance structure can be put in place consistent with the overall state R&D policy
recommendations developed by the Virginia Research and Technology Advisory Commission.
They project a minimum need of $15 million per year would be needed to make a substantial
impact. We have set a very modest target of finding $5 million in state funds per year to support
new energy R&D.

We will need to tap funds from the Commonwealth Technology Research Fund, from the state
funding available to hire eminent scholars at our Universities, and from the state fund to equip
university research facilities. In reality, much more will be needed, from state, university, and
private funds, to meet our energy R&D needs.

Virginia trails other states in providing these investments. Fixing this will be particularly
challenging given the current state budget picture. However, we can clearly show the needs and
benefits of making these investments to be prepared when funds may become available.

While I may have painted a pretty bleak picture, I don’t want to leave you on this note. I know
every morning when I get up that we can respond to these challenges. Our potential is so great –
from basic areas such as using combined heat and power and increasing efficiency in our buildings,
vehicles and industry, to new technology such as plug-in hybrids and fuel cells, to developing
nano-technology based solar photovoltaic materials integrated into our building materials, to

                                           - 15 -
addressing our land-use/transportation issue that will lead to improved community energy
efficiencies, to building and renovating buildings to LEED standards, to each of us individually
making the choices to use energy wisely.

We also will need to be diligent over a long time and learn the lessons from our on-again and off-
again investments in energy since the early 1970s. Jim Woolsey, your December 4th speaker will
talk about energy security as a long war. We need to, and I am convinced we can, keep our efforts
going over the long path to our energy future.

Lastly, I would like to go back to one of my opening remarks – about coming to Virginia Tech and
seeing the opportunity each of us has to make a difference in the world. Whether through students
or faculty, I see exciting work that leads to improvements in people’s lives. Each of you, really
each of us, needs to every day feel this excitement, this ability to make a difference. Through this,
our potential will more than meet our energy challenges.




                                           - 16 -

				
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