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Energy Technology: Cultivating Clean Tech

New Models for Energy RD&D: A new ‘Clean Energy Institute’ could lead the industry’s war on climate change.

Fortnightly Magazine - May 2008

a possible model for a proposed clean energy institute, to be created by industry in cooperation with the federal government.

The GRI was established in 1976 when FERC approved a surcharge on natural gas sales for use in RD&D. GRI was managed by a public board of directors with an annual budget review by FERC. It was a planning, managing and funding organization, not a performing organization; it did not do the research itself, but by 1993 had launched 132 successful commercial projects. The reported success rate of these projects was 30 percent, more than twice the documented industry average. According to former GRI executives William M. Burnett, Barry G. Silverman and Dominic J. Monetta, GRI’s R&D projects generated benefits for natural gas consumers and suppliers (savings plus sales increases) of $7 billion to $15 billion a year on an annual investment of about $1.6 billion, netting almost a 7 to 1 annual rate of return.

Funding for GRI was scrutinized and challenged annually by FERC on a project-by-project basis. To defend its decisions, GRI developed the project assessment methodology (PAM), an approach that combined objective criteria, probabilistic assessments and quantified subjective judgments by independent experts. Monetta, now president of consulting firm Resource Alternatives Inc. and a board member for Hudson Technologies, says the PAM worked well for GRI, helping to avoid major mistakes and leading to strong research performance.

In 1997, after the gas industry was deregulated, the pipeline companies withdrew their support of the surcharge that funded GRI and gave a seven-year deadline for ending the surcharge in the face of competitive pressures to lower costs. As a result, GRI merged with the Institute of Gas Technology (IGT) to form the Gas Technology Institute (GTI), which is funded from contributions, not a surcharge, at much lower levels ($55 million today vs. $220 million in 1996).

• The Pew Proposal - A Trust Fund

The Pew Center for Climate Change has issued a discussion paper on creating a trust fund to accelerate deployment of CCS. Pew reviewed numerous models in its research, including the federal Highway Trust Fund. The Pew report says the trust fund has provided a measure of insulation from Congressional pressures, certainty in dispensing funds on a timely basis, and the ability to use private-sector best practices in decision making. Pew also warns against failing to specify a termination date or conditions for ending the programs. It encourages appointing a broad spectrum of stakeholders and technical and scientific experts to oversee, manage and operate the fund. The group also points out that such a trust fund is likely to meet resistance from affected companies and is an unfamiliar model to the electric utility industry.

As an example of why it’s important to have a broad coalition, the coal industry may oppose a trust fund if it does not have a voice in the program, as well as the assurance that clean-coal projects will get their fair share of funding. Coal would want a seat at the table on the trust fund’s board of directors.

Environmental groups likely will