Industry Growth Forum Connecting to the Market Navigating

Industry Growth Forum Connecting to the Market: Navigating the Valley of Death Terry Surles, Director Technology Systems Division California Energy Commission November 6, 2001 CALIFORNIA ENERGY COMMISSION

California Must be Prepared to Face the Same Issues as Others Must u Economics w w u Environment w w u Resource Competition New technology market penetration Climate change Life cycle analysis Security w Oil, Nuclear materials Energy Costs Fundamentally Affect our Overall Economy CALIFORNIA ENERGY COMMISSION

A g l] l l’ l’ CALIFORNIA ENERGY COMMISSION

2000 Net Power System Eligible Renewables Biomass & Waste- 2. 0 Geothermal - 4. 6 Small Hydro - 3. 0 Solar - 0. 4 Wind - 2. 0 CALIFORNIA ENERGY COMMISSION

MWh person-year California: policy really does work CALIFORNIA ENERGY COMMISSION

Contribution to ISO Peak Demand August 16, 2001 (MW) MW 6000 5000 6000 26, 509 Commercial AC Commercial Lighting Residential AC Other CALIFORNIA ENERGY COMMISSION

Any R&D Program Must Consider u Near-term realities w w u Longer-term vision w w u political attributes: affordable, reliable, safe resource competition future regulatory/environmental issues For both w w limited budget uncertainties associated with life-cycle costs and competing technologies and lifestyles CALIFORNIA ENERGY COMMISSION

Carbon Management: An Approach for Integrated Energy Systems R&D Carbon Management Efficiency < Btu/GDP Decarbonization < CO 2 Btu < Sequestration CO 2 atm CO 2 produced CALIFORNIA ENERGY COMMISSION

Vision Statement The future electrical system of California will provide a clean, abundant and affordable supply tailored to the needs of “smart”, efficient customers and will be the best in the nation. Tailored, clean, abundant, affordable supply Smart, efficient customers CALIFORNIA ENERGY COMMISSION

PIER Mission Statement Priorities California’s Energy Future Economy: Affordable Solutions Quality: Reliable and Available Environment: Protect and Enhance CALIFORNIA ENERGY COMMISSION

Attributes for Addressing State Issues Program Integration Balanced Technology Portfolio -Temporal Technology Partnerships - Universities - Industry - Federal Focus on California - Specific to State needs -Technology -Risk CALIFORNIA ENERGY COMMISSION

Technology Development Continuum Innovation to Market Renewables Prog. (CEC) PIER Program (CEC) DG & Energy Efficiency Prog(CPUC) CA Mun. Utility Programs CALIFORNIA ENERGY COMMISSION

Investment • Existing, New and Emerging Renewables • Emerging Renewables Buydown Program • Export Program CALIFORNIA ENERGY COMMISSION

EXPORTING ENERGY TECHNOLOGY • The World Bank estimates that over $30 trillion in investments are required for power generation projects over the next years to meet global electricity demand. 20 • Developing and industrializing nations throughout the world are improving their electricity resources by investing in and developing new and efficient energy technologies. • The California energy industry is viewed as a model for technology innovation and implementation. • Since 1988, $400 million in energy export sales has resulted from the program’s assistance to California companies. Data from export brochure; Export Program CALIFORNIA ENERGY COMMISSION

Lighting Advances: The Berkeley Lamp u u u u Increased lighting quality Energy savings- 30 -50% Low glare - computer Unique control features Up or down lighting Lots of light 450 W worth of incandescent and halogen lighting for 150 W CALIFORNIA ENERGY COMMISSION

Power. Light • Power. Light achieved a 57% reduction in manufacturing costs of the Power. Guard and opened an 18, 000 ft 2 automated tile manufacturing facility in Berkeley • Power. Light is the U. S. leader in BIPV with Power. Guard • 2/29/00 - Power. Light installed the largest roof-integrated, thinfilm solar electric system in North America a 10, 000 ft 2 installation at the Port of Cape Charles, Virginia • The Power. Guard system are joined by a tongue-and-groove design that requires no roof penetration or adhesive, thus eliminating leakage and related maintenance CALIFORNIA ENERGY COMMISSION

Power. Light Corporation Building. Integrated PV Roof System CALIFORNIA ENERGY COMMISSION

The Wind Turbine Company u u u Design, develop and demonstrate a utility-scale wind turbine Horizontal axis, two-blade, downwind design Prototype developed for PIER and tested at NREL rated at 250 k. W Commercial prototype demonstration sited at the Fairmont Reservoir in LADWP territory for a 500 k. W - scaled up to 750 k. W - wind turbine demonstration to begin in October 2001 Goal is to produce electricity $0. 035 cents per k. Wh per 100 unit wind farms with wind resources 15 mph. CALIFORNIA ENERGY COMMISSION

Alzeta Gas Turbine Semi-Radiant Burner (GTSB) • PIER is helping develop low- or noemission electric production methods, including gas turbines for use in DG • Alzeta’s GTSB combustors successfully demonstrated simultaneous readings 2 ppm emissions of NOx, CO and unburned hydrocarbon on gaseous fuels during prototype testing. • Goal is to lower cost of emission reduction by $100/k. W for smaller facilities • Alzeta has paid $24, 464 to date in royalty repayment to the PIER Program based on direct sales and licensing of the product CALIFORNIA ENERGY COMMISSION

Catalytica Energy Systems Xonon Catalytic Combustion u u u Ultra-low NOx < 3 ppm provides pollution prevention vs. exhaust cleanup Addresses forecast that 90% of proposed new capacity in U. S. by 2020 (390 GW) will be gas fired Commercialization agreement with Kawasaki (>50% of small turbine market) currently offering Xonon-equipped 1. 4 MW turbine Commercial Xenon modules shipped 3 Q 2001; 4 Q 2001 VA hospital installation GE (50% of world turbine market) launch order for up to six Xononequipped 10 MW turbines CALIFORNIA ENERGY COMMISSION

Kalina Cycle Canoga Park Facility • Kalina Cycle uses working fluid of 70% ammonia and 30% water • Ammonia has much lower boiling point than water and spins the steam turbine at lower temperatures • 3. 2 MW plant at Canoga Park, CA • GE has purchased exclusive license to use Kalina in their combinedcycle gas turbine systems worldwide • $505, 000 royalties received from Exergy, Inc. CALIFORNIA ENERGY COMMISSION

Real Time Transmission Line Monitoring/Rating • tension monitoring increases transmission capabilities by 15 -30% • highly accurate measures line sagging to within 1 -3 inches • increased safety provides the actual real time rating and provides alarms of impending clearance violations • system 1 -3 were built for utilities in Virginia, Colorado and Finland • 200 th system was sold on 8/4/00. The systems are in use on five continents by 70 utilities. CALIFORNIA ENERGY COMMISSION

High Performance Fume Hood • reduces airflow and energy requirements by 30 -50% • flow reduction from each hood cuts energy costs by $1000/yr • maintains or enhances worker safety • ASHRAE standard test achieved containment with 70% flow reduction • with 30, 000 hoods in state, the new Hood could save about 360 million k. Wh/yr, totaling nearly $30 million CALIFORNIA ENERGY COMMISSION

California Energy Commission Thoughts on Market Connectedness u u u R&D, with the wrong set of attributes, will fail on a commercial basis Attributes must include factors for successfully reaching the marketplace Even technologically mature products need governmental support due to market failures w w u u environmental externalities of fossil fuel-based energy technologies are not reflected in the market price unbalanced distribution of energy subsidies CEC supports existing, new and emerging renewables through production incentives, capital cost buydowns, and rebates to customers Venture capital can catalyze movement into marketplace CALIFORNIA ENERGY COMMISSION

Conclusion: Still an Open Question as to Our Success u u Need near-term successes to establish variability of program Must establish substantive collaborations with other funding agencies Must establish long-term relationships with successful performers Better linkage between existing state programs is mandatory Interaction with venture capital community critical to our future success CALIFORNIA ENERGY COMMISSION

Will California Lead Change? u u u OLD Electricity by nuclear, gas, coal-by-wire, hydroelectric No choice to consumers - tax mentality Laissez-faire u u u NEW Base load central stations with reliance on distributed generation “Community systems” Choice of supplier and technology Government catalyzes true paradigm shift CALIFORNIA ENERGY COMMISSION