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How Not to Waste Taxpayer Dollars

Steve Isakowitz, the Department of Energy's CFO, on how the agency will spend billions on energy technology.

By Kevin Bullis

Friday, June 26, 2009

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The Department of Energy has been showered with money lately. It's received about $30 billion in funding (on top of its approximately $24 billion annual budget) from the stimulus bill passed in February. And it's responsible for issuing $125 billion in loans and loan guarantees. The person in charge of the agency's finances is chief financial officer Steve Isakowitz. He's responsible for, among other things, the formulation of the DOE's budget and the management of the mammoth loan-guarantee programs.

Energy CFO: Steve Isakowitz is the Department of Energy’s chief financial officer.
Credit: JR Rost
Multimedia
video  Watch the Department of Energy's CFO explain how the agency is spending taxpayer dollars.

Technology Review interviewed Isakowitz at a recent conference on innovation held at the United Nations (see accompanying video). He discussed the challenge of issuing loan guarantees designed to promote economic recovery while avoiding the mistakes made decades ago when President Jimmy Carter's administration managed its own loan program. In a follow-up interview, Isakowitz described some specific changes that the DOE is making and also provided an update on the newly established Advanced Research Projects Agency for Energy (ARPA-E), a $400 million agency created to push high-risk, potentially breakthrough energy technology to market.

All told, the DOE has been ordered to allocate $100 billion for commercializing clean-energy technologies, with half of that going to established technology that isn't being funded because of the recession, and the other half going to commercial-ready technology that hasn't yet been tested on the market. This program is actually an expansion of a $4 billion loan-guarantee program first established in 2005, but no loans were actually given out until this year. The DOE announced the first award this March: $535 million to the solar company Solyndra. Another $25 billion loan program was funded last year for helping automakers and suppliers produce cars that use less gas. The first awards under that program were announced this week, with $8 billion distributed among three companies: Tesla Motors, Nissan North America, and Ford Motor Company.

Story continues below


Similar loan programs in the late 1970s and early 1980s were a debacle. "The price of oil was skyrocketing, and the conventional wisdom was that it would continue to increase, therefore making things like synthetic fuels look economically attractive," Isakowitz says. "That was a going-in assumption, and it turned out to be flawed, as the price of oil dramatically dropped. Most of the loans went into default as a result."

The most famous example, he says, is the Synfuels Corporation, a quasi-public organization created in 1980 to commercialize processes for converting coal and shale oil into synthetic fuel. It was part of an attempt to reduce foreign-oil consumption. At the time, oil cost $40 a barrel (in 1990 dollars) and was expected to reach $80 to $100 a barrel in short order--expensive enough to make synfuels competitive (synfuels cost $80 to $90 a barrel to produce). But oil prices dropped, and the venture failed.

Comments

  • Show Guts and Independence
    Prove to America DOE won't fund ongoing mistakes. Immediately drop ethanol research.  Ethanol is s corrosive solvent, absorbs water, has a short shelf life, causes equipment damage, and creates more pollution than it prevents.  Algol, or isobutanol, or some other higher energy compatible fuel is a better choice.  Have the guts to drop programs that don't make sense. Also have the guts to be POLITICALLY INDEPENDENT!  Admit that CO2 is not the problem.  Rather CH4, N20 (from fertilizer), and water vapor are more effective global warming gases (if you believe in MMGW).  The irrigation alone to grow feedstock for biofuel dramatically increases atmospheric water vapor.  Look at the consequences of proposed programs - large battery vehicles take more energy to make; escaped hydrogen (in a hydrogen economy) depletes atmospheric hydroxyls and ultimately increase methane concentrations; burning wood for fuel bypasses the methane cycle and reduces GWG effect; mass produced modular nuclear power plants should be expedited.

    And if you want to increase cheap energy, we have over $40 Trillion of it buried underground.
    Rate this comment: 12345

    RD
    06/26/2009
    Posts:138
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    • Re: Show Guts and Independence
      completely agree with your comments.

      There needs to be more of us.
      Rate this comment: 12345

      devassocx
      06/26/2009
      Posts:62
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      4/5
      • Re: Show Guts and Independence
        And for gads sake cancel FutureGen and spend some funds on advanced coal technologies that can generate power or fuels at more than 20 to 30 percent busbar efficiency.
        Rate this comment: 12345

        JDRUBY
        06/26/2009
        Posts:16
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    • Re: Show Guts and Independence
      Some studies also show that Ethanol from corn has an energy output less than the energy input and I agree is definitely not the way to move forward.

      I’m not sure why you think unnatural emission of CO2 is not a problem.  The majority of scientific data show that CO2 is one of the problems and even though Methane (CH4) and Nitrous oxide (N20) due cause more global warming on a 1 to 1 comparison, the amount of unnatural CO2 pumped into the atmosphere is a lot greater than the others. 

      Can you also please provide some supporting data on you claim that “large battery vehicles take more energy to make”.  Take more energy to make compared to what?  Electric vehicles have the potential to help solve the renewable energy storage problem with technology called vehicle to grid (V2G) http://en.wikipedia.org/wiki/V2G  coupled with smart grids.  They also have the potential to reduce tailpipe emissions.  Yes we still have the problem of where we get the electricity from but at least it can be regulated a lot easier and used during non-peak times. 

      The hydrogen economy does not make sense right now and is at least 30 to 40 years off.  I agree with you that nuclear fission power plants should be expedited but where are you getting this 40 trillion dollar number from?  Is that in the US? 

      I for one don’t really care how much oil is buried but what I do care about is the health risks pollution posses on people especially people of lower income levels.  Would you not pay more to improve your health and the health of others? 

      My last point you will never hear the government say is that we need to curb population growth.  I know I am going to get criticized for this but I do not believe it is your “god given right” to have as many children as you want. 
      Rate this comment: 12345

      tomlanzilott...
      06/26/2009
      Posts:5
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      • Re: Show Guts and Independence
        Rights don't much matter here -- people are curbing population growth all on their own, as, between child labor laws and the shift to urban areas, children are no longer the asset as they once were. All over the world, not just in the developed nations. That's why the current population falls way below all the doom & gloom scenarios of the 60s and 70s.
        Rate this comment: 12345

        Monsterboy
        06/28/2009
        Posts:89
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    • Re: Show Guts and Independence



      >>Prove to America DOE won't fund ongoing >>mistakes. Immediately drop ethanol research.  >>Ethanol is s corrosive solvent, absorbs water, >>has a short shelf life, causes equipment >damage, and creates more pollution than it >>prevents. 

      If ethanol was burned directly in fuel cells it would dramatically increase automobile efficiency.  Only ethanol from corn causes more pollution.  It can be and will be soon produced from cellulosic biomass instead of corn.

      >>Algol, or isobutanol, or some other higher >>energy compatible fuel is a better choice.  >>Have the guts to drop programs that don't make >>sense. Also have the guts to be POLITICALLY >>INDEPENDENT! 
      I agree with dropping programs that don't make economic sense.  But it doesn't make economic sense to spew cr*p into the atmosphere from now till eternity either. 

      >>Admit that CO2 is not the problem. 
      Sorry, you're just plain wrong here.  We now spew 30 GIGATONS, heading up to 40 gigatons of co2 yearly.  This is 1% of the 3 teratons in the atmosphere, so over last 30 years we have increased the levels 30% or more minus the amounts dissolved in the oceans as carbonic acid, destroying plankton which produces 70% of the world's oxygen.

      >>Rather CH4, N20 (from fertilizer), and water >>vapor are more effective global warming gases >>(if you believe in MMGW). 
      This just shows your ignorance.  'if you believe in MMGW'.   Try reading rather than listening to pundits who pull figures out of their nether regions.  Separate the event that is happening from political reactions to it. 

      >>The irrigation alone to grow feedstock for >>biofuel dramatically increases atmospheric >>water vapor.  Look at the consequences of >>proposed programs - large battery vehicles take >>more energy to make; escaped hydrogen (in a >>hydrogen economy) depletes atmospheric >>hydroxyls and ultimately increase methane >>concentrations; burning wood for fuel bypasses >>the methane cycle and reduces GWG effect;
      Escaped hydrogen would be minimal just as escaped propane in the 'propane economy' of rural areas.  It is too expensive to waste alot.
      And we could still have hydrogen powered vehicles by storing hydrogen as water and forming hydrogen on demand with aluminum or magnesium in cars to feed fuel cells in the cars.  Would make future cars safer than today's gasoline cars too as in an accident, 20 gallons of water would gush forth from your tank. 

      >>mass produced modular nuclear power plants >>should be expedited.
      1) as soon as everyone starts using nuke power yellow cake prices will skyrocket rendering the plants obsolete and expensive.
      2) it takes 10 years for design and regulatory hurdles and construction, plus billions of dollars for each plant plus interest on the loan as no juice is produced till it is all done plus 2,400 highly trained personnel for EACH plant.

      Certainly modularization would help speed things up, and they are designed to store spent fuel.  The traveling wave reactor proposed would help with the fuel issues as it burns other isotopes and elements.  But the govt is still subsidizing liability insurance for leaked radiation ruining hundreds of square miles around the plant and some security costs.  If a terrorist runs a plane into a solar field or wind farm or steals some solar panels we would be alot less worried than the same events at a nuke plant.


      >>And if you want to increase cheap energy, we >>have over $40 Trillion of it buried underground.
      REAL CLEVER!!  Just dig up the carbonaceous material still in the ground stored as coal, nat gas, methane hydrate, etc laid down in the carboniferous period.  That would put 7 times the 3 teratons of CO2 into the atmosphere.  Might as well call Michael Crighton to clone some Jurassic park dinosaurs to wander around the planet after we turn the earth into a hot fetid stinking mess, as doing this will probably destroy us
      Rate this comment: 12345

      erbium
      06/26/2009
      Posts:143
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      • Re: Show Guts and Independence
        I admire the accuracy of your figures, but please explain why global average temperature has fallen over the last decade while AGW theory predicts its increase.

        AGW theory depends on a positive feedback occurring.  This has only been observed in computer models that lack any ability to account for cloud formation and its effects on our atmosphere.  In short, the science of anthropogenic global warming is short on facts to substantiate it.  There is certainly not enough established science to merit the kind of economy killing legislation like Waxman-Markey, regardless of what consensus you may believe exists.
        Rate this comment: 12345

        kstauff
        06/29/2009
        Posts:120
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  • N-Power
    Amen to that. Particle bed technology is easy and if the "cooling" fails, it just stops. Seems to me that non-US parties would be the only ones against it. (I elude to those who refuse to let ladies drive autos of course).
    Rate this comment: 12345

    rvandell
    06/26/2009
    Posts:22
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  • Electric Cars
    We haven't had a energy policy that worked since I have been on this Earth. I have kept up on the killing of the electric car and it's possible rebirth. I just read a new book called Two Cents Per Mile: Will Obama Make it Happen with the Stroke of a Pen? Simply put, this book shows the open conspiracy going on between the Department of Energy and corporations to prevent the development of 100% electric cars. Big corporations, with the help of the Department of Energy want to move us toward what they call the “hydrogen economy.” This is a dangerous idea and a very expensive one. The book calls upon the reader to send letters to local, state and federal officials to get us back on track for all electric cars. There are links in the book to customize form letters. If you value America’s future, the environment and are concerned about what kind of world our kids will inherit, you have to check this book out. http://www.amazon.com/Two-Cents-per-Mile-President/dp/0615293913/ref=sr_1_1?ie=UTF8&s=books&qid=1245854577&sr=8-1
    Rate this comment: 12345

    EVs Now
    06/26/2009
    Posts:3
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    1/5
    • Re: Electric Cars
      I confess! I killed the electric car. I did it deliberately.

      I don't want them and have tried to convince everyone I know that gives electric cars some consideration to avoid them like the plague.

      I have mobilised considerable political pressure to prevent public funding or extra regulatory support for their development.

      I have done this because I am not you. Where I live it is not only hilly but even mountainous. We need the car heated in the winter and air conditioned in the summer. We need wipers for a good part of our driving experience. Even if we got rid of our national safety requirement of headlights being on all the time (it is actually much safer), where I live there is considerable fog. All of these are significant power drains that detract from an already constrained vehicle range.

      Hills are an important consideration because it takes exponentially more power to maintain speed going _up_ a hill than is provided by regeneration going _down_ a hill.

      Electricity rates where I live are about a third of what the lowest rates are in the U.S. The power comes from nice clean hydro. If most or even many of the cars in our region suddenly went electric we would have to start generating electricity with fossil fuel, or build dams and flood massive forests and valleys with entire cities in them, or build nuclear plants in an earthquake zone. Whatever combination we chose would certainly raise the price of electricity by entire orders of magnitude.

      For a time I managed a fleet of vehicles that were a mix of cars powered by diesel, natural gas, propane and gasoline. The drivers' order of preference was gasoline, diesel and propane. Natural gas cars were considered punishment detail. We looked at adding some electric cars and rejected them out of hand. Think about that. We rejected electric cars as too inconvenient and unpleasant for a fleet where natural gas cars were considered punishment for poor driving practices.  

      When electric cars can be recharged with the same range in about the same time at about the same cost it takes the alternatives then I might be interested. 

      My problem with you considering me to be part of some vast conspiracy is not that you feel free to compel me to do as you think (finance your pet theories of social organisation). It is that you seem to feel free to compel me to think as you do.
      Rate this comment: 12345

      arnetwork
      06/26/2009
      Posts:25
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  • [no subject]
    Arnetwork -
    The debate is not over the viability of electric (or hydrogen, or compressed air, etc) as a stored energy source over petroleum based fuels.  Very clearly, the energy density of any petroleum fuel is exponentially greater than any alternatives remotely close to market.

    The debate is not over global warming, the direct effects of which we could argue about for decades.

    The debate IS about energy sources we rely exclusively on, which is to say petroleum.  We are bound lock, stock and barrel to countries and corporations who discover, sell, tap and refine petroleum and are entirely at their whim when it comes to production.  The exclusivity of access to this fuel is so finite that infrastructure and capital in the trillions is regularly invested by the largest corporations in the world - and they are rewarded with sterling ROIs for leveraging their finacial resources. 

    Allow me an analogy in the form of a few question to make a point.  Would you consider providing our Armed Forces with weapons produced by foreign countries?  As a member of the Armed Forces, and in part responsible for purchases of this nature, my answer would be "Why not, as long as they are capable and perform the required function".  But if you now added that not only do my troops now have these weapons, but that I have no way of providing munitions for said weapons without buying them directly from a single and proprietary source...well then sir I would tell you to pound sand.  The thought of my troops being defenseless at the whim of some other countries decision during a time of need sends shivers down my spine...and our entire nation stands just as defenseless with our incredible reliance on petroleum.

    I have no doubt that the ingenuity and resourcefulness of this great country, brought to bear against so many other obstacles in it's history with the result being our nations success, would solve our energy issues as well if given the chance.   But we (and our country) cannot afford status quo anymore my friend.  So it requires a sacrifice from the individual as well.  If we sacrifice 200 miles of range and a bit of convienice on our commute to work, but do so knowing the energy that we used during that ride was developed, generated, transported and implemented right here in our country then so be it.  But without a change in both our energy policy and curbing our individual needs and comforts we are headed for a fall of Roman proportions.
    Rate this comment: 12345

    sirsquintz
    07/06/2009
    Posts:1
  • Dependence on Foreign Oil & Nat. Gas
    One of the major reasons we're dependent on foreign oil is because of our ridiculous regulations against accessing our own oil and natural gas.  We have several enormous reservoirs of both that we cannot access because of restrictions placed on our domestic fossil fuels industry.  There are new technologies that can be employed to pump oil and natural gas out of Alaska, offshore CA and under several midwest/western states that would not only reduce the dependence on foreign sources, but also drive down the cost of energy by supply and demand, which would dramatically boost our economy. 
    Drill here, drill now, save money!
    Rate this comment: 12345

    freelane
    07/06/2009
    Posts:2
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  • Government mandates and GW
    In the fifties, we were told that the USSR's five year programs were a failure. And we laughed at the stupitity. In the sixties, china's great leap forward likewise a failure. And we laughed at the stupidity.

    More recently, Japan's mandate was that analog high difinition TV was the answer. Unbeleivably, this mandate, began after the beginning of the digital ere in the late 70's and early 80's.

    Alas, in 2020/30, we will laugh at today's mandates. WE NEVER LEARN.

    ron hansing.
    Rate this comment: 12345

    rhansing
    07/13/2009
    Posts:40
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  • SynFuel Demise
    Carter may have been forward thinking, but the market chnaged and Supplies were increased. I suspect the the Petroleum Industry bought up all the intellectual rights from SynFuel when they went bust. If I was a savvy Oil Exec I would have made a highly coordinated (and quiet) effort to buy up potential threats to my business.

    Can anybody confirm what happened to those patents and Intellectual property SynFuel used to own?
    Rate this comment: 12345

    mkogrady
    07/14/2009
    Posts:246
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