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Eere Strategic Program Review United States Department of Energy Energy Efficiency and Renewable Energy STRATEGIC PROGRAM REVIEW March 2002 MEMORANDUM FOR THE SECRETARY FROM: DAVID K. GARMAN ASSISTANT SECRETARY ENERGY EFFICIENCY AND RENEWABLE ENERGY (EERE) COPIES TO: DEPUTY SECRETARY BLAKE UNDER SECRETARY CARD SUBJECT: EERE STRATEGIC PROGRAM REVIEW I am pleased to present the complete report of the Strategic Program Review (SPR). The SPR is the result of recommendations of the National Energy Policy Development Group as stated in the National Energy Policy. The SPR concluded that EERE research, in the aggregate, generates significant public benefits and often exhibits scientific excellence. This finding is validated by external reviews by the National Academy of Sciences/National Research Council, and reinforced by the fact that EERE research is a top recipient of coveted “R&D 100” awards. However, the SPR also concluded that there were significant areas needing improvement: • Twenty projects should be terminated because they provide insufficient public benefits or have been successfully advanced to the point that no further public support is necessary. Among the projects identified were Natural Gas Vehicle Engines, Concentrating Solar Power Troughs and Residential Refrigerator Research. • Six initiatives and processes need significant redirection, including the Partnership for a New Generation of Vehicles (PGNV) initiative. • A variety of programs and projects have been placed on the “watch list,” meaning that they will require close monitoring to advance effectively. Congressional earmarks, microturbine research, the biomass program, deployment programs in the Office of Building Technologies, and analytical underpinnings of the Federal Energy Management Program are examples of “Watch List” programs/projects. • The application of “best program practices” is uneven across EERE sectors. Program management and evaluation, use of competitive solicitation, and sound business execution are not uniform. The SPR also reports that there are program areas that could generate increased benefits with greater funding and emphasis. These program areas include the hydrogen program, fuel cell vehicles, building equipment R&D, and low speed wind turbines. Thank you for the opportunity to undertake this review of EERE’s programs, projects and processes. Strategic Program Review of the Office of Energy Efficiency and Renewable Energy March 2002 Table of Contents: Chapters and Sections Transmittal Letter i Table of Contents ii Executive Summary Recommendations ES- 1 Findings ES-11 The Long-term Challenge ES-19 1. Introduction EERE Organization 1- 2 The Strategic Program Review – The Process 1- 3 The Strategic Program Review – The Results 1- 4 2. Energy Market Context How We Use Energy 2- 1 Key Energy Market Trends 2- 5 Energy Market Challenges 2-10 Key Market Conditions: Shaping Program Design 2-16 3. Aligning EERE’s Program Activities with National Goals and Interests Alignment Issues 3- 2 Modernize Energy Conservation 3- 5 Modernize Our Energy Infrastructure 3-10 Increase Energy Supplies 3-13 Accelerate the Protection and Improvement of the Environment 3-15 Increase Energy Security 3-16 4. Program Technical Merit and Performance Introduction 4- 8 Technology Approaches 4-11 Program Approaches 4-14 Program Accomplishments 4-26 Performance Indicators 4-27 Appendix 4-A: Technical Merit Analysis 4-30 ii 5. Program Benefits Technology Development Programs and Public Benefits 5- 3 Benefits and the Sectoral Context 5- 6 Benefits Frameworks 5- 8 Benefits Observed 5-10 Potential Economic Benefits 5-20 Options Benefits 5-21 Knowledge Benefits 5-22 Conclusions 5-23 Appendix 5-A: Benefits Analysis 5-24 Appendix 5-B: GPRA FY01 Results 5-31 6. Business Performance Review Background 6- 1 Change 1: The Strategic Management System (SMS) 6- 1 Change 2: The Program Management Initiative (PMI) 6- 5 Change 3: Incorporating the SMS and PMI in Personnel Reviews 6- 6 Linkage to Budget and Performance Integration 6- 6 Recent EERE Business Performance 6- 7 EERE Acquisition Strategy 6- 8 The Status of the Three Changes 6- 9 Recommendations 6-12 7. Findings and Recommendations Findings 7- 2 Recommendations 7-12 Market Challenges 7-27 The Long-Term Challenge 7-28 Report Appendices: A. Public Comments on the Office of Energy Efficiency and Renewable Energy B. EERE Alignment with the National Energy Policy C. Historic Budgets iii Table of Contents: Boxes Executive Summary Box ES-1: Estimating Benefits ES-13 1. Introduction Box 1-1: Recommendations of the National Energy Policy Group 1- 2 2. Energy Market Context 3. Aligning EERE’s Program Activities with National Goals and Interests Box 3-1: Acting on NEP Recommendations 3- 7 Box 3-2: Infrastructure areas with no, or limited, current EERE role 3-11 Box 3-3: Interactions with other NEP goals 3-12 Box 3-4: Energy supply areas with no, or limited, current EERE role 3-14 Box 3-5: Acting on NEP recommended goals within EERE 3-15 Box 3-6: Acting on NEP recommendations 3-16 Box 3-7: Environmental improvement areas with no, or limited, current EERE role 3-16 Box 3-8: Interactions with other NEP goals (Biofuels) 3-17 4. Program Technical Merit and Performance Box 4-1: Case Study of Fuel Cell Program Management 4-24 5. Program Benefits Box 5-1: Estimating Benefits 5- 4 6. Business Performance Review 7. Findings and Recommendations Box 7-1: Estimating Benefits 7- 6 Box 7-2: Recommendations 7-12 Box 7-3: Market Challenges 7-27 Box 7-4: The Long-Term Challenge 7-28 iv Table of Contents: Figures Executive Summary 1. Introduction 2. Energy Market Context Figure 2-1: Energy use in residential and commercial buildings by end use. 2- 2 Figure 2-2: U.S. energy use by industrial sector, 1998 2- 3 Figure 2-3: U.S. energy consumption in the transport sector, by transport mode, 1999 2- 4 Figure 2-4: U.S. petroleum consumption by sector 2- 7 Figure 2-5: Age of U.S. electric power transformer infrastructure 2- 8 Figure 2-6: Sources of world petroleum, 1998 2-11 Figure 2-7: U.S. 1998 energy-linked emissions as a percentage of total U.S. emissions 2-12 3. Aligning EERE’s Program Activities with National Goals and Interests Figure 3-1: FY 2002 budget request by NEP goal 3- 2 Figure 3-4: Energy intensity of various industries, with the Vision Industries circled 3- 9 4. Program Technical Merit and Performance Figure 4-1: Total number of R&D100 awards received by EERE-supported research 4- 2 Figure 4-2: Number of R&D100 awards received by EERE-supported research by year 4- 3 Figure 4-3: Change in annual electricity consumption for typical refrigerators 4- 9 Figure 4-4: Reductions in the cost of electricity from photovoltaics and wind 4-10 Figure 4-5: Technology roadmapping and areas of common interest 4-15 Figure 4-6: OIT project statistics 1998-2000 (preliminary) 4-20 Figure 4-7: Balancing the overall portfolio. 4-21 Figure 4-8: Redirections and competitions in the transport fuel cell program 4-25 Figure 4-9: PV cell efficiency over time 4-26 5. Program Benefits Figure 5-1: OIT estimates of net cumulative production cost savings from its research 5-20 Figure 5-2: Changes in energy displacement after external reviews, FY1997-2001 5-21 Figure 5-A1: Market penetration 5-28 6. Business Performance Review Figure 6-1: The Strategic Management System 6- 3 7. Findings and Recommendations Figure 7-1: Total number of R&D100 awards received by EERE-supported research 7- 4 Figure 7-2: Number of R&D100 awards received by EERE-supported research by year 7- 4 Figure 7-3: Balancing the overall portfolio 7-25 v Table of Contents: Tables Executive Summary Table ES-1: Recommended Closures ES- 3 Table ES-2: Cost Shares by Type of Research ES-14 Table ES-3: Typical Times for RD3 and Capital Stock Turnover ES-18 1. Introduction 2. Energy Market Context 3. Aligning EERE’s Program Activities with National Goals and Interests Table 3-1: Fraction of EERE Budget in Different Sectors 3- 6 4. Program Technical Merit and Performance Table 4-1: Distributed Energy Resources (DER) Program Activities 4-13 Table 4-2: Industry Cost Shares 4-18 Table 4-A1: Recent Technology Roadmaps 4-29 Table 4-A2: Representative Graduations and Terminations 4-31 Table 4-A3: External Peer Reviews, 1990-2001 4-37 Table 4-A4: Patents, 1978-2001 4-39 Table 4-A5: EERE R&D 100 Awards, 1978-2001 4-40 Table 4-A6: Top R&D100 Award Winners, 1963-2001 4-43 Table 4-A7: Selected Program Accomplishments 4-44 Table 4-A8: FY2001 Congressional Earmarks 4-52 Table 4-A9: FY2002 Congressional Earmarks, Energy and Water Development 4-54 5. Program Benefits Table 5-1: Typical Times for RD3 and Capital Stock Turnover 5- 6 Table 5-2: Net Realized Benefits Estimated for Selected Technologies 5-12 Table 5-3: Net Realized Economic Benefits Associated with Public RD3 5-14 Table 5-4: Example Technologies Needing Further Quantitative Benefits Analysis 5-16 Table 5-5: GPRA Estimates FY01 5-22 Table 5-6: GPRA FY01 Analysis 5-22 Table 5-A1: NRC Benefits Analysis Methodology 5-24 Table 5-A2: Classification of Benefits by State of Technology Development 5-26 Table 5-A3: Modified NRC Benefits Analysis Methodology 5-29 Table 5-A4: Classification of Benefits by State of Technology Development 5-29 6. Business Performance Review 7. Findings and Recommendations Table 7-1: Industry Cost Shares 7- 7 Table 7-2: Typical Times for RD3 and Capital Stock Turnover 7-28 vi Executive Summary and Recommendations The National Energy Policy (NEP) recommended a review of the “historic performance” of the Office of Energy Efficiency and Renewable Energy (EERE) programs.
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