capacity today. if you go get wind in the middle part of the country, you're getting wind that is blowing more hours of the day at higher capacity factors, which means you need less back-up generation. when you talk about integration costs, people need to understand that these are not just a wind issue. there are 104 nuclear reactors built in this country in the '60s and '70s and '80s. almost every one of them has a pump storage hydrofacility associated with it. that is not considered an integration cost for nuclear, but it is absolutely essential for those nuclear plants to be built because they needed a load at night. they were the base load generation. what they did was they built a pump storage facility at night. they pumped water uphill. during the day, they let it fall downhill when demand went up.

it's an integration cost. it's not calculated into the price of nuclear power. integration costs are part of a system. if we look individually around this country, and if we think individually, we have challenges. if we think collectively we can do much greater things. that leads me to the last point. that is we have to do big things in this country. we don't do hoover dams anymore, we don't do huge infrastructure projects, but guess what, our economic partners around the world are. japan is billion dollar 22 high voltage plants now from coal and wind. we can't build pipeline from alaska, big transmission lines and big wind in the united states because we can't build transmission. we need all of these things, guys. y'all are young. y'all are young. you need to know that in the future i want choices. the choices begin now that you

have to ask your folks, challenge the convention aal wi dochl the price of natural gas isn't going to stay at $2.50. you know how i know that? every natural gas company is saying we've got to get the price of gas up. defy the conventional wisdom. treat these research projects as research projects, learn from them but don't believe every word that's in them. thank you. >> thanks, jimmy. as you can see, we aren't afraid to have stark differences of opinion. we shy away from these things. speaking of stark differences of opinion, i will turn to our cleanup batter. i'm sure that our two first speakers are chafing at the bit to counter, but that is a cross i must bear. kate gordon vice president of

center for american progress. most recently co-director of the national apolo alliance, serves as senior policy adviser, expert on clean energy and economic development policy and long worked on economic justice and labor issues. i will leave the rest of her bioto your pleasure. it's in your conference materials. kate, you are going to have the last kick of the formal speaking can. >> we'll try to keep it short because i always like the q&a stuff best of these conversations. i know you're going to be shocked to hear this. i am not a republican. i know, it's amazing. it shouldn't matter. these issues we're talking about really are issues that shouldn't be partisan. energy really has moved from being a regional issue about regional issues and regional choices to being a partisan issue where those regional issues and the reality of national resources don't matter as much as they used to. i think we need to get it back. we shouldn't be talking about it

as a partisan issue. we should be talking about what makes sense for the country, different parts of the country. i'm going to talk a few minutes about the bic picture and weave in some points here. i need to be big picture because we start from different places. the two reports that you heard about, the excellent research that was done looks at sort of pieces of the issue, sort of like that old part of an elephant adage. i want to take a step back and say there are broader issues to discuss here and then come to other things. i won't go into details jimmy covered on integration and cost. he's in the business and knows that stuff way better than i do. i'm going to leave that stuff to him. where are we now? what's the actual energy picture in the united states. the first important point that neither of the speakers talked about is the status quo is simply unsustainable. it is one where we have volatility, $100 billion a year in costs for blackouts every

year. we have a lack of diversity of energy sources and lack of distribution of those sources. we essentially rely on a couple of different fossil fuels at utility scale power plants that are not particularly well distributed. let me say about the siting of those plants, it's not exactly optimized. siting is done so the dirties coal plants are in the lowst income communities. that's optimizing siting. that's another conversation. i wouldn't say it's optimist. we don't have diversity, a lack of distribution getting coal to market isn't an efficient process we only get 35% of the energy from coal to the consumer in most places. we have a declining transmission grid infrastructure which contributes to that problem. all these things i talked about are why the department of defense is investing resources in creating micro grids at each

of its bases. it doesn't want blackout. it doesn't want someone to attack a power plant it wentz diversity, flexibility and choice. that's exactly what we don't have in the current system. we also have environmental impacts. environmental impacts of the cost to the environment of things like mining and extraction. health impacts up to the level of $500 billion a year to the u.s. economy. so these health impacts are disproportionately in low income communities where they are located. that's another piece not sustainable about the current situation. also as jimmy pointed out we're getting increasingly competitive with other countries. other countries are moving forward to make green and clean energy a big part of development policy. china made it a big piece of what it just did. we have not incorporated it into a long-term economic planning

process. that's frankly just silly given if we haven't put a price on carbon or recognized climate change as a policy issue, most places have and these markets are growing worldwide. not prioritizing this as an economic development strategy does not make sense. one more thing, we currently also to the point dr. zyker made, we do recognize status quo. i take issue with subsidy kilowatt hour, we've been subs di subsidizing oil and gas since infrastructure costs were high. now it happens most of that stuff is built out and what we're subsidizing is operation of those plants. it looks like a low megawatt per hour. if you go back to the beginning it looks like now.

emerging industry, lots of capital cost, lots of infrastructure. i think comparing that on a megawatt hour is apples and oranges. status quo is unsustainable a lot of companies think this, too. a huge number of european including energy intensive companies like siemens just came out with a call for europe to increase its carbon emission standard from 20% by 2020 reductions to 30. for all of the reasons i just mentioned, volatility, consumer choice, concern about national security, concern about competitiveness. this isn't me at a liberal think tank, this is actually an economic argument believe it or not. the other thing you don't hear clean energy is a bright spot. people always say if this was so great people would invest in it. people are investing in it. u.s. is the number one investor in clean energy in the world surpassing china last year. much of that investment is in other countries because the demand is in other countries.

we are the number one investor. 83% of all venture capital investments are u.s. investments. so people are, in fact, emerging in these emerging technologies and in some cases mature technologies where they have been built out and gotten to scale. i agree with jimmy's point they are coming to scale, getting down in price, becoming competitive especially where there's high demand. a great spot. during the recession, clean energy industries, clean tech industries grew at almost twice the rate of the economy as a whole, during the depth of the recession. this is, in fact, a bright spot. demand growing for these products worldwide and we should look at it as a place that we should celebrate rather than a place -- sector we should cut off. there's another way for us to be doing this kind of economic development given the unsustain ability of the status quo. you've heard a lot of arguments against. i would reiterate the other

side, which is we could diversify our energy sources by including a lot more renewable energy, a lot more distributed generation, which you didn't hear much about. one of the nice things about renewable energy you can do it at different scales. we used to do coal on different scales. we burned coal in our furnaces. we don't do that anymore because of the health impacts, but we actually can do solar panels, white roofs, efficiency, distributed energy, which is quite efficient for getting energy to your home but we can do it on a big scale. we need to diversify, talk about efficiency. it's the first thing we should be doing. we need to hedge against volatility by providing a much larger percentage of our electricity market from these different types of resources. there's a great anecdote i always forget all the details of because i admit i'm not appear football fan. the last super bowl there was a

statement about how important it was that wind energy provided energy in the super bowl because there were concerns about rolling blackouts in texas. wind energy hedged against that. we need to invest across the value chain. you've heard a lot about jobs on the deployment and installation side. this is actually a sector where we can do early stage research and development which speakers said they support. we can do a lot of production and export. we can do installation, operations and maintenance and a huge number of services associated with that. this is as important because if you're doing the kind of comparison especially around export and manufacturing issue with the oil and gas sector one thing we see with the oil sector in particular it's been around a long time, infrastructure built out once the manufacturing is done we import some of it. majority of jobs in the oil sector are gas stations, gas station attendants make up the majority of jobs in the oil sector. that's an important point whereas over 25% of the jobs in

energy are in manufacturing. so you're able to do a number in construction, sales. it's a much more diversified set of occupations and industries. i think that's important because it's part of the competitiveness strategy. we can't just have a service-based economy we want production and export. there's a whole jobs argument. i've made green arguments. it's an important point i want to take issue with the doctor, i would combine your level playing field and externalize cost arguments. in fact, we're talking about a maturing industry, in some cases more mature than others, that is coming into a situation where there are already a lot of subsidies. it's not a mature industry on a level playing field, obvious investment if this was the right thing to invest in. you just go there, right? if you have an unequal playing field where a bunch of industries have been built out but still subsidized and you're

trying to come into that situation with new technologies that are not subsidized at the same level trying to bud out their infrastructure, that's a huge combination of how do you compete. how do you compete if their costigur in, subsidized beyond the industry and you're trying to get into the market. i think you have to combine those two and look at the broader picture of the fact these are emerging industries that haven't built out their infrastructure is, in fact, why you see jobs at the beginning, just like we were hearing over here. we're building out the infrastructure for renewable energy much in the way we built out infrastructure in the early days of oil and gas. you see a similar argument with keystone pipeline. lots of jobs in keystone. why in they are building a big pipeline. there's a lot of construction jobs at the beginning of any process. jobs level off after the process starts. you keep getting jobs in the industry through invasion. that's why it makes sense to go to clean energy. lots of new construction jobs,

manufacturing jobs, continued innovation through research and development especially as demand grows around the world. the last thing i'll say because i know ken wants me to stop talking is that we didn't hear a lot about opportunity costs here, of continuing with the status quo. i've said some already, costs of competitive, insecurity, volatile, the one i want to get to oil drelg off california point, you do a lot of oil drilling offshore. there's a lot of research to back this up. you lose money in things like tourism, fisheries, commercial fishing, you lose the ability to do offshore wind development, which is a pretty good large scale. there are cost toss ma talking t today. there are costs to those long-term choices. we really need to think about which paths we need to go down as we figure the energy future question. i'll stop.

>> thank you, kate. we've had a robust discussion. i'm going to risk inducing an embolism in our first two speakers by giving them an opportunity to make a couple of points in 90 seconds to two minutes at the most so we actually have time for q&a. i know each of you have scrawled down 40 minutes of notes. i have full faith in your ability to prioritize and yield maximum results in your 90 seconds or so. ben. >> don't hold your breath about your faith being rewarded. 90 seconds? >> right. >> with respect to jim's comments, the fact that republican governors like to get their snouts in the troughs just as much as democratic governors really is not very meaningful to be blunt about it. >> in this city it is.

>> well you mentioned brownback and a few others, they are not in this city, at least not physically. the $30 per megawatt hour, the numbers, those all reflect the subsidies. if you really think wind power is competitive, you should be supporting getting rid of the subsidies or getting rid of the subsidies to the extent that coal and gas get them, make those equal and let's see them compete. you're giving us numbers that incorporate the subsidies and then claiming they are competitive which is preposterous. growing corn around turbines, that's not the point i was making. the fact you have to use a lot of land illustrates the nature of solar power. the fact you can use the land around the turbines for other purposes is irrelevant. the unconcentrated nature of the power is a problem and reflected in a small market share despite

all the subsidies. the sale economies of the turbine levels are irrelevant, it's the scale economies at the industry level that matter. integration costs. if you -- i talked about the cost of back-up not integration. that's $300.68. integration $40 for wind if you believe ie numbers. >> it's the same thing. in the market integration and back-up is the exact same thing. >> no, it's not the same thing. >> in the market. >> well, whatever, we can talk about this later. all right. let's see here. kate's points. economic justice, environmental justice issues, we haven't got time to get into that today. that whole set of arguments is seriously askew and we can talk about that some other time. the dod wants micro grids for bases, yes, power is more expensive and unreliable precisely because they are being forced to buy into wind and solar power, so they want to

ensure they won't face blackouts when troops -- >> which they are buying in higher numbers than any other part of the economy, biggest investors -- >> as moderator, how many people think dod's decision are made on an economic basis. >> a security argument. >> you seem to be a great fan, kate, of central planning in china. they are also building a coal-fired plant subsidized every week for the next 10 years. do you think we ought to do that? don't answer that question. it answers itself. historical subsidies, oil and gas industries is irrelevant. we are where we are, and the issue is whether the subsidy is moving forward or improved resource allocation. investors investing in clean energy in the u.s. true. there are subsidies out there and they want to capture them. that doesn't really tell me very much. clean energy grew two times as fast as the economy. yes, if you subsidize some you

get more of it. that again isn't meaningful. we need to diversify. i've not heard an argument the market is diversifying sufficiently. if you want to say why it's insufficiently and why the government should yield in that improvement i'd like to hear that argument but i haven't. >> that was a great last comment, ben. thank you very much. we're going to go to tim for the last minute or so of comments, then we will have q&a. so if you guys would deactivate your microphones. thank you. we'll deactivate from the front of the house, too. a few minutes then to q&a. >> thanks. i have two overarching comments. one is nitpicking. we actually used a price for wind slightly over $0.10 per kilowatt hour in our study. that is higher than the cost of wind in the midwest because the capacity factors are lower in

california. so you're right. i live $40 away from medicine, wind farm in medicineville wyoming. their capacity factor is over 50%. those kilowatts are cheap. there's no question about it. but here is a really important point. >> good point of that was a good one. >> thank you. appreciate that. this is a big picture issue. this is going to be an issue that will -- it's already under way involving u.s. manufacturing in energy production. this is the production of unconventional oil and natural gas with hydraulic fracturing. the case study i looked at in california involving slant drilling was offshore. and in an existing oilfield there's already production fields out there. there are platforms out there. it's just a matter of extending

the existing production. but more fundamentally, the thing you should note about unconventional oil and gas is the resource base is very large, and there are two things going on right now. there's a move away from dry gas production where you're just going after natural gas because of low prices, and rigs are being directed to produce crude oil and liquids like ethane and propane. when you produce crude oil in these liquids you have a by-product and its methane. there's a good chance if this drilling continues we'll see a prolonged period of abundant natural gas supplies at relatively low prices. granted that highly uncertain outlook, that's something to consider. now, on the manufacturing side, because this resource base is so

large like the marsalis, utica shales, eagle ford, there's about a dozen of them out there, you're going to have continual development, continual drilling. in fact, the whole paradigm for oil and gas development is like a manufacturing operation. the company looks at the field and has a ten-year plan for drilling. it's no longer in for five years build out. now, my study had those type of projects. but when you look at -- you're going to see a lot more activity in u.s. manufacturing sector from the demand pull for resources to do the drilling but most importantly industries using natural gas and liquids to produce stuff, chemicals, products and like. >> great. thank you, tim. nour, we do have a little time for q&a.

the pittier we keep the questions and answers the more we handle. we have microphones circulating around. wait for them to arrive so you can get on the record. state your name, so we know where you're from. the jeopardy rule, ask your question in the form of a question if you have any hope to go onto second and final jeopardy. we have one in the back but we'll take the gentleman in the tan coat first and then the back. again, pithy is priced. >> henry kilpatrick, econ policy. how does the discussion of oil get into this electricity debate when oil is basically a transportation fuel and not a power plant fuel. >> wonderful. a straight question. i love that. i think that would go to nterte comparing the jobs and value

added generated between the two sectors. i just thought it was an interesting case study in the choices california faces. in the national debate green energy has been touted as a replacement for imported crude oil. and that's if we can use electricity in transportation. the prospects for that are very limited. so then the next logical alternative is to produce more oil and natural gas here to reduce imports. i think california is a microcosm of the national debate. so that's why we had a side by side comparison. a lot of proponents of green energy will say, well, it cease a lot of jobs.

well, how many jobs and how does it compare with developing oil and gas with private capital? >> good morning, jorge madrid, with the center for american progress. mr. zycher, i'd like you to speak a little more about the issue of externalities, which i'm concerned you glazed over the topic of environmental justice. what we're talking about here are some very real public health costs specifically which are borne by communities next to power plants, african-american communities, latino communities, talking about cancer rates two to three times the national average. it seems to me that we need to, a, internalize these medical costs, public health costs and i'd like for you to discuss it a little further. i was a little disappointed you

didn't want to talk about them at all. >> thank you. we will not hold you responsible for the ringer there, kate. >> right. it's not that i don't want to talk about them. this conference is not about environmental justice and i don't have time to get into that issue. the argument those costs have not been internalized or not been internalized fully is far from obvious. we have the clean air act regulations at federal and state level. the mere fact there's pollution out there doesn't mean the costs are not borne by both sides of the market, suppliers and demanders. we don't have time to get into environmental issues today. suffice it to say the environmental justice argument you hear from the left boils down to a complaint that there are poor people in the world who can't consume as much health as wealthy people, which is true and not very relevant in a policy sense. the fact it is disproportionately people who are nonwhites who bear those

costs is not relevant to the policy question. we should be treating everybody equally. rights adhere to individuals not groups. again, we just don't have time today. we don't have time to get into the issue of whether or not we need to lament the fact there are poor people in the world and what we should do about it. that's what it boils down to. >> which is why we need more conferences. i would point out in previous generations people living in the ghettos were not necessarily black or hispanic if you view this in the long-term of development from the beginning of the industrial era any number of lower income people migrated through the same areas and dealt with the same consequences, which is why i would say is not really an american issue. you're not with the center for -- are you? this gentleman down front then move to you. >> ask my question.

>> i'm a university students. i wanted to ask, you kept making a point, dr. zycher about wind subsidies, that they get some and that's why it's lower. doesn't oil and gas receive more than wind as of today? i wanted to get your feedback on that. >> not if you believe the ei estimates average per meeting watt hour and metcalf's implicit subsidy estimates on the effective marginal tax rates. i had a couple of slides on this. i'm sure you saw them. the subsidies for renewables are two or three magnitude higher on average and at least a magnitude higher on the margin for renewable than commercial generation. that's why my argument is that the level playing field argument in support of subsidies for renewable power does not work because the subsidies are a good

deal higher for the latter than former. >> jimmy, real quick? >> real quick. i would say again i have an issue with per hour costs when you're looking at subsidies going to oil, they are going to a very mature industry doing operations on a long-term basis. subsidies going to wind are production tax credit. that's going for production and new installation of pretty capital intensive equipment. so more of the subsidies going to that capital intensive piece of the operation. we at cap and most pool i work with don't believe wind subsidies should be permanent. we don't believe they should go on, for instance, as long as oil and gas subsidies have. we think they should be looked at continually to see if the market matured. >> my add is the wind subsidies, they will go away at some point in time. 2.2 cents a megawatt hour. you're