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this 38.5. So maybe you could just tell me why it was deferred and not granted some other status.

Miss FITZPATRICK. Mr. Chairman, that is a photovoltaic residential experiment station.

Senator DOMENICI. Yes.

Miss FITZPATRICK. It is one of several around the country that have been maintained for several years. We have felt for some time that they have served their purpose very nicely. The private sector is now picking up on such systems, not just experimentation but actual installation and it is time to phase those out.

Senator DOMENICI. Do you think you might have, in the generosity of your heart, found that since it was judged the best in the country that you might have rescinded it and thus we could have kept it?

You could have, but you did not; is that the answer?

Miss FITZPATRICK. I was not allowed to have very much kindness this year, Mr. Chairman.

Senator DOMENICI. I see. Right.

I asked you about one other thing I think the last time you were before the Appropriations Committee. Congress appropriated $2 million additional for expanded effort in electrochemical research for fuel cells. You are not going to do that. Do you know why?

Miss FITZPATRICK. I am informed that we are doing that, Mr. Chairman.

Senator DOMENICI. You are? Was I mistaken, and you have changed your mind? Or was that never going to be terminated?

Miss FITZPATRICK. I do not think that we had planned to terminate that, Mr. Chairman. I do not think it was included in the deferrals.

Senator DOMENICI. We will not say you changed your mind. We were misinformed.

Senator Hecht, did you have any questions?

Senator HECHT. Thank you, Mr. Chairman.

First of all, I have an opening statement. I am sorry. I was detained on getting here.

Senator DOMENICI. Do you want to give it or make it part of the record?

Senator HECHT. We will just make it part of the record.
Senator DOMENICI. It will be made a part of the record.

Senator HECHT. Unless you want to hear a good speech. [Laughter.]

[The prepared statement of Senator Hecht follows:]

STATEMENT OF HON. CHIC HECHT, A U.S. SENATOR From the State of NevadA

Mr. Chairman, I wish to commend the subcommittee for holding this hearing today on what I believe is a very important matter-the budgets for the solar, geothermal and conservation programs of the Department of Energy.

In these days of huge federal budget deficits, we must of course closely examine all federal programs for ways to cut expenses. Right now, with the price of oil so dramatically lower than just a few weeks ago, it may be tempting for us to cut the budgets of solar, geothermal and conservation programs.

However, I hope we all realize the price of oil will eventually rise again, perhaps sooner then many people think. We cannot count on cheap oil, and we cannot count on imported oil if we are to protect our national security. In the long run, we will need the type of safe, clean renewable domestic energy resources provided by solar, geothermal, and conservation.

As the Congress considers the President's budget for renewable energy, I hope we will all realize that promoting this type of domestic energy resource serves a national defense purpose, as well as a longterm economic purpose.

In this context, I am particularly concerned that we not jeopardize our future national energy security by cutting too deeply into the budgets of these programs, just because the short term outlook for oil prices seems reassuring.

Thank you, Mr. Chairman.

Senator HECHT. One fast question for Secretary Fitzpatrick.

The budget request for geothermal energy eliminates one activity and includes deep cuts in two activities. However, there is a small increase in program direction. What is program direction and why is it getting increased when the other geothermal activities will receive deep cuts?

Miss FITZPATRICK. The program direction is a line item for people; it is a case for staffing. I would like to provide for the record the explanation for the increase.

Senator HECHT. Please do, and I would like to hear from you. [The information follows:]

GEOTHERMAL PROGRAM DIRECTION

As a result of reductions in geothermal program activities, the geothermal staff. ing was reduced by three Full-Time-Equivalents (FTEs) in FY 1987; however, the FTE funding requirements were repriced to be more consistent with actual funding needs. This resulted in an increase in program direction dollars even though the actual number of FTEs decreased by three.

Miss FITZPATRICK. Thank you.

Senator HECHT. Thank you very much.

Senator EVANS [presiding]. I could not let this opportunity pass without asking one more question about energy and conservation. Well, first, do you feel that the current plunge in oil prices and the free flow of oil that is now occurring is likely to continue over any extended period of time?

Miss FITZPATRICK. If I knew-Senator, I am very often asked to predict what the price of oil will be and-

Senator EVANS. Let me put it this way: Do you think it would be useful for us at this time while there is apparently an abundance of oil at very low prices to prepare for the potential of a oil shortage and getting ready for higher prices?

Miss FITZPATRICK. I do because I think that what the Federal Government has to do is to think of the long term: 5, 10, 15, 20 years. I notice the chairman very correctly observed that we as a country often act on a very short-term basis and have a short attention span, and I think it is the role of the Federal Government to have the long term in view.

Certainly over the long term oil prices will have to go back up. I do not think we should be deterred from our basic goals by what is necessarily a blip on the oil prices.

Senator EVANS. If I remember general figures, at least, we are headed in a direction where the amount of imported oil to the United States is now heading back up again from a decline that we saw for the last several years and that it is expected to be several times the current level within relatively few years, the amount of imported oil, and that currently I think something close to twothirds of the known world reserves of oil are either under Commu

nist or OPEC countries. Are those essentially accurate facts, as far as you understand them?

Miss FITZPATRICK. Yes.

Senator EVANS. That being the case, it would not take much disruption or collective decisionmaking at a time when it could count for both oil prices to shoot up and potentially for us to get into a severe shortage of oil. Is that also a very real potential?

Miss FITZPATRICK. Yes, Senator. I think the potential is certainly there.

Senator EVANS. With all that, do you think it's wise for the Federal Government to lower the fuel efficiency standards that were placed on automobiles 10 years ago?

Miss FITZPATRICK. There is a great deal of debate about how effective those fuel efficiency standards have been as standards. That is, would the market have done that anyway? Is there more drag on the market by imposing the regulations or not? I think it is a highly debatable issue and I am glad that I did not have to make the decision. That is the responsibility of the Department of Transportation.

I think that again the transportation market, in particular automobiles, is one of the markets that is susceptible to short-term changes or expected changes in oil prices. It is also susceptible to being turned around very rapidly, in case it is necessary to do so. Senator EVANS. Turn it around very fast in what way?

Miss FITZPATRICK. As an example, we saw how quickly we had a swing toward the demand for more efficient automobiles in the mid-1970's when the prices went up.

Senator EVANS. We had the demand for more fuel-efficient automobiles and we did not have them.

Miss FITZPATRICK. That is true, and it was very vulnerable to foreign competition. I think what has happened is that the U.S. auto makers certainly know how to make fuel-efficient cars and they make fuel-efficient cars, but their product mix right now is responding to a demand that is pushing a bit toward the less fuelefficient cars. But at least they have the tooling and the capacity to make more efficient cars and to change their mix rather rapidly. Senator EVANS. You would say that most of those really fuel-efficient cars that are in the American automobile mix are made overseas?

Miss FITZPATRICK. I do not know the answer to that, Senator.

Senator HECHT. Would you submit for the record what I asked you to before and would you also put in your reason for cuts in the program on geothermal?

Miss FITZPATRICK. On the geothermal program, yes I will, Senator.

[The information follows:]

REDUCTIONS IN THE GEOTHERMAL PROGRAM

The geothermal energy program has been reduced in part by the orderly conclusion of a number of large engineering development projects initiated in prior years. The technical progress of the geothermal program has been paralleled by an increasing confidence in and commitment to geothermal technology by the private sector. This commitment and confidence is reflected in the development of a group of many small businesses and the creation of sizable divisions of large companies. Utilities, institutions, and states have become increasingly involved with promoting

and conducting research and development programs to further advance geothermal technology. Federal funding has been reduced in those areas where considerable interest has been shown by nongovernment entities. Federal dollars have been focused on the highest priority research to address the most critical technology base issues which have the greatest relevance and potential for future private sector development.

Senator HECHT. Thank you.

Senator DOMENICI [presiding]. Senator Evans, might you permit me to first thank you for agreeing to continue these hearings. We are obviously about to finish with the Department's witnesses and then we will have the non-Department witnesses.

I want to thank them for coming. I want to assure you that Senator Evans will take your testimony and we will obviously pay attention to your concerns as best we can. I thank you all very much for being patient.

And to the two secretaries who are here, thank you very much. You do a marvelous job under very adverse circumstances, and we try to do the same.

Miss FITZPATRICK. Thank you, Mr. Chairman.

Mr. BAUER. Thank you, Mr. Chairman.

Senator EVANS [presiding]. Thank you.

I think we will have some other questions; I know some other Senators will, as well. And to perhaps both of you and we would be delighted to have the answers.

Our next panel is Dr. Lloyd Lawrence, vice president, Mechanical Technology, Inc.; Dr. Stuart Ridgeway, R&D Associates-Dr. Lawrence was from New York; Dr. Ridgeway is from Marina del Ray, CA; and Mr. Vladimir Bazjanac, from Berkeley, CA. If you three would please come to the podium.

Welcome, gentlemen, to the committee. Mr. Lawrence, you are first on the list. If each of you would summarize your testimony, I will say at this time that the full testimony of each of you will be included in the record.

STATEMENT OF DR. L.R. LAWRENCE, JR., VICE PRESIDENT, TECHNOLOGY DEVELOPMENT, MECHANICAL TECHNOLOGY, INC. Dr. LLOYD LAWRENCE. Thank you, Mr. Chairman.

I am Bob Lawrence, and I am vice president of technology development with MTI. We are a $60 million corporation and we have a firm of about 850 people specializing in high technology products and services.

I am here today to discuss the need for a strengthened DOE conservation technology budget, especially in the areas of gas-fired heat pumps, industrial R&D, and Stirling engines. I would like to point out to maybe amplify on the thoughts of Congresswoman Schneider earlier today that these things are not only just energyconserving technologies but, in fact, they provide a commercial technology base that will aid our country in our international competitiveness.

I have quoted in my testimony some of the results from the President's Commission on Industrial Competitiveness, and in fact was taken directly from their final report entitled "Global Competition: The New Reality." The technologies, then, from the conservation budget apply directly to the kinds of recommendations that

this particular Commission made. I think it is important to point out then that the results of these programs are much more farreaching than simply conserving energy at this time.

Moving along to the specifics of my testimony, gas and oil-fired heat pumps is one particular technology that can have a very broad range of application in this country. If you look at the fact that we have 50 million homes now heated by gaseous fuel and another 15 million heated by oil or kerosene, if you take those in the very gross sense-take the total number of homes and assume that a gas or oil-fired heat pump is going to be installed at a cost of approximately $4,000 per home, you are talking about a market of $260 billion. That is a fairly substantial market. And, unfortunately, our markets are still a good 3 years away from that market, which means the private sector has not yet stepped up to them.

Again, unfortunately, our Japanese friends have been a little more foresighted and in January of this year, the Japanese delivered 12 gas heat pump units to the United States to begin field and market testing. They are very aware of the size of this market and the kinds of employment that can be resulting from manufacturing products into this market.

Now it is our position that the American prototypes in the number of contractor laboratories can actually beat the Japanese competition because performance will be higher and costs will be lower. But, again, they are further away from the market. The Japanese have taken the approach of coming to the marketplace with rather rudimentary units to establish their distribution, marketing, and transportation channels and to get their servicing in place, and then follow that later with better units.

So it is our position, Mr. Chairman that if, in fact, 20 million per year for the next 3 years could be applied to this particular technology in a combination of private sector and government dollars, that in fact the American prototypes can be brought to the marketplace and we can win one for a change; it would be a nice change. In the industrial programs, I just want to mention very briefly that these programs have now come to the point where they have actually paid back to the country, through the implementation of their technologies, more than was ever appropriated in total to support these programs.

The results that we are seeing are really based on the kinds of programs that were originally implemented in the late 1970's and 1980 and 1981, which are aimed at the 3- to 10-year timeframe, which no other budgets in the country seem to be addressing in the commercial sector.

Unfortunately, these programs are being more and more pushed out into the future and being looked at for much more long-term higher risk, which means that their effectiveness is going to be reduced in this time of rather dramatic budget deficits and balance of trade deficits.

I would strongly encourage the subcommittee to put language in the bill along with restoring these programs to the level they ought to be at, put language in the bill, saying that they should return to the 3- to 10-year timeframe to be addressing that.

Finally, Mr. Chairman, I am happy to report that our automotive Stirling engine program continues with a great deal of success.

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