Chu envisions a focus on "transformational energy research that industry by itself cannot or will not support due to its high risk," he told Congress when he headed the Berkeley lab. This is exactly what's needed, but it looks like most of his 15 billion will be for subsidizing current technology. $15 billion is what we spend every year on space toys -- I love 'em, but we need to get serious.

The FY 2010 Budget, proposes a carbon cap and trade system with "a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits." Revenues from the auction have been estimated at anywhere from $50B to $300B per year, but the official estimate is $79B in 2012 and growing slowly.

The Budget proposes that $15B/year would "fund vital investments in a clean energy future," and the rest would "be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy."

Assuming full carbon coverage, the price of permits assumed by OMB must be about $13/ton, or $0.13 per gallon of gasoline. According to an earlier MIT report this is about four times too low. However if enough money is spent by the government on targeted projects, such as subsidized wind, it is possible to achieve the targeted carbon reduction of 83% in 2050 with a carbon price.

Returning $60B/year (or quite possibly $160B/year) to vulnerable families, communities and businesses, will be a hugely contentious process. For one thing the businesses hardest hit will be independent coal-fired power plants, the polluters that the auction seeks to avoid. This is also the one group whose losses are most easily calculated.

A terrific speech by Obama. But since I'm tracking energy I must point out that cap and trade is going to do him no favors in Copenhagen in December (that's son-of-Kyoto and it looks to be another one of Dr. Frankenstein's monsters). Its job is to ... patch together pieces of US environmentalists, with Chinese, and Indians, who are saying "read my lips." They are right. Cap-and-trade would be completely unfair to them, or do nothing at all.

I share this view with the liberal Nobel prize winner Joseph Stiglitz, the top energy economist for the last 30 years, William Nordhaus, and the well-known conservative economist Gregory Mankiw. This is not a political matter. If you just do the numbers, caps do not work for the developing countries, and they understand that well. The have said they are willing to make commitments, just not that one. Why are we so stubborn. There is another path to effective carbon pricing, but EDF is blocking it.

The stimulus package adds about $14B/year for energy, but on $5.4B or less than $2B/year is for research. Adding this to existing funding brings energy research up to about $3B/year, far short of the $15B Obama promised in his campaign, so we'll be checking the budget.

Energy Secretary Steven Chu has created a "special organization" within the Department of Energy (DOE) to distribute the $40 billion in the stimulus bill slated for energy projects. The agency intends to spend 70% of the money by the end of 2010. ... start cutting checks under its loan guarantee program for clean energy technology by the beginning of May, ... the loan-guarantee applications will be reduced from approximately 1,000 pages to about 50.

Joan Glickman, will handle the renewable side of the house and Gil Sperling, on the efficiency side of EERE.

Drilling began at an Energy Department carbon sequestration demonstration project in Illinois that could store 1 million metric tons of CO2 by 2012. The Mount Simon formation, which stretches underneath Illinois, Indiana, and Kentucky, could eventually store more than 100 billion tons of CO2. Geologists are optimistic about the storage capacity of the formation because there are three layers of impermeable rock between the sandstone where the CO2 would be stored and the surface.

Governments have already designated more than $20 billion for large demonstration projects, mostly in the U.S., Europe, Canada, and Australia, which could support more than 30 projects. If this money does flow to projects and they are successful, the report concludes that CCS will be "well positioned" to scale up after 2016. The report also found that long-term storage potential will require the use of saline aquifers, and will likely involve and benefit the major players in the oil and gas industry. The report is available at CCS Report.