A ‘Real’ Energy Policy?

American Association of Petroleum Geologists (AAPG)

A new year offers the chance for new beginnings – and that’s what’s happening here this month in Washington, D.C., as the Senate and House of Representatives convene the 112th Congress.

Deficits, soaring debt and persistently high unemployment dominate the headlines. But as I talk to AAPG members the frustration I hear frequently is the absence of a national energy policy.

Make that statement to congressional lawmakers or their staff and you’ll get a blank look. Clearly you haven’t done your homework, they’ll say, because nearly every Congress passes energy legislation: The Energy Policy Act of 2005 runs over 500 pages; the Energy Independence and Security Act of 2007 is more than 300 pages long.

How much more policy do you want?

As you read those pages, however, the problem quickly becomes apparent – the legislation is light on strategy and heavy on tactics.

While it may have a theme – such as energy independence and security – it is hard to discern from the constituent parts what the desired outcome looks like and how these programs get us there.

Many of the programs are designed to benefit a legislator’s constituents and home state. There is strong bipartisan support for biofuels, for example, because it benefits the American farmer. And passing legislation requires consensus. So what becomes law is not necessarily what is best, but what legislators can agree on.

Consequently, tough decisions are deferred and resulting policy isn’t comprehensive.

The process of developing a national energy policy is further complicated by the diverse and numerous participants in the U.S. energy sector – it is not a monolithic system. Instead, you have multinational corporations alongside mom-and-pop oil and gas producers, public utilities and start-up renewable energy producers all responding to supply/demand pressures in a highly regulated energy market.

Policymakers try to prompt desired behavior from energy producers and consumers through energy policy. But the intended policy outcome is frequently accompanied by unintended (and negative) consequences. You can’t expect simple stimulus-response behavior in a complex market, especially when you’re dealing with differing time horizons. As former Shell CEO John Hofmeister observed in “Why We Hate the Oil Companies,” “[T]here is a basic conflict between ‘energy time,’ which is defined by decades, and ‘political time,’ which is defined by two- and four-year cycles.”

Developing a coherent, far-sighted national energy policy is a major challenge – one further compounded by the partisanship that characterizes today’s political discourse, which is why I found the following paragraph so interesting:

“Today, few issues in American political life are as polarized as energy policy, with both left and right entrenched in old worldviews that no longer make sense. For the better part of two decades, much of the right has speculated darkly about global warming as a United Nations-inspired conspiracy to destroy American sovereignty, all while passing off chants of ‘drill, baby, drill’ as real energy policy. During the same period much of the left has oscillated incoherently between exhortations that avoiding the end of the world demands shared sacrifice, and contradictory assertions that today’s renewable energy and efficiency technologies can eliminate fossil fuels at no significant cost. All the while, America’s dependence on fossil fuels continues unabated and political gridlock deepens, preventing real progress toward a safer, cleaner, more secure energy system.”

The above is from the introduction to Post-Partisan Power – how a limited and direct approach to energy innovation can deliver clean, cheap energy, economic productivity and national prosperity.

The report, released last October, is a joint effort by the American Enterprise Institute, Brookings Institution and Breakthrough Institute, a trio of think-tanks that spans the political spectrum. It is an effort to push beyond current thinking, and consider how to develop a strategy for our nation’s energy future.

Their proposal has four elements:

♦ Invest in energy science and education.

Creating our energy future requires a significant investment of resources to fund energy research, and a commitment to public energy education from kindergarten onward and to train the next generation energy work force.

♦ Overhaul the energy innovation system.

Harness the creative talents and entrepreneurial spirit needed to discover and commercialize energy technologies through “regional energy innovation institutes.” These institutes would foster public and private partnerships between companies, government and academia. Scale up the activities of the Advanced Research Projects Agency for Energy (ARPA-E) to conduct high-risk, high-reward energy research. Look at dual-use energy technologies that also have military application.

♦ Reform energy subsidies and use military procurement and competitive deployment incentives to drive price declines.

Focus on cost and performance of new energy technologies and stop subsidizing business as usual. Use incentives to drive down costs until new technologies become competitive with current technologies, use the scope and scale of the military to further reduce costs – and don’t forget nuclear.

♦ Internalize the cost of energy modernization and ensure investments do not add to the deficit.

Scrap ineffective subsidies, redirect existing federal revenues and raise additional revenue to fund this innovation and make energy systems, such as the power grid, self-sustaining.

Are these four principles sufficient to create a new energy future? Probably not. But the focus on reducing costs so that alternative energy sources are commercially competitive without subsidy, and using military procurement to drive innovation and cost reduction are ideas worthy of consideration.

That such an ideologically diverse group could debate and agree on these principles suggests developing a national energy policy isn’t a hopeless cause.

In fact, it points to the real task ahead:

Another round of energy legislation isn’t the answer. Instead, we need a national dialogue that forges consensus on the energy future we are trying to build.

Then, and only then, will energy policy have any hope of getting us there.


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