Energy One Year Later

In the year between President Obama's Energy speech at Andrews Airforce Base at the end of March, 2010 and his speech yesterday at Georgetown, much has changed in energy.  Unfortunately, with the exception of the promise of fracked gas, it has not been for the better.

A year ago, there was a real prospect of comprehensive legislation that would have rewritten the rules for energy for decades, setting the US on a path to ramp up renewable technologies and revamp or retire fossil fuels.  That legislation did not move last year, and a new Republican House has totally different priorities for energy, making the politics of legislation this year far more difficult.

With respect to energy itself, two key elements of the President's plan last year were increased offshore drilling and nuclear power.  Only three weeks after his Andrews Airforce Base Speech, however, the BP Deepwater Horizon rig blew up.  The explosion highlighted the risks of deepwater drilling and brought it abruptly to a halt.  The future of nuclear power is far more uncertain in light of the ongoing Fujushima meltdowns, the full extent of which are still unknown.  Finally, a political tsunami, set off by soaring food prices, is roiling the Mid-East, driving oil prices upwards.  The result is that there is a crying need for action on energy policy at the very moment when figuring out what policies to adopt remains more uncertain than ever.

Yesterday, the President called for a one third reduction in oil imports over the next decade, a reopening of offshore drilling, more nuclear energy and also a clean energy standard (that would include nuclear) in lieu of last year's renewable-only standard.  As the New York Times makes clear today, calls for energy independence, despite their long history, going back to President Nixon that give them a Groundhog's day quality, have yielded results.  For example, the US has eliminated oil from its electricity portfolio (oil once supplied 15% of electricity) and even cut imports 10% in the last four years.  Oil from Canadian tar sands is now a reality, ethanol is a real business and other biofuels--unlinked to the food chain--are on the horizon.  It would be wrong to say that efforts to grow energy independent never work.  The goal of cutting imports by one third is if anything, modest.

However, the US still exports $400 billion per year on oil or over 2% of GDP.  Solar energy supplys only about 1/10 of 1% of our electricity--though it supplies 10 or more percent in parts of the EU.  And electric cars--promising as they are--have yet to gain real market share.  In short, policy is not working nearly fast enough.

The Presidnent set the right overall goal of energy security.  Here, however, are my suggestions on the policies needed to translate the overall goal to reality.

First, while a few countries have faced up to the significance of the Fukushima disaster, there has been an odd suspension of judgment in the United States.  In fact, Fukushima is a truly cataclysmic disaster that means that nuclear energy cannot be relied on to solve the world's climate problem or future energy needs.  Nuclar energy, already very expensive and unfinancable privately, will grow much more expensive and uncompetitive.  It will continue to supply a share of the world's electricity, but is not a growth industry.  The US despite what some say--probably won't build any new plants.  It is time to disabuse ourselves of the idea
that nuclear power is the answer to our problems.

Second, the two main problems with oil imports are one, prices are manipulated by a cartel and two, many imports come from unfriendly countries.  We can't solve the second over night but could solve the first.  Given our huge role in the Mid-East and involvement on both sides of the battles underway--supporting rebels, for example, in Libya but incumbents in Saudi Arabia--we need to simply dissolve the cartel.  Let the cartel continue with Iran and Venezuela members but it is inexcusable that Iraq, Saudi Arabia and other countries we sustain are members.  We can and should break it. 

Third, we should reform our electricity regulatory regime to promote, not block innovation as NDN has proposed through our work on Electricity 2.0.  Simply put, Congress needs to pass legislation analagous to the Telecom Act of 1996 to rewrite the rules for electricity to create large, open, national business platforms that play to our strength in innovation, allow energy efficiency and renewable electricity to flourish, and democratize energy.  A renewable electricity standard should be part of this effort.

Fourth, as Secretary Chu and others have suggested, we need to dramatically increase our investments in new technology, particularly in the area of fast charge batteries and biofuels to create the basic science and technology to underly wholesale change in energy.  However, a far larger share of this money should go through universities and to small businesses than has been the case to accelerate technology transfer.

The bottom line is that we can achieve energy independence as the President proposed yesterday at Georgeown but only after we get the policy right, look truly forward and create the right rules of the road to drive real innovation.