Solyndra bankrupt - and not all bad

I saw news today that Solyndra was forced to declare bankruptcy today. There's lots of handwringing and schadenfreude happening over this because $535 million loan guarantee from the Department of Energy. It was part of the vaunted 'green jobs' part of the stimulus.

I think its actually good (overall) that prices are coming down, and we're seeing some consolodation in the industry. The only way solar ever gets to grid-competitive (which is very possible) is by reducing prices. And - there's a lot of solar companies in the US right now. There were a lot of car companies in the US in 1910. Recessions thinned them our so that only the best three remained to compete around the world. Don't think that early car companies didn't get any federal help. Probably an even better example is the railroads. There were many - they all received support from the federal government

And - even with the Chinese driving down prices, the US had a $1.9 billion surplus in solar exports last year, according to the Solar Energy Industry Association. So - even if there's not a lot of jobs - that's still a lot of money being made.

Asian Companies want technology - not Canadian Exports

I'm almost done with the tar sands, but there is one other argument I've heard a lot about: Asian national oil companies are buying up shares in Canadian oil companies to secure access to their oil.

However, I understand that the investments from Asian oil companies in Canada is not really for supply, contrary to many assumptions. Instead, Asian (particularly Chinese, but also Malaysian and Indian) companies are looking for access to technology. If they can master the technology for fracking, horizontal drilling, and in-situ drilling, they will open up many new areas of domestic production. That's really what they're after - not Canadian oil.

Even More on the Tar Sands

Prompted by a very interesting post on Grist, "Everything you’ve heard about the tar sands and energy security is wrong", which said that we should keep Canadian oil in reserve to ensure longer-term energy security - a point I also made in my recent (and long-winded) post on the Tar Sands and the Keystone pipeline.

That has prompted an interesting discussion on the nature of energy security, and our relationship to Canada.

It clearly would be in Canadian producer companies interests to open up their Pacific coast to oil exports. There has, indeed, been a push to build a pipeline to the coast, at the port of Kitamat. However, there is significant opposition, from both environmentalists and Native Americans, to building it. They will probably be enough to block it, at least for a time. So - we can't simply assume that the export routes will open. Here's a source on that.

What will actually happen on the Oil Sands

I just finished a post on why I think that permitting the Keystone XL pipeline would not benefit American energy security, economic stability, or environmental sustainablity (see also here on ASP's blog).

However, that does not mean I think that anyone will listen to me.

Before they left for their August recess, the House passed legislation that would require the State Department to issue a ruling on whether or not to allow the pipeline to move forward. Although the legislation is unlikely to move through the Senate, it does put pressure on the Administration to move forward with its decision.

As much as the Administration has done on climate and environmental policy, I think they realize they're vulnerable to charges of not creating enough jobs. That will be question #1 in next fall's election, and I think they're willing to sacrifice environmentalists (who have never proved able to deliver any votes) for jobs. If Bill McKibben and 350.org can use their direct action to convince policymakers otherwise, more power to them. But, I'm not sure that will actually happen.

On the Canadian Oil (or Tar) Sands

I've been trying to figure out one which side I come down on regarding the Keystone XL pipeline. For those unfamiliar with it, the Keystone XL pipeline is a proposed expansion of a pipeline operated by TransCanada to bring oil from the Northern Alberta refined from the oil sands (or tar sands) into the United States and down to the main American refineries in Texas and Louisiana.

Be prepared - this is a long post, because this is a complicated and difficult issue. I am writing about this now because there has been a series of protests against the oil sands by Greenpeace and Bill McKibben's 350.org group. I see that a number of protesters have been arrested this week at the White House.

This is a difficult topic to write about because, as I have been writing, most recently in my paper "America's Energy Choices" and the Op-Ed published along with it, we have to consider three aspects when making choices about energy: (1) energy security, (2) economic stability, and (3) environmental sustainability. The problem with the Canadian oil sands is that these three concerns come into conflict, thus proving that determining America's energy future will require us to make difficult choices.

States rights and National Energy Markets

As I mentioned in a post earlier today, I have a post up on The Hill's Congress Blog, "The Energy Choices We Need to Make". I noticed a couple of comments were already up on the post.

I knew it was probably a mistake to read the comments when the first one said "Get the communist out of the decisions Period", but I forged on anyway. Ultimately, once you get through the crazy, they actually brought up a good point.

It is a common perception that everything should happen at the state level. If Washington is broken, then it seems that you would want decisions made in your statehouse, not in broken Washington. However the energy and electricity markets are national, not local. If we leave it up to 50 states to make decisions about energy policy and regulation, that is a recipe for the status quo.

And the status quo leaves us with an energy system in decline. One where energy will get more expensive, dirtier, and we will remain dependent upon foreign countries for our energy.

I think, in order to let the private sector work best in energy markets, Congress needs to make some long-term, strategic decisions about what we want our energy system to look like in 30 years, and set up the regulatory structure that will make that happen. Once that is set up, then the markets will determine the best way to meet those goals.

Ironically, the one state that could argue 'States' Rights' - at least in the case of the electricity market - is Texas, because their electrical grid is separate from the national grid.

Post in the Hill's Congress Blog

I've got a new post up in the Hill's Congress Blog. I've reprinted it below. 

Thirty-seven years ago, President Richard Nixon announced a national goal that by “the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
 
Since this 1974 State of the Union address some sort of ‘energy independence’ has been a stated policy of every Presidential administration, but the United States though has not come anywhere near ‘energy independence.’
 
Today, we have an opportunity to set on a road to achieve these goals.

US-Brazil Strategic Energy Cooperation - Time to Drop the Ethanol Tariff

The U.S. - Brazil Strategic Energy Dialogue began today. I see that Deputy Secretary Energy Dan Poneman is leading the delegation. After our immediate neighbors, Canada and Mexico, Brazil is probably the most important bilateral relationship on energy in the hemisphere. It is one of the fastest growing countries in the world, and they are soon to become a major oil producer, after the find of significant oil in deep water off their coast.

Brazilian gas pump - note the 'alcool' (ethanol) pump at right

And - they have the most advanced ethanol production infrastructure in the world. They use distilled sugar cane to create ethanol, a process that is about 7 times more energy efficient than using corn, the process we use in the United State. About 50% of their cars are flex-fuel models that allow the consumer to choose whether to use gasoline or ethanol as their fuel.

So, I'm just writing a plea to the United States Congress and to the Obama Administration - it is time to repeal the ethanol tariff. Nothing would do more to bring strategic cooperation on energy between Brazil and the United States.

In June, the Senate voted 73-27 on an amendment from Senator Feinstein that would repeal the 45 cent per gallon tax credit for domestic ethanol production and the 53 cent per gallon tariff on imported ethanol. These tariffs and subsidies act as a wall preventing a full integration of the ethanol market between the U.S. and Brazil. I understand that there is an agreement, brokered between the main opponents of the subsidy (Senators Feinstein and Coburn) and the main proponents (Senators Thune and McCaskill) that would phase the subsidy out, beginning immediately. This agreement should be immediately passed through the Senate and House when Congress returns, and the President should sign it.

This would help to cement the strategic cooperation on energy between Brazil and the United States, as well as saving the taxpayers money.

Ironically, the loss of domestic subsidies will be helped by the export of ethanol to Brazil. When I was working in Congress in 2008, we had Brazilian companies asking us to repeal the tariff so that they could export their superior sugar-cane ethanol here. Now, the stagnant growth of US gasoline demand (and the ethanol blended into it), combined with growth of car ownership in Brazil and record-high sugar prices means that the tables have turned; Brazil now must import American ethanol to meet demand. 

That make this the perfect time to wean American ethanol producers off subsidies and the tariff. High gasoline prices and a ready market mean that ethanol producers won't be significantly hurt by the loss. 

Why Fuel Economy Standards Don't Kill People

Yesterday, as I was writing up my post about fuel economy standards, I was troubled by one thing: I couldn't find any reports to refute the claim that higher milage standards kill people. The argument, from people like John Stossel on Fox News, is that higher CAFE standards cause car companies to manufacture smaller cars, which are less safe.

Intuitively, this feels right. Smaller cars=less protection=more deaths. And, indeed, when fuel economy standards were first introduced in the 1970s, the only way to meet the standards may have been to shrink the cars.

Luckily for me, I see that Stephen Lacey over at Grist has found the evidence that debunks the myth proves that more small cars don't kill people. The evidence that is often used is from a couple of out-dated studies. The people trying to show that fuel economy standards are unsafe overlook three things.

1. More SUVs and pickup trucks make the roads less safe. Although they protect their passengers, they are far more likely to kill someone in another car when they hit them.

2. Overall safety in cars has increased significantly over the last 30 years.

3. New technology means that auto companies won't even have to make exclusively small cars to meet the fuel economy standards (as I explained yesterday).

On Fuel Economy Standards

A couple of weeks ago, I wrote about how important the new corporate average fuel economy (CAFE) standards would be to reducing America's oil dependence.

The opponents of fuel economy increases have trotted out their usual arguments about free markets, overbearing bureaucrats, and safety. If you're not familiar with these arguments, they sound persuasive.

I should know - I used to agree with them. I am by nature opposed to government involvement in private transactions. Two things changed my mind: first, the clear and present national security consequences of American dependence on imported oil. Our foreign policy is needlessly constrained by the need to protect low cost oil. Second, and most importantly for this argument, there is clear evidence that the auto companies are not providing the fuel economy that people want. This is a market failure.

However, just because I have changed my mind, it doesn't mean that everyone else has. The best example I can find for the brain-dead opposition to CAFE standards come from Larry Bell's column in Forbes. Reading this guy's stuff drives me crazy. On my previous blog, I wrote a very long refutation of a column of his in 2010. 

Bell's column is notable for his combination of hyperbole, opinion spouted as fact, and being just plain wrong. After the jump, I will go through some of his most egregious examples.

Turning Point?

Who said August is supposed to be a slow news month? There is a lot happening while people begin their vacations.

I think we may look back on the ten days that have begun August, 2011 as one of those historical turning points. I'm not sure what we're turning to, but

Just to go down the list, in no particular order:

1. Riots in London
2: S&P Downgrades US Debt from AAA to AA+
3. Global Market unease: Dow Jones Industrials drops 500 points Monday, jumps back 300 Tuesday, drops back below Monday's close on Wednesday.
4. President Obama gives a speech Monday to calm markets, says nothing important, markets ignore.
5. Euro debt crisis gets worse as investors flee Spanish, Italian bonds, as well as French banks.
6. 30 Americans, 7 Afghans killed in the shooting down of a helicopter in Afghanistan.
7. It seems like ancient history now, but it was only a week ago (August 2) that the President signed the extension of the debt ceiling.
8. The Chinese Navy launches their fist aircraft carrier.

I really don't know where these events will all lead us, but I do think that this month has shown some serious strains and ongoing changes in the world. We have known that the path we have been on in many of these stories is unsustainable. The question is what happens when the bottom does finally drop out? We may be learning.

David Rothkopf, writing in FP.com, has a very pessimistic list of where things could be heading. Unfortunately, I think he may be right on some of these.

Reason #1 for the Military to use less Fuel

This picture, from the AP via MSNBC's photblog gives a pretty good explanation for why NATO should use less fuel. 

Credit: Dan Yasin/AP

The story goes on to say that no one was killed, but at least 5 fuel trucks were burned. That is likely to be fuel that was trucked all the way from the port in Karachi through the Pakistani tribal areas, and up to Kabul. This is a significant vulnerability of ISAF in Afghanistan.

This shows the case that was very well made in two recent reports from other think tanks here in DC: The CNA's report "Powering America’s Defense: Energy and the Risks to National Security" and CNAS's report "Fueling the Future Force: Preparing the Department of Defense for a Post-Petroleum Era" showed how the energy supply chain is a crucial vulnerability of America's deployed forces. They also began the process, continued by the new DoD Energy team in the Pentagon under Assistant Secretary for Defense for Operational Energy Plans and Programs Sharon Burke, of showing how the military can use less fuel.

Number of the Week: 41,235,700

Today's number of the week is how much gasoline the United States uses.

In May, 2011 refiners in the US delivered 41,235,700 gallons of gasoline per day. If expanded out to a year, that totals out to 15,051,030,500 (15 billion) gallons per year (These numbers are all from the Energy Information Agency).

What is most interesting here is that the United States is on track to use the least gasoline since the EIA began keeping track of these numbers in 1983. If you see the chart, you can see that gasoline use started to fall after 2003, then fell off a cliff with the oil price spike in 2008 and the ensuing recession. It has not come back.

Politico has an article today "Expiring gas tax may be next battle on the Hill" saying that the Tea Party may pick a fight over the extension of the 18.4 cent/gallon gas tax, slated to need re-authorization by September 30. The chart above, combined with the knowledge that the gas tax hasn't been increased since 1993 shows in graphic detail why our roads, rails, and bridges (funded with gas tax money) are crumbling.

Launch of America's Energy Choices

At lunch today, I gave a presentation at ASP's office to mark the release of my new white paper "America's Energy Choices" (or read it below). This report marks an effort by ASP to begin to outline a new way of looking at how America uses and produces energy.

The problem with American discourse on energy today is that arguments about energy are too often based on which will ‘sell’ the best in order to fit a decision already made. These argument are not meant to be balanced - they are poll-driven and appeal to people's basest fears and desires. The report says that, instead, policymakers should look at the all options and weigh the trade-offs for each. Because the truth is there are trade-offs – decision makers should not pretend there are silver bullets that will automatically bring cheap, clean, domestic energy to all.

In the report, I maintain that the proper way to address the debate about energy is to balance three main concerns:

1. Energy Security
2. Economic Stability
3. Environmental Sustainability

There are three broad categories of energy the U.S. has to choose from, including: fossil fuels, nuclear energy, and renewable power. Within each of those categories is a range of several choices.

Over the next few days, I will do a series of posts on my personal blog (http://andrew-holland.blogspot.com/) expanding on how each energy choice I brought up in the report matches up with the three main concerns above. In the meantime, I would encourage you to take ASP's online poll to show how you would prioritize America's Energy Choices, just click here.

Below the jump, the report is embedded.