Could Unlimited Clean Power Have Problems? Not Compared with Today's Energy Problems

I have been having trouble getting my head around this article in the New Scientist: Power paradox: Clean might not be green forever (H/T WSJ TechEurope). Basically, what they're saying is that the waste heat from all the energy we use will cause warming itself. The thesis is that all energy production and use give off some heat as waste. I have no problem with this; its true, but it is so small as a part of the total heat that the earth takes in from the sun and radiates away into space that we don't contemplate it.

The article says that if we forever generate more energy - so long as it is external from the solar energy that the Sun sends us, like nuclear fusion or fission or fossil fuels - then that waste heat will eventually cause global warming on its own, regardless of greenhouse gas emissions. Again – this is true, but so far in the future that its really not worth contemplating. In the science fiction world that this article is creating, it claims we could have access to almost  limitless energy (they posit a world that uses 5000 Terwatts per year; we use 16 TW now).

My problem is that this is so far beyond any reasonable time horizon that it's not worth contemplating or planning for. If humanity is able to generate more than 300 times as much energy as we use now, then we'll also have limitless energy to build the giant mirrors to reflect some sunlight away or some such geoengineering scheme.

To compare - if, say scientists in Edinburgh in the 1750s had determined that all the coal they were burning was going to cause global warming in the first half of the 20th Century - 250 years ahead - would they have planned for that? I don't think so. Let's focus on the problems of today: energy security, economic instability, and environmental sustainability. We'll let our great-great-great-great grandchildren deal with these consequences.

Keystone To Be Rejected

- Cross Posted from ASP's Flashpoint Blog - 

It looks like the the long saga of the Keystone XL pipeline is finally going to come to a close, as the Washington Post reports that "The Obama administration will announce this afternoon it is rejecting a Canadian firm’s application for a permit to build and operate a massive oil pipeline across the U.S.-Canada border."

I have written previously on this blog, in a very long post, that the Keystone XL Pipeline was simply not necessary for America's energy security. The very real environmental costs, including increased greenhouse gas emissions and substantial environmental degradation in northern Alberta, are not worth the questionable benefits to American security, especially given that much of the imported Canadian oil would simply be re-exported due to changes in America's refining capacity.

On the cynical side, some will see this as a move that will help the President shore-up his support among environmentalists. Certainly, the protests in November that surrounded the White House with activists opposing the pipeline showed that the environmental movement was able to put some political weight behind its opposition.

However, I think there is a case to be made that this is about more than simply naked political calculation. Instead, this should be seen as a decision that is part of a larger strategic move away from oil. This administration has supported alternatives to oil, including next-generation biofuels and electrified cars, as well as pursuing efforts to reduce demand for oil by increasing fuel economy standards for American autos.

Although largely unremarked upon, I think that 2011 will go down as the most significant year for America's energy security since 1991, when the fall of the Soviet Union and the invasion of Iraq combined to secure new sources of oil that would help fuel the substantial global economic growth of those two decades (you can read more about why I think 1991 was so important in my article published in The Atlantic, "Race Around the World, The 20-Year Contest for Oil").

2011 was so important because it saw real course changes on both the supply-side and the demand side of energy. We are seeing new energy production within the Continental U.S. - whether from shale gas, oil from the Bakken field, or the world-leading increase in alternative energy. We are also seeing new policies that will increase energy efficiency and reduce energy demand - like the new rule that will double America's fuel economy by 2025 and the move toward green buildings.

President Obama will have the opportunity to place the canceling of the Keystone XL pipeline within this context at next week's State of the Union address. If he doesn't mention energy - something he skipped last year - it will be a missed opportunity.

The problem is not dependence on imported oil - its ALL oil

I see, via Real Clear Energy, that Jim Powell of the Cato Institute has an article over at Forbes, saying "Why 'Dependence' On Foreign Oil Is A Bogus Worry".

He's right that dependence on imported oil is not a problem. But, he doesn't complete his thought. It is dependence on ALL OIL that is the problem. Politicians like to blame foreign oil, but the truth is that its our dependence on oil at all that is harming both the American economy and America's national security.

So long as American businesses and consumers are completely dependent upon oil for 94% of their transportation, fluctuations in price will disproportionately affect those who need oil. This is not a commodity with easy and available substitutes.  

We're seeing it now with prices back up over $100 per barrel. This acts exactly as a tax increase: we don't have any other option. That harms our economy. Note that it is not whether the oil is imported or produced here at home: consumers are still bearing the burden.

There is a better way - we should reduce overall dependence on oil by increasing fleet fuel economy and by promoting alternatives that can break the monopoly that oil holds.

Huntsman: "we need to break oil's monopoly as a transportation fuel"

-Cross-posted from ASP's Flashpoint Blog -

Yesterday, Jon Huntsman gave a major speech on energy policy in New Hampshire. The former Governor of Utah and Ambassador China - and currently low-polling Republican Presidential candidate - laid out a vision for America's energy future. Much of it is standard Republican objectives (reducing regulations, producing more at home, etc), but I wanted to flag an important component that he brings up: "breaking oil's monopoly as a transportation fuel".

Unlike many other candidates in the Republican primaries, he is not of the "Drill, Baby, Drill" crowd, saying "we cannot simply drill our way to energy security". That is a key point to this. Even if we produced 100% of the oil we consumed, the U.S. economy would still be stuck with the global market for oil, and all the price fluctuations that go along with that.

So - to reduce that dependence, Huntsman proposes to open up we need to open up the transportation fuels market to competition. I will quote from his speech at length:

America's prosperity has always flowed from competition, and I believe it's time to let creative destruction loose in our energy sector.  Energy security, as Winston Churchill said, "lies in variety and variety alone."

Yet the current system of transportation fuels is essentially closed to competition because of gasoline's de facto monopoly for light-duty vehicles and diesel's near-monopoly for heavy-duty vehicles.

The concentration of distribution ownership is similar to the broadcast network domination in the early 1970s, which triggered market-opening FCC rules and an antitrust consent decree.

Accordingly, the Federal Trade Commission and Senate Judiciary Committee must commence an expedited review of the fuel distribution network.

Breaking oil’s monopoly will also require the repeal of regulations that prevent a truly open and fair market.

This proposal is broadly in line with a problem I identified in the ASP white paper "America's Energy Choices". Because oil is 92% of our total transportation energy, American consumers are at the mercy of broad fluctuations in the oil market. With competition, they could choose which fuel or mode of transportation offers the best combination of value, cost, and time.

This is an energy plan that is thoughtful, and Gov. Huntsman deserves credit for it. You can see the speech in full after the jump:

China Suspends Rare Earth Production

This is Cross-Posted from ASP's Flashpoint Blog
I see, via the AP, that China's biggest producer of Rare Earth minerals is suspending production for one month. The DailyTech has a great article explaining what Rare Earths are, and why they're important. Short summary: they're needed for a lot of high-tech and renewable energy devices.

Recall, about a year ago China suspended exports of Rare Earths to Japan, in a clear linkage to an international incident in a disputed sea boundary. That was a wake-up call to many - both the businesses that use them and the producers who supply them.  It is interesting that the reason for the suspension this time is not geopolitical, but instead is economic: a slumping global economy means there's less demand and lower prices.

ASP published an important report "Rare Earth Metals and U.S. National Security" in February, 2011. Take a read, or look at the fact-sheet when you can.

It is important to remember that Rare Earths actually are not that rare. The fact that China has 97% of their production is a historical accident. The U.S. and Canada have reserves in the Rocky Mountains of Rare Earth minerals, but there are no operating mines.

Molycorp is beginning to change that with plans to re-open its mine in Mountain Pass, California. Businesses, too, that rely on Rare Earths are finding ways to build the batteries they need without the minerals.

There is no reason for Rare Earth Minerals to be a strategic resource. In the end, they should be little different from copper or iron: necessary for production, but easily sourced from the lowest-cost producer.

Space Based Solar - The Videos

I've got a new blog post up on ASP's blog looking at Space Based Solar Power. This is a very cool technology, and I would encourage you to click over to check it out. But - one thing I cam across when doing research for this post was how many cool videos there were explaining it. Below is a series of some of the best.

The first features some great elevator music:

After the jump, several more.

Nuclear Lessons Learned from Fukushima

The Springfield Nuclear Power Plant

This morning, I attended an event, "Lessons from Japan, Global Implications of Nuclear Disaster" hosted by the National Journal. I'm not going to do a full summary of the event - most of everything that was spoken wasn't new - it was a restating of positions. This is a problem in Washington: an external event - even one as big as the Tohoku disaster - does not change positions. Instead, it just causes people to restate their previous stances, and say "now more than ever" (with hat tip to Ezra Klein for that idea). At this event we saw such statements from Rep. Markey, as well as panelist from the Nuclear Energy Institute and the Center for American Progress.

The most pertinent presenter was Greg Jaczko, the Chairman of the Nuclear Regulator Commission. The lesson he claimed the U.S. should learn is that accidents do happen - all of the preparation in the world cannot prevent every accident. In a nuclear disaster, its never just one thing that goes wrong, instead it is an unanticipated series of events that cascade into a severe disaster. That is what happened at Three Mile Island, Chernobyl, and Fukushima. To take account of that, there needs to be a constant re-evaluation of risk - including looking at the unknown and unpredictable as well as mainstream predictions. I am heartened to see the nuclear regulator taking this. As was discussed at the conference on energy and environmental risks I attended last week at Maxwell AFB, this is the difference between prediction and foresight. Planners need to look beyond a single, linear prediction, and instead realize that planning is about preparing for that which is not obvious.

Finally, a brief criticism of the event - if they were really looking for lessons from Japan, it seems that at least one of the presenters should have been from Japan. As it was, the overwhelming response to the event, from almost every participant, was that we don't yet know the final lessons. So - it seems that a pertinent speaker would have been someone from Japan who worked closely on the response. They could have then discussed how this experience should shape American nuclear policy. Instead, we had a series of American policymakers and commentators who seemed to be saying the same things they've always said.

U.S. Military’s Efforts to Reduce Exposure to Energy Security Risks

- This post is cross-posted from ASP's Flashpoint Blog -

Last week, there was an important article posted up on the Army’s website, “Scientists bring energy solutions to the desert.” The article discusses how the Army has set up a small (one megawatt) smart-grid at the Army’s Camp Sabalu-Harrison in Afghanistan. The smart grid uses 4 large diesel generators to provide power for 66 structures. These 4 system is an example of a ‘smart grid’ because it is able to balance supply and demand throughout the day. This grid has replaced 20 separate generators that were required to be running all day regardless of demand. Whereas the old system required a fuel truck to refill each generator throughout the day, the new system has one centralized refueling point.

This article is an example of how the different branches of the military are innovating ways to reduce their exposure to energy security risks. I spent a few days down at Maxwell Air Force Base last week for a conference on the military’s proposal’s to address energy security. At this conference (held under Chatham House rules – so I can’t quote anything for attribution), it was clear that every branch of the military was moving to reduce their exposure to energy insecurity.

Mostly, this means that the military is trying to reduce their use of oil. There are two big reasons to do this. Strategically, military leadership understands that scarce resources, like oil, are a potential spark of conflict, and the military’s dependence on oil from unstable regions is a major strategic vulnerability. At the tactical level, the long logistical tail left by convoys carrying fuel or water are the most vulnerable to attack, with some sources saying that one casualty is taken for every 24 convoys.

Reducing fuel use means means different things to each service. The Navy and the Air Force don’t have to operate forward deployed bases, so they are less concerned about the vulnerability of their supply lines. Instead, they are concerned that future shortages of oil could impact their effectiveness. The Air Force is testing biofuels in an effort to secure ‘drop-in’ replacements for jet fuel. Similarly, the Navy has the Green Hornet program for naval aviation to run on a 50/50 blend of biofuel and traditional jet fuel and just last year it launched the USS Makin Island, the first navy ship to run on a hybrid gas turbine with electric auxiliaries propulsion plant.

Like the Army, the Marines are concerned about reducing the logistics tail of forward-deployed units. However, they have also been getting a lot of press recently for their push to use solar on the battlefield to reduce the heavy load of batteries that each Marine is forced to carry into battle.

All of this has led some policy people to talk about “Green Soldiers” or some such term, but the military’s push to reduce fuel use is not about being environmentally friendly, it is about helping the war fighters to more effectively fight and win wars. However, it is an important bonus that the technology they are developing could immediately be useful to American civilians. If a biofuel mix turns out to be a drop-in replacement for jet fuel, I am sure that civilian airlines will jump on. Similarly, the Army’s microgrid could provide significant experience for implementing a larger ‘smart grid’ here at home. Here’s hoping that innovations from the battlefield can help civilians as well as the military. 

Yergin's "The Quest"

My copy of "The Quest" - Dan Yergin's follow-up to his excellent history of oil "The Prize - arrived yesterday from Amazon. I've read several reviews of the book, so I'm not going into it cold. Steve LeVine thinks that it doesn't have nearly as much original research as The Prize. Fareed Zakaria thinks that he doesn't complete many of his thoughts, perhaps because doing so would lead to some of the disturbing conclusions - either about climate change or energy security. David Roberts chalks up Yergin's book and Zakaria's review to elite disdain for renewable energy.

In August, I put out my large White Paper on Energy and Environmental policy, "America's Energy Choices". Although it only topped-out at 30 pages, I felt like I could very easily have expanded it into a book. I probably would not have sold as many copies as Yergin has, but I see the importance of a big book like this. That's why I'm going to try to live blog my reading of The Quest. I'll put up a brief notes here on the blog with the 'Yergin' label after many chapters. I'll also put Yergin's little bits of insight up on twitter with the hastag #YerginNuggets. Maybe we can have a little fun with it.

Our Grid Still can't Keep up in the Summer

The AP has the story today of the the Outage that affected millions in the Southwest and Mexico last night.

8 years after a windy day knocked out power across the northeast, it appears that a similar chain reaction knocked power out across the Southwest.

This points out to two big problems. First, when the electricity grid is operating a peak capacity in the summer, there in no leeway in the system. Any problems will be magnified when there's so little 'give' in the system.

The second problem that this points out is that the power grid is not smart enough to react to problems. Although this has been pointed out as 'human error', the truth is that humans are going to make errors. If the grid was smart, a problem on a transmission line in Yuma wouldn't cause cascading problems across the system (including the shut-down of San Onofre nuclear power plant). Humans will never be able to react fast enough, but a smart grid would be able to quickly move power to where it was needed.

North Anna's Reactor and the Earthquake

Just a quick hit today on an article that appeared in the NY Times: "After East Coast Quake, Virginia Nuclear Plant Takes Stock."

Credit: Brendan Hoffman for The New York Times

I've been waiting for an assessment of the damage to the North Anna reactor after the quake. This reactor was rated prior to the quake as the "7th most At-Risk for Earthquake Damage" according the Nuclear Regulatory Commission (NRC). I found that story the day of the earthquake here in DC; it also said that North Anna was designed to withstand a magnitude 5.9 – 6.1 earthquake. Because our earthquake was rated as a 5.8-5.9, it quickly became clear that North Anna should be an area of concern. Although no one expected a Fukushima-style meltdown - it was the tsunami, not the earthquake, that did in their reactors - it is important that we learn how American reactors can stand up to trauma.

The New York Times article make clear that the jury is still out. The reactor has not yet come back on line after the quake, and the NRC is requiring them to prove that the damage to reactor was only cosmetic. The picture above shows how one of the 117 ton casks containing radioactive spent fuel shifted, it isn't clear that there was any real damage.

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.

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. 

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.

Fuel Economy Increase Will Help National Security

While all of Washington is focused on the debt reduction talks, it does seem that there is some work actually happening. On Friday, the President is expected to announce a compromise between automakers and environmentalists.

According to the Wall Street Journal, who first reported this on Tuesday night, the President will announce that corporate average fuel economy (CAFE) standards will see a 5% average annual increase in fuel economy for cars and a 3.5% increase for light trucks, staring in 2016 and lasting through 2021. From 2021 until 2025 both would face a 5% annual increase. This builds upon the announcement of a new rule implemented last year that raised fuel economy standards from 2012 through 2016.

The result of this is that by 2025 - not that long when we're talking about the long lead-time necessary for designing and building cars - the average fuel economy will jump to 54.5 miles per gallon. That is approximately double what it was in 2010, the model year previous to the current one, of 27.5.

This is a big deal.

It is very important for American national security and foreign policy that we use less oil. First, it is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar. The United States sends hundreds of billions of dollars overseas to pay for oil. The United States consumed over $1.45 trillion worth of oil in 2010, of which $680 billion was spent on imports.

Without these imports, the U.S. trade deficit, which was $497 billion in 2010, would not have existed. That capital could be used for investment at home, and the export of that capital had the effect of driving down the value of the dollar.

Second, it is important for each American consumer that they are less vulnerable to oil price fluctuations. Oil is a volatile commodity. Over the last four years alone, the global price of oil has fluctuated from an average price per barrel of $69 in 2007 to a peak of $147 in July 2008, back down below $35 in January 2009, then back up above $120 per barrel in April 2011. This constant fluctuation harms consumers because it impairs their ability to plan for the long-term by acting as an unplanned tax.

These problems directly impact the security of the United States because every person working on foreign policy knows how vulnerable the American economy and the American consumer are to the rising price of oil. That vulnerability constrains these decision-makers when dealing with oil-producing regimes. There is a good argument to be made (for another blog post) that the United States has acted very differently to Arab countries throughout the Arab Spring, depending on how much oil they produce.

The increases in CAFE standards that the President will announce tomorrow will put the United States on track to reducing its vulnerability to oil-producing regimes. This is an important step that should be applauded.

American Shale Gas is Revolutionizing European Energy Security

For the last three decades, the story of European energy security has been a steadily growing dependence on Russian natural gas. From the time when the Trans-Siberian Pipeline first started delivering gas to Europe in 1983, countries of Europe have grown steadily more dependent on Russian gas. The integration of the former Eastern Bloc into the EU over the last two decades made the problem even more acute, as 40 years of infrastructure was built in order to foster dependence between the Soviet Union and its satellite states. By 2009, Russia was exporting 4.5 trillion cubic feet of gas into Europe, about 25% of Europe's total gas consumption.

The result of that dependence is that Russia has been able to exert its status as a monopolistic energy supplier. Gas shut-offs to Ukrainian pipelines (through which most of Europe's supplies travel) in the winters of 2005 and 2009 caused widespread misery across Eastern Europe as power and heat were shut down in countries like Bulgaria and Romania that are almost totally dependent on Russian imports. Gazprom, and the Russian state, have not been afraid to threaten the stability of these supplies to gain geopolitical power and extract foreign policy concessions.

Now, however, new supplies of shale gas from the United States are reshaping this equation.A new report out from Rice University's Baker Institute, "Shale Gas and US National Security" (pdf) by Kenneth Medlock, Amy Meyers Jaffe and Peter Hartley highlights how increased US production of gas is already undercutting Russia's geopolitical power of European energy. It states that "Russia’s natural gas market share in Western Europe will decline to as little as 13 percent by 2040, down from 27 percent in 2009."

Even without any significant production of shale gas in Europe (yet), a glut of gas produced in the United States is changing Europe's geopolitical energy equation.

Over the last ten years, the United States has gone from essentially zero in 2000 to over 10 billion cubic feel per day by 2010. The graph at left shows how this revolution has affected total US gas production.

This production increase has been enough to change the US from a net importer of gas to a net exporter. Where once the US had been scrambling to build Liquefied Natural Gas (LNG) terminals in the early part of the decade, now those same terminals are being used to export gas. This has freed other large producers, most notably Qatar, to change their exports from the United States to places like Europe or Japan. Not only has this reduced prices, it also has given Europe the redundancy it needs to free itself from Russian gas dominance.

For years, US policy on building energy security in Europe was to foster competition with Russian gas. The focus of this policy was to build a gas pipeline through the 'Southern Corridor' from the Caspian Sea through Turkey and up through the Balkans. It is ironic that now the United States is the exporter that could provide the competition to Russian gas that Europe needs.

Offshore Drilling Lawsuits

The Chamber of Commerce has a new blogger, and his first post is about how How Environmental group's lawsuits will raise the price of energy.

Let me start by acknowledging his point - the lawsuits will make it more difficult to drill in the Gulf of Mexico. And, he's  right in saying that, too often, groups like the Sierra Club, the Gulf Restoration Network, and the Florida Wildlife Federation are interested in delaying and raising the price of drilling projects. I would question his assertion that these actions will raise energy costs, but that is for another post.

However, I would think his post should include some sort of an acknowledgement that the environmental groups might have a point. I'm not sure if he missed the story - it was only on the cover of every newspaper for 6 months - BP's drilling in exactly this area cost over $20 billion in clean-up costs, untold damage to the Gulf's ecosystems, and - in case we forget - 11 lives. It seems like some acknowledgement that America's energy policy should take environmental sustainability as well as economic issues into account is in order.

He seems to be saying that creating jobs now is more important than any environmental damage down the road. That is a dramatic assertion, if that is what the Chamber thinks. We cannot have a debate when both sides talk past each other - the Chamber should engage the enviros on their turf, and they should engage back by asserting how the long-term costs are higher than any short-term gain. We need a debate on energy in this country that acknowledges all sides.

How to Assess America's Energy Choices

Cross-posted from the American Security Project's 'Flash Point'

On Tuesday, May 24, I participated in an ASP-sponsored event called “America’s Future Energy Choices.” This blog post is a summary of my presentation.

The United States is facing a series of choices over the next decade that will determine how its economy is powered to meet the needs of the 21st Century. By 2035, the total energy demand of the United States will rise by 20%, including a 30% increase in electricity demand. In addition, much of the aging power infrastructure will have to be retrofitted or replaced. All of this will happen in a world where total energy demand is expected to have risen by 50%. Inevitably, energy prices will rise because of the increased demand, and constrained supply. However, decision-makers in government and the private sector can not make decisions based on price alone. Depleting global resources, worries about climate change, and the impact of energy choices on national security will make the decisions about how the United States gets its energy much more difficult than the choices of the 20th Century. The government, utilities, and private sector of the United States should consider these decisions in lights of three concerns: (1) Energy Security, (2) Economic Stability, and (3) Environmental Sustainability. Sometimes these terms are simply buzzwords, so it is important that we specifically define each.

Energy Security

Energy Security is the ability for a country to act in its foreign and security policy independently of how it uses energy domestically. This should not be confused with the political term of ‘energy independence.’ In a world of globally traded commodities, it is neither possible nor even desirable to be energy independent. Instead, energy independence comes from energy flexibility and redundancy – so that the impact of supply shocks do not affect national security decisions. The United States’ foreign policy should be determined by its interests, not by its dependence.

An important caveat to this is that sometimes in Washington, talking about ‘Energy Security' has often been seen as way to sell climate change and environmental issues; the perception is that 'security' sells better than 'green'. However, that does a disservice to both. Considering Environmental Sustainability is important, but the decisions made could be completely different. For example, if you only considered Energy Security important, and ignored economic stability and environmental sustainability, it would make sense for the US to invest heavily in liquefying coal to drive our cars.

Economic Stability

It seems clear that all decisions about energy policy must consider price. The United States is one of the most energy intensive developed economies, which makes its economy vulnerable to supply-shocks. The unstated policy of the US government has clearly been to promote low prices, but the unintended result of that is there is little buffer against fluctuations in price – both up and down. Upward price shocks harm consumers by acting as a tax, but downward price shocks can harm producers as well by harming long-term investments.  Overall, it is more important for an energy choice to be made that will provide long-term economic stability rather than providing only for low-prices, especially if those prices tend to be volatile. Volatile prices encourage dependency when the price is low, leaving consumers harmed when the price spikes. Today, American drivers are feeling the pain of gasoline-dependency that years of low prices created.

Environmental Sustainability

Although there remains a deep and frustrating political divide in this country (and few others) about whether man-made emissions are causing the climate to change, the debate in the scientific community is no longer about whether humans are causing climate change, but how much those emissions are hurting. The most controversial debates among scientists are about the sensitivity of the climate to increased concentrations of greenhouse gases. Unfortunately, as much as the computer models try to quantify sensitivity, they are unable to.

Climate change has deep implications for energy policy/ The fossil fuels we us to produce 92% of America’s energy are the main driver of climate change. As the world’s second largest emitter, with about 25% of global greenhouse gas emissions, US reductions are important.

Local environmental changes are as important – or more – than global climate change. How energy production affects local water supplies and local air quality will determine how the public accepts new energy developments.

In conclusion, how America chooses to replace and expand its energy supply will affect the health of the world’s environment, America’s national security, and the well-being of the United States economy. The decisions made by government and the private sector over the next decade will set the path on the way to 2035. With those parameters in mind, I will be putting together a series of blog posts, both on ASP’s Flashpoint Blog and my own blog, which can be found on my blog at Andrew-Holland.com. I hope that it will draw some good comments.

Environmental Change and Energy Infrastructure Investment

Via Keith Kloor's blog, I see that my friend Cleo Paskal has a good post up on how environmental change is upsetting risk assessment in making major infrastructure investments.

"First, due to changing environmental conditions (sea level rise, subsidence, changing storm activity, etc.), historical records may no longer be reliable predictors for future risks. 

For example, the summer of 2003 was unusually hot. Many of the French nuclear power stations are cooled by river water. But, in 2003, the rivers were so warm, they couldn’t be used to cool as normal. That caused the powering down or shutting off of 17 French nuclear reactors. It cost the French utilities hundreds of millions of dollars to buy power from neighboring countries. 

This ‘anomaly’ happened again in the summers of 2006 and 2009, again causing powering downs at French nuclear facilities. According to the Hadley Center, by 2040, it will be ‘commonplace‘ for European summer temperatures to reach 2003 levels. 

This new environmental change variable is often left out of risk assessments for all manner of new infrastructure builds. Dams in India are seeing reduced generation capacity as a result of shifting monsoons. Sections of oil and gas infrastructure along the U.S. Gulf Coast are suffering repeated shutdowns due to flooding, hurricanes and subsidence. Homes in the US and UK are already being built on actual floodplains, let alone areas that are likely to become floodplains."

One question I have for Cleo (and have posted on Huffpost) draws from her statements about risk assessment.  She gives high marks to actuaries and the insurance companies. But, we should be very careful about attributing perfect knowledge to private-sector actors, while going against government. Certainly, the lessons of AIG show that the insurance industry is not always very good at assessing risk.  Maybe structural and engineering risk is different from financial risk, but there are still questions here.

Also - it is important to note that the Indian parliament decided not to allow the liability cap on nuclear power.  The implications of that, though, are far from clear. The result very well could be that companies from the United States are prevented from investing there, because of (justifiable) investor concerns about being stuck with a potentially unlimited bill for a nuclear accident, while Russian nuclear companies face no such concerns - because their decisions are made for political, not economic reasons.  The likely result here would be Indian investment in reactors that are not as high a standard as possible.  So - we have to be careful about creating perverse incentives with policy decisions like this.