Sunday, August 10, 2008

Energy Policy

Much has been said and written over the last few months about energy independence as gasoline prices have starkly indicated how America has become a debtor nation, subject to the whims of the oil producing countries.
So what are the hallmarks of a energy policy that would deserve our support?

I submit that it should have four principles, it should:
-encourage every alternative.
-make a difference as fast as possible.
-depend upon private capital as much as possible rather than require funding from the over-stretched U.S. taxpayer.
-support free-market and price mechanisms.

Broad alternatives
To break our addiction to the crack cocaine of foreign oil, we are going to need to exploit all our energy options. Wind power has a number of advocates, and rapidly improving technology from blades to turbines. No government funding is really required; wind is finding investors. The Pickens' Plan deserves not only consideration, but quick action. Solar is moving along; is a long-time environmental darling, but struggles to compete cost effectively with just about anything else. Nonetheless, solar has attracted a fair amount of venture funding, so no government funding is really needed. But, Congress should suspend endangered species rules in some areas to permit solar farm construction to determine if there really is some scalable technology. There is a lot of activity around clean coal and green coal. Private capital seems adequate here as well.

The trouble starts with nuclear power. It has been proven safe in France. China is moving agressively to construct plants and secure its own energy sources. Opposition in the U.S. is basically led by a significant Luddite faction raised on The China Syndrome and aided by a trial lawyer community highly skilled in delay tactics that can postpone factory construction for (quite literally) almost two decades. Since virtually no investor is prepared to tie up hundreds of millions of dollars for twenty years or so before seeing the first trickle of cash coming back, there has been no investing in nuclear in the U.S. in a couple of decades.
This only gets resolved in the favor of energy independence by the passage of pro-nuclear legislation that protects particular sites from litigation.

Offshore drilling is a necessary stopgap. Yes, it takes years to make a difference. Yes, it is only a partial solution. So what? If I want to run a marathon next year, I've got to start training this year. Opposition to drilling has a number of opponents. There are true-belivers, who are convinced that high gas prices are good for us; a recession, loss of jobs for millions, etc. is just the penance we must pay for all the damage we've inflicted on the planet with our evil ways, in paticular our penchant for large, safe, comfortable motor vehicles. Then there are the meek and weak, who really don't buy that argument, but fear retaliation by the super-powerful environmental lobby and therefore go along. And there are the opportunists, who also don't buy that argument, but see political power to be gained and re-elections to be won. Finally, there are the rich, famous and connected, who fear their view from beach front dacas may actually include an oil drilling platform on the edge of the horizon. For America to return to the self-sufficiency it one-time enjoyed, these anti-progress forces must be overcome.

Energy legislation that doesn't provide for immediate litigation protection, and immediate removal of barriers is, of course, toothless and a sham. The problem is already accute; inaction moves it to critical. The Russian invasion of Georgia is emblamtic of our country's future as an energy slave to be bullied at will.

CapitalEthanol, solar and wind are already attracting significant capital. Oil shale has attracted some, but only a little in the U.S. Meaningful legislation protecting the development of nuclear plants is necessary for the market to work and capital to be attracted. Congress also must take specific action to permit oil shale development in Colorado, where there are potentially billions of gallons of gasoline equivalents, but are currently off-limits. Again, if millions of dollars that would otherwise be spent constructing a nuclear or oil-shale plant must be diverted to legal manuvuers, and years of development time are lost, no one is going to write the checks.

Price mechansim
Gas prices have gone up; more drilling has occured and people are driving less. Shocking isn't it - the price mechanism works! However, the government has tinkered with ethanol pricing - subsidizing the price about 50 cents a gallon. And, effectively pricing Brazilian ethanol (sugar cane -not corn) out of the market. That pricing has now spilled over into everything made from corn - especially grain-fed beef and corn sweetners. This nonsense needs to stop. Subsidies for ethanol need to be phased out - a simple 20% per year for five years should do. That lets farmers get off the dole, while providing time for all the other biomass formulae to be perfected and winners to emerge.

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