Energy 2007 Overview

Energy and the 110th Congress

By Elizabeth Wise
Contributor, Analysisonline
Washington, D.C.

The curtains have opened, the 110th Congress has burst onto the Washington stage, and the chorus is loud: “End federal subsidies to Big Oil, and invest in renewable energy.”

The newly Democrat-controlled legislature is keen to make a stunning debut, and perhaps its most stirring speech is a call for a new look at energy policy in this country.

House Speaker Nancy Pelosi is expected to introduce a new energy package on January 18th. It is likely to include billions of dollars of cuts in oil drilling incentives, increased royalties from oil and gas companies to the federal government, and new tax breaks for sources of renewable energy.

In its recent National Symposium on American’s Energy Future, held in Washington, DC, the Communications Institute gathered energy experts from government, business and academia to tackle key issues this new Congress must address in creating a successful energy policy. The experts had words of caution, and some advice, for lawmakers.

All agreed that in order to promote renewable energy, Congress must set a stable, long-term, strategic policy regarding investment in renewable energy sources.

Caltech chemistry professor Dr. Nathan Lewis advocated fairly high government subsidies to allow new technologies to come to scale in the face of less expensive, still-abundant fossil fuels.

Doug Arent, Director of Strategic Analysis at the National Renewable Energy Laboratory, said that no incentive can work unless it’s offered for a sustained period of time, perhaps decades. He said many renewable energy sources have great potential but investors can’t promote or adopt new technologies if they can’t mitigate their perceived risks. Biofuels, solar and wind energy could provide some 30 percent of our energy materials by 2030, Arent calculated, if the policy environment is right.

“When policy is unstable, when production tax credits are on and off, investors hold back,” Arent explained.

General Electric vice chairman John Rice said that on-again, off-again tax credits from Congress had stifled his company’s efforts to invest in renewable energy. GE has a healthy market for the wind-generated electricity it makes – it is “sold out”, in fact. “We could expand our wind power capacity in the U.S., but we won’t, because the current production tax credit expires in 2007 and there’s a debate about whether it will be renewed. The last time it was debated it remained expired for six months before it was renewed.”

Not only do inconsistent policies from Congress stifle private investment, they waste government money, Rice said. “It takes decades to get a return on investment for jet engine companies, for example, so all the dollars from Congress are wasteful” if they’re not long-term.

While panelists agreed that government policy is needed to set a steady course on investments, they also stressed that lawmakers should not be the ones to choose which technologies, or even which energy sources, get support.

“The government should not pick technology winners and losers in an early stage. Government should be doing pre-competitive R & D and then let those options go play in the marketplace,” said Nathan Lewis.

Arent agreed, adding, “Policies on the table now, such as the ethanol tax credit, are good for ethanol, but we need non-molecule specific policies and credits. The policy must be focused on the goal of decarbonization, not on the particular molecule that might achieve it.”

In other words, we need a generously defined, open-ended policy of support for a wide range of energy options. How can Congress achieve that?

Lewis suggested one way to motivate research in all fields would be to attach a price to carbon emissions. “We need an Alan Greenspan setting carbon rates and setting a course,” he said. Then, when the government sets a price on carbon, innovators will have real impetus to find the energy source that has the fewest carbon emissions.

Would this Congress approve a carbon tax? Probably not. “No one ever has,” reminded Robert Simon, Democratic staff director for the Senate Committee on Energy and Natural Resources.
Lawmakers are still haunted by memories of Clinton’s proposed “Btu tax” on fossil fuels, approved by a Democratic House, which would have raised gas prices by 7.5 cents a gallon. Some even feel it helped the Democrats lose Congress in 1994.

Panelists unanimously felt that a hike in gas prices would drive investment towards alternative energy sources, but also agreed that such a move was highly unlikely.

There might, however, be votes in Congress for carbon sequestration, said Mark Helmke, staff member on the Senate Foreign Relations Committee. That technique, which involves burying CO2 underground or underwater, is also wrought with complications and expense.


Alternative Options

So how can we reduce, or even just maintain, our emissions of CO2? According to Caltech’s Nathan Lewis, the only existing, proven technology that could keep carbon emissions down is that of nuclear power. To keep CO2 emissions at only double their current levels, he said, we’d have to build 10,000 nuclear plants, or one every other day for 50 years.

William Halsey of the Lawrence Livermore National Laboratory noted that current loan guarantees and production tax credits have encouraged the nuclear power industry. But before nuclear power can come to the fore as an electricity source, Congress must address a number of challenges – nuclear waste perhaps first among them. “Waste is a politically challenging topic,” he said.

Building plants on the scale proposed by Nathan Lewis would mean creating a new Yucca Mountain every six months – and it’s taken 30 years to get the one we have. Halsey said there are significant differences of opinion between the House and Senate on future of a nuclear program, but that 19 are being scheduled, including “one or two in the next year or so.”

James Kendell of the U.S. Energy Information Administration, said government forecasts show that “by 2026, nuclear power becomes economical because fossil fuels become so expensive.”

Other Considerations

In addition to concerns of cost and environmental impact, other issues come into play as lawmakers consider energy policy.

“There is an important third leg to the energy and environment components, and that is national security,” noted Mark Helmke of the Senate Foreign Relations Committee. “We often consider it to be a separate issue. It’s not. The security issue will drive the debate. There’s a realization that we went to war because of energy. Energy dependence reduces our ability to play objectively on the world scene.”

Panelists noted that the $50 billion spent annually to protect Middle Eastern shipping lines is eight times what the U.S. government spends on research and development of alternative energy sources.

The only way to get out of that predicament, Henry Lee said, was to make every gallon of gas cost more. “To make inroads on climate and on national security, you have to raise energy prices. If prices are below $2, the urgency will disappear.” Politicians who can’t raise energy prices defeat their ability to act effectively in foreign policy.


Can the Democrats do it?

Robert Simon warned that a political party, no matter how well-intentioned at first, cannot rein in constituents’ competing energy interests completely. “Energy policy quickly gets away from political lines and into regional lines,” he said. “Strong regional interests overwhelm partisanship.”

Helmke agreed, citing the example of Midwestern politicians, who constituents include corn farmers and who are pushing for automakers to be required to use ethanol made from corn.

Simon said there is hope, he said, noting that the 2005 Energy Policy Act made sweeping changes in some areas and showed that bipartisan progress is possible. While many proposed items for the Act didn’t win consensus, he said, “We’ll work on those now.”

Panelist and Congressional Quarterly reporter Jeff Tollefson warned that although Democrats might have different approaches than those of their Republican counterparts, they face the same problems. “Don’t expect quick answers,” he said.

Written and reported by Elizabeth Wise
Contributor, Analysisonline, Washington, DC