Tick-Tock

In my last article (http://spoon-spoonworld.blogspot.com/2010/07/fucked.html), I discussed the problem that the United States is facing regarding its energy policy. The biggest challenges that we are facing are a rising energy profile and a limited supply of easy to acquire energy. Add to this the possibility that we are reaching an environmental tipping point that may result in our inability to sustain our civilization. I also indicated the urgency of fixing this problem. I believe the severity of this problem coupled with the importance and difficulty of implementing a solution means that we have to take immediate and drastic actions.

We as a country are living in a world that is undergoing a fundamental change. In the past we were living in a society with lots of energy that was easy to produce. We were also living with the notion that we had unlimited financial resources. Both of these things are fundamentally changing. The solution I am proposing is a fundamental change to our entire way of life. It will not be pretty, but it will be necessary. This deadline is imposed by nature. If it were up to me, I would recommend a smooth, comfortable transition during the next 40 years that would involve education to ensure that everyone understood the nature of what we are doing. I would also be advocating solutions that were feasible in our current political environment. WE DON’T HAVE THAT KIND OF TIME. Nature has given us a hard and fast deadline. We cannot change the nature of the situation so we MUST change the politics. Nature is not conservative or liberal. It does not care if people are inconvenienced. Nature has given us an ultimatum. Fix this problem in 20 years or we as a civilization are doomed.

I equate this situation to a football game. It is 5 minutes left in the fourth quarter of the Super Bowl and we are down by 2 touchdowns. This situation is not impossible to overcome, but we have ZERO time to mess around. In the first quarter getting 4 yards/carry out of the running game would be great. But in the context of the fourth quarter and loosing, it is not an adequate game plan. In the fourth quarter we need to be THROWING THE BALL. Because of the urgency situation I cannot be happy with baby steps. I cannot be happy with an efficient ground game. This is the time for long bombs and huge chunks of yardage. I cannot be happy with politically friendly three yard running plays when the situation is so urgent.

My energy solution is based on a fundamental idea. It is my belief that the fastest way to change behavior is to change the economics of the situation. We do not have time to wait for people to come to the realization that this is important. We don’t have time to slowly transition to our new clean-energy based economy. We don’t have time to gradually move away from the wasteful way of life that we have had for the last 80 years. We as a society have to pay for bad behavior and be rewarded for favorable behavior.

I will present my energy policy in terms of what I would like to see happen within the next year. I will then state what I think our goals should be in year 5, year 10, and year 20.

Year 1

The primary thing we must accomplish right now is to change the economic incentives that will allow our energy policy to be effective. Most of this will have to be done at the legislative level. The major argument that opponents of clean energy put forth is they believe the market forces should determine what energy source we use. They say that the market does not favor investment and use of alternative energy.

I. Remove Oil and Coal Subsidies

I agree that the market should dictate what energy sources we use. The problem is that the government is subsidizing oil production and thereby artificially deflating the price of oil. The government is giving private industry money (in the form of tax credits, investment cost, and free land) to develop oil. This has the effect of making oil appear cheaper for the general population. On the surface this may make sense to some people: The oil companies are doing a service to this country by providing cheap energy so it would be worth while for the government to aid in this effort. Everyone in America in theory will benefit from cheap gasoline. People then go to the alternative energy companies and say that the market says alternative energy isn’t doable. Because our current economic system artificially makes oil cheaper, it then tells alternative energy companies that its solar power is too expensive. If alternative energy were subsidized on the level that oil production is, we wouldn’t be having this discussion. If we really want to let the market dictate energy policy then we have to make people pay the full cost of oil production.

Therefore the first thing the government must do is stop subsidizing oil. I would not do this at one time. I would decrease the oil subsidy by 10% a year for the next 10 years. This sends a price signal to the market and to investors that 10 years from now oil will not be subsidized by the government and will therfore be more expensive. It also says that if you invest in alternative energy now, 10 years from now there is the potential for a huge payoff.

Make no mistake this WILL RAISE GAS PRICES. It has been estimated that unsubsidized gas would result in gas costing between $6.00-$14/gallon. This simple fact will go along way to change the behavior of both the market and the individual. If gas is $6.00, paying an extra $3,000 for a hybrid is more economical. Driving an SUV would be impossible for most Americans. Taking the train to work may be better than paying $6.00 for a gallon of gasoline. If the cost of a plastic grocery bag was 50 cents, there would be a lot more people buying a $1 reusable cloth bag. What would packaging of products look like if companies had to pay the full price for plastic (which is made from petroleum byproducts)? How would it change business if companies with a fleet of 18-wheelers had to pay for $6 gas? To stay competitive, business would have to change. They would first pass the cost onto customers. They would soon realize that in to stay competitive they would have to find cleaner ways to do business, or they would have to HIRE SOMEONE ELSE (more jobs) to help their operation run cleaner. This one policy change would send ripples through our entire economy. The price signal drives incentive toward the production of clean energy. The first step is for us as a society to pay the full price of carbon fuel. As long as this double standard is embedded in our economy, alternative energy economy will never work.

I propose the same type of action regarding the coal industry. We also currently subsidize the production of coal. But we must also pay the full price of coal. Currently 51% of our electricity comes from coal. This will be more drastic for the consumer and the consumer would have much less control. To mitigate this I suggest that the government reward people for the purchase of energy efficient appliances and “incentivize” energy conservation methods. Replacing coal is essential if we are going to have any chance at a clean economy. It does us no good to have bullet trains and plug in cars if we get our electricity from coal. As long as we are burning coal to get our electricity we have no chance of having clean energy. We have to have economic incentive to offset the 90 year head start that the fossil fuel industry has had.

II. Power Grid

I have stated in many other essays I have written that the first thing this country needs to do is build a power grid. Everyone who knows me knows this issue is something I have been yelling about for a decade. This is not some Green Peace techie pipe dream. This is something that we absolutely must have if we want any chance of getting out of this.

When I think of our current power grid I am reminded of a time when I was a kid when my family (Mom, Dad, and Sister) went to Disney World. We drove from New Jersey to Florida in the middle of summer in my grandparent's Buick. The trip took about 2 days. We stayed over night at South of the Border (Dillon South Carolina). The trip was long and hot, but we finally got to Disney World. Now imagine the same trip without taking I-95. Imagine driving from New Jersey to Florida BY ONLY TAKING THE BACK ROADS!!! That long uncomfortable trip becomes impossible. Our current power grid is very similar to that back roads trip to Florida in many respects.

Our current grid is extremely regionalized. It is more like several smaller grids instead of one large one. The problem with this is that it makes it very difficult to get power from one place to another. We need a grid that can get power from where it is being generated to where it is needed. It does us no good to build a solar field in Arizona if all that power generated can’t get to the big cities in California. We can build all the wind power in South Dakota we want, but if we can’t get that power to New York and Chicago then we are not getting the most of our investment. There is also some discussion as to what clean energy source is the best one to use. It may not be clear what energy source will win out. What is certain is that we will need a new power grid no matter what energy source we use.

The current grid is also very inefficient and very unreliable. The performance of the grid is only going to get worse as we consume more energy and the grid itself gets older. The grid could be vastly improved by using the latest computer technology to monitor and react quickly to changes in the system. As it is now, a little bit of rain can cause power loss in large sections of the grid. This grid also has to be able to monitor energy usage especially at non-peak hours. It has to interact with other components of the grid and allow the flow of energy in both directions. We have to be much more efficient with our energy usage and production. The only way to do that is with a new power grid. The potential is for the grid to actually interact with our appliances to help the individual conserve energy. We need to put the right economic incentives in place and give people the information they need to curb their energy habits. There is an additional benefit not related to the energy crisis. We would need people from every sector of our workforce to build this grid. We would need construction workers, tradesmen, metal workers, engineers, computer scientists, city planners and everything else to build this thing.

III. Conservationist Tax Structure

Conservation is the most effective short term policy we have in this energy crisis. In the late 1970s, President Jimmy Carter launched one of the biggest conservation programs on record in response to the oil embargo and resulting gas shortage of the decade. It was one of the most successful campaigns ever launched. If Ronald Reagan had not reversed most of Carter’s policy we may not even be in this mess. We do not have time for people to come to the realization that they must conserve. We need to create incentives for doing the right thing and penalties for doing the wrong thing. We have to change the tax structure to reward good behavior and economically punish bad behavior. Many of these tax incentives have already been proposed. Most of the penalty phase comes in year 10 of my plan, but things like an SUV tax and a tax on bottled water could be implemented right away. The energy conservation measures proposed by this administration are a very good start, but by no means enough.

IV. Higher Standards for Federal, State and Local Governments

It would be too expensive to retrofit every building that is not energy efficient. This may be a long term goal, but in the first 5 years it is not feasible. What I do propose is that every building built by a state or federal government going forward is built with the highest energy efficiency standards. The initial cost would be higher, but it would actually save money in the long term. The other economic impact would be to send a price signal to the market. People who provide green energy services will have customers, and lots of them. Every state and local government will need to hire these small businesses to construct these buildings of the future. Every vehicle bought by state and local governments should have the highest fuel efficiency standards. This doesn’t help fix our current problem, but it stops the bleeding. This is also a standard that can be enacted relatively quickly.

V. Cap and Trade

I am not usually someone who says we must have cap and trade, but if a cap and trade policy is well done it would create a huge pool of money that we could use to pay for many of the other things we so desperately need. It would also make a scenario that would force business to think about the impact they are having on the environment. Cap and trade has gotten a bad reputation because of the lack of success it has had in Europe. If done correctly, it would allow the individual to make money in the long term. At the very least the short term economic strain on the individual could be managed. There are some fundamental things that can be avoided if adopting a cap and trade system since there are many cap and trade models. I am not going to dive into each one of these models now. I don’t think cap and trade is necessary for a successful energy policy (removing subsidies I think is better), but it could be a helpful tool for generating revenue if done correctly.

Cost

The limiting factor in any new program is cost. This will cost A LOT. To quote the movie "Timecop" it will cost “more than a little and less than too much.” The cost of doing nothing would be devastating. I do not believe our society would survive. In the first 5 years of this plan the biggest cost is the power grid. “Popular Science” estimates that we loose billions of dollars worth of productivity a year due to power outages and having to maintain obsolete technology on our current power grid. Dr. Bill Chameides, Dean of Duke’s Nicholas School of the Environment estimates the cost of a new power grid at $65 billion. The stimulus package allocated just $11 billion to start production of a new power grid. The coal and oil industries currently get annual subsidies of $17 billion and $14 billion respectively. My suggested 10% phasing out of subsides would generate $42 billion in 5 years (wish I would have paid attention to that N factorial crap in calculus). That gets us most of the way there. That is only for the power grid, that doesn’t count anything else. A lot of the money we raise will have to pay for the tax incentives that we are going to give for good behavior. Some of that will be offset by the idiots who will continue to do the wrong thing, but that still will not be enough. We are also going to have to pay in the form of tax credits to offset the increased energy cost of the middle class. This is only for the first 5 years. We will have to raise a lot of money some other way. A well-run cap and trade system could generate a huge pool of money. Here are some other suggestions for where we can get the money.

Cost of Iraq and Afghanistan in 2009 - $144 billion

Total Defense Budget 2009 - $560 Billion

Total United States Oil Imports 2007 - $327 billion

2 Bush Tax Cuts – $3.1 Trillion over 10 years

I don’t know where all of the money will come from, but it has to come from somewhere. If we don’t fix our energy problem then NOTHING ELSE MATTERS ANYWAY. Of course, I am not in favor of dismantling our military, but when you look at how much we are spending on defense, $60 billion to save the planet (or at least begin to) doesn’t seem like too much to ask.

My next article will discuss how we go forward in years 5, 10, and 20. I am by no means an energy expert, this is just what makes sense in my mind. I also admit I don't have all the answers. With a situation this complex very few people (if any) do.I encourage everyone to look at the situation objectively and come up with another plan. What we must do is be realistic about the mess we are in. We have a deadline. A 3 yard running play is not a solution. “Drill Baby Drill” is a great bumper sticker, but is a pretty crappy energy policy. THE CLOCK IS TICKING. While we as a country are whining about what can't be done and complaining about how unfair this situation is in TIME IS RUNNING OUT! We can either whine about the situation that is confronting us or we can try to think of a solution. I choose the later.