Powering the future

Today’s question: What will America’s energy economy look like in a generation? What should it look like? Previously, Taylor and White discussed the future of the personal automobile, calls to build more nuclear power plants, T. Boone Pickens’ alternative-energy plan and offshore drilling.

Let the market achieve efficiency
Point: Jerry Taylor

John, before you confidently hold forth about the future of energy markets, you really ought to pick up a copy of Vaclav Smil’s 2005 book, “Energy at the Crossroads,” and direct your attention to Chapter 4. There you will find a thorough review of the most prominent energy forecasts that have been offered over the last several decades by various blue-ribbon commissions, government forecasting agencies, top-flight academics, energy trade associations, think tanks, policy advocates and energy corporations. One can’t help but conclude that drunk monkeys would be just as reliable as “the best and the brightest” when it comes to soothsaying about the future of technology, market share or price.

The point here is that we don’t know what the energy future may hold and we should accordingly treat the periodic energy crazes that sweep the political landscape more skeptically than we have in the past.

If you need any proof that unleashing government to plan our energy future is like giving car keys to drunken teenagers (to paraphrase P.J. O’Rourke), you need look no further than President Bush’s 2002 “Freedom CAR” initiative. First, it was charged with delivering us into the hydrogen age. But then the president discovered switch grass; fuel cells were henceforth “out” and cellulosic ethanol was “in.” Now it turns out that 200-proof grain alcohol is not the fuel of the future; electricity delivered via plug-in electric-gasoline hybrids is. And Freedom CAR is but one example of many that one could marshal; whole books have been written about the myriad economic disasters and quiet taxpayer waste associated with our ongoing practice of energy planning in post-World War II America.

I’m sure you have your own pet energy projects, John, but the problem isn’t that ignorant or venal people -- and not you or your colleagues -- are charged with making our collective energy decisions. The problem is that we can no more sensibly plan the energy economy than we can centrally plan any other sector of the economy, particularly given the fact that political decisions are inevitably made primarily on their political merits, not on their economic or environmental merits.

Markets will provide the lowest-cost energy possible because energy producers compete mightily with one another for profit. The argument we frequently hear that “we need every source of energy in the future to meet our staggering energy needs” is ridiculous. Some energy -- such as nuclear fusion and grid-connected solar energy -- is simply too expensive to produce now, which is to say, it costs more to generate than it is worth. Subsidies and mandates to get “every energy source to market” simply force us to generate and consume energy that costs more than it is worth.

In an ideal world, we would strip the energy market of all subsidies; liberate the energy industry to exploit resources on federal lands; leave prices alone so that they deliver accurate information to investors about wealth-creating opportunities and to consumers about relative scarcity; allow energy companies to structure themselves in any manner they like; and fully embrace free trade in energy markets, which keeps prices down.

John, I don’t disagree with you that we have a responsibility to police the public environmental commons. But the best way to do that is to set emission rules or regulations that apply fairly to all emitters in all sectors of the economy and that have some relationship to the harms being addressed. Once that’s done, market actors will order their affairs efficiently to produce the lowest-cost energy possible and do a better job picking “winners” than would-be central planners.

Jerry Taylor is a senior fellow at the Cato Institute.

10 years that could change our energy landscape
Counterpoint: V. John White

In his 2007 book, “Winning our Energy Independence,” S. David Freeman writes, “What the far future holds depends mightily on what we do in the next 10 years.”

We face a decisive decade. Fundamental changes in energy sources take many years to achieve, and we must begin the transition in the next three years. We have wasted precious time in the last decade. We are wasting too much energy and increasing our dangerous dependence on coal and oil.

I respect your faith in the gospel of free markets, Jerry. But our dependence on imported oil threatens our national security. We cannot remain at the mercy of foreign oil exporters. Higher energy prices alone can’t get us to the clean-energy economy fast enough. A sustained, orderly transition must begin today. The change will be led by states and cities, not the federal government. But Washington can help by getting out of the way of California and other regions that are ready to lead the U.S. toward fundamental changes in our energy system.

Job No. 1 is improving energy efficiency. Enormous waste is embedded in our buildings, homes and factories. Over the next 10 years, we can replace and remodel old, inefficient machines and equipment and make all new buildings completely energy efficient. Fuel cells, photovoltaic technology, solar heating and cooling and geothermal heat pumps are promising tools. Smart distribution grids could generate zero-emission and high-efficiency power and integrate wind and solar at low cost. All of the new demand for electricity could be met by increasing efficiency.

In the next 10 years, America’s auto fleet will be replaced and new engine technologies will start to take over. By 2020, 70% of new cars should be hybrids, and we should use sustainable biofuels in flex-fuel vehicles that have batteries that can be recharged at night when the wind blows. Battery-powered cars and hybrids will set the state for hydrogen fuel cells powered by off-peak energy from renewable energy plants.

We should get ready to retire 50% of today’s coal plants and put wind, solar, geothermal and biomass power at the center of our electricity supply system. In 25 years, the U.S. should have a “renewable electron economy,” with 70% of its electricity from renewables. Big solar plants built with heat storage could handle much of the summer peak demand. Geothermal plants would run around the clock, displacing large amounts of coal power. And when the wind blows, we would conserve fossil fuels. All of the renewables will be working together, integrated in a widely cross-linked grid that combines large and small generators and overcomes the weaknesses of green technologies.

By 2030, 50% of the energy for transportation should come from electricity, which would significantly reduce oil imports. Plug-in hybrid fuel cells, powered by renewable electricity and biofuels, would displace gasoline. Biking, walking and public transport can replace 50% of all vehicle trips. Cities should be planned to increase urban density and reduce driving.

We can start today and begin the journey that will lead us from today’s dangerous and unsustainable energy economy. We have an abundance of nature’s gifts and the technologies to use them. We know what we need to do. Let us become the change the world needs.

V. John White is executive director of the Sacramento-based Center for Energy Efficiency and Renewable Technologies.