American Jobs Act

Much will be said in the coming days of President Obama's American Jobs Act, which in one form or another will very likely be the keystone policy of his re-election campaign. Whether via its victory of defeat, Obama will almost certainly campaign on its proposals and job creation ambitions.

As the National Journal's Amy Harder pointed out during the Presiden't speech, the word "energy" did not appear once in the 4000-word speech Obama gave to a joint session of Congress last week (although his slideshow did include a picture of high-speed rail). This is in contrast to this year's State of the Union, in which he omitted the words "climate change" but hit the energy innovation narrative pretty hard. Indeed, in February the President called for the elimination of federal oil subsidies to pay for a smarter, expanded clean tech policy strategy. Last week, he proposed eliminating those same subsidies in favor of extending tax credits for small businesses.

All was not lost on the energy front, however. As Energy Secretary Steven Chu pointed out on Friday, much of the investment enabled by Obama's proposed National Infrastructure Bank would be directed towards clean energy projects.

The national infrastructure bank would not only put Americans back to work, but continue to build off of the significant strides we’ve made in clean energy sector through our Recovery Act-funded Loan Program, which is set to expire on September 30th. In the past two years, the Loan Program has supported a robust, diverse portfolio of more than 40 projects that plan to employ more than 60,000 Americans and create tens of thousands of indirect jobs.

Here Secretary Chu invokes the DOE Loan Guarantee Program, recently criticized for its 2009 approval of a loan to California solar manufacturer Solyndra, which declared bankruptcy two weeks ago (laying off 1100 workers in the process). Perhaps Solyndra was the reason President Obama did not mention energy in his speech on job creation, but if the goal of a clean energy future is to be realized, policies and institutions with the financing capability of this National Infrastructure Bank will be essential.

Krugman Still Doesn't Get It

By Alex Trembath and Devon Swezey. Originally published at the Breakthrough Institute Blog.

Yesterday, New York Times columnist Paul Krugman published a blog post repeating his insistence that a carbon price is the key (if not the only) incentive needed to unleash "the magic of the marketplace" and drive innovation in clean energy technology. It was reminiscent of the conventional wisdom of the climate community over the past decade, and reflective of Mr. Krugman's own typically neoclassical views on the economics of climate change. Unfortunately, Mr. Krugman (and most climate policy advocates) continues to get the story wrong on clean energy innovation.

In the spring of 2010, Krugman wrote a widely-read piece in the New York Times Magazine called "Building a Green Economy," which pondered why, if anti-environmentalists are so adamant in their free-market faith, do they not support a price on carbon dioxide emissions. A carbon price, in Krugman's estimation, would serve as a signal to the market, driving innovation in cleaner technologies to the point where they achieved price parity with fossil fuels.

Since publishing his original article, cap-and-trade has crashed and burned. The prospect of pricing carbon emissions in the United States is effectively zero for the foreseeable future, but Mr. Krugman is still pushing a carbon price as the key to unlocking a clean energy future. On his blog, he noted the successful innovation in fossil-burning energy technology over the past century, and suggested that the only thing standing in the way of renewables achieving the same innovation path is the lack of a carbon price.

"The point is that renewable energy like wind and solar has not gone through a comparable process of improvement -- yet -- because the incentives haven't been there. But once we get to the point where a carbon price makes these commercially viable, there's every reason to expect huge improvement over time through, yes, the magic of the marketplace."

But Mr. Krugman neglects the substantial obstacles to a large-scale shift to renewable energy technologies, stemming from technical challenges related to intermittency of electricity generation, energy storage, and materials constraints. Contrary to what Krugman implies in his article, fundamental scientific breakthroughs are required to fully replace our fossil fuel infrastructure with clean energy technologies, a view shared by Nobel physicist and current Secretary of Energy Steven Chu.

To his credit, Krugman acknowledges the need for new innovation in clean energy technology, a view that would place him outside of the mainstream climate advocate's mantra that "we have all the technology we need and lack only political will." Yet in expressing his zeal for a carbon price, Krugman ignores the actual history of technological innovation. As research from the Breakthrough Institute has shown, the emergence of key technologies has much more often been the product of directed and sustained government investment than the result of price signals. Breakthrough's report, "Where Good Technologies Come From," demonstrates that most game-changing technological developments--from interchangeable parts to railroads to jet engines to microchips to the iPhone, GPS and the Internet--resulted from direct federal investments in research, procurement, and deployment, often in active partnership with private industry.

Krugman falls victim to an ignorance of technological history and the relative roles for technological "push" policies, like research and development, and demand "pull" policies, like a carbon price. As Robert Atkinson and Matt Hourihan of the Information Technology and Innovation Foundation explain in their report on carbon pricing, "truly disruptive innovation comes, not from price-based demand-pull, but from focused (and occasionally, not-so-focused) technology supply-push, in the form of research-driven technological development."

Indeed, if our goal is driving innovation in maturing clean energy technologies, a carbon price is not even the most effective demand-pull mechanism in our policy toolbox. To be sure, pricing carbon can increase demand for clean energy technologies, but it is not optimized to drive innovation in energy technologies. Krugman writes that aviation technology steadily improved through "experience and practical innovation," and that clean energy must do the same. But innovation in aviation and jet engines did not happen because the price of sea travel (the main substitute) increased. Rather, military procurement created a demanding customer relationship that constantly pushed the private sector to innovate and improve technology for military application.

Despite his enduring affection for a price on carbon emissions, there is no indication that Mr. Krugman's sensibilities would prevent him from embracing an energy agenda founded on government research and investment. Indeed, Krugman's New York Times colleague David Leonhardt has embraced a technology-first energy innovation agenda, recognizing that a carbon price will be more politically difficult and less effective in the absence of cheaper, more reliable clean energy technologies.

As the Breakthrough Institute has consistently advocated, there are multiple policies and institutions with great potential to drive investment and innovation in clean energy technology. Some, like the Advanced Research Projects Agency - Energy, are already in existence (if underfunded). Others, like a Clean Energy Deployment Administration (CEDA), are not. Overcoming the challenges presented by market lock-in of fossil energy infrastructure, engineering challenges of clean energy technology, and climate change demands a broad suite of policies, of which a carbon price is only a small (and not even the most important) part.

Mr. Krugman is no technologist, by his own admission. In yesterday's blog post, he referred to the engineering of wind technology as "not my field of expertise, to say the least." But if a political economist as influential as Krugman is to continue weighing in on the energy technology challenge, it would be appropriate for him to develop a literacy in the history of technological innovation. Ever the champion of publicly funded health care, Krugman should have great affection for the government policies and institutions that can more effectively build a green economy.

After the failure of the carbon-price-centric American Power Act last summer, and with austerity measures increasingly dominating federal policy, the prospects for a carbon tax in the United States remain very low. Without one, the case for an energy innovation agenda not only remains, it has grown stronger.

Alex Trembath is a Breakthrough Generation Fellow and Devon Swezey is Project Director at the Breakthrough Institute.

Energetics Cliff Notes - Wednesday Edition

All your riveting climate/energy news in one convenient place.

• Greentech Media recaps this weekend's Berkeley-Stanford Cleantech Conference, featuring keynote speaker Steven Chu (see my Twitter timeline for overly detailed liveblogging).
  

• Chu stuck around after the weekend to attend a bill signing by Jerry Brown at a SunPower manufacturing plant in Milpitas. The legislation will require California utilities to get 33% of their power (an increase from 20%) from alternative energy technologies by 2020.

• Bill Weihl, Google's green energy czar and a founder of google.org's fan-favorite Renewable Energy Cheaper Than Coal, on a prototype mirror design that could cut the cost of large solar thermal plants in half.

• Grist's Dave Roberts explains why environmentalists blocking CARB's implementation of AB 32 (featuring California's cap-and-trade program) are a little misguided.

• This (long-ish) post by Barry Brook is one of the best reactions pieces I've seen to the Fukushima nuclear accident.
  

• Big cuts are expected as the latest CR to fund the government unfolds -- high-speed rail is just one of the many unfortunate choices taking hits.
  

Nuclear Reaction Roundup: Experts Warn Against Dismissing Nuclear Power

Originally published at Americans for Energy Leadership.

In the midst of the ongoing partial meltdown at Japan's Fukushima nuclear plant, energy experts across the spectrum are urging caution and patience in considering the implications for nuclear energy in the United States and internationally. In particular, many energy and climate change experts note that we should not so readily dismiss nuclear power as an option for reducing greenhouse gas emissions and meeting rising global energy demand.

International Energy Agency chief Nobuo Tanaka:

"While I understand the public's fear, I am concerned given the important role of nuclear power. I encourage patience until more information is gathered for a full review so we can learn the lessons," he added... "The cost of fighting against global warming will increase, that is sure," he told Reuters. "I think it is very difficult (to fight global warming), even impossible, without using nuclear power."

Nuclear Regulatory Commission (NRC):

Nuclear power plants built in the areas usually thought of as earthquake zones, such as the California coastline, have a surprisingly low risk of damage from those earthquakes. Why? They built anticipating a major quake... The NRC, the federal agency responsible for nuclear power safety, says the odds are in the public's favor. "Operating nuclear power plants are safe," the NRC said when it reported the new risk estimates.

International Atomic Energy Agency (IAEA):

Robert Engel, former IAEA inspector and Swiss nuclear engineer, told Reuters Sunday that a partial meltdown of a reactor “is not a disaster” and that he doubted a complete meltdown is possible. And the details of the current Japanese reactor crisis bear little similarity to the Soviet-era meltdown at Chernobyl, which came about through design flaws and human error before it spread a radioactive cloud across much of Europe and Asia 25 years ago.

Experts at the IAEA “aren’t planning for the next Chernobyl” says a mid-level Western diplomat familiar with how the organization works. “But nor do [they] think we are out of the woods yet. The reactors are still hot. But this situation has no relation to Chernobyl, even though I realize that in the popular lore, if you say ‘Chernobyl,’ it means 'catastrophic meltdown.'”

United States Secretary of Energy Steven Chu:

“The president and the administration believe we have to be looking very, very closely at the events in Japan. We have to apply whatever lessons that can be and will be learned from what has happened and what is happening in Japan,” Chu explained. “Those lessons would then be applied to first look at our current existing fleet of reactors, to make sure that they can be used safely and… how as one proceeds forward, any lessons learned can be applied.”

Jason Grumet of the Bipartisan Policy Center (and former Obama energy advisor):

“It’s not possible to achieve a climate solution based on existing technology without a significant reliance on nuclear power,” said Jason Grumet, president of the Bipartisan Policy Center in Washington and an energy and climate change adviser to the 2008 Obama campaign. “It’s early to reach many conclusions about what happened in Japan and the relevance of what happened to the United States. But the safety of nuclear power will certainly be high on the list of questions for the next several months.”

Joshua Freed of Third Way:

One shouldn’t minimize the dangers faced by the workers, but even something as catastrophic as the disaster in Japan might turn out to be a lot less catastrophic in terms of damage and loss of life than we fear right now. And you have to weigh that against the health, environmental impact and assorted other costs of the fossil fuels we rely on every day. And if, like most people, you think climate change is happening and poses a massive threat, you have to ask what options we have.

The New Supply and Demand of Energy Innovation

Originally posted on the Americans for Energy Leadership Blog.

Most of us are familiar with the basic economic principle of supply-and-demand. Economists tend to envision the intersection of the supply and demand of goods and services as the “equilibrium point,” where consumer need for a product meets the ability of producers to provide it. That point is what governs fundamental economic indicators and attributes, especially price and market quantity.

Recently, however, a new supply-versus-demand debate has begun to take shape in the minds of activists and policy-makers alike. Put simply, this new paradigm concerns the supply and demand of clean energy technology.

Conventional wisdom, as it has evolved among global warming activists, tells us that society already has the requisite technology supply to decarbonize the economy. Al Gore has said that “we have all the tools we need to solve three or four climate crises,” and influential climate blogger Joe Romm maintains that “we have all the technologies we need and just lack the political will.” This would suggest that the current supply of clean energy technological is sufficient, and that “political will” should come in the form of demand-side, deployment policies.


But this notion has been increasingly challenged. Energy Secretary Steven Chu, a Nobel laureate, has called for a “second industrial revolution” in clean energy technology, contradicting the perception that political will is the only missing factor on the path to a clean energy future. Chu’s message has become a siren call for many clean energy advocates, but it has not completely dulled the chorus of climate activists who still believe that the technology will materialize once we have fostered adequate demand.

Many of these climate activists have promoted a cap on carbon emissions as their policy-of-choice, ostensibly a mandate that energy companies considerably scale down the burning of carbon sources for energy in favor of cleaner alternatives like solar or nuclear power. However, most governments lack the political will to impose a serious, or “hard”, cap, ending up with a “soft” cap at best, one that allows energy companies to pass on the modestly higher cost of producing carbon energy onto consumers. The theoretical effect of this cap would be to shift consumer energy demand towards cleaner alternatives.

Climate activists point to a similar cap program on chlorofluorocarbons in the early 1990s. But the technological innovations that were required to fix the CFC problem were child’s play next to the mind-boggling challenges of redesigning and deploying entirely new systems for generating, converting, transporting, storing and using energy. In addition, a politically palatable carbon price, like one that would be established by a U.S. cap-and-trade program, would have the approximate effect of increasing the per-gallon price of gas by approximately 10-30 cents—hardly the economic impetus to create a new world.

Subsequently, advocates are now beginning to question the political feasibility of even a soft cap on carbon emissions, following the failure of such a policy to pass the U.S. Senate earlier this summer (the fourth such failure in a decade). A European carbon cap, now in its fifth year of operation, has yet to abate emissions to any considerable degree. Carbon trading schemes are also in the works regionally in the U.S, with the Western Climate Initiative and the Regional Greenhouse Gas Initiative, but these are a far cry from the once yearned-after global cap on carbon emissions. Effort after effort has revealed that nations are unwilling to increase the price of dirty energy, despite IEA projections of a 40% increase in global emissions by 2030. Thus, we see that the chief demand-side effort to reform consumer behavior has met with little success. What, then, is the best path to a clean energy future?

For a more effective and comprehensive solution to our energy problems, we must turn to “supply-side” policies with technological innovation at the forefront. Perhaps the primary obstacle between the status quo and a global clean energy economy is the price gap between clean and dirty energy technology, and a politically palatable price on carbon emissions will do little to bridge that divide. The workable solutions stem from making clean energy cheap, in unsubsidized terms, and available to consumers worldwide.

We can achieve these goals through various supply-side “technology push” policies, such as major public financing of energy RD&D; making the R&D tax credit permanent; and the creation of new public-private partnerships and institutions whose explicit goals are to develop clean technology. These measures must be significant and sustained, and they must complement demand-side industrial policy of which cap-and-trade may be only a small part.

Supply-side innovation policy can be traced to the origins of the Internet, the jet engine, biotechnology, the Manhattan and Apollo projects, and the personal computer. In these and other game-changing technologies, governments played a central role in the initial RD&D processes, to the point where the private sector was able to take full advantage of a technologically transformed economy. We cannot trust the creation of a brand new global energy infrastructure to demand-side policies alone, nor to the assumption that we have all the technologies we need. Partial solutions like cap-and-trade will keep failing until we effectively combine supply and demand approaches towards an innovative mission to build a clean, safe, and sustainable energy future.