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US Energy Policy

US Energy Policy

Energy Policy

The incandescent lightbulb is now outlawed.[1]  This fact is a perfect metaphor for “energy policy.”  Should it be illegal in the United States to manufacture, sell, buy, and use a traditional incandescent light bulb?  Your informed answer to that question will provide deep insight into your views on hundreds of other energy policy questions.   (BTW, my answer is no, but I bet you guessed that.)

Energy is the lifeblood of our economy; it touches your life in a hundred ways each day.  Yet energy policy--the set of government rules and regulations that prescribe how energy is produced, delivered, and consumed--is a complex and even a chaotic subject.

Energy was an uninteresting subject for the average person prior to the OPEC Oil Embargo in 1973.  Oil prices had been stable at about $20 a barrel in real terms for nearly a century and electricity prices had declined from about 22 cents per kilowatt to about 13 cents from 1960 to 1973, even as consumption of electricity quadrupled from 1950 to 1973, as more and more homes and appliances used electricity and utilities became better at building large coal and nuclear plants.

But the OPEC Embargo changed everything about energy and energy policy.  Four points will illustrate this importance. 

  • President Jimmy Carter’s presidency (1976 to 1980) was dominated by energy issues which he characterized as the “moral equivalent of war.” 
  • A little more than two decades later a California governor was recalled because he botched an electricity crisis in California and Arnold Schwarzenegger was elected Governor. 
  • There is a widespread perception that the US has gone to war in the Middle East over oil issues.
  • The Pope of all people has recently declared war on climate change, most of which is laid at the feet of fossil energy.

Part of the complication in energy policy is that it must be addressed on many fronts; international, national, State, and local governments all have a role in stirring the pot. 

Many books and articles are written on very specific aspects of energy policy but most are written for other experts.  Surprisingly, few are written that cover the broad landscape of energy policy.  Even fewer of these writings take a strong market-oriented perspective; the vast majority take an interventionist approach largely for environmental and oil import reasons.  And none that I have found are addressed to the pro-market political activist who has a real job during the day and then tries to save the country in his or her spare time.  This discussion is for that heroic citizen, The Forgotten Man.

So what’s the bottom line on energy policy? 

  • First, we make energy policy much more difficult than it has to be.  Energy is a commodity just like wheat or cars or hamburgers.  Mostly, we rely on competitive markets in each of these other commodity industries to make sure that we have an adequate supply to meet the consumers’ needs at reasonable prices.  But we treat energy differently.  I venture to guess that there are only a few industries more affected by government intervention than energy.  Why is that?  Does that mean we benefit from that intervention?  Is there a better way?  The article explores these questions.
  • Second, right now energy policy is being driven by climate change.  Even if one is sympathetic to some of the claims made about climate change, many stupid actions are being taken in its name that has profoundly negative effects on energy markets. 
  • Third, oil issues get the most attention but we do not face any real danger in oil markets.  Oil trades in global markets and while there may be price fluctuations (as I write, oil is about $35 a barrel, having been over $100 in the recent past), we will never face a situation where we run out of oil.  Most countries with plentiful oil have built their economies on oil revenue and the recent drop in oil prices has created serious political problems for these countries.  They simply can’t afford not to produce oil.  But problems in oil markets can result in unnecessarily higher prices and thus we need to pay some attention to them in order to promote prosperity. 
  • Fourth and most important, electricity faces real problems that could result in catastrophic failure of the system, thus threatening not only prosperity but human life.  The major framework for electric policy was set in 1935.  That framework worked fine up to the OPEC Embargo.  Electricity can compete against oil and natural gas in many applications.  Thus adjustments were necessary to the historical framework after the Embargo.  But policymakers have only nibbled at the edges of electricity policy and have not fundamentally changed the 1935 framework.  Yet little more than additional tinkering is being done to promote an electricity industry for the 21st Century.  Many special interests are pushing and pulling on the antiquated framework for personal gain but few are fundamentally committed to a complete rethinking of the role of the electric system of the future, especially given the increasing digitalization of our economy.  And as noted above, unsound policies on climate change make electric issues even more difficult.

[1] This is a good place to make a point.  Some pointy headed academics will disagree with even this first sentence.  Technically, Congress did not “ban” incandescent bulbs in the Energy Independence and Security Act of 2007.  Rather, they set a standard that most, if not all, traditional incandescent bulbs could not achieve and established a schedule for light bulbs of different wattages to meet this standard.  So it is fair to say that Congress outlawed incandescent bulbs.  But since the accompanying Article is a synthesis of the broad topic of “energy policy” it would needlessly clutter and complicate the text to be “technically” accurate in every instance.  The size of the document would need to double and the reader would understand less of the essence of energy policy if I did not make some broad generalizations.  Nonetheless, I am sure I will receive some criticism that many of my statements are not “technically correct.”  I hope that making this point early in the article will allow for a better understanding of the content of the Article.


Energy War Similarities

First they came for the socialists, and I did not speak out—because I was not a socialist.

Then they came for the trade unionists, and I did not speak out— because I was not a trade unionist.

Then they came for the Jews, and I did not speak out—because I was not a Jew.

Then they came for me—and there was no one left to speak for me.

                Martin Niemöller


First they came for nuclear and I did not speak out, because it was a competitor.

Then they came for oil and I did not speak out, because it was a competitor.

Then they came for coal and I did not speak out, because it was a competitor.

Then they came for me – and there was no one left to speak for me.


Environmental activists have waged war on the US energy industry in the press and in the courts for decades but lacked the power to inflict major damage. They have since allied themselves with the political left, which has provided them with access to power and funds they lacked previously. This alliance has also enhanced their access to the media, which have provided ample exposure and support for their efforts.

The US nuclear industry has been faced with organized resistance to new power plant siting, resistance to existing power plant life extension programs and demands for premature plant closures. This resistance has been loosely tied to environmental concerns, though not with climate change, because nuclear generation is the only reliable, dispatchable generation technology which emits no CO2 or other “Green House Gasses (GHGs)”.

The alliance with the political left then led to the 2009 US EPA Endangerment Finding regarding motor fuels (oil distillates) and to massive government subsidies for electric vehicles. The Endangerment Finding was based on projected environmental damage estimates produced by unverified climate models, run with uncertain climate sensitivity, forcing and feedback estimates and extreme Representative Concentration Pathways. These models and their uncertain inputs are suitable for generation of scary scenarios, but not as the basis for public policy. This Endangerment Finding is now under review for possible revision or withdrawal.

Success with the Endangerment Finding then led to the EPA Clean Power Plan, intended to require premature closure of existing coal generators and require the application of carbon capture and sequestration technologies, which have not been commercially demonstrated and appear uneconomical, to any new coal generating stations. This Clean Power Plan is being replaced by a far more flexible Affordable Clean Energy Rule.

Environmental activists and state government entities are also resisting coal industry efforts to increase the capacity of US coal export facilities. These facilities could partially offset the loss of domestic markets with export sales to developing nations which are currently unconstrained in expanding their use of coal for power generation. The stated intent is to eventually shut down the US coal industry.

The environmental attacks on nuclear and coal generation, in combination with advanced natural gas combined cycle generating technology and dramatically increased availability and reduced prices of natural gas as the result of hydraulic fracturing has caused the electric utility industry to move towards natural gas as their generating fuel of choice. This shift to natural gas generation has been the primary factor in the impressive US reductions in CO2 emissions, since natural gas combustion results in half the CO2 emissions of coal combustion and the combined cycle generators are also approximately twice as efficient as coal generators. Massive subsidies for wind and solar have been far less effective in reducing CO2 emissions.

Environmental activists have also worked with the political left and the media to prevent or delay construction of new and expanded oil and gas pipeline capacity to connect new and expanded production fields to new and growing markets. The delay or denial of oil pipelines has forced incremental oil supplies to be moved to market by rail, resulting in both higher transportation costs and increased environmental risk. The delay or denial of new natural gas pipelines has impeded the electric generating industry in its efforts to site new natural gas combined cycle generating facilities because of constrained delivery capacity.

More recently, these delivery constraints are also forcing natural gas utilities to halt new customer service connections to protect supplies for existing customers. The State of New York has recently denied necessary permits for two natural gas pipelines, one intended to increase delivery capacity to upstate New York and New England and the other intended to increase delivery capacity to Brooklyn, Queens and Long Island. Both actions have caused the serving natural gas utilities to halt new customer connections. Ironically, the Governor of New York has asked the New York State Public Service Commission to investigate the utility decisions to halt new connections. The New York State ban on hydraulic fracturing has also dramatically constrained in-state natural gas production.

Most historic US natural gas utilities have been acquired by or merged into electric utilities, forming or expanding existing combination utilities, effectively converting inter-company competition to intra-company competition, which ultimately devolves to market allocation for convenience. This is particularly true as constrained pipeline capacity has tightened competition for available pipeline capacity between the utility generating unit and the gas distribution unit. Since generation typically represents 70-80% of combination utility assets, generation typically has priority on available supply.

The electric utility industry has been aggressively marketing and lobbying for an all-electric economy for decades. They have been aided and abetted in these efforts by US Department of Energy Appliance Efficiency Standards and site-based building energy efficiency standards, both of which largely ignore the inefficiencies of the electric power generation, transmission and distribution systems and their higher environmental emissions.

The electric industry has found a new ally in municipal bans on new natural gas connections, imposed in the alleged interest of avoiding increased climate change.  Berkeley, California has imposed such a ban, effective beginning in January 2020. The City of Seattle, Washington is also considering such a ban. Other cities will likely follow suit, particularly in California, Oregon and Washington, at least initially.

These bans, as well as suspensions of new connections as the result of government-imposed supply constraints deprive new residents and commercial businesses of fuel choice for heating, water heating, cooking, laundry drying and other competitive energy end uses. They also prohibit the installation of automatic standby generators, which will become progressively more necessary as reliable, dispatchable generating systems are increasingly replaced by intermittent and non-dispatchable generators, such as wind and solar.

The ultimate intent of the environmental activists and the political left are to move the US toward an all-electric energy supply system, powered by “clean energy” such as wind and solar, supported by battery or other energy storage systems. This approach is questionable from a national security standpoint, since many of the materials required for the construction of the wind and solar generators are controlled by China.

The estimated $30 trillion investment required to achieve this transition and the resulting higher energy costs for the US economy appear to be of little real concern to its advocates. The unsuitability of the resulting energy supply system for process industries, iron and steel production and cement production also appear to be of little concern. One advocate recently suggested that perhaps certain types of production might not be able to be conducted here, even though relocating them to nations with weaker environmental rules would make no difference regarding their contributions to anthropogenic climate change.

The electric utility industry has apparently decided to pursue appeasement of the environmental activists and the political left and, as Winston Churchill suggested, “feed the alligator in the hope that it will eat you last”. The recent fascination of the political left in the US with nationalization of industries suggests that the alligator’s meal might not long be delayed.


Tags: EPA Endangerment Finding, Nuclear Power, Electric Power Generation

Highlighted Article: Net-Zero Carbon Dioxide Emissions By 2050 Requires A New Nuclear Power Plant Every Day

  • 10/10/19 at 11:20 AM

From: Forbes

By: Roger Pielke

Date: September 30, 2019


Net-Zero Carbon Dioxide Emissions By 2050 Requires A New Nuclear Power Plant Every Day


"More than a decade ago, Gwyn Prins and Steve Rayner characterized climate policy as an “auction of promises” in which politicians “vied to outbid each other with proposed emissions targets that were simply not achievable.” For instance, among Democrats competing for the presidency in 2020, several, including Joe Biden, have committed to achieving net-zero carbon dioxide emissions by 2050. Candidate Andrew Yang bid 2049, and Cory Booker topped that by offering 2045. Bernie Sanders has offered a 71% reduction by 2030.

One reason that we see this “auction of promises” is that the targets and timetables for emissions reductions are easy to state but difficult to comprehend. Here I’ll present what net-zero carbon dioxide emissions for 2050 actually means in terms of the rate of deployment of carbon-free energy and the coincident decommissioning of fossil fuel infrastructure." ...


Net-Zero Carbon Dioxide Emissions By 2050 Requires A New Nuclear Power Plant Every Day


Tags: Highlighted Article

USA Climate Priorities 2

The previous commentary on USA Climate Priorities discussed priorities regarding climate science, specifically regarding: accurate temperature measurement; establishment of specific values for climate sensitivity and feedbacks; and, verifying a climate model. Addressing these priorities is essential to understanding the potential future challenges which might be presented by climate change.

This commentary focuses on priorities regarding energy production. The extent to which US and global energy production must move toward zero CO2 emissions is a function of the results of the climate science research discussed above and in the previous commentary. Results confirming low sensitivity and minimal or negative feedbacks would suggest a modest progression toward increased renewable energy production. Results which confirmed high sensitivity and positive feedbacks would suggest a more aggressive progression toward zero emissions technologies for energy production.

There is growing recognition that a sole focus on wind, solar and battery storage to replace the current global energy infrastructure would represent a high cost, low reliability approach which would ultimately prove unacceptable or unachievable, absent some major scientific breakthroughs.

There are three reliable and dispatchable zero emissions technologies employed in the current global energy economy: nuclear, hydroelectric and geothermal steam. There are three additional potentially reliable and dispatchable technologies which have been identified but remain to be developed and implemented: wave energy, ocean thermal energy conversion and dry hot rock geothermal.

Several US thought leaders, including Bill Gates and James Hansen, are convinced that the dramatic reductions in global CO2 emissions envisioned by environmental and climate activists are unachievable without a significant increase in nuclear energy production. Nuclear technology is proven and is capable of significant expansion to meet current and future needs, as are hydroelectric and geothermal generation, though to a lesser extent.

Research priorities for nuclear generation include: inherently safe reactors; modular reactors; reactors capable of using a higher percentage of the energy available from the nuclear materials; and, reactors capable of being fueled with the spent fuel currently stored at nuclear generating facilities. Some research has already been conducted in each of these areas, but these efforts could easily be expanded and accelerated.

Hydroelectric development is currently underway in several countries, including China and India. Attempts to expand  US hydroelectric capacity have met with fierce resistance from environmental activists, many of whom argue for removal of existing hydro facilities. Some environmental organizations do not even include hydro in their lists of renewable technologies.

Geothermal steam generation is currently limited to areas where there are currently steam vents. Dry hot rock geothermal could be far more widely available, since dry hot rock could be accessed globally. However, limited experiments in Europe have triggered earthquakes, resulting in suspension of the research efforts.

Wave energy and ocean thermal energy conversion are also in their infancy but have very significant generation potential if successfully developed and deployed.

Major energy technology research efforts to advance these technologies could result in lower cost, reliable energy supplies; and, in major new industries to build, manage and maintain them. These research efforts could offer the potential to provide reliable electricity to developing and not-yet-developing countries as an alternative to expanded fossil fuel generation.


Tags: Renewable Energy, Nuclear Power

Highlighted Article: The "New Energy Economy": An Exercise in Magical Thinking

  • 4/18/19 at 06:00 AM


From: Manhattan Institute

By: Mark P. Mills




"A movement has been growing for decades to replace hydrocarbons, which collectively supply 84% of the world’s energy. It began with the fear that we were running out of oil. That fear has since migrated to the belief that, because of climate change and other environmental concerns, society can no longer tolerate burning oil, natural gas, and coal—all of which have turned out to be abundant.

“So far, wind, solar, and batteries—the favored alternatives to hydrocarbons—provide about 2% of the world’s energy and 3% of America’s. Nonetheless, a bold new claim has gained popularity: that we’re on the cusp of a tech-driven energy revolution that not only can, but inevitably will, rapidly replace all hydrocarbons..."




Tags: Highlighted Article
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