Back to Basics on Energy Policy

Back to Basics on Energy Policy


Back to Basics on Energy Policy

For the past 40 years, political leaders have promised that government can plan and engineer a fundamental transformation of our energy industry They were wrong.

In June 1973, President Richard Nixon addressed the emerging energy crisis, saying that “the answer to our long-term needs lies in developing new forms of energy.” He asked Congress for a five-year, $10 billion budget to “ensure the development of technologies vital to meeting our future energy needs.” With this speech, the federal government set out to engineer a fundamental transformation of our energy supply.

All seven subsequent presidents have endorsed Nixon’s goal, and during the past 40 years, the federal government has spent about $150 billion (in 2012 dollars) on energy R&D, offered $35 billion in loan guarantees, and imposed numerous expensive energy mandates in an effort to develop new energy sources. During this time, many talented and dedicated people have worked hard, done some excellent science, and learned a great deal. Yet federal energy technology policy has failed to reshape the U.S. energy market in any meaningful way.

The major failure has been in efforts to commercialize technologies, with many billions of dollars essentially wasted on loan guarantees, tax credits, and other subsidies that never produced results. We have failed to learn that commercialization cannot be forced and must wait until the technologies are competitive enough to support private investment on a market basis.

It’s time to refocus the nation’s efforts on what the federal government has traditionally done best: supporting conceptual and technical research. Commercialization should be left to the marketplace.

A rocky road

Fossil fuels (oil, coal, and natural gas) are the dominant source of energy today and will be for decades to come (figure below). The federal push to develop alternatives in the two other major energy categories—nuclear and renewables—has been rocky, to say the least.

The nuclear era began with the brilliant physics and engineering of the Manhattan Project and the subsequent development of nuclear reactors by the U.S. Navy for submarines and aircraft carriers. The road to civilian applications, however, has been less successful. The aftermath of World War II brought a wide range of ideas for the peaceful application of nuclear power, including nuclear-powered aircraft, rockets, and even cars (the Ford Nucleon). In 1959, the U.S. government launched the N.S. (Nuclear Ship) Savannah, a nuclear-powered passenger-cargo ship, to demonstrate the commercial potential of nuclear power. The ship was a technical success but an economic failure, and no other commercial nuclear vessels were ever built in the United States.

Electricity generation emerged as the best civilian application for nuclear fission. In the immediate postwar period, coal was the dominant source of electricity, but it created serious air quality problems. Beginning in 1965, electric power companies began building generating plants burning high-sulfur heavy fuel oil made from imported crude. Nuclear power offered the potential for an almost infinite fuel supply with no pollution or dependence on foreign oil. Technically, nuclear power plants can be built almost anywhere and in any number, and can be operated with high load factors, often more than 90%. At first, the economics of nuclear power looked promising, prompting Atomic Energy Commission Chairman Lewis Strauss to hope that electricity would someday be “too cheap to meter.” The federal government offered massive support. Since 1973, roughly 30% of federal energy R&D has been devoted to nuclear power. Billions of dollars were also spent on subsidies for plant construction and commercial and regulatory support. There was also extensive spending for military applications.

Civilian nuclear power made some real progress, but only for a while. The United States has 104 nuclear power plants with a total capacity of around 100 gigawatts (GW). These plants were built in three roughly equal tranches: the first plants broke ground between 1964 and 1969, the second between 1969 and 1974, and the final third between 1974 and 1977. The first tranche showed good economics and an average construction time of 6.5 years. Prospects began to dim quickly, however, with reduced government subsidies, increasingly strict safety standards, and growing public opposition. The second tranche of nuclear plants took an average of 10.5 years to build, and the third tranche nearly 12 years. The Watts Bar #1 plant of the Tennessee Valley Authority came on line in May 1996, 23 years after construction started. Long delays are deadly to the economics of any capital-intensive project. Groundbreaking for new nuclear power plants came to a complete halt in March 1977, and hopes for a restart died with the Three Mile Island accident in 1979. Sixty-three planned nuclear power plants were canceled between 1974 and 1995.

Many of the completed nuclear power plants suffered severe cost overruns, but the canceled plants were often even more expensive. The Shoreham plant on Long Island cost $6 billion, about 30 times the original estimate. Even worse, the completed plant was abandoned and decommissioned before startup in the face of overwhelming public opposition. The burden of this stillborn plant fell on Long Island electricity consumers.

The commercial nuclear program also produced another problem: radioactive waste. A typical nuclear plant generates about 20 tons of radioactive waste annually. Almost all the waste products are currently stored at power plant sites, but there are limitations to this approach. The federal government has always anticipated a long-term solution through either a central storage site or fuel reprocessing. But these options have proven to be politically difficult, and the planned waste repository at Yucca Mountain in Nevada has been scrubbed after more than $10 billion in sunk costs. There is no solution in sight.

In 1973, Nixon predicted that nuclear energy would provide 25% of the nation’s electricity supply by 1985 and 50% by 2000. The actual share was about 15% in 1985, plateauing at 20% in 1991. The nuclear program thus proved much more modest and much more expensive than expected.

The context for nuclear power has now changed. Not only are nuclear plants much more expensive than anticipated, but their primary competitor is no longer dirty coal or imported oil but instead clean, inexpensive domestic natural gas. The problem of nuclear waste remains unsolved, and public opposition, rekindled by last year’s Fukushima disaster in Japan, will probably frustrate the nuclear industry for the foreseeable future.

Only two new nuclear plants are currently under con- struction. The latest Energy Information Administration (EIA) outlook projects 10 GW of new nuclear capacity by 2035, plus another 7 GW of productivity improvements in existing plants. Unfortunately, the EIA also anticipates the gradual retirement of older nuclear plants, leading to an absolute decline in nuclear capacity after 2029. In current parlance, nuclear is no longer scalable.

The outlook for renewables

The limitations on nuclear power leave us with renewables as our only alternative to fossil fuels. In 1973, renewables accounted for 4 quads or about 6% of our energy consumption. By 2010, renewables had doubled to 8 quads and their share had increased to 8%. By the year 2035, the EIA projects another 50% increase to about 12 quads. It’s tempting to see the growth in renewables as evidence of success in developing alternative fuels, but when we look at the disparate components of the renewables category, the picture is not quite so rosy.

The current 8 quads of U.S. renewables include: hydropower (2.5 quads), wood (2 quads), municipal solid waste (MSW) (0.5 quad), corn ethanol (2 quads), geothermal (0.2 quad), wind (1 quad), and solar (0.1 quad). Let’s look at each of these energy sources.

Hydropower provides clean and virtually carbon-free power, but is expensive to build, and its output varies by season and by year. Both scalability and economics are limited by geography. The United States has 1,426 hydro plants with a combined capacity of 78 GW. About 40% of this capacity, however, is in 16 massive dams on major rivers, such as the Grand Coulee (7 GW), Chief Joseph (2.5 GW), John Day (2 GW), and Dalles (2 GW) dams on the Columbia River in Washington State and Oregon. Almost all of the low-cost sites are already developed, and the EIA projects an increase of only 0.5 quad by 2035.

The economics of wood are excellent, but only if you happen to be in the lumber or paper industry. About two-thirds of the 2 quads of wood energy is in the 15 main timber-producing states in the Southeast and Northwest, and growth will track lumber and paper production. MSW contributes another 0.5 quad to our energy supply. Producing electricity from burning trash may help cities deal with landfill limitations, but it’s not a very efficient, economical, or environmentally friendly form of energy. MSW electricity costs about four times as much as natural gas combined-cycle power and, according to the Environmental Protection Agency, releases toxic chemicals, mercury, and dioxin. Not much growth potential here.

Corn ethanol (2 quads) is the only renewable energy source competing with oil, but it’s expensive and diverts crops from the food supply. In 2011, the United States used nearly one-third of its corn crop to replace only 5% of its oil supply—not a very good tradeoff. The resulting corn price increases have hurt not only U.S. consumers but also consumers in poor countries that rely on U.S. corn exports.

Ethanol is not technically complex. In fact, virtually every society during the past 5,000 years has mastered the technology of distilling ethanol from plants. Ethanol shows great economics for wine and spirits, but not for fuel. Fuel ethanol requires buying huge amounts of corn, transporting it to a distillery, operating the distillery, and then distributing the final product into the gasoline pool. Ethanol contains only two-thirds as much energy per gallon as gasoline, and moving it by pipeline presents a number of technical problems. Despite these problems, the federal government forced ethanol into the market, initially through federal excise tax breaks, plus a tariff to keep out Brazilian imports. So far, U.S. consumers have paid about $50 billion in subsidies plus at least an additional $5 billion per year in higher food prices.

Although direct ethanol subsidies were eliminated in 2011, Congress has retained a mandate requiring that the gasoline supply contain increasing amounts of ethanol. The 2022 requirement of 36 billion gallons would consume almost the entire corn crop. To square this circle, Congress mandated that ethanol from cellulose feedstocks contribute at least 16 billion gallons by 2022. That makes the arithmetic work, but unfortunately, there is no viable technology to produce cellulosic ethanol, and corn-based ethanol is hitting its limits.

Next on the list is geothermal (0.2 quad). In many seismically active areas, high-temperature, high-pressure water trapped below the surface can be accessed by shallow drilling. Although its environmental footprint is small, geothermal energy is limited by geography and thus not scalable. About 85% of U.S. geothermal capacity is in California and another 13% in Nevada. The EIA projects growth to about 0.5 quad by 2035, a negligible contribution to the energy balance.

Wind energy (1 quad) has shown rapid growth, with electricity-generating capacity increasing from less than 2.5 GW in 2000 to over 43 GW today. Wind economics have improved somewhat, mainly by making turbines larger and building ever larger wind farms, but wind power is still expensive. Onshore wind power costs about 70% more than natural gas combined–cycle power, and offshore wind costs about 300% more. Wind power is also intermittent, has low load factors (around 30%), and is disproportionately available at night, when utilities have other low-cost units sitting idle.

Perhaps most important, state-of-the-art wind turbines, some taller than the Washington Monument, bring into conflict two basic tenets of the environmental movement: support for clean energy and opposition to disturbing pristine areas. Although the environmental community supports wind power in general, large wind farms near populated areas tend to generate substantial local opposition, often from staunch environmentalists. As a result, most wind turbines are built in remote areas, requiring expensive longdistance transmission lines.

There would be no wind power in the United States without massive federal and state support, including a 2.2-cent per kilowatt-hour federal production tax credit and Renewable Portfolio Standards in various states that require electric utilities to acquire a certain percentage of their power from approved renewable sources, regardless of cost. These subsidies and mandates cost consumers/taxpayers on the order of $3.5 billion to $4 billion a year. The EIA outlook shows only modest growth in wind power from 1 quad today to about 2 quads in 2035, which is still less than 2% of energy supply.

Solar, the icon of the green movement, contributes only 0.1 quad, or about 0.1% of the U.S. energy supply. The first solar cells, developed by Bell Labs in 1954, were inefficient (4% conversion) and expensive, but they were a real engineering breakthrough. The search for more cost-effective solar became a cornerstone of the federal energy R&D effort in 1977 with the establishment of the Department of Energy’s (DOE’s) Solar Energy Research Institute, now part of the National Renewable Energy Laboratory.

Today’s silicon crystal solar panels are a dramatic improvement over the original Bell Lab designs, with some cells achieving a conversion efficiency of about 35%, but the power output is still intermittent and load factors are very low, around 15%. On balance, solar energy is way too expensive for widespread application. Residential rooftop solar panels or large-scale photovoltaic power plants generate electricity at 7 to 10 times the cost of grid power. Even with continued heavy subsidies at the federal and state levels, the EIA expects solar energy to grow from 0.1 quad today to only about 0.4 quad by 2035, which is less than 0.5% of our energy supply 80 years after their invention.

Why have we failed?

On balance, 40 years of intensive federal research have produced no new technologies that could be called transformative. Why have all the hard work and taxpayer money failed to meet the national goals set by the past eight presidents?

Successful technologies pass through three distinct stages. In the conceptual phase, we develop a solid understanding of the science involved. In the technical phase, we learn how to build machines that actually work. In the final commercial phase, we figure out how to make products whose cost and performance convince consumers to prefer them over competing products. Few technologies can move all the way through this progression, and it’s not easy to pick the ultimate winners.

The United States has a long history of extraordinary technological achievements in all aspects of life, and the federal government has played a critical role in this process, driven mainly by national security needs. Having learned the hard way in World War II the disastrous consequences of military inferiority, the United States has invested trillions of dollars in our defense capabilities. The economics of national security, however, are different from the economics of the civilian economy. Technical superiority is mission-critical in many military situations, and the Pentagon is often willing to pay a high premium for relatively small advantages. The military also has a high tolerance for program failures, cost overruns, and an inefficient procurement process, because the consequences of military failure can be catastrophic. As a result, the military tends to focus on technical success. Fortuitously, some but by no means all military advances turn out to have major commercial applications. Four-engine bombers easily became airliners. Jet engines, computers, the Internet, and the Global Positioning System moved easily into the civilian economy. Commercial applications, however, are incidental to military research, not its objective.

In the civilian economy, new technologies face a much more severe economic test. The Department of Defense’s (DOD’s) fiscal year (FY) 2012 budget, excluding the Iraq and Afghanistan wars, is $531 billion. U.S. consumers, however, pay approximately $1.5 trillion for energy every year. The economy is therefore very sensitive to energy costs, and forcing the use of more expensive forms of energy can have serious consequences for growth.

The mantra of the energy R&D program has always been, “If we can put a man on the Moon, we can do anything,” but this comparison is wrong. Apollo was a conceptual and technical triumph with no commercial aspirations. Between 1969 and 1972, the United States landed 12 astronauts on the Moon at a cost of $12.5 billion (in 2012 dollars) per astronaut. The purpose of the program was to accomplish a technically difficult feat a few times despite the enormous cost. Civilian technology requires the exact opposite: the ability to do something on a large scale at a low cost. More than 40 years after Neil Armstrong’s giant leap, spaceflight is still too expensive for the average citizen, at least those unable to pay Virgin Galactic $200,000 for a 15-minute suborbital ride.

Supersonic flight faced the same problems. On October 14, 1947, Air Force pilot Chuck Yeager broke the sound barrier in the Bell X-1. The U.S. military quickly developed supersonic fighter and ultimately bomber aircraft and has been flying them successfully for more than 60 years. In contrast, there are no supersonic airliners in civilian service. Everyone is familiar with President John Kennedy’s famous May 1961 speech in which he committed the United States “to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to Earth.” Less well known is Kennedy’s commencement address to the U.S. Air Force Academy in June 1963, in which he committed us to the development “of a commercially successful supersonic transport superior to that being built in any other country of the world.” The difference between Apollo’s success and the supersonic transport’s failure lies in the single word “commercial.”

Jet engines are superior to piston engines in terms of efficiency, performance, and cost, thus creating the perfect conditions for commercial application. Supersonic flight, however, is very expensive, because the only way to break the sound barrier is to burn massive amounts of fuel. Furthermore, supersonic aircraft cost more to build and maintain and produce annoying sonic booms over populated areas. For the military, supersonic flight can mean the difference between mission success and failure and between life and death for flight crews. The high cost of high speed is therefore justified. For civilians, however, supersonic travel means the ability to get from New York to London in 3.5 hours rather than 6.5. The clientele for supersonic airliners are the tiny group of people who value their time at $1,000 to $2,000 per hour. The supersonic Concorde was a technical marvel but a commercial disaster, barely covering its cash operating costs until its retirement in 2003. Its European investors never recovered their investment.

Transformation of the nation’s energy balance requires technologies that succeed not just in the conceptual and technical phases but in the commercial phase as well, and government commercialization efforts have been a complete failure. The root cause of the problem is the inherently political nature of government programs.

The market is far superior to government as a vehicle for commercialization. Private investors spend their own money and tend to watch it carefully. Lots of private commercialization efforts fail. In the marketplace, however, investors demand that management recognize failure quickly and stop throwing good money after bad. The government, on the other hand, has an almost infinite supply of other people’s money to spend. Elected officials are reluctant to say to voters, “The solution to this problem should be left to the marketplace.” They would much rather say, “If you elect me, I will fix this problem for you through government action.” The promise itself often brings the desired short-term political benefits, even if the policy itself ultimately fails.

In his 2006 State of the Union message, President Bush made a pitch for cellulosic ethanol, stating, “Our goal is to make this new kind of ethanol practical and competitive within six years.” It’s now six years later. The government spent some money and put in place a cellulosic ethanol mandate, but there is still no economically viable way to make cellulosic ethanol.

President Obama’s “Blueprint for an Energy Strategy” claims as its centerpiece a Clean Energy Standard, which would require that an increasing share of electric power come from “clean sources.” The White House claims that “With this requirement in place, clean sources would account for 80% of our electricity by 2035.” The administration has also launched the SunShot Initiative “to make solar energy cost-competitive with other forms of energy by the end of the decade.” The objectives of the DOE’s FY 2013 budget request include reducing the cost of car batteries by three-quarters by 2020. These are appealing promises, but how exactly will the government make these things happen, and why should we believe them? By the time we know whether these objectives can be met, Obama will be long retired from the White House.

Moreover, the actual allocation of government funds is always heavily influenced by short-term political considerations. Most federal employees are capable, honest, and professional. Congress, however, tends to write laws to direct funds to favored constituencies, and the president controls the appointments of all senior officials in the Executive Branch, creating an understandable sensitivity to the viewpoint of the White House.

Since 1973, the federal government has spent $40 billion (in 2012 dollars) on coal R&D, including President Bush’s $2 billion Coal Research Initiative designed to “improve coal’s competitiveness in future energy supply markets.” Why are U.S. consumers better off with more coal and less domestic natural gas in the energy balance? Why not let the coal industry compete on its own? The answer, of course, is jobs. Government coal programs support employment in several critical swing states, including West Virginia, Illinois, Ohio, Pennsylvania, Montana, and Missouri.

In order to support the commercialization of renewable energy, the Energy Policy Act of 2005 authorized loan guarantees, supplemented by President Obama with additional money from the economic stimulus program. Outstanding DOE loan guarantees now total $34.7 billion. Despite the best efforts of DOE staff, considerations of the political connections of loan applicants, the districts in which they operate, and the number of jobs they provide find their way into the decisionmaking process.

The loan guarantees include $8.4 billion for electric cars and their batteries. The technology for low-cost electric cars does not yet exist, and it’s unlikely that forcing the manufacture of the current generation of vehicles will create a technological breakthrough. In fact, forced scale-up may actually impede technological progress. Tesla Motors, for example, received a $465 million government loan guarantee. Its first model, the all-electric Roadster, was priced at more than $100,000. The Model S, Tesla’s new all-electric offering for 2012, is a mid-size sedan selling for $50,000, or twice the price of comparable conventional cars such as the Toyota Camry or Ford Fusion. Even with the current $7,500 federal tax credit, Tesla’s cars are toys for rich people. Rather than working to design commercially viable electric vehicles, electric car and battery companies lobby the federal government for subsidies. Why innovate when you can make money on inferior technology? Why spend R&D dollars when lobbying dollars generate more profit?

Rather than working to design commercially viable electric vehicles, electric car and battery companies lobby the federal government for subsidies. Why innovate when you can make money on inferior technology?

Two new nuclear power plants have been granted $10.3 billion in loan guarantees. What is to be gained from expensive subsidies to nuclear plants without solving the outstanding problems of economics, waste disposal, and public opposition?

More than $1 billion of program money has gone to solar manufacturing companies, including the infamous Solyndra. Unfortunately, the solar market created by state and federal subsidies for U.S. homeowners has now been taken over by the Chinese, whose manufacturing costs are lower. U.S. homeowners are now buying expensive solar systems, and the U.S. solar industry is going bankrupt, both at taxpayer expense.

An increasingly popular argument in defense of federal renewable commercialization efforts is the need to compensate for government support to fossil fuels. A 2011 study by Management Information Services, Inc. (MISI) calculated federal energy incentives between 1950 and 2010, including tax policy, regulation, R&D, market activity, and government services, and concluded that 44% of these incentives went to oil, 12% to coal, 14% to natural gas, 11% to hydro, 9% to nuclear, and only 10% to wind and solar. There are serious methodological problems with this study, such as defining partial relief from oil price controls as a subsidy, but let’s take the numbers at face value. The study counts $369 billion (in 2010 dollars) in government support for oil, implying that oil has been underpriced and therefore unfairly advantaged in the market place as compared to renewables, which enjoyed only $81 billion in support. This analysis ignores the fact that oil is the most heavily taxed product on Earth. Between 1950 and 2010, U.S. excise taxes on motor fuels totaled $1.2 trillion at the federal level and another $2 trillion at the state level (in 2010 dollars). Renewables are not burdened with any significant taxes.

Eight steps to reform

So given the disappointing results of government energy R&D to date, where should the United States go from here? Here are eight suggestions for restructuring the federal energy technology program.

First, focus the federal energy technology budget on conceptual and technical research. Private companies don’t do enough conceptual research, because it’s difficult to capture the benefits of better science. Further, laboratory work is relatively inexpensive, and the government has a real comparative advantage in this area.

Second, give up the loan guarantees, production tax credits, renewable portfolio standards, government/industry partnerships, and mandates. These programs are the most expensive and least effective components of our energy policy. They try to force premature commercialization.

Third, stop trying to pick winners. Government energy R&D should seek a wide range of fundamentally new approaches and ideas. For example, the current technologies of crystalline silicon or thin-film solar cells may never be commercially successful. Federal R&D dollars would be better spent working on fundamentally new ways to capture sunlight. The concepts produced from federal research should be made available free of charge to U.S. companies for development by the private sector.

Fourth, fix the Research and Experimentation Tax Credit (RETC). The 20% RETC reduces the cost of private research, but it applies only to incremental R&D expenditures, and Congress periodically allows it to lapse. A permanent 5 to 10% tax credit for all R&D would allow companies to plan properly and boost overall R&D, including in energy.

Fifth, deal with externalities explicitly rather than implicitly. Fossil fuels do indeed have external costs that are not reflected in their prices, and renewable technology does offer potential advantages. U.S. air and water quality have improved dramatically during the past several decades because of the creation of reasonable federal standards for criteria pollutants, such as sulfur, carbon monoxide, and particulates, and allowing the affected companies to choose the most effective and least expensive means to comply.

Other externalities, however, are harder to address. U.S. dependence on the global oil market raises national security concerns because oil price volatility has an impact on the economy. The United States needs a comprehensive strategy to deal with this problem, involving not only alternative fuels but domestic oil resource development, diplomacy, and defense. Forcing small amounts of expensive ethanol into the gasoline pool offers little if any relief. Replacing coal or domestic natural gas with wind or solar has no impact at all on the oil market.

Carbon dioxide (CO2) is an even more perplexing problem. Climate change scientists argue that increasing CO2 emissions will have a catastrophic impact on humanity. If this view is correct, the solution must involve substantial and cooperative carbon reductions on a global scale. No government anywhere in the world, including the United States, has shown any willingness to bear the economic costs of such reductions. All the current solar and wind power in the market today have reduced U.S. CO2 emissions by 30 to 35 million metric tons per year, which is less than one-10th of 1% of the current worldwide total. China is increasing its carbon emissions by that amount every month.

The congressional cap-and-trade proposals discussed during the past few years would have limited the price of carbon to $25 to $50 per metric ton out of fear that higher CO2 prices would impede economic growth. Such a price is well below the level required to change consumer behavior or to bring the current generation of renewable technologies into the market. Addressing climate change requires an open and honest debate about the severe tradeoffs involved and the feasibility of achieving meaningful results on a global scale. The forced commercialization of tiny amounts of highcost wind and solar is simply throwing money away.

Sixth, stop using job creation as a rationale for renewable energy. Any federal program by definition creates jobs for the people who administer it and for those who receive its largesse. Jobs are also destroyed, however, by the removal of those funds from private capital markets by taxation or government borrowing. It’s impossible to determine whether this substitution has a net positive effect on the economy. Government spending should be judged solely on whether it meets program objectives.

Seventh, let the U.S military focus on defending the country. Covering military installations with solar panels and wind turbines and testing biofuels in military aircraft may enhance the DOD’s relations with Congress and the White House, but do nothing to enhance military capabilities or reduce costs. The considerable prestige of the military cannot rescue expensive, poor-performing energy technologies.

Finally, and perhaps most importantly, don’t overpromise. For 40 years now, political leaders of both parties have been proclaiming that government can plan and engineer a fundamental transformation of the energy industry. Some elected officials continue to promise specific new technologies within specific time frames. Although these promises always sound good when they are made, none has ever been kept. When the promises prove to be empty, the politicians who made them are long gone from the scene.

The Unites States won the Cold War because it did not succumb to the temptations of central planning. Instead, it put its trust in the strength of its economic institutions to find new technologies and bring them to fruition, with the government and the private sector each doing what it does best. It’s quite possible, perhaps even likely, that the next 100 years will bring energy revolutions as profound and consequential as electricity or the automobile, but the technologies that spark these revolutions may not even be on today’s list of government-sponsored candidates. A real energy supply transformation may involve technologies we can’t even imagine today.

In 1540, Francisco Vasquez de Coronado set out from Mexico into what is now the U.S. Southwest in search of the Seven Cities of Gold. He failed not because his project was underfunded, but because he was seeking something that didn’t exist. In contrast, in 1804 President Thomas Jefferson sent Lewis and Clark’s Corps of Discovery to explore the U.S. Northwest—not to find anything specific, but to find what was actually there. Unlike Coronado, Jefferson understood the essence of research.

Bruce Everett () is an adjunct associate professor of international business at the Fletcher School at Tufts University. He has 40 years of experience in global energy markets, including 6 years with the U.S. government, 22 years with ExxonMobil, and 10 years on the faculties of the Fletcher School and Georgetown University’s School of Foreign Service.