Strategies for Today’s Energy Challenge

The energy challenge the United States faces today is different from and more encompassing than what it encountered even a few years ago. Until fairly recently, at least in Washington, the energy challenge was seen largely as the need to reduce dependence on foreign oil. For the past quarter century, the country has seen its oil imports grow, and although relatively little has been done during these years to reverse that trend, that issue has dominated the energy debate.

Dependence on foreign oil remains a major concern, but today the energy challenge is larger than that and in many ways very different. Different in nature, different in scale, and much more urgent.

Today’s energy challenge is global rather than national. It is to change the way the world produces, stores, distributes, and uses energy so as to reduce greenhouse gas emissions. It is to shift, not just the U.S. economy but the global economy from dependence on combustion of fossil fuels to the use of non-emitting energy sources. With the concentration of greenhouse gases in the atmosphere on a trajectory to unacceptable levels, the sense of urgency to take action has risen as well. Simply stated, it is not enough to commit to reducing greenhouse gas emissions beginning in 2025. We must act and we must act now.

The scale of the challenge is immense. The United States and the other nations of the world will need to overhaul the existing energy infrastructure on which we all depend. That infrastructure did not develop overnight. Two hundred years ago, the combustion of fossil fuels, primarily coal, produced the steam that turned the turbines that powered the Industrial Revolution. Today, our planet has more than 50,000 coal-burning power plants, accounting for nearly one-third of greenhouse gas emissions worldwide. The normal rate of turnover for this infrastructure is at least 40 to 50 years. One hundred years ago, the decision was made to power our transportation sector by burning petroleum-based fuels in an internal combustion engine, rather than through the use of electric motors and batteries. Today, we have over six hundred million vehicles using some version of that internal combustion engine, producing 14% of greenhouse gas emissions worldwide.

But our challenge is not limited to just the power plants and vehicles we have today. We live in a world of growing demand for energy as billions of people are rising out of poverty. As that demand for energy grows, it will require new energy production capacity. Today, that new capacity generally consists of coal-fired power plants with the same high CO₂ emissions as our current energy infrastructure. Just a couple of weeks ago, India announced that it is building a new four-gigawatt coal-burning power plant complex. These plants will emit more than 23 million tons of CO₂ a year. The justification? That the need to bring electricity to one of the world’s poorest regions is more pressing than the need to limit CO₂ from burning fuel, and this is the least expensive way to do it. It is difficult to argue against such a statement, when most of us here have never known a life without electricity.

As we struggle to develop alternatives to our current energy infrastructure, we must recognize that in order to achieve sustainable use of those alternatives worldwide, they must become cost-competitive so that they are the option of first resort. To accomplish all of this, we will need both a revolution in technology and major changes in our economy. Our past technological choices are inadequate for our future. The solutions we need can only come from new technologies. And if the challenge of developing those new energy technologies, and implementing them worldwide, is immense, so too are the opportunities afforded by tackling this problem the right way. If the United States sees its most pressing environmental problems as an opportunity to reassert its leadership in science, technology, and innovation, it has the potential not only to resolve those problems, but also to revitalize its R&D enterprise and rebuild its manufacturing base.

But how can the country accelerate the development and widespread use of new technologies to address the energy challenge? One promising place to start is to adopt policies that put a price on emitting CO₂ and other greenhouse gases. Levying a cost on putting greenhouse gases in the air will accelerate the private-sector development and use of technologies that avoid and minimize greenhouse gas emissions.

In the Senate, we are working to design a regulatory framework in the form of a cap-and-trade system that will recognize the real costs of continued emission of greenhouse gases and shift development toward low-carbon energy production. In the past few years, we have seen a dramatic increase in private-sector entrepreneurs who want to develop clean energy technologies. Putting a price on the emission of greenhouse gases will stimulate that private-sector involvement even more.

The proper design of a cap-and-trade system for greenhouse gas emissions is not a simple matter. Having been in the Senate for 25 years, I can assure you that we in Congress have the ability to design and enact a totally unworkable system. Without the help of this country’s best minds, we could wind up doing just that.

Although putting a price on CO₂ emissions is an essential part of the solution, it is not the only tool that should be used to resolve this problem. Changing the way that the country pursues technology development and deployment will also be essential, and that is what I want to address.

Spurring innovation

U.S. policies to support technology development and use have fallen short in key areas. The government cannot afford to sit on the sidelines at this critical time. It must understand how it has failed to fulfill some key responsibilities and take action.

Lack of support for the nation’s basic scientific and engineering enterprise. The best recent analysis of this problem was in the National Academies report Rising Above the Gathering Storm. The report was a significant and well-supported wake-up call for policymakers about the need for major sustained support of the basic sciences. We in Washington are beginning to respond. Although we don’t have major progress to report as yet, I believe we will make progress in the months and years to come. One aspect of our anemic and unreliable support for the basic science and engineering enterprise in this country has been the anemic and unreliable support for energy-related science and technology development.

Failure to set priorities among the promising energy technologies that would lower our greenhouse gas emissions. You can find government reports on climate change technologies such as the Department of Energy’s 2006 Strategic Plan, but these reports are basically only shopping lists of viable technologies. They lack concrete goals, roadmaps for making progress, and timelines for development. Such reports are not entirely without value, but what we have nationally now is far from being a strategy. And it is far from adequate to address the challenges before us. We need to formulate a strategic R&D plan that maps out a prioritized set of technological goals, the steps needed to achieve those goals, and the time in which those goals should be met. I am not talking about a document that would limit scientific and technological exploration, but a roadmap with broad highways along which we could ensure that science and technology would be supported. Any energy R&D roadmap we design will need plenty of on- and off-ramps to incorporate the new knowledge, understanding, and breakthroughs that will inevitably occur.

Japan has recently begun to move along the path of developing such a strategic plan with the release of its Cool Earth—Innovative Energy Technology Program. This document identifies 21 areas of technology development that meet two criteria. First, each is expected to deliver substantial reductions in CO₂ emissions in the world by 2050. Second, each is a technology area in which Japan believes it can lead the world. Technology roadmaps are being formulated for each of the 21 technologies, giving R&D direction and milestones for measuring performance, with timelines toward long-term goals.

Perhaps the closest parallel we have to the Japanese priority-setting effort is a National Academy of Engineering project that identified the Grand Challenges for Engineering in the 21st Century. Among the challenges are 2 of the 21 technology areas covered in the Japanese innovative technology program: making solar energy economical and developing carbon sequestration methods. Although there is a significant effort under way at the National Academies to determine U.S. R&D needs in the energy area, it is clear that the systematic setting and maintenance of priorities for energy technology development is not something we have committed to at the highest levels of our government. The time has come for the government to act.

The first step is to establish overall responsibility at the highest levels of government. The Department of Energy is already supporting research in most of the key energy technologies, and other agencies such as the Department of Commerce are also funding necessary research. But even the secretary of Energy and the secretary of Commerce have a difficult time acquiring the research funding they need out of the White House budget process, which is run by the Office of Management and Budget. So I believe that the president’s science advisor needs to be given a stronger hand by also being made a deputy director in the Office of Management and Budget. This would ensure that the same person with responsibility for overall science and technology policy in government has some real authority to ensure that the funds to support science and technology make it into the federal budget.

As a second step, the president’s science advisor, armed with his enhanced authority, should work with the key departments and the National Academies to come up with a manageable set of energy technology areas that promise to help meet energy needs and substantially reduce greenhouse gas emissions in coming decades. Some of these will be technology areas that the Japanese or others have chosen as well. Others will be new to the list.

As a third step, in each of the chosen technology areas, a working group of academic, government, laboratory, and industry representatives should be convened and a broad roadmap developed to chart the way forward. Responsibility for pursuit of the roadmap in each technology area should be assigned to a particular government department or agency.

Fourth, to ensure an adequate degree of sustained focus and an adequate level of funding, the president should be required to submit to the Congress with his annual budget proposal a separate document detailing the funds being requested in support of each energy technology area across the agencies of the government.

And finally, to ensure that the areas being pursued continue to be those that hold the greatest promise, the National Academies should be directed to prepare an updated analysis of energy technology priorities every five years. This is similar to what government does for military technology in the Quadrennial Defense Review.

Sustainable policy

But as we have learned from hard experience, it is one thing to set priorities and begin pursuing them and quite another to sustain the effort. This brings me to the third major policy failing on my earlier list.

The U.S. record of sustaining its efforts in critical technology development has been poor. Once we set the course, why can’t we stay on it? One obvious problem is that each new administration feels a need to pursue something new. Instead of sticking with the difficult blocking and tackling required to move the ball down the field, the nation’s leaders allow their attention and effort to be deflected and then comfort themselves with the notion that some hail Mary pass will nevertheless allow them to score the touchdown.

The nation’s numerous discarded efforts to improve vehicle technology are a frustrating example of this tendency. On February 10, 1970, President Nixon announced the following in a special message to the Congress: “I am inaugurating a program to marshal both government and private research with the goal of producing an unconventionally powered pollution-free automobile within five years.” In 1977 President Carter announced his program for “reinventing the car,” in 1993 President Clinton announced his Partnership for a New Generation of Vehicles, and in 2003 President Bush announced his push for the Freedom Car.

Identifying the priority is obviously not enough. It is also necessary to develop a consensus on how to proceed—a consensus that will survive from one administration and one Congress to the next. The development of a national strategic plan for energy technology development, together with regular updating of that plan, will go a long way toward avoiding the stop-and-start approach that has plagued us in the past.

The fourth major failing is the absence of long-term regulatory and tax policies to promote development, manufacture, and widespread use of new technologies. As Germany has shown in the areas of wind and solar technology, providing such long-term policies can create a booming renewables industry. A very different story has played out in the United States. Utility regulation and rate setting have historically been the job of public regulatory commissions at the state level. Although some states have enacted progressive policies such as renewable portfolio standards and net metering, many have not.

We have tried for the past three Congresses to enact a renewable portfolio standard at the national level, but those efforts have met strong resistance from utilities and from the current administration. Similarly, in the area of tax incentives for increased efficiency and renewable technologies, our record has not been stellar. Congress has enacted some renewable tax incentives, but for budgetary reasons they were enacted for only short periods of time. And often they were allowed to expire.

As an example, the most significant tax incentive Congress has enacted to encourage alternative energy development is the Renewable Energy Production Tax Credit. In the case of wind energy, this credit provides a reimbursement of nearly 2 cents per kilowatt-hour for electricity produced from a wind turbine for a full 10 years after the turbine is put into service. The problem has been that the periods during which one is required to put the turbine in use to receive the tax credit were relatively short.

This problem is clearly illustrated in the history of U.S. wind capacity expansion. In years when the production tax credit was fully available, there was robust development. In years when the tax credit was scheduled to expire, financial institutions were reluctant to invest in projects that were not certain to be producing before the expiration of the credit. The result was the boom-and-bust cycle that is apparent in the graph. Clearly, a more consistent tax policy would have moved the country much further along in its development and use of wind power. Government-driven boom-and-bust cycles send the wrong message to entrepreneurs.

The government needs to support long-term market stability for renewable electricity production. One way to do that is to provide a long-term extension of the tax credits for renewable electricity. I believe that Congress will, next year, with a new administration in office, finally pass a much longer-term extension of these tax credits.

Finally, the country must devise a way to capture all the economic benefits from clean-tech manufacturing. First, policymakers need to acknowledge, at least in theory, that it is possible to meet the energy challenges I have outlined without creating the domestic manufacturing capability and domestic manufacturing jobs that ought to go with that. To use the current buzzword, we unfortunately could wind up “outsourcing” that manufacturing, particularly through inaction. Advanced energy storage devices, thin-film photovoltaic cells, and highly efficient light-emitting diodes will all be needed for clean, efficient energy production and use. But there is no assurance that these products will be produced in the United States. In fact, some would argue that unless the country adopts substantial changes in the way it does business, it is more likely than not that the United States will buy these products from abroad.

In their 1990 book The Breakthrough Illusion, Richard Florida and Martin Kenney argue convincingly that “Although the commonplace impression that breakthrough innovations create permanent advantage for American companies may once have been true, it is just not the case anymore. A new reality is upon us: the U.S. makes the breakthroughs, while other countries, especially Japan, provide the follow-through.” Now, 18 years after that was written, I believe it is truer than ever, and the other countries include many besides Japan.

The nature of the problem is evident in the history of world production in photovoltaic cells since 1995. Until 1998, the United States was holding its own against other countries. In the past decade, though, while production in other countries has soared, the U.S. photovoltaic industry has remained stagnant. This failure to compete well in growing markets is consistent with a worrisome trend in the entire U.S. manufacturing sector, which is experiencing a steady decline in jobs.

A strategy to revitalize U.S. manufacturing is a topic for another day. Such a strategy will require developing a consensus on changes in tax, procurement, trade, and probably health and education policy as well. The United States has a real opportunity to grow a high-tech renewables manufacturing base if it commits to the right policies. The nation has the knowledge, the technology, the workforce, and the drive to make it possible. Germany has proven that such a transformation can occur in an advanced economy. Nearly 250,000 renewable energy jobs have been created in Germany, and it is expected that over 400,000 people will be employed by 2020. Imagine what is possible in the much larger U.S. economy.

Tackling the policy challenges in the five major areas I have discussed is important to all Americans, and I believe it provides an exciting opportunity for the nation’s young people, particularly those now studying science and engineering in college. Young people equipped with knowledge, ability, and persistence will likely emerge as the leaders in meeting this global challenge. Reengineering the way the world produces, stores, distributes, and uses energy may in fact be the greatest challenge that we as a global community must face together. And to my mind, it is a worthy calling.

Addressing the energy challenge will require government, industry, scientists, and engineers to work together. Some may choose to make contributions through government service; many others will make a mark on our future energy system through direct research and innovation. As Vannevar Bush, a scientific advisor to Presidents Roosevelt and Truman said, “Without scientific progress, no amount of achievement in other directions can ensure our health, prosperity, and security as a nation in the modern world.”