Commentary

Corner Extra: Energy Yack

By Jerry Taylor
This article appeared on Nationalreview.com, January 31, 2006.
Author’s Note: The text of President Bush’s remarks (taken from the speech as released by the White House before delivery) are in italics. My commentary regarding those remarks are not.

Keeping America competitive requires affordable energy. Here we have a serious problem: America is addicted to oil,

Another way of putting it is that American consumers are oddly attracted to using the lowest cost sources of energy to meet their energy needs. It’s odd to call that sensible inclination an “addiction.”

which is often imported from unstable parts of the world.

The choice today is between low-cost energy that occasionally spikes in price due to producer instability and high cost energy that is less subject to disruption and thus periodic price spikes. It’s not obvious that the latter arrangement is economically preferable to the former.

The best way to break this addiction is through technology. Since 2001, we have spent nearly 10 billion dollars to develop cleaner, cheaper, more reliable alternative energy sources — and we are on the threshold of incredible advances.

And what do we have to show for that $10 billion? Nothing. The market share for non-hydro renewable energy (presumably what the president is referring to when he talks about “reliable alternative energy sources”) is between 1-3 percent (depending upon how you define your terms). That’s scarcely an advertisement for even more lavish subsidies.

So tonight, I announce the Advanced Energy Initiative — a 22-percent increase in clean-energy research at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants; revolutionary solar and wind technologies; and clean, safe nuclear energy.

If those technologies have economic merit, no subsidy is necessary. If they don’t, then no subsidy will provide it. Let’s look at each of those technologies in turn.

  • Zero-emission coal-fired power plants are a figment of the imagination. As far as “clean coal” is concerned (which is not ‘zero-emission’ by any means), it’s been the recipient of lavish government subsidy for 20 years now without even one single commercially viable facility to show for our past efforts. Those plants are still too expensive to compete in the market and investors won’t touch them.
  • Wind and solar power has been the recipient of 30 years worth of government largesse, yet neither has been able to gain any significant market share despite the handouts. Apparently, hope springs eternal.
  • Nuclear power is solar power for conservatives — an energy source with every merit in the world save for the most important — economic merit. Investors — not environmentalists — are the parties that have turned against nuclear and there’s no reason for government to second guess the businessmen that President Bush is otherwise so quick to praise in other contexts.

We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen.

It is not government’s job to design automobiles. It’s track record in that regard is abominable. Government funded R&D projects to redesign the internal combustion engine are nothing new. What we constantly seem to overlook is the unmitigated track record of failure. The worse aspect of these programs isn’t just that they waste taxpayer dollars — or that they subsidize research that should be paid for by the auto companies themselves — but that they divert investments from more productive paths. For instance, while the Clinton administration was engaged in a similar undertaking called “The Partnership for a New Generation of Vehicles” and producing nothing of consequence, Japanese auto companies — without significant government help -were busy designing the hybrid powered engines that are now all the rage within the auto industry. When government picks losers, it can set the entire domestic industry back.

We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips, stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.

If government subsidies could guarantee that uneconomic industries would transform into economic industries, we’d all be putting synfuels into our auto tanks by now. 27 years of lavish subsidy hasn’t turned ethanol into a competitive fuel (defined as one that doesn’t need government support to exist in the market). There’s no particular reason to think six more years of this will make any difference.

Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025.

Accomplishing that goal would be economically meaningless. A supply disruption in the Middle East would increase the price of crude everywhere in the world no matter where or how it is produced.

By applying the talent and technology of America, this country can dramatically improve our environment … move beyond a petroleum-based economy … and make our dependence on Middle Eastern oil a thing of the past.

Rhetorically, the president has just joined the Sierra Club. I doubt, however, that the Sierra Club believes that the president’s proposals achieve the goals he set out for them.

There is nothing really new in this speech as it pertains to energy except more money for old programs — the political equivalent of the triumph of hope over experience.

Jerry Taylor is director of natural-resource studies.