Launching a New National Strategy for Energy Security: Mostly Hits, Some Misses

Taking my seat at a large table in the lovely Newseum building yesterday morning, I scanned the faces of other participants in a discussion about energy security. Other than Phyllis Cuttino of the Pew Clean Energy Program, I was the only representative from an environmental group at the table. Atlantic Magazine's Steve Clemons led a spirited debate on energy policy by the group, which included the CEO of Fed Ex  Fred Smith, author and energy analyst Dan Yergin and former Director of National Intelligence Dennis Blair.

When it was my turn to speak, I pointed out that any energy policy must be aligned with the goals of reducing carbon pollution and increasing preparedness for more destructive events such as Hurricane Sandy. I also said I hope the group releasing the report, an august set of industry captains and senior flag officers called the Energy Security Leadership Council (ESLC), recognizes how powerless the U.S. is vis-à-vis a globally determined oil price and on the other hand how much leverage we have to reduce costs. And I stated the two main strategies NRDC favors for cutting costs: Increasing efficiency and competition in transportation.

I am pleased to report that as the discussion unfolded it became quite clear that this savvy group is pretty well aware of these hard facts. The most amazing thing to me in these discussions is the total disappearance of outrage over fuel-economy performance standards. Less than a decade ago I remember my dismay at the fate of an amendment offered by Senator Durbin to increase the standard to 40 miles-per-gallon (mpg) – it got a paltry 28 votes in the U.S. Senate, a new low watermark for the battered policy tool. Now, however, there is little dissent about the standard promulgated by the Obama Administration this year, which will raise the performance bar to 54.5 mpg for new vehicles by 2025. There’s been a sea change in policymaker, automaker and consumer sentiment about fuel-efficiency.

Of course, the group has put together a huge list of policy ideas which also include proposals for new drilling and fracking in the U.S. This is odd for a group that kept noting, correctly, that energy self-sufficiency won’t protect us from high and volatile prices in a global marketplace that is not free since most oil reserves are now controlled by governments including those that organize in the OPEC cartel to set price targets. The group kept invoking Canada (which I wrote about here) and Norway as examples of nations that are net oil exporters and yet remain vulnerable to the global oil-price rollercoaster. So if the most effective energy-security strategies are boosting efficiency and competition in a sector that as the group notes in its report is still 93 percent dependent on oil, why the additional emphasis on increased production?

Setting aside some of the unwise production ideas, such as drilling in the Arctic Refuge set aside for conservation a few decades ago as well as leaving regulation of hydraulic fracking techniques to a crazy quilt of state regulations, there’s a lot to like in this report. After a careful read I conclude that despite Mr. Smith’s claim that this is a package and shouldn’t be subject to picking and choosing by policymakers, the latter is exactly what the Administration and Congress should do. There are some thoughtful and at times provocative ideas in here.

Specifically:

• Establishing 6-8 demonstration “deployment communities” for alternative fuel vehicles (AFV), making sure that they include large, medium and small metros so the leveraging effect on peers is maximized. The idea is to ramp up AFV penetration through consortia and plans collaboratively developed by government and private sector institutions (e.g., state and local jurisdictions as well as automakers and utilities) in order to facilitate “learning by doing” and to “demonstrate proof of concept to consumers.” This can be framed as a new kind of intensive public-private collaboration I wrote about recently, and would help ensure that policy and investments aimed at accelerating the take-up of AFVs don’t are as effective and cost-effective as possible. For example, I now charge my new pluggable Prius up at a neighborhood organic grocery free-of-charge. While I am grateful for the service, and am as a consequence more loyal than ever to the store, I can’t help but note the charging stations are poorly located. There’s never anyone using them! Such capital investments should be more leveraged given that capital isn’t  infinitely available. Better regional coordination and planning could help ensure that’s the case with future stations.
• Increase federal investment in research and development for automotive-grade batteries and natural-gas storage tanks. Getting costs down, and range up, for batteries is especially important for advancing vehicle electrification as many have written (Bottled Lightning is especially worth checking out).
• “Reorienting” DOE’s research and development activities so they are more effective at improving national security. ESLC rightly laments that R & D investments have plummeted 70 percent between 1978 and 2006 so that we now spend less as a percentage of GDP than China, France, Japan and South Korea. In addition to boosting that level, the group recommends focusing on 1) Transportation given its importance to energy security; 2) The transition between research and commercialization; 3) Data collection, analysis and dissemination; and 4) Accountability, including a 2013 audit of program effectiveness.
• Increasing the pay for petroleum engineers at the Department of Interior to improve parity with private industry, thereby making it a more effective regulatory agency.
• Increase funding for research and development related to advanced biofuels.
• Allow DOD the flexibility to purchase advanced vehicles and fuels to improve security of supply lines and to help accelerate scale-up of alternatives.

Depending on the details when written up in a bill, these could all be very good ideas, standing alone as such. Another idea in the report -- establishing new Energy Security Trust Fund which uses tax revenues from new energy production to develop means to reduce our oil dependence -- is also a laudable concept as long as there's a twist. We already produce a lot of oil and gas, and the amount is going up as I type this. Why not establish such a trust fund for revenue from existing production? Continuing our role as one of the world's largest producers while using tax revenue to map out and forge viable pathways out of our dependence sounds pretty good.

I urge policymakers to read this thoughtful new entry into the energy debate, and to pick and choose the best concepts from it and transform them into policy. That would truly help deliver more energy security that Americans want and deserve.