WASHINGTON – President Barack Obama’s plans to lead America out of recession rest in part on a task bigger than a moon shot and the Manhattan Project put together, as complicated as any feat of economic engineering in the nation’s history.
His goal, which past presidents have spent more than $100 billion chasing with limited success, is to replace imported oil and other fossil fuels with a so-called “clean energy economy” powered by the wind, the sun and biofuels.
The stakes are high. If Obama succeeds, he could spark a domestic jobs boom and lead an international fight against climate change. If he fails, he could cripple existing industries and squeeze cash-strapped Americans with higher energy prices.
“We essentially need a second Industrial Revolution that can generate lots of energy cleanly, cheaply, sustainably,” Energy Secretary Steven Chu, a Nobel Prize-winning physicist, said in an interview last week. “We have a lot of necessity,” he added, and the administration and the Energy Department “have to start inventing right, left and center.”
Success hinges on whether Obama can nurture alternative energy sources to the point where they cost no more than fossil fuels – a feat that most experts say will require heavy doses of brainpower, cash and market manipulation.
It also requires clearing most of the same hurdles that frustrated Obama’s predecessors, including technology bottlenecks, a shortage of capital to finance innovation, and above all, crippling economic factors that have repeatedly trumped good intentions.
To help renewable energy compete on price, Chu and other officials say, the administration wants to revamp energy research and spend more on it, starting with billions of dollars in the pending economic stimulus bill; to create demand for clean energy by forcing utilities to draw from renewable sources such as wind turbines and solar panels; to string thousands of miles of transmission lines to carry wind and solar power to consumers; and to levy a de facto tax on fossil fuels through a nationwide cap on greenhouse-gas emissions.
“I’m not going to call it a once-in-a-generation challenge,” said Deborah Wince-Smith, president of the Council on Competitiveness, a collaboration of business, labor and academics. “It’s even more rare than that.”
By the end of this year, the Energy Department’s spending on 35 years of clean energy research will exceed the total inflation-adjusted cost of the Apollo program, which sent Americans to the moon, and the Manhattan Project, which developed the nuclear bomb.
That research, economists say, has made wind, solar and other alternative sources of energy cheaper. But fossil fuels remain cheaper yet.
Renewable sources compose about the same sliver of America’s energy portfolio as they did three decades ago, while the nation’s reliance on imported oil has doubled.
Experts say more money would help. The federal government spends about the same amount on energy research today, adjusted for inflation, as it did in 1968. The private sector has only begun to outpace government spending on energy research in the past year, according to a new study by Daniel Kammen, who directs the University of California at Berkeley’s Renewable and Appropriate Energy Laboratory.
“Energy is the biggest chunk of our national expenditures,” Kammen said in an interview, “and we just neglect it.”
Investment ran high in the oil-shocked 1970s, then slumped in the ’80s and ’90s. It was rising again in recent years until the financial crisis froze lending.
“If we as a country want to move forward and address energy security, we need to resolve the credit crisis as it relates to the energy industry,” said John Denniston, a partner at the venture capital firm Kleiner Perkins Caufield & Byers.
Then there’s the question of how research dollars are spent. In a new report released this past week, the Brookings Institution urged the Energy Department to partner more closely with academia and the private sector to help bring better, cheaper clean-energy technology to market.
The report suggests modeling today’s research on the regional agricultural extension services, created in the late 1800s, that pioneered advancements in crops and industry. “Agriculture was something that needed new technology and a green revolution,” said James Duderstadt, a former president of the University of Michigan and the lead author of the study. “But it could only go into the marketplace by working hand in hand on a regional basis with farmers.”
Chu said last week that he will recruit “the smartest people” to the Energy Department and charge them with bringing clean-energy technology to market. But to drive down prices, he said, the government must help those sources “scale up” to a size that lets them compete with Big Oil and other fossil-fuel providers.
Free-market advocates don’t like the idea. The policies Chu and Obama hope would boost demand for renewables – including an electricity mandate and an emissions cap – “would likely increase consumer energy costs and the costs of a wide array of energy-intensive goods, slow GDP growth” and kill jobs, the Institute for Energy Research, a free-market think tank that has taken funding from oil interests, said in a recent report.
Price Fishback, an economic historian at the University of Arizona, said that when it comes to bringing technologies to market, “Governments haven’t typically done a very good job of picking winners.”
But clean-energy researchers say government has long helped fossil fuels, offering tax breaks and subsidizing transmissions systems, such as railroads that carry coal to power plants. Stephen Long, a leading biofuels researcher at the University of Illinois, said without those subsidies, many biofuels could easily compete with coal as an affordable energy source.
Given America’s land area and research talent, Long said, there’s no reason clean energy can’t someday replace fossil fuels entirely.
Obama seems to agree. “Inaction is not an option that is acceptable to me, and it’s certainly not acceptable to the American people,” he said Thursday, in a speech promoting the stimulus plan at the Energy Department, “not on energy, not on the economy, not at this critical moment.”
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