Worldenergy Blog

Energy policy in today's world of make-believe

Wednesday, August 19, 2015

Does energy policy need to be complicated?


Well the biggest issue in making energy policy is trying to get your arms around the topic.  Energy is very important, it is the industrial oxygen that moves our economy and it is inherently dull to talk about.  The energy industry moves with about as much excitement as a submarine race and our main interaction with it comes at the gasoline pump or on the news when something blows up.  So is it really such a surprise when we see things like the “Clean Energy Act” or the hyper regulations coming out of the EPA or the continued embargo of our resources, probably not.

But energy policy does not have to be complex.  Remember, I said “policy” not the production and delivery of energy.  Policy is the framework under which our industry players will operate, let them figure out how to get it done.  Energy policy should begin with one big rule, “First do no harm”.  This one is basic, but important and follows with the idea that if it isn’t broke don’t fix it.  Second, any sound policy should be based on three basic principles.  

  • Principle number 1, we need energy.  Unless you are willing to go back to living in a grass hut and gathering berries we all need energy to live the lifestyle we have become accustomed to.  As I have said before, energy is industrial oxygen and without it the economy cannot survive.  So basic principle, energy is a requirement.
  • Principle 2, not all energy is created equal.  The quantity of energy needed for an application varies and the energy source must match the use for which it is intended.  You cannot run a city without an abundant, dependable energy source so don’t close down your coal-fired power plants without a replacement…that’s bad policy and does harm.
  • Priniple 3, surface impact varies by source and it must be taken into account.  For the environmental crazies that think all energy comes from the plug on the wall, this doesn’t mean we shut down all hydrocarbon energy.  It means that all energy sources take space and have a risk profile surrounding them.  If you measure the size of a wind farm and count the damage to wild life it carries a hefty surface impact compared to a natural gas turbine.  Since energy is needed locally, the specifics of delivery need to be handled by the community, then the State, the region and lastly the federal government.

In summary, we need energy, not all sources are equal and we must consider the surface impact of what we do. From a macro sense using that simple equation much of what we do right now around energy policy is counter productive.  Just about any of the recent “acts” from the EPA can be disqualified with this simple arithmetic. 

Currently, our energy base is made up of coal (45%), natural gas (28%), nuclear (18%), “renewable energy” (less than 10%), and oil for transportation at 95%.  Most of our current reductions in pollution and green house gases (GHGs) have come from switching coal to natural gas.  Natural gas is cheap, plentiful, clean burning and well understood.  A natural policy that makes sense is to encourage natural gas production and power generation. Natural gas can also run a car or a truck, so we should encourage that use whenever possible. 

Each part of our policy needs to factor in the demand for energy in our economy.  We cannot mandate wind energy for every need, just as we cannot insist that cars run on corn ethanol.  Government should not be picking he winners in the energy evolution any more than government can predict which species of arctic wildlife will survive climate change.  

So what role does energy policy from the federal government play?  The feds can layout the simple framework and hold companies accountable when they step outside the framework.  The federal government can focus on what works, while leaving the innovation to individuals and companies.  They can focus on far future energy adventures that are too far over the horizon to attract investment.  The feds can moderate when multiple states are involved. Government can strategically use our resources to help our allies by getting out of the way of exports.

Energy is far too important to leave in the hands of armatures, alarmists and dreamers.  We need to set up the framework and let our creativity and enterprise thrive and produce.  At the end of the day the market will dictate successful, cleaner energy sources and technology will improve our creation of it. If we get it wrong the economy will suffocate.  

So my advice to the President, put away the pen and the phone and stop the over regulation.  My advice to candidates, don’t make policy around climate change and environmental activism and focus on the very real need to provide for an ever-increasing demand for energy.  My advice for consumers, get ready for a rough ride because none of these principles are going to get much air time in today’s regulatory and reactionary world of politics.