The Green Energy Economy: What It Will Take to Get There

Everyone agrees it's time to get serious about renewable energy, but the barriers go beyond technology
By Kent Garber
Posted March 20, 2009
To describe what's needed to wean the country off fossil fuels, people often use the word transition. As in "the transition to a clean-energy economy." But transition is too smooth. It suggests steadiness, even inevitability, as if the endpoint is predetermined. Countries obtain and consume energy is anything but predetermined. There are no definite answers to questions about the role one source of energy or another will play 15 or 20 years from now, no clear sense about the type of fuel (if any) people will put in their cars, no consensus on how quickly any of this can happen or at what cost.
Nor is the change likely to be smooth and quiet. Instead, it will probably be disruptive, breaking down existing ways of thinking and acting. Not that disruption is bad: Joseph Schumpeter, the famous Austro-Hungarian economist, once spoke of "creative destruction," whereby new technologies and ideas replace old ones, which themselves are overthrown by newer, more progressive ones.
Already, 2009 has been a year of visions, of prophecies. President Barack Obama's inaugural address offered one such vision: doubling alternative energy production in the next three years, updating and expanding the nation's energy infrastructure, saving billions of dollars in energy costs through improved energy efficiency. Think tanks, businesses, industry groups, and environmentalists have laid out their own plans, some more aggressive and some less so.
The sheer number of these plans, not to mention the interest percolating up from nearly all corners of American life, suggests, as Energy Secretary Steven Chu puts it, that "the landscape is changing."
Ebb and flow. Clean energy is, of course, a narrative that has been slowly developing in the United States over the past four decades or so, at least since President Jimmy Carter's administration. In the past, its visibility and its urgency have ebbed and flowed with the price of oil. Today, however, it's not just the wild fluctuation in oil prices that is driving the discussion. There is the economic crisis. There is the burgeoning climate crisis, with its implicit call for global cooperation. And there are fresh concerns about national security in an age of emboldened oil cartels and nuclear ambitions.
Addressing each of these priorities raises its own set of questions. At the moment, there is no consensus on how aggressively the United States should reduce greenhouse gas emissions over the few next decades or, more broadly still, the proper role of fossil fuels and renewable energy.
Meanwhile, almost every potential contributor to a " green energy economy"—wind and solar power, biofuels, nuclear power, energy efficiency—faces hurdles well beyond the technology of each system. Regulatory policies or economic issues stand in the way of massive, quick deployment of any of these.
And so, today, a new mentality is emerging among almost all the major energy players, from wind developers in the Dakotas to coal-plant operators in North Carolina: Energy issues can no longer be treated as piecemeal policy items left up to states and hodgepodge federal legislation to decide but instead must be addressed nationally, in a sweeping manner.
Want the country running on flex-fuel vehicles? "It's just a few hundred dollars more per vehicles," says retired Gen. Wesley Clark, the 2004 presidential candidate and now cochairman of Growth Energy, a group representing several of the nation's largest ethanol producers. "What would encourage an automobile manufacturer to believe he should do it would be a government policy that says we are moving in that direction."
Want more wind power? "The critical thing we are talking about here is national policy and the signals it sends to people," says Denise Bode, CEO of the American Wind Energy Association. "There is tremendous demand for wind power, but there is not enough transmission."
What Washington won't do—not in theory, anyway—is pick specific winners. "The market will decide what the mix will be," says Matt Rogers, a former director at McKinsey & Co. and now one of Chu's top advisers. "It will be interesting to see what the market brings forward." Of course, in reality, Congress's record is one of subsidizing some industries but not others. Even within the biofuel world, corn-based ethanol is heavily supported, but some others, such as biofuel made from algae, receive almost no backing.
In this new era of national energy, one of the primary questions facing the country is that of timing. When should things happen? In what order? And how soon can they occur? "Broadly, what scares me is that we want to do this in an incremental fashion. We want this to come across as painlessly as possible," say Rich Wells, vice president of energy at Dow Chemical. "We need a breakthrough mentality."
It has become a cliché to say that there is no "silver bullet" for the nation's energy and climate problems. Most experts prefer to think about energy solutions as a collection of options to be deployed in tandem. Perhaps the most widely quoted example is the "wedge model," developed by Princeton University professors Stephen Pacala and Robert Socolow in 2004. It outlined 15 wedges, each one representing a way to significantly reduce greenhouse gas emissions over the next 50 years. Among them: raising the fuel economy of 2 billion cars from 30 mpg to 60 mpg and doubling nuclear capacity worldwide.
Only some of these, of course, are realistic in the shorter term. "If you're only going to do one, the top one is always energy efficiency," says Dow's Wells. "It is for the most part the easiest, cheapest fuel out there." Amory Lovins, chief scientist at the nonprofit Rocky Mountain Institute, agrees, saying that energy savings from highly fuel-efficient cars would be equivalent to "finding a Saudi Arabia under Detroit." Perhaps the biggest barrier for buildings has been the upfront cost of doing retrofits, with the need to convince people that the costs can be quickly recouped by lower energy bills. The stimulus package is taking a stab at this, setting aside $5 billion for home weatherization.
Meanwhile, everyone else is jockeying for position. The biofuel industry wants Congress to lift the cap on how much ethanol can be blended into gasoline. The nuclear industry is asking Congress to cough up billions to insure new nuclear power plants; wind and solar industries are asking for transmission superhighways. Detroit wants more in government bailout money. And coal wants money to research carbon capture technology. The great energy nationalization is here.