Wednesday, January 24, 2007

Wasted Energy

Does anyone remember the Synthetic Fuels Corporation? Established in 1980, the last year of the Carter Administration, it was charged with dramatically increasing the amount of energy that Americans got from sources other than traditional imported fossil fuel. Billions of wasted dollars later, President Reagan killed it in 1984. The National Academy of Sciences told us why in 1992 (hat tip: Heritage Foundation):

Energy programs of that time were hindered by excessive political interference. Political influence on funding allocation decisions, selection of R&D projects, or the direction and conduct of scientific research is counterproductive and damaging to the success of federal technology efforts. Fuel-cell projects under the SFC, for example, were allotted to each of the 50 states, regardless of economic viability. Implementation of energy performance standards for buildings was held back by complex regulations. The clean coal technology project was hampered by congressional involvement in technical design and operational management. Although programs such as the tertiary oil recovery initiative and the R&D program in photovoltaic cells attained some success, these technologies were not widely adopted."


Alas, President Bush (and, in all likelihood, the new Congress) have forgotten these lessons, if they ever learned them. In a State of the Union address last night all too laden with the imperative voice, here were some of the urgencies he saw:

It is in our vital interest to diversify America's energy supply, and the way forward is through technology. We must continue changing the way America generates electric power by even greater use of clean coal technology, solar and wind energy, and clean, safe nuclear power. We need to press on with battery research for plug-in and hybrid vehicles, and expand the use of clean diesel vehicles and biodiesel fuel. We must continue investing in new methods of producing ethanol, using everything from wood chips, to grasses, to agricultural wastes.

Tonight, I ask Congress to join me in pursuing a great goal. Let us build on the work we've done and reduce gasoline usage in the United States by 20 percent in the next 10 years. When we do that, we will have cut our total imports by the equivalent of three-quarters of all the oil we now import from the Middle East.
To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017. And that is nearly five times the current target. At the same time, we need to reform and modernize fuel economy standards for cars the way we did for light trucks, and conserve up to eight and a half billion more gallons of gasoline by 2017. Achieving these ambitious goals will dramatically reduce our dependence on foreign oil, but it’s not going to eliminate it. And so as we continue to diversify our fuel supply, we must step up domestic oil production in environmentally sensitive ways.


Let us stipulate that our heavy use of imported oil is a problem. (Whether we should is another question, but let's play along.) What our government is (predictably) proposing is that we embark on a particular path toward addressing this market failure, one negotiated by politicians. One might suppose that the system will be designed to reward the decision-makers. Ethanol, for example, might loom unusually large in the handing out of government funds because it is an important issue to Iowa, the first caucus state in 2008, at a time when both parties have wide-open contests for Presidential nominees. And lo and behold, ethanol was apparently one of the biggest applause lines of the night.

Is 35 billion gallons the right number to get from alternative fuel by 2017? Is the optimal average fuel efficiency for cars 25 miles a gallon , or 35, or 37.623? (Recall, among other things, that smaller, more fuel-efficient cars are more dangerous and can carry fewer materials per trip.) I have no idea, and neither does anyone reading this or certainly anyone in the government. People could of course sort out these tradeoffs in the market. From the point of view of efficiency (assuming the externality problems were accurately diagnosed, which is debatable), the simplest thing to do would be to tax imported oil and let individuals sort out which uses of oil remain valuable after this adjustment and which do not. If ethanol produces more value than the opportunity cost required to bring it to consumers, it will be. So too with fuel efficiency and everything else on the President's wish list.

But of course doing that would eliminate politicians' ability to dole out favors to pressure groups that power their re-elections. This classic sort of rent-seeking is too tempting to pass up, and this is how we get the Synthetic Fuels Corporation and then get the ethanol empire a quarter-century later. Hayek warned (in the far more serious context of evaluating central planning and totalitarianism) that "We must shed the illusion that we can deliberately 'create the future of mankind.' This is the final conclusion of the forty years which I have now devoted to the study of these problems." But the illusion is too lucrative for the leaders when the led are insufficiently aware.

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2 Comments:

Anonymous Jay Draiman said...

MANDATORY RENEWABLE ENERGY – THE ENERGY EVOLUTION –R11

In order to insure energy and economic independence as well as better economic growth without being blackmailed by foreign countries, our country, the United States of America’s Utilization of Energy sources must change.
"Energy drives our entire economy." We must protect it. "Let's face it, without energy the whole economy and economic society we have set up would come to a halt. So you want to have control over such an important resource that you need for your society and your economy." The American way of life is not negotiable.
Our continued dependence on fossil fuels could and will lead to catastrophic consequences.

The federal, state and local government should implement a mandatory renewable energy installation program for residential and commercial property on new construction and remodeling projects with the use of energy efficient material, mechanical systems, appliances, lighting, etc. The source of energy must by renewable energy such as Solar-Photovoltaic, Geothermal, Wind, Biofuels, etc. including utilizing water from lakes, rivers and oceans to circulate in cooling towers to produce air conditioning and the utilization of proper landscaping to reduce energy consumption. (Sales tax on renewable energy products should be reduced or eliminated)

The implementation of mandatory renewable energy could be done on a gradual scale over the next 10 years. At the end of the 10 year period all construction and energy use in the structures throughout the United States must be 100% powered by renewable energy. (This can be done by amending building code)

In addition, the governments must impose laws, rules and regulations whereby the utility companies must comply with a fair “NET METERING” (the buying of excess generation from the consumer at market price), including the promotion of research and production of “renewable energy technology” with various long term incentives and grants. The various foundations in existence should be used to contribute to this cause.

A mandatory time table should also be established for the automobile industry to gradually produce an automobile powered by renewable energy. The American automobile industry is surely capable of accomplishing this task. As an inducement to buy hybrid automobiles (sales tax should be reduced or eliminated on American manufactured automobiles).

This is a way to expedite our energy independence and economic growth. (This will also create a substantial amount of new jobs). It will take maximum effort and a relentless pursuit of the private, commercial and industrial government sectors commitment to renewable energy – energy generation (wind, solar, hydro, biofuels, geothermal, energy storage (fuel cells, advance batteries), energy infrastructure (management, transmission) and energy efficiency (lighting, sensors, automation, conservation) (rainwater harvesting, water conservation) (energy and natural resources conservation) in order to achieve our energy independence.

"To succeed, you have to believe in something with such a passion that it becomes a reality."

Jay Draiman, Energy Consultant
Northridge, CA. 91325
Jan. 25, 2007

P.S. I have a very deep belief in America's capabilities. Within the next 10 years we can accomplish our energy independence, if we as a nation truly set our goals to accomplish this.
I happen to believe that we can do it. In another crisis--the one in 1942--President Franklin D. Roosevelt said this country would build 60,000 [50,000] military aircraft. By 1943, production in that program had reached 125,000 aircraft annually. They did it then. We can do it now.
The American people resilience and determination to retain the way of life is unconquerable and we as a nation will succeed in this endeavor of Energy Independence.

Solar energy is the source of all energy on the earth (excepting volcanic geothermal). Wind, wave and fossil fuels all get their energy from the sun. Fossil fuels are only a battery which will eventually run out. The sooner we can exploit all forms of Solar energy (cost effectively or not against dubiously cheap FFs) the better off we will all be. If the battery runs out first, the survivors will all be living like in the 18th century again.

Every new home built should come with a solar package. A 1.5 kW per bedroom is a good rule of thumb. The formula 1.5 X's 5 hrs per day X's 30 days will produce about 225 kWh per bedroom monthly. This peak production period will offset 17 to 24 cents per kWh with a potential of $160 per month or about $60,000 over the 30-year mortgage period for a three-bedroom home. It is economically feasible at the current energy price and the interest portion of the loan is deductible. Why not?

Title 24 has been mandated forcing developers to build energy efficient homes. Their bull-headedness put them in that position and now they see that Title 24 works with little added cost. Solar should also be mandated and if the developer designs a home that solar is impossible to do then they should pay an equivalent mitigation fee allowing others to put solar on in place of their negligence. (Installation should be paid “performance based”)

Installation of renewable energy and its performance should be paid to the installer and manufacturer based on "performance based" (that means they are held accountable for the performance of the product - that includes the automobile industry). This will gain the trust and confidence of the end-user to proceed with such a project; it will also prove to the public that it is a viable avenue of energy conservation.

Installing renewable energy system on your home or business increases the value of the property and provides a marketing advantage.

Nations of the world should unite and join together in a cohesive effort to develop and implement MANDATORY RENEWABLE ENERGY for the sake of humankind and future generations.


Jay Draiman
Northridge, CA 91325
Email: renewableenergy2@msn.com

9:22 AM  
Blogger Evan said...

If the battery runs out first, the survivors will all be living like in the 18th century again.

Fossil fuels will become expensive, and hence undesirable, long before they become gone.

3:43 PM  

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