Time to “Pump the Brakes” on Renewables?

With many of the world’s largest energy CEO’s meeting last week at the annual Cambridge Energy Research Associates (CERA) conference, I thought it appropriate to discuss the ideal source mix for the World’s energy needs.  We’ve seen a sort of “over-exuberance” for making green/renewable energy sources the majority of our energy mix and the Obama administration has been at the forefront of this push.  The DOE annual budget has significant increases for wind and solar, yet does very little (negative in some cases via tax-break cuts) for the classic sources (oil, gas, coal).

Needless to say, the leaders of the major oil & gas companies have become extremely outspoken with their opposition.  ConocoPhillips CEO Jamie Mulva (a fellow Longhorn) had this to say,

“We must overcome the opposition of the ‘hydrocarbon deniers’…those who believe that renewable energy will quickly and easily replace hydrocarbons and cure all that ails us.”

Given Mulva’s position, it should come as no surprise that he feels this way about “competitors” to his oil & gas, but I think his words are a dose of reality.  All too often we hear about some new “silver-bullet” solution and our politicians keep vowing to rid the US of our dependence on foreign oil by throwing gobs of money at the new solution.  As we’ve learned in this class, there is no single, best solution, so it’s completely unrealistic to rid ourselves entirely of oil, gas, and coal.

While I think it’s important to increase our usage of renewable sources, I am a staunch believer in economic and fiscal “intelligence” in the development of these sources.  If a new technology does not make much sense economically, even with extensive subsidies (I’m looking at you Ethanol), then it should have no business being pursued.

Source: New York Times, “Oil Execs Chortle as Obama Admin Promotes Renewables”, http://www.nytimes.com/gwire/2010/03/10/10greenwire-oil-execs-chortle-as-obama-admin-promotes-rene-73770.html



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3 responses to “Time to “Pump the Brakes” on Renewables?

  1. jrfyffe

    While I think it is important to evaluate all investments thoroughly to ensure money is not wasted on technologies with no future (like corn-based ethanol), I think it is important to realize the necessity of government investment in new technologies. Our country has acknowledged the importance of our long-term energy security and has made the decision to invest heavily in our future in order to reach that goal. The oil and gas industries are already well established and make good returns on their investments. Increased investment in the oil and gas industry would most likely lead to lower returns for the government when compared to new up-and-coming technologies that could potentially supply renewable and clean energy. This post claims that the amount of government investment in green, renewable technologies may be excessive, but compared to the overall percentage of GDP and the historic evidence of successful government investments in technologies leads me to think that money invested in energy technologies may be too low.

  2. smf928

    I also think that it’s important to be fiscally conservative, especially in situations where we see dead-ends (corn ethanol), but I feel that there are several examples where government investment has been crucial to expanding not only the particular technology being funded, but drastically changed the private sector.

    Certainly the easiest example, and at the time a controversial financial issue, was NASA funding. The overall spending on the Apollo mission alone was roughly 300 billion dollars (2002 $) which is a very large investment in something that a majority of the American public thought was a pride battle rather than directly beneficial. However, the number of consumer products spun-off by NASA are staggering. Those claimed include LED’s, artificial limbs, chemical detection, better radial tires, improved baby food, and a slew of others.

    Though the intangible benefits of investments such as these are nearly impossible to predict, scientific discovery is in part done by accident. Further, as jrfyffe pointed out, investing in a mature technology would see significantly diminishing returns, though you are correct in that we must maintain our petroleum infrastructure and not be naive about becoming entirely petroleum independent. Sometimes a leap of faith is required to travel miles down the road.




  3. juliaharvey

    I agree with the main foundational logic of your argument, that it is foolish to believe that hydrocarbons can be phased out in the near-term, but the conclusion you draw, that “if a new technology does not make much sense economically…it should not be pursued,” seems unsound. I cannot think of a single energy technology that has achieved large-scale viability without government subsidies. New technology almost universally has high costs in comparison with conventional technology. And while upfront R&D and construction costs may seem unfeasible, greater efficiency in operation may even things out.

    Ingrained industrial and political interests already provide significant barriers to entry for energy technology, and high entry costs are a fact of life. The purpose of government subsidies is to allow technology market viability if it provides a social benefit, and I believe funding renewable energy technology to be in line with this goal.

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