Energy Conference Casts Doubt on Alternative Fuels

Published June 1, 1999

The Energy Information Administration (EIA) of the Department of Energy held its annual energy outlook conference on March 22. The morning session was devoted to Kyoto issues; the various afternoon sessions focused on specific energy issues, many with Kyoto in mind.

Paul Portney, head of Resources for the Future (RFF), set the tone for the morning by stating for the record that all environmentalists, politicians, and think-tank types were in private agreement that the Kyoto Protocol was a dead letter and it was time to move on.

Portney called for a new approach authored by a group of RFF economists–a carbon auction program with a price cap administered at $25/ton. The program would start in 2002 and have a sunset provision. Three-fourths of the funds raised would be refunded to households. The program would be unilateral–the U.S. would “lead by example,” Portney said, while other countries could conduct business as usual.

When asked whether RFF had performed any cost/benefit analysis on the proposal, Portney replied that they had not, due to the constraints of not knowing the science and not having the capability to conduct macro models.

Portney also discussed a new RFF study conducted for the Renewable Energy Policy Project. The study concludes that the advocates of non-hydro renewable energy were wrong on their estimates of market penetration . . . but the costs of solar, wind, and biomass projects had fallen as projected. Thus, he contends, renewal energy projects should not be deemed a market failure. Portney admitted that “all the other energies had improved too.”

David Montgomery of Charles Rivers Associates explained that the Kyoto Protocol would result in higher energy prices in Annex I countries, giving non-Annex I countries more incentive not to participate. A Greenpeace representative at the conference suggested that border taxes could correct for the advantages of Kyoto non-participants– a notion Montgomery dismissed by noting that an international trade war would be in no one’s interest.

The afternoon sessions offered up painful realities, leaving many environmentalists in attendance glum. A representative from Ford reported that new technology gleaned from the federally subsidized Partnership for a New Generation of Vehicles was being applied primarily to “trucks” (read sports utility vehicles). Not exactly what the anti-automobile environmentalists had in mind.

EIA’s top expert on renewable energy announced that the agency’s estimate of the amount of electricity to be generated by wind power might have to be reduced, due to legal issues and the “cultural values” of many sites. State and federal protected areas, sacred grounds, burial sites, ecologically sensitive ridges, bird populations, and plain old “visual blight” have become major concerns.

One miffed conference attendee asked if DOE would cut back its estimates for fossil fuels, given the huge negative effects of their use. The EIA representative responded that fewer people complain about oil and gas than complain about noisy 15-story wind turbines packed with concrete, fiberglass, and steel. When someone raised a question about the intermittency of wind, a representative of the Tellus Institute tried to neutralize the argument by pointing to wind’s “spatial diversity” advantage.

Overall, the DOE conference was refreshingly realistic in its evaluation of alternative energy’s future.

Jerry Taylor is director of natural resource studies for the Cato Institute.