In an interview with Amanda Little of the left-of-center environmental news site Grist, Sen. Lamar Alexander of Tennessee argues the following:
Making gas more expensive would be a terrible way to introduce electric cars to the country. What we’ve seen is that slight increases in the price of gas, even when it goes to $4, affects every level of economic activity. It’s the nature of our country: People are used to traveling long distances, trucks travel long distances to deliver food and other products. Our focus should be low cost, not high cost. The way to do it is to invest heavily in research, get batteries that will travel 200 to 300 miles per charge and are cheaper than they are today.
The open question is over what kinds of public investment in research is and is not appropriate. Alexander makes a number of related observations in the interview, e.g.,
First, I would try to swap the money we’re spending on permanent subsidies for energy and invest it instead in research. Second, I’d like to focus these funds on the most promising areas of clean energy. I’ve devised a plan for seven mini Manhattan Projects for energy independence: solar, batteries, green building, capturing carbon, fusion, making fuels from crops we don’t eat, and finding better ways to deal with nuclear fuel.
Let’s return in a moment to which of these domains are appropriate targets of public investment.
So far we’ve been able to identify about $20 billion a year of energy subsidies [that could go toward R&D]. I was visited recently by a group including Bill Gates and Chad Holliday that thought we ought to increase federal support for energy research from the current level of $5-6 billion a year to about $20 billion a year.
Critics often wonder if the reinvigorated fiscal conservatism of the right is really a mirage. The fact that Alexander is mindful of identifying offsets for any new federal support for energy research, and that he is looking to tax subsidies to find them, strikes me as an improvement, if only a modest one, over what had been established practice. Moreover, the uproar over Solyndra might prompt more skepticism about channeling public funds to particular private enterprises in the future.
I would start with the wind subsidies. The U.S. is already committed to spending $26 billion over the next 10 years on subsidies for wind developers. That’s a complete waste of money in my book. This is a mature technology that no longer needs government support. I also believe the oil companies don’t need subsidies beyond those that other manufacturing and producing companies have.
Alexander’s reference to wind as a mature technology is important, and suggests that he’s using a non-crazy framework. In fairness, however, there are wind technologies, like airborne wind turbines (AWT) of the kind currently being deployed by Makani Power on a small scale, that are not yet mature. Airborne wind turbines have a smaller footprint on land, addressing an objection from “land greens,” and they can access strong, consistent wind sources over a much larger geographical expanse than traditional wind turbines. Some have argued that airborne wind turbines might at some point prove cost-competitive with coal. This isn’t to say that AWT technology should be backed by the public sector, but a strong case can be made that if any kind of wind power receives government support, it should be AWT and not the mature technologies invoked by the senator.
Alexander is cool to efforts to single out the oil and gas sector:
Well, many of the tax credits that President Obama talks about taking away from the oil companies appear to be tax credits that any company has. My feeling is, let’s let the oil companies have the same deductions as any old company — they are entitled to whatever Microsoft and Starbucks get. Beyond that, the rest of the deductions should go into energy research.
Generally speaking, my thinking has evolved to the point where if I had a dollar, I’d first put it into research and, in certain cases, jump-starting new technologies like modular nuclear reactors [with short-term subsidies]. I would not put that dollar into any subsidy that lasts more than three to five years.
It’s not clear to me that expensing for new drilling is comparable to the deductions that Microsoft and Starbucks get, yet the case for expensing is strong regardless, for the economic development reasons we’ve discussed in the recent past.
It’s worth noting that Alexander has done yeoman-like to encourage investment in and adoption of modular nuclear reactors. My next post will be on which technologies merit subsidies.