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Energy Policy?

by Cullen Couch


Part I  |  Part II  |  Part III  |  Key Players

Coal miner
Coal country, southwest Virginia/Kentucky

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For a tense period last summer, the BP Deepwater Horizon oil disaster forced a debate about offshore drilling and the direction of U.S. energy policy. The Obama administration imposed a moratorium on further drilling as the world watched the uncapped well expel millions of gallons of oil into the Gulf of Mexico. But soon after BP engineers slowed and then stopped the leak, the nation moved on to other news. It is hard to imagine a worse event, or better opportunity, to hold public attention. Political inertia, however, seems to have outlived the urgency of the moment.

Any attempt to steer domestic energy policy risks offending someone. Energy is a deeply complex subject that confounds the best policy minds and resists easy summary. It involves issues of cost, feasibility, safety, national security and, most importantly, environmental integrity. “It’s amazing that, with all the problems with the oil spill in the Gulf and a number of other significant issues, there isn’t some movement on energy legislation and climate,” says Hank Habicht ’78, managing partner of SAIL Venture Partners, a pioneer in the clean-tech investment sector. “It’s definitely needed.”

In 2004 the bipartisan National Commission on Energy Policy (NCEP) released a comprehensive blueprint for an energy policy that, among other things, began the serious discussion of a cap-and-trade approach to carbon emissions.

Habicht, who served on the commission, says the report, Ending the Energy Stalemate, “was designed to be very non-partisan, very factual . . . We all bemoan the fact that the country doesn’t focus on energy policy for a long enough time, and that we have so many different actors and different parts of the energy system: transportation, hydrocarbon fuels, power sector, and so forth. Energy is so geographically focused and differentiated that there are a lot of political reasons why a comprehensive energy policy has been difficult.”

According to the report’s executive summary, the commission “found common ground in rejecting certain persistent myths — on the left and on the right — that have often served to polarize and paralyze the national energy debate . . . Some of these include the notion that energy independence can be readily achieved through conservation measures and renewable energy sources alone, or that limiting greenhouse gas emission is either costless or so costly as to wreck the economy if it were tried at all. Most of all, commissioners rejected the proposition that uncertainty justifies inaction in the face of significant risks.”

Three years later, in 2007, the NCEP released an updated report with similar detailed recommendations, noting that “the politics of polarization and paralysis continue to exert a potent influence. They must not prevail.” Yet another three years has passed and the country has done little to alter its sources and use of energy. The commission’s recommendations, meanwhile, barely draw mention in the press.

We have asked Virginia Law alumni with wide experience in energy, from regulation to development, to frame the dialogue that keeps breaking down between industry and Washington. They identify the major collision points that must be resolved for a new energy strategy to emerge.

The Energy Mix

The Lawrence Livermore National Laboratory, in association with the Department of Energy, releases a yearly “Energy Flow Chart” that estimates total annual U.S. energy use. The chart shows at a glance each source of energy, where it flows, and its ultimate destination.

Estimated U.S. energy use in 2009
Estimated U.S. energy use in 2009 (Click to see larger)
Download a high-resolution PDF (3.6 MB)

In 2009 the U.S. used approximately 94.6 quads of energy (approximately 25% of total world energy usage). One quad is equivalent to over eight billion gallons of gasoline.

The column on the left lists each source used in the nation’s energy portfolio. These energy sources feed four broad categories: residential, commercial, industrial, and transportation. To varying degrees, every energy source generates electric power for each of the categories.

For example, the green band at the bottom shows the amount of petroleum used in a year, 35.27 quads. Tracking right shows its destination. A thin green line (.39 quads) leads to “electricity generation,” joining other types of energy devoted to that sector (total 38.19 quads). Continuing right, part of the band again moves into residential use (1.16 quads out of a total 11.26), commercial (.60 of 8.49), industrial (7.77 of 21.78), and finally, transportation (25.34).

The total of renewable energy (solar, hydro, wind, geothermal, and biomass) is just 7.74 quads, about 8% of the total energy mix. Nuclear energy yields 8.35 quads, or about 9% of the total mix, all of which is used for electricity generation. Petroleum (oil) contributes 37%, coal 21%, and natural gas 25% to the rest of the mix.

The federal government’s Energy Information Agency (EIA) predicts that by 2035 population growth will increase annual energy usage by about 20 quads, but because of higher efficiency standards mandated for vehicles and lighting, the actual average BTU use per person will decline, as will the average energy use per dollar of real GDP. The EIA also predicts that renewable and nuclear energy will grow their share to about 22% of the total.

One fact leaps out from this chart. Of the total 94.6 quads generated in 2009, fully 58% of it is “rejected energy” (the sum of the gray bands in the upper right corner of the chart), which is a function of energy efficiency. “Rejected energy” represents the amount of energy that leaks out of the system during energy generation, storage, and transmission (e.g., waste heat from power plants, power line loss, motor inefficiencies, etc.). The least efficient categories are transportation (75% rejected) and electricity (68%). The most efficient are residential, commercial, and industrial, rejecting 20 % on average.

Can we recoup some of that lost energy? “Two key questions are what is scientifically and physically possible, and what is institutionally and practically possible,” says Habicht. “They’re two very different things we have gleaned from watching energy crises come and go over the decades, but basically it’s possible to perform much better, maybe even 70% or 80% better from a technical standpoint.”

Of the 12.08 usable quads of electricity generation, about a third each powers the residential (4.65), commercial (4.51), and industrial (3.01) sectors. The transportation sector uses just a tiny amount (.03). If electric vehicles (EV) grow in popularity, that number could rise rapidly, changing the relationship between the automotive, oil, and electric industries in unpredictable ways. Tom Farrell ’79, CEO and chairman of Dominion Resources, sees both challenge and opportunity with EVs.

“EVs present the industry with a unique opportunity to help transform the nation’s transportation sector in a way that benefits both the environment and our national security,” he says. “First, when compared with conventional gasoline-powered vehicles, EVs will significantly reduce greenhouse gases and other air emissions. That will lead to cleaner air and a healthier environment. Second, since our primary sources of electric power – coal, nuclear, natural gas and renewable energy sources – are produced domestically, we will reduce our dependence on foreign oil by powering our vehicles with electricity. Almost no electricity today is produced by burning oil so the more electric cars we have, the lower our use of foreign oil.”

Part I  |  Part II  |  Part III  |  Key Players