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Wednesday, June 20, 2012

America Could Have Dropped Big Oil Decades Ago -- What Happened?



Renewables are still just scraping by, while we're beholden to dirty fossil fuels. An important history lesson explains why.

Photo Credit: SasPartout/ Shutterstock.com
This story is not new. Today, solar energy is picking up momentum. But despite the current numbers and the recent raves, the solar saga, and that of renewable energy as a whole, has been going on for decades. It is a history of false starts and stutter steps.

First, the good news. According to the Solar Energy Industries Association (SEIA), 2011 showed record-breaking numbers for U.S. solar installations. The industry's best year ever saw demand rise by 109 percent over the previous year. With tremendous incentives and benefits for homeowners, and as prices continue to decline, the future looks bright for this alternative energy source.
However a quick glance to the past throws harsh light on the fact that we've been at this precipice before. In 1978, the White House Council on Environmental Quality issued this glowing statement: "Our conclusion is that with a strong national commitment to accelerated solar development and use, it should be possible to derive a quarter of U.S. energy from solar by the year 2000. For the year 2020 and beyond, it is now possible to speak hopefully, and unblushingly, of the United States becoming a solar society."

The key words here being "strong national commitment," because just as timber, coal, oil, gas, and nuclear received enormously strong federal support, solar needs the same kind of government backing, which as of yet, the sector has not seen. The statement should instead read, We could become a solar society, if only we wanted to become a solar society.

The process of generating electricity directly from sunlight, known as photovoltaic (PV) effect was first observed in Paris by 19-year-old Alexandre Edmund Becquerel in 1839. Albert Einstein won his only Noble Prize for his discovery of the law of photoelectric effect, which was an integral part of future photovoltaic technology. After groundbreaking PV research at Bell Labs in the1950s, it was finally in the '70s, when a combination of American spirit and ingenuity met simple necessity to bring modern solar technologies to the forefront as a power source. The trigger was the Arab Oil Embargo of 1973 and 1974. Out of this crisis, came the Energy Reorganization Act of 1974, and then formation of Energy Research and Development Administration, (ERDA), which would in later years become the Department of Energy. The goal of ERDA, which had an initial budget of $4.3 billion, was to bring together all the efforts devoted to energy research and development, including solar, under one umbrella. Or in the law's wording to use "all energy sources to meet the needs of present and future generations... to make the nation self-sufficient in energy."
Despite the initiatives, high oil prices and fuel shortages continued to plague the United States throughout the '70s.

Deadly Cold

January 1977. Nationwide, factories were shutting down and workers were being laid off. The cause was harsh winter temperatures and a country running out of fuel. The human toll of the oil and natural gas shortage and brutal weather was coming to bear. A newly elected president spoke of a "permanent, very serious energy shortage."

In the eastern states it was the coldest winter on record in almost a century. Gas companies such as Consolidated Edison Company were shutting off supplies to customers just as the Arctic air plummeted the mercury lower and forced demand higher. Temperatures on the streets of New York City vacillated between 1 below and 12 degrees above Fahrenheit. At welfare hotels across New York City, tenants (some of whom ended up perishing) were forced to go without heat for weeks at a time due to unpaid bills on their part or on behalf of absentee landlords, many of whom were disinclined to make necessary repairs even if the bills were paid.

New York City's Central Complaint Bureau noted that it had received the highest total of calls, more than 10,000 a day, reporting weather related emergencies. By month's end New York, along with New Jersey, had declared a state of emergency due to the weather and natural gas shortage. 1,319 New York gas-heated schools were ordered closed for a week. In New Jersey, the governor ordered heat turned down to 60 degrees at night and warned that non-compliance could lead to residential natural gas cut-offs.

Energy concerns grabbed the nation's attention. Consumption was up, oil from abroad was iffy and gas production domestically was down. There was uncertainty whether continued gas drilling would even be able keep up with America's appetite for the fuel. The nation had become addicted to "natural gas as a cheap power source."

Moral Equivalent to War

By spring, the air had warmed, but President Jimmy Carter had no choice, things had to change. On April 18, Carter took to the Oval Office to speak to the nation on live television. He pulled no punches. "Tonight I want to have an unpleasant talk with you about a problem unprecedented in our history."
The energy crisis was only going to get worse if not addressed, as the demand was increasing faster than the supply. He called the situation worse than the gas lines of '73. At the core of the problem was the United States, in Carter's words, "the most wasteful nation on earth."

"We waste more energy than we import," he said. It was quite possibly the bleakest presidential speech in history. But Carter did not waver, he continued talking of "national catastrophe," "embargoes and loss of freedom, of sovereignty," and if we were lucky, of "drifting along for a few more years." Finally he laid it all on the line. "This difficult effort will be the 'moral equivalent of war' except that we will be uniting our efforts to build and not destroy."
But Carter left the door open for every American to make a difference. What the newly elected 39th president was asking for was unselfishness and shared sacrifice -- tricky territory indeed. He even suggested the dreaded c-word --- conservation. The ugly word meant altering citizens' lifestyles, and historically, whether it's with anti-smoking campaigns or eating less sugary foods, such amendments are never going to be popular. War was a comparatively easy sell. Carter was doomed by common sense.

His plight was not lost on reporters. Hedrick Smith of the New York Times described "the political gamble inherent in preaching sacrifices to a nation of consumers in peacetime." Americans did not want to hear about taxes on high-gas luxury cars, such as when Carter decreed that "Citizens who insist on driving large, unnecessarily powerful cars must expect to pay more for that luxury." In fact, at the time of Carter's energy speech, in an ode to our current "debate" over global warming, national polls showed that half of the public thought the energy crisis was "artificially created."

The nuts and bolts of his speech, besides the "strict conservation," called for a renewed use of coal and the development of permanent renewable energy sources. His goal for solar energy was to have it power 2.5 million homes by 1985. Carter had been touting solar since his inauguration in January, when four solar heating units were set up at the receiving stand on the White House North Lawn to keep the Commander in Chief and his entourage warm while viewing the parade. Granted, solar was but a part of a larger strategy. Nevertheless, solar was in the game, and it was a start.


In May of 1978, following up on his success as organizer of the inaugural Earth Day in 1970, Denis Hayes, a senior researcher for Worldwatch Institute, was part of a group to bring together Sun Day, an internationally scoped event aiming to educate the public and the policy makers that the technology to go solar was available. A day of fairs and exhibitions were scheduled to take place in 28 different countries, and officially kicked off at the United Nations Plaza in New York with a ceremony titled "The Dawning of the Solar Age." President Carter used the spotlight to announce a $100 million increase in money devoted to solar and renewable projects.

A little more than a year later, Hayes would move on to become director of the Solar Energy Research Institute (SERI), which had been established in 1974 and became operational in July of 1977 in Golden, Colorado. (In 1991, SERI would become the National Renewable Energy Laboratory.) Hayes was a man ahead of the game and talked to reporters nearly 35 years ago about the "profound and irreversible alterations of global climate," and that we were already "behind schedule" for "solar transition."

Hayes remembers the early days of SERI as being "built with enormous enthusiasm," as an "analytical and research center, a place where policy formulation could take place in the field." At the time, the term "solar" was a category-head for a bundle of renewables including wind, biofuels and ocean thermal electric. Staffed with the finest minds in the country, including Noble Prize-winners, the institute's atmosphere was one of prestige, and comparable to the National Institutes of Health and not unlike the early days of NASA. It didn't take long before researchers at SERI believed that photovoltaic technologies could make substantial contributions toward our energy problems. Hopes at SERI were high. They believed they could solve America's energy problem.
In 1970, solar funding was a mere $75,000. By 1977, it had increased to $261 million. A year later, in 1978, subsidies were aimed towards renewables for the first time, including a tax credit for residential installations of solar. Still, the numbers paled in comparison to the dollars handed out to the other energy sectors, including the $787 million spent on nuclear in 1977.

At the same time other nations were coming to the same conclusion regarding the necessity of alternative sources of energy. Even Saudi Arabia, the world's largest oil producer, was on board, as the nation announced in 1977 it was building the world's largest solar heating system.

"We had, in the Carter years, a well-developed plan to get 20 percent of nation's energy from renewable resources by the year 2000," Hayes says, and is confident they'd have made their mark if a series of policies had been enacted. "Unfortunately," Hayes says, "none of those policies were ever implemented."
Hayes identifies the moment when Carter embraced the 20 percent-call, over quite a few objections, as "the high point of solar energy in the United States."

Two Presidents, One Bad Idea

Energy independence is something every president campaigns on. Moving into the 1980s, the one simple truth was that the United States didn't want to ever be in a situation of scarcity again, or have to rely on foreign sources of energy. Yet in all of the government's brilliance, it was decided to gut the very agency that might have actually delivered the promise of energy independence -- SERI.
In November 1980, America voted out Jimmy Carter, and in came Ronald Reagan. (Reagan even took the opportunity of their October 1980 debate to take a poke at Carter's conservation pleas: "He [Carter] has then accused the people of living too well and that we must share in scarcity, we must sacrifice and get used to doing with less.")

For Denis Hayes the transition of administrations was a time of great uncertainty. The biggest question was whom the president would choose as the Secretary of Energy. As a possible sign of Reagan's interest, or lack thereof, in the field of energy, this would be the last cabinet position he'd get around to selecting. As Hayes recalls, "he chose, apparently by throwing a dart at the wall, a guy named Jim Edwards, the former governor of South Carolina, a dentist by profession, to be Secretary of Energy." Edwards would replace Charles Duncan Jr., a former president of Coca-Cola.

Inside the halls of the Solar Institute in Golden, Colorado, the irony of a dentist replacing a soft drink executive was not lost on the aforementioned group of Noble-caliber scientists. Says Hayes; "It suggests something about the feeling of whether or not somebody needs to know anything about a fairly complicated field before you give them the [department's] highest office in the land." A former dentist was now calling the shots on whether the experiments and research undertaken by SERI's staff of distinguished scientists would ever see the light of day.

By June 1981, Dennis Hayes was out of a job; along with 370 of the gifted scientists and activists he had recruited. Reagan's distaste for all things solar was never more evident than by his dismantling of the solar panels Carter had placed atop the White House roof, but that display was only the beginning as the budget for solar development, along with subsidies and tax credits for the industry were slashed. With federal backing virtually wiped out overnight, young solar companies began to collapse and the industry as a whole was on the ropes.
Reducing the nation's reliance on foreign oil and fossil fuels, in general, would have seemed to have been in the U.S.'s interests. In order for this to happen, scientists and renewable advocates pushed for the same federal backing that all other energy sources received in their years of infancy, going all the way back to timber. Instead, the Reagan administration chose to double-down on fossil fuels and keep heaping enormous amounts of taxpayers' money in this direction. As an alternative to foreign oil, the new administration put its support behind, not renewables, but synthetic fuels.

The Synthetic Fuel Corporation was a dirty alternative to dirty energy. There is perhaps no better example of misplaced taxpayer money than the decision to invest in synfuels, which is the result of turning all the dirty shit we can find; shale oil, tar sands oil, coal and lignite into a substitute for gasoline. Two presidential administrations, one on each side of the political line, put their support behind synfuels. From an original price tag of $88 billion, the Synthetic Fuel Corporation was eventually awarded $20 billion. Money that, despite the corporation's president taking home $135,000 a year, which made him the second highest paid federal employee, behind only Reagan, the corporation struggled to come up with ways to spend the money, taking three years to throw a nickel behind a single project. The technology for synfuels wasn't even new, having been shopped around two other times in American history, in the '20s and the '50s.

In comparison, Hayes' Solar Institute budget spiraled from $124 million in 1980 to $59 million in 1982. Speaking of the $88 billion proposed for synfuels, Hayes says such a commitment to solar would have been "transformational," but $20 billion would have certainly done the trick. Hayes says that if the United States had put together a five- or 10-year plan for solar and stood behind it with those kind of dollars and just let the industry develop, "We'd be in very different shape than we're in today." But instead, the government supported synfuels, which Hayes calls a fiasco. "We spent, in the end, $18-20 billion on these things for just a couple of kettles full of oil."

In 1985, tax credits for solar homes were not renewed. The solar industry itself, once a billion-dollar business, had barely a pulse. Oil prices were at rock bottom, and so alternative energy was no longer a priority. Shortsightedness prevailed. The Reagan administration systematically cut all things renewable, while the budget for nuclear rose substantially.
Hayes probably summed up the backwardness of the U.S. energy policy best when he penned an op-ed for the New York Times in 1981, with the hopes of creating as big a splash as he could amidst his forced resignation in 1981. He wrote, "If the oil industry cannot thrive today without subsidies, who can?"
Anti-government spending advocates may applaud the decision to cut funding for renewables, but the reality is that spending and subsidies towards energy has never wavered -- federal dollars were simply directed at the fossil fuel industry instead of renewables. Or put another way, taxpayers are now subsidizing oil and gas profits, instead of the technology needed to spearhead the energy sources of the future. Take away the oil and gas subsidies, and the industry will still turn enormous profits. Take away renewables' funding, and more likely than not these companies fold.

According to a March 2012 study done by the Congressional Research Service, analysis shows that since the inception of the Department of Energy in 1978, 62.3 percent of energy technology funding went to nuclear and fossil fuels, 16.5 percent to renewables, while 14.7 was directed to conservation, and 6.6 to electric. Going back further and expanding the numbers from 1948 to 2012, funding for fossil and nuclear goes up to 74 percent, while renewables took in 12 percent during that same period.

Level Playing Field

It is impossible to speak about solar energy today without getting into Solyndra's 2011 bankruptcy after receiving a $535 million loan guarantee from the federal government. Bring up the name Solyndra in some corners and you'll be required to give witness to forced guffaws from the uninformed, or worse yet, plain old contrived outrage. The sight of Americans rooting and applauding the demise of an American company whose business was geared to bring the country clean, homegrown energy defies logic. Speaking to those within the solar community, they'll plainly admit the loan was a bad investment, but they're also quick to point out that such an investment is a minuscule piece of the overall energy pie.
Such misperceptions motivated Nancy Pfund, a managing partner at Double Bottom Line Venture Capital (DBL Investors) to undertake the grueling study of U.S. energy subsidies for her report, "What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America's Energy Future." Pfund says a growing frustration on her part regarding the politics around subsidies motivated her study, which she believes is the first to quantify "how the current federal commitment of renewables compares to support for earlier energy transitions."

At the conclusion of her study, Pfund says, "I was surprised at how much more support oil, gas, and nuclear received in their earlier days than renewables has received, because if you just read the popular press you'd think just the opposite. There is a lot of hue and cry about how renewables are being subsidized but when you actually look at the numbers it's a fraction of what oil and gas and nuclear received." Not to mention she adds, "these are gifts that keep on giving." Which leads to the question, why are we still subsidizing a 100-year-old industry, when the initial impetus for such action was to help launch these industries. Is there any doubt that they are now secure?

A look at some of Pfund's numbers shows that the average for annual energy subsidies were as follows: (adjusted for inflation) oil and gas (1918-2009), $4.86 billion per year; nuclear (1947-1999), $3.50 billion per year; renewables (1994-2009), $0.37 billion per year.

However, what's most noticeable is the federal support given to the different energy sectors during their infancies. Pfund writes: "There is a striking divergence in early federal incentives. For example, federal support for the nuclear industry overwhelms other subsidies as a percentage of federal budget, but equally striking is the support for oil and gas which was at least 25% higher than renewables, and in the most extreme years 10 times as great."
Pfund found that "Every great expansion of the U.S. economy can be linked with the discovery of a new energy source." And today federal support for energy innovation is much lower than at the same correlating juncture in the development of timber, coal, oil, gas, and nuclear.

Simply put, the playing field is not level. "Subsidies exist for all energy sources," Pfund says. "So when people talk about yanking the wind production tax credit or in 2016 the investment tax credit for solar, I hope that people will think twice about that. It doesn't have to be an ITC, but without some type of continuation of financial incentives until the costs come down to a point where they don't need them, you're going to create this boom and bust. You're going to draw dollars away from renewables right at the point when they're actually about to make a big dent on our energy profile."

State of Solar Today

Dave Llorens, CEO and co-founder of the solar power company One Block Off The Grid (1BOG), sees solar energy as on the verge of tipping. 1BOG is located two blocks from AT&T Park in downtown San Francisco but its business scope is nationwide. Backed by New Enterprise Associates, the same team behind Groupon, 1BOG gets groups of customers together in an area and sets them up with a vetted contractor to install home solar panels. 1BOG negotiates the best deals for solar panels in a particular region, and through leasing provides savings while eliminating the big upfront cost.

Llorens' customers are pleased to not only save money but to have a clean source of energy. In fact, his team's biggest hurdle now is convincing potential customers to help themselves. Says Llorens, "Some people are like 'It sounds too good to be true. I can save money immediately, it doesn't cost anything, and somebody guarantees it all?'" Not only does 1BOG accomplish those things, but through the use of satellite photos, the company can also give estimates over the phone. "People just want to see the numbers -- we can do that for them," says Llorens.

Llorens sees the overall market opportunity for solar in the United States as gigantic. "It's just enormous," he says, "and it grows at a breakneck pace every year." But again, it all comes back to support. "One way to get regain the glory of our auto manufacturing days is clean tech," says Llorens. "That's what this country does better at than any other country, innovating and selling those products around the globe. But that can't be done without immense backing and support to get it off the ground. Even coal was subsidized to take the place of wood. Nobody remembers that. Everything needs a push to get off the ground."
Llorens looks at solar's growth as somewhat unavoidable and foresees the United States leading the way as a global leader in installations, and with it, generating an immense amount of business, jobs and infrastructure. "Soon, I think that it will be impossible to ignore the fact that solar makes you money. There's this iceberg of a mindset, this paradigm, where people think it's for rich environmentalists -- it's not to save money. That's going to thaw pretty soon. People are going to start to get it."

He compares the adoption of solar to that of central air conditioning, and how suddenly homeowners went from wall units to central air. It was simply a smarter way to cool the home and soon everyone had it. He sees solar following the same adoption curve. Once a few people on the block see it coming to the neighborhood, Llorens foresees a domino effect. "When people see it for themselves, that it's just an unequivocally better way to get power for your home," he says. "That it's cheaper, more stable, and it's clean. Then it explodes."
There's no way to get around the fact that on Capital Hill and at the state level today everything is about spending. But the focus is incredibly narrow. Take Pennsylvania's penny-pinching new governor, Tom Corbett, who has taken a hatchet to such things as education and social service programs, yet will go out of the way to give the fossil fuel industry an unnecessary break. Here's a headline from the Pittsburgh Post-Gazette on June 4, 2012, "CORBETT SEEKING $1.675 BILLION TAX BREAK FOR SHELL."

On a global scale, as well, lunacy seems to rule the day, such as occurred in late May of this year when it was reported in the Guardian that natural gas had been "rebranded as a green, low carbon source of power" by the European Union, allowing the fossil fuel to inch in on the billions of euros intended for renewables.

Since solar technology has become available, the obstacles have remained the same year after year. Sadly the solutions are the same, as well. It's simply a matter of failed leadership. Spend no more, if that's the Holy Grail; merely spend the money in the right places. Last year, solar combined with wind, and geothermal to provide only 4.7 percent of the nation's power, still a far cry from the 20 percent said to be obtainable more than 30 years ago.
Aaron Skirboll is a freelance journalist and the author of "The Pittsburgh Cocaine Seven: How a Ragtag Group of Fans Took the Fall for Major League Baseball."

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