By John A. Bewick

The Presidential candidates increasingly are including energy-policy issues in their stump speeches. And the Democratic contenders propose enormous spending programs—from $50 billion (Sen. Hillary Clinton) to $150 billion (Sen. Barack Obama)—with a New-Deal style appeal for investing in the country’s energy future.

Last year, Obama said, “This is our generation’s moment to save future generations from global catastrophe. It will take a grass-roots effort to make America greener and end the tyranny of oil.”

Clinton, in a speech at the National Press Club, said “Instead of national security dictating our energy policy, our failed energy policy dictates our national security.”

Sen. John McCain likewise includes the energy theme in his campaign promises. In April 2007 he said, “We have the urgent need and the opportunity to build a safer and thriving future with more diverse, reliable, and cleaner energy. But it will take another indispensable commodity to make it happen—American leadership.” McCain is well known as the perennial co-sponsor, with Sen. Joe Lieberman, of legislation that would mandate carbon constraints.

It seems the next president, regardless of who it is, is going to attack development of clean energy vigorously. If mountains of public money are to be spent on development of new technologies, there is an equally mountainous question of how those funds should be managed to assure the money is not wasted—i.e., that the investment yields commercially viable, clean energy technologies that get widely deployed in the coming decades. Who should manage this project—the federal government or the private sector?

While the Department of Energy might seem like an obvious choice, its track record suggest otherwise. For one thing, DOE’s annual appropriations are subject to political whims, as well as political competition inside the beltway—with defense, health care, education, and other departments clamoring for their share. Further, the agency’s tendencies to pick so-called winners like FutureGen before the facts are in about commercial viability suggests it would be the wrong model for managing a New Deal-scale energy development effort.

So what about the private sector? The Electric Power Research Institute (EPRI), funded by the utility industry, has prepared a comprehensive and detailed RD&D program for developing commercial, climate-friendly power generation technology. EPRI brings a great degree of industry credibility, but its budget model severely constrains its resources, and its track record is mixed, when it comes to wide-scale deployment of technologies developed.

The Gas Research Institute might be a model worth replicating. It generated 30 percent success on commercial ventures—twice the normal industry rate of success—with a benefit/cost ratio of 7:1. GRI selected its projects under the oversight of a government watchdog—FERC—with multiple review boards—including industry, academia, public interest groups and technical experts—all contributing in a formalized project appraisal methodology that winnowed out the important, likely winners with amazing success.

Plus GRI’s funding model bears more resemblance to the broad-and-deep stream that might characterize a New Energy Deal. GRI was funded by a surcharge on interstate gas pipeline sales.

It comes down to this: whom do you trust? No one I know trusts the government to develop commercial products. And historic examples support this sense of mistrust.

After World War II, Alfred Loomis shut down the MIT Rad Lab that had developed radar during the war by January 1946, because he felt companies like RCA and Motorola would do a much better job of exploiting the commercial potential of electronics. By contrast, the National Laboratories associated with atomic energy were not closed. And while they have produced valuable research, their efforts have paled in comparison to what the RCAs and Motorolas of the world have produced.

America might need a New Deal to finance the mammoth clean energy challenge, but such an investment must be managed by the private sector—perhaps in a GRI-style structure—to ensure public spending actually results in cost-effective technologies being developed, commercialized and deployed.

(EDITOR’s NOTE: This blog entry provided a preview of John Bewick’s article, “Cultivating Clean Tech,” which appeared on the cover of Fortnightly’s May 2008 issue. Bewick, formerly secretary of environmental affairs for the Commonwealth of Massachusetts, is founder of Compliance Management Inc., an environmental consultancy based in Hingham, Mass. -MTB)

Posted: April 2nd, 2008 under 2008 elections, R&D, energy policy.
Comments: none