A National Energy Policy

Our  vision

• Our country is 100% powered from energy sources that are: 
  • Clean/safe for people and environment 
  • Renewable/available 
  • Inexpensive 
  • Reliable 
• We use fossil fuels only for lubrication.
• We have eliminated our dependence on foreign energy sources 
• We export our technology to other countries to reduce the threat of global warming
• Our air quality meets state and federal guidelines 100% of the time

Primary goals of this legislation

• Reduce national dependence on foreign energy sources
• Ensure stable energy supply and prices
• Reduce energy costs
• Reduce global warming contribution (CO₂ emission)

Secondary goals of this legislation

• Create new jobs for Americans
• Help existing American businesses and the American economy
• Reduce dependence on non-renewable fossil fuels
• Reduce air pollution

New strategy

• Agree on a small set of aggressive national goals and guidelines. For example, 
  • Eliminate our national dependence on foreign energy sources by (date)
  • Ensure stable energy supply and lower energy prices by accelerating the adoption of renewable sources (through incentives and investment in infrastructure), for transportation and electricity whenever they can be shown to achieve lower energy prices than we are paying today.
  • Reduce our total  global warming contribution (CO₂ emission) every year. Achieve the maximum reduction without increasing energy prices (this is possible by choosing low-cost renewable sources such as wind whenever possible).
  • Adopt energy policies and programs required to enable states to meet state and federal clean air guidelines (e.g., break the chicken egg problem on fuel cells by providing incentives to manufacturers and gas stations)
  • Provide any necessary guidance to industry to eliminate ambiguity whenever this would be beneficial to achieving any of the above goals (example of this is picking a path for fuel cell vehicles: onboard reformers vs. pure hydrogen)
• Appoint a panel of no more than 10 nationally recognized energy experts (such John Holdren and Bob Williams) to develop a plan within 12 months to achieve these national goals. The plan should set milestone goals for efficiency and for use of renewables in the energy mix and for emission reductions and should lay out specific recommendations to achieve those milestones. For example, the panel should recommend whether the government should support a specific path to fuel cells (on board reformers vs. direct hydrogen), Congress should debate and pass the plan, as intact as politically possible, or pass any other plan that meets scientific peer review (such as approval by this panel) that accomplishes the specific goals that Congress has laid out. The plan might include the 5 point "energy independence plan" detailed below. I'd suggest the legislation should call out 10 universities by name and instruct each university president to pick a world-renowned energy expert, either from their institution (if someone there fits the bill) or endorsed by their institution. That way, the selection of the panel is non-partisan. The expert panel need not have complementary experiences; the top energy experts will know where to go for any information they lack.

Old strategy

• Agree on a small set of aggressive national goals. The fewer the better. For example,
  • By 2007, reduce US electric generation CO₂ emissions to 1990 levels
  • By 2012, raise fuel economy standards for passenger vehicles to 40 miles per gallon 
  • By 2020, consume <10M barrels of oil a day (we are consuming 20M barrels/day today)
  • All new cars sold must be hydrogen FCVs by 2020 (16 years after first commercial introduction). Make a statement of commitment to incentivize hydrogen fuel cell vehicles to remove FCV path ambiguity and speed development
  • No fossil fuel powered plants for generating electricity will be permitted after 2005. Therefore, after 2005, the only permits that will be granted will be for plant powered by renewables. 

That's it. 

PART II

Based on my own research in talking with experts, I've outlined below a 5 point plan that I believe is viable. It could be submitted to the expert panel for their consideration and refinement.

• We need to incentivize four areas: fuel economy, fuel cells, biomass conversion, and hydrogen
• The two cheapest ways to generate (or save) incremental energy are 1) efficiency (i.e., changing to more efficient lights, etc) and 2) wind. 
• The best way to reduce our oil dependence is to accelerate the move to hydrogen fuel cell vehicles. The sooner we do this, the more money we'll save.
• The cheapest way to add new energy capacity is to tap into the wind power potential of the Great Plains states. This will require creating a national electrical grid to move this power (as electricity) and transmitting baseload wind power, which means load leveling by coupling the wind power to a compressed air energy storage (CAES) unit or other means. This can be done efficiently and cheaply.
• Generate hydrogen from fossil fuels (methane, coal) with geological sequestration of the separated CO2. For the next 10 years, this will be cheaper than generating H₂ from electricity and water.  Use this hydrogen to fuel hydrogen fuel cell vehicles.
• Provide incentives to break the chicken-egg cycle for fuel cell vehicles. Incentives should target to manufacturers, service stations, and consumers.
• Continue research in renewables, efficient ways to generate hydrogen

Background

In the United States, over 95 percent of the high-quality wind resources are concentrated in the twelve states of the Great Plains. The entire Midwest region alone (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) could potentially produce 5.4 trillion kilowatt-hours of wind-generated electricity per year. This is nearly twice the electricity that the entire United States consumes annually! North Dakota alone has enough wind to supply 35 percent of the total U.S. electricity demand! But without a national commitment, incentives, and a national energy grid to transport this power to where it is needed, this national asset cannot realize it's full potential.  

Good wind resources are in regions remote from major markets for electricity. However, large-scale exploitation of these remote resources would be feasible by constructing large (multi-gigawatt) wind farms coupled to compressed air energy storage units to produce baseload power that could be transmitted at acceptable transmission costs to markets thousands of kilometers from the generation sites via high-capacity (gigawatt-scale) transmission lines operated at high-capacity factors. 

The cost of wind energy today is now comparable to or lower than traditional non-renewable energy sources. Wind power worldwide has grown 25% per year, faster than any other energy source. (See article by David Stipp, Fortune, Nov 12, 2001). 

For example, for oil, more than half our money flows overseas instead of remaining at home. It makes no sense. The $52 billion that we pay annually overseas for oil alone could be enriching Americans instead of Saudis. I don't get it. Who in Congress is voting for enriching the Saudis instead of Americans!?!?! 

For less than what we are now paying overseas in a single year, we could provide the incentives to end this insanity forever. Isn't it time for a change? Investing our federal capital in incentivizing the move to renewables for electricity and using our existing fossil fuels for  hydrogen to power fuel cell vehicles has a higher return on investment than anything I can imagine. We'll be saving money. And we'll enrich Americans instead of Saudis. We'll create new American jobs instead of jobs in foreign countries. And we'll clean up our environment too! Wind farm royalties would provide a major supplement to the income from farming/ranching: in the United States, income per acre would typically be greater than the net income from farming/ranching.

Why isn't this happening now? There are  two chicken-egg problems that we need the government to break. Without government intervention, this cycle could take decades to break.

• Fuel cells car manufacturing costs are too high without high volume and there isn't high volume at the start so no one will make the capital investment to make a fuel cell car since there is no clear economic payoff to making the big investment required. 
• No one will buy a fuel cell vehicle without a filling infrastructure and no one will invest in creating a filling infrastructure if there are no fuel cell cars. 

There is universal agreement that our energy future will be based on hydrogen. There is no economic or technical reason we can't start the switch now to a hydrogen-based economy. However, there are chicken/egg cycles  that must be broken in order to make the switch. In a long term sense, the sooner we break the cycle, the more money we'll save. However, to break the cycle requires making a decision on a direction, making a long-term commitment to that direction, and making the necessary investment to carry it out. From a short term viewpoint, it seems always cheaper to maintain the status quo. From a long term view, it's economically foolish. There is no reason to delay. Every year we delay "costs" us up to $50B in payments overseas that we don't have to make.

Once the incentives are in place, we can produce fuel-cell vehicles within 5 years that would be comparable in price to today's cars. We can also produce fuel cells to convert hydrogen into electricity for use in power plants.

The point of this legislation is two-fold: (a) to improve our energy efficiency (this is the most cost effective way to "create" new power) and (b) to accelerate the switchover to an energy economy based on renewable sources by providing incentives both on the supply and demand side that are sufficient to overcome the inertia in maintaining the status quo fossil fuel based energy economy. 

This means Congress must take a stand and pick a technology to get behind. In high tech we call it "focus". Scott McNealy, CEO of Sun, would call it "putting all the wood behind one arrow." That arrow is most logically hydrogen. That doesn't mean that other technologies are bad. It is just better to make a decision and pick a path (even if you are wrong!) rather than avoid making a decision. It is time to draw a line in the sand and take a stand and pick a direction.

A 5 point energy independence plan

• Enhance the existing national energy distribution grid. Beef up the existing national grid so that power from wind in the mid-west can be sold in other states. Also provide subsidies for CAES for storing excess wind power. This will reduce the need to use fossil fuels for electricity generation and instead free up our fossil fuels for use in conversion to hydrogen for powering fuel cells. This would result in new American jobs and the money paying for the energy would remain in America and not flow overseas. The price for fossil fuels would decrease because of less demand, meaning lower energy prices and lower prices for hydrogen for fuel cells.
• Give a $250M reward to any American car maker to sell 25,000 or more hydrogen-powered highway capable fuel-cell vehicles within a 12 month period. The reward is available once per car maker and must be claimed by Jan 1, 2008. If this dollar amount is not sufficient to get car makers off their butts, raise the reward until you get one of them to commit. $250M should be enough money to build a plant for producing fuel cell cars. Give a higher reward to the first car maker to break the threshold, and 20% lower reward to 2nd place, and a 40% lower reward for the third place company. You might even make the reward proportional to the number of cars sold in the first 12 months from first sale (with say a $500M cap on the maximum reward). Car makers and organized labor should love this as it will create more jobs and increase profits. It will also capitalize on American spirit of national pride and American competitiveness.
• Institute a "scrap and trade" program to speed fleet turnover. We'll charge all fossil fuel new car sales a small fee proportional to EPA highway gallons per mile of the vehicle (i.e., the inverse of mpg). For example, if a 10mpg car is charged a $1,000 fee, a 100mpg car would pay only $100. Electric cars and hydrogen fuel cell cars would pay no fee. If you are buying a hydrogen fuel-cell vehicle (or electric vehicle or any other electric or hydrogen powered vehicle), and you agree to have your old car destroyed, you will be given a rebate proportional to the gpm of the old car you scrap. Scrappage will disproportionately boost fleet efficiency (i.e., cut down on the money we pay overseas), cut smog and CO2, and expand automakers' new-car markets and hence jobs. We must get inefficient old cars off the road-they're worth far more dead than alive. This is not a tax!! The fees in this program flow from consumer to consumer (it is a feebate). Car makers should love this since it will sell more new cars (low mpg car sales would decrease, but incremental sales of subsidized fuel cell vehicles should more than cover the lost sales). The incentive would only be paid out to car models with low fuel efficiency and only if you are trading it in for a vehicle powered by hydrogen or electricity and only if your trade-in will be destroyed. It is not available for methane powered cars, for example. This is what we mean by putting all the wood behind the hydrogen arrow. Make the decision and stick to it. A smaller incentive might apply for buyers of hydrogen/electric cars without a gas guzzler trade in vehicle to further encourage adoption during the period when the fueling infrastructure is still being put in place.
• Break the chicken/egg on hydrogen fueling infrastructure by providing federal re-imbursement to cover 80% of the cost of installing methane reformers and hydrogen pumps at the first 10% of American service stations to apply for re-imbursement. While this is not a good long term solution (it consumes a non-renewable resource and generates CO₂), it's a reasonable and cost-effective (cheaper than generating hydrogen from electrolysis) way to kick-start the fueling infrastructure. It allow gas stations to use the existing natural gas pipelines to generate hydrogen for fueling vehicles. No more fuel trucks and no more toxic fumes and contaminated sites! Since we only reimburse the first stations to install the pumps, there is tremendous incentive to act quickly, especially if you believe that this is the way all stations will be heading. Also provide federal tax credit of 80% of the cost of an efficient in-home electrolyzer (such as from Stuart Energy Systems of Toronto) so that consumers can fill up their cars at home (just as we know from electric cars, this one incentive alone is sufficient to kick start the system). At some point, wind electricity may become so cheap we can extract hydrogen from water cheaper than from natural gas. This has environmental benefits (no CO₂).
• Allocate $1B each year for the next 10 years for renewable research and development. See the next bullet for how this should be allocated in the first 3 years. It could go to tax credits for erecting wind turbines, R&D grants on advanced solar cells, matching grants for labs working on fuel cell manufacturing processes.

The benefits of implementing these 5 provisions include:

• create new American jobs (building wind turbines, manufacturing and installing the national pipeline, building fuel cell cars, methane reformers, electrolyzers, etc)
• help the American economy (the $50B not sent overseas would stay in the country where it would be spent on buying American goods and services)
• enrich American families (the $50B each year could instead be going to American families), 
• lower energy costs (because wind power is cheaper than oil), 
• eliminate dependence on foreign oil (since all the energy can be generated domestically), 
• substantially reduce global warming (since the hydrogen energy cycle is completely clean),
• clean up our air quality (since wind turbines and fuel cells do not pollute)
• help the auto industry by selling more cars (the feebate would result in a net increase in the number of new vehicles sold leading to more American jobs)
• help reduce the deficit (the $50B saved would be taxable income)

Notes:

• Solar has potential in the near future. The sunlight falling on the United States in just one day contains more than twice the energy we consume in an entire year! Today, the costs for solar are not competitive yet with wind (unless you are not on the electrical grid).
• America now imports more than half its oil at a cost of $52 billion annually. New energy technologies based on indigenous, self-renewing resources will help keep these dollars at home to strengthen the economy and create as many as a 300,000 new jobs for American workers. And, they will give U.S. companies a competitive edge in the $400-billion-a-year global market for "green" goods and services.
• The plan from the energy expert panel would include things to incentivize efficiency, increase research on renewable energy technologies (the experts would suggest which are the most promising from the myriad available and suggest how to allocate $1B of new renewable research funding over the next few years), and make any further recommendations for achieving the goals of this legislation. Congress would be expected (but not required) to select from among the set of options offered by the experts by reviewing their reasoning (and level of agreement) on each recommendation (the experts wouldn't all have to agree on each recommendation, but at least 5 experts would have to agree on the recommendation to get it on this list). The 20 energy experts could be chosen by having 10 submitted by Democrats and 10 by Republicans. The "vote" of the experts on each item would be quite interesting... hopefully there will be many that have bi-partisan support since this is an issue that's all about American benefit or foreign benefit.