Grading the Stimulus Energy Investments
by Dr. Gregory Bothun & Jesse Jenkins
Huffington Post, February 19, 2009
Economic Stimulus, Clean Energy and the Scale of Our Challenge
Earlier this week, President Barack Obama signed into law the $787 billion economic stimulus package. The stimulus directs more than $80 billion to start the construction of a new, national clean energy infrastructure. Many are hailing this clean energy investment as unprecedented, which in the context of the last thirty years of neglected energy priorities is undoubtedly true. But with all those billions thrown about, it's hard to get a grasp on the scale of this investment. What does $80 billion really mean in the context of the 21st century United States energy system? Is this a significant investment or merely the first step on the long road to a green economy? In order to answer those questions, we'd better brush up on our energy literacy and get familiar with the scale of our energy system.
Welcome to Energy Literacy 101.
We start with a bit of historical context, noting that the energy infrastructure projects initiated in the 1930's under FDR culminated with 45% of the nation's electricity coming from renewable energy (hydropower) and employed approximately 100,000 workers over the decade or so it took to build that infrastructure.
With that bit of history in the back of our minds, we now turn to four big numbers: 100 million; 1 trillion; 400 million; and 1 billion.
With this sense of scale as our backdrop, we can now turn our eye to some of the individual components of the $80-plus-billion in energy sector stimulus investments and assign grades to each investment, as after all, this is a class in energy literacy.
We begin with the good grades:
A+: The act provides a much-needed, long-term extension of the critical Production Tax Credit that has spurred the booming wind industry, and makes tax credits for wind, solar and other renewable energy sources fully refundable for the next two years. In the past, these incentives have been implemented one year at a time, and allowed to lapse for up to a year or more at the end of each period, throwing these industries into crippling boom-bust cycles. Extending the PTC through the end of 2012 and credits for other renewables even longer is a smart move that provides longer-term certainty for businesses to plan their investments. Making these credits fully refundable during the economic crisis is also critical. Clean energy projects typically rely on banks and other financial institutions to absorb their tax credits in exchange for a payment, since the clean energy companies receive far more tax credits than they can absorb in their own profits. Now days, with banks everywhere in the red, financial institutions have stopped snapping up these tax credits, drying up funding for clean energy projects and rendering the tax credits almost useless. Finally, the bill also includes $6 billion to support loan guarantees expected to cover more than $60 billion in private loans to clean energy projects and helping thaw out frozen credit markets for these capital-intensive projects. With this kind of critical support in place, we can expect wind, solar and other renewable energy sources to experience robust growth over the next two years, bringing much-needed jobs and new supplies of clean, domestic energy.
A: Approximately $5B has been set aside for energy-efficiency retrofits for low-income housing, enough to significantly augment the existing Federal Weatherization Assistance Program for efficiency in low-income households. Saving poor households money during a recession while cutting back our national energy consumption is equitable and wise, and this investment is sufficiently large to retrofit a sizable one million low-income homes each year for the next two years. Still, with 20-30 million households in America eligible for weatherization assistance, this is just the beginning of this smart investment. If this level of support can be sustained for a decade, we'll have a truly scalable solution on our hands, and we will upgrade this project to A+ status.
A: Approximately $11B has been set aside to improve the energy efficiency of federal buildings and to provide local governments with block grants for efficiency retrofits. Relatively simple upgrades like changing out lighting, installing proper insulation and windows, and putting in programmable thermostats, can generally achieve an energy savings of 20-30 percent per building. Even at a retrofit cost of $100,000 per building (high in many cases) these funds would produce 110,000 more energy efficient government buildings. If the money is spent wisely, we estimate that approximately 250,000 buildings could reduce their energy footprint by about 20 percent - saving energy and taxpayer money. Of course we have millions of government buildings that need such energy retrofits so commitment to this course must be sustained beyond the next two years.
A-: Another $4.5B is dedicated to modernizing the electrical grid with up to $11B more devoted to implementing "Smart Grid" demonstrations throughout the US (like the one already initiated in Boulder, CO). Upgrading and expanding our transmission system and installing new, Smart Grid technologies, including "smart appliances" in homes and business, would increase the efficiency of the grid and enable grid operators to make smart, real-time decisions about how to generate, store and consume electricity - an essential step if we are to a) modernize our failing electrical grid and b) incorporate the widespread generation of renewable energy into the grid (wind, solar, wave, and more). After many decades of neglect, this $15.5B is the first serious public investment in our electrical grid in recent memory. Of course, the effort to upgrade and modernize our national electrical system will take many years, and the cost of building a nation-wide smart grid may well cost hundreds of billions when all is said and done. (Are you detecting a pattern here?)
Unfortunately, we have now handed out all the A grades that we can, and the remaining investments begin to fall progressively shorter of the A mark.
B: $2B for the Advanced Battery Manufacturing grant program to support the manufacture of advanced vehicles for hybrids, plug-in hybrids and electric vehicles. Currently, batteries store less than 1/60th as much energy as an equivalent amount of gasoline by mass and 1/30th by volume. While electric vehicles are more energy efficient than their internal combustion engine cousins, cramming enough batteries onto an electric vehicle to provide the 200 miles of range Americans expect (gotta be able to drive to the nearest factory outlet store and back after all) is still a major technical challenge. No wonder Obama's new Energy Secretary Steven Chu recently called for "a battery that's ten times better and cheaper than what we've got today." The widespread electrification of transportation could truly end our oil addiction once and for all by letting Americans plug our cars and trucks into a diverse portfolio of clean, domestic electricity sources. Switching to electric vehicles or plug-in hybrids would also dramatically lower our greenhouse gas emissions. Electrifying transportation is a lofty but critical objective, perhaps our highest collective energy and climate policy priority. It's worth - and will require - far more than $2 billion.
B-: About $8.5B has been committed for further R&D in both renewable energy and fossil energy (predominantly carbon capture and storage techniques for coal and gas plants). While this is a substantial increase from today's anemic federal energy R&D budget, energy innovation will take a sustained investment over the coming decades, and this is merely a critical first step. Federal investments in energy R&D should ultimately increase to the scale of the National Institutes of Health, which receive nearly $30 billion annually. Curing our oil addiction and stopping the climate crisis is surely worth as much as curing cancer and other disease. Furthermore, the bulk of these new funds are directed to the Department of Energy. On the surface this sounds sensible, but alas, the DOE is not really in the clean energy innovation business. Indeed only 17% of DOE's budget focuses on energy, with the bulk of DOE's funding (and operational competence) focused on managing (and cleaning up after) our nation's sprawling and antiquated nuclear weapons production system, as well as supporting high energy physics research.
That's why many are questioning whether DOE is really equipped, as currently structured, to drive energy sector transformation on the massive scale we need. That's one of the main reasons the Brookings Institution has proposed creating a network of new Energy Discovery-Innovation Institutes, regionally-focused, university-based research consortia that would bring together the best thinkers from across disciplines and from wherever they are in the academic, public or private sectors to tackle translational energy research and improve and expand our portfolio of clean energy technologies and fuels. In summary: when it comes to energy innovation, we don't just need to spend more money, we also need to spend our money differently, and that's a challenge that Obama and the Congress have yet to take up.
C+: About $16B has been set aside for new mass transit systems, with about half going to intercity rail lines, including new high speed rail lines, and half going to urban areas for better public transit systems. Expanding access to efficient and reliable mass transit will give people more transportation freedom and cut both oil consumption and global warming pollution, making it a critical investment. And the United States is getting way behind in the high-speed rail arena compared to nations like China, Japan and the EU. So it's about time we put some money on the table to build modern high-speed rail lines linking our major cities and providing comfortable, convenient alternatives to air travel for medium-distance trips. However, keep in mind again the scale of our transportation system and our oil addiction ($1 billion a day on gasoline alone, remember?). The ultimate price tag for the construction of new large-scale mass transit systems is enormous. For perspective, simply extending the existing DC metro system to Dulles Airport (and its about damn time) is projected to cost around $2.5B-$3B... for just 11 new miles of track!
All right, we're now out of the middling but passable grades and right on to the outright failures. And yes, there's a couple.
F: Just $0.3B for the Energy Star appliance rebate program. That's a nice gesture, but remember those 100 million households referred to above? This amounts to $3.00 per household, unlikely to do much to move the needle of national energy consumption, and a failing grade in our book.
F: Another $0.3B has been allocated for the purchase of more alternative-fuel and hybrid vehicles for the federal fleet (including plug-in hybrids if they are available soon). This is symbolic only, enough to convert just ten percent of the federal fleet (less if more expensive plug-in hybrids are purchased). Why not allocate $3B (remember you've got hundreds of billions being doled out here) and completely convert the federal fleet to efficient, advance vehicles? Ten percent is less than half-ass, and in the academic world, less than half-ass gets a failing grade.
OK class, you're almost dismissed, but first your must endure some concluding remarks (in typical Academic Windbag style):
We applaud President Obama for prioritizing clean energy investments in the stimulus and Congress for having the good sense to begin laying the foundation for a new energy economy. The bill focuses on all the right areas - clean energy innovation and deployment, a more efficient built environment, a smarter, more robust electrical grid, the electrification of transportation, and new mass transit options.
But the scale of our energy transition is simply enormous, and the $80 billion invested in clean energy by the stimulus takes us only the first steps towards an ultimate goal of energy independence and a zero carbon energy system. Luckily though, history teaches us that incremental progress, when sustained, can produce great achievements; but only if we respond, with sustained dedication and commitment to our energy challenges.
The American response to the launch of Sputnik began with innocuous baby steps. Yet soon, the United States had dedicated itself to the Space Race in full, and in a mere 12 years after the shock of Sputnik, American astronauts were walking on the moon. Today, we can again embark on the large-scale programs and muster the sustained commitment needed to reach our energy goals. While the American ideals of commitment, dedication and leadership have taken a long hiatus from the political stage over the past decades, they are not yet extinct. We can once again summon these ideals, rise to this challenge, and build a new, clean energy economy. Yes we can - not in 2 years, probably not in 10 years, but this journey must begin now. In that respect, $80 billion is a solid first step.
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