Energy security is the greatest challenge and the greatest opportunity of our time. But lack of action has put the U.S. at risk. America needs a bold plan that ignites our collective imagination, sparks innovation, and creates economic and national security. The starting point? A call to action from our new president in the first 100 days of his administration.
The president, Congress and industry must proceed with haste because a seismic restructuring of the global energy system is under way. Oil and natural gas consumption is rising at an unsustainable rate. Western companies that have controlled Middle Eastern oil since World War II are losing prominence. New powerhouses, notably Saudi Arabia’s Aramco, Russia’s Gazprom, China’s CNPC, Iran’s NIOC, Venezuela’s PDVSA, Brazil’s Petrobras, and Malaysia’s Petronas, control more than one third of the world’s oil and gas reserves. The International Energy Agency estimates that 90 percent of new production over the next 40 years will come from developing countries.
Flush with resources—and influence—these supply countries and their nationalized companies are amassing assets and market shares, while building their own integrated supply chains. Russia is using its oil and gas abundance to lock up deals with European countries, even as they fret about how their huge neighbor will use its dominant energy position as a geopolitical tool. Many speculate that Russia’s recent invasion of Georgia was spurred, in part, by that position. And China is on a worldwide march to secure energy supplies and minerals.
The global shift in supply chains and the effects of natural disasters, terrorism and war dispel the notion of “energy independence.” The U.S. must focus on “energy security” instead, which should include as much self-sufficiency as we can muster.
Since 1973 the U.S. has gone from importing a third of its oil to nearly two thirds. New energy policies have arisen after events such as oil embargoes or price hikes, only to fade away. Today the forces working against the U.S. are staggering. So is the opportunity to benefit economically; the global private sector is investing heavily in renewable technologies, yet the U.S. has barely taken part. This time we must get our energy policy right—and soon. We urgently need decisive leadership.
The Action Plan
The U.S. can no longer afford merely to tinker with alternative energy or to focus on a single energy source. We certainly cannot drill our way out of this problem. A comprehensive energy plan would adhere to six principles: ensure redundancy of supply and diversity of source; support well-functioning energy markets; invest in sound infrastructure for energy generation, transmission and distribution; provide for environmental sustainability and energy conservation based on full life-cycle costs; offer consistent regulation and transparent price signals; and link each energy source to its optimal sector of use.
Working through the U.S. Council on Competitiveness, leaders from industry, labor, academia and government are formulating such a comprehensive energy security road map, with a particular eye to enhancing economic competitiveness while limiting environmental damage. A cornerstone of the plan is an action agenda that the new president and Congress should implement in the administration’s first 100 days:
- Issue an executive order mandating that the federal government purchase products and services that meet the highest energy-efficiency standards. Such leadership and market pull will encourage the private sector.
- Establish a $200-billion “clean energy” bank, modeled on the U.S. Export-Import Bank and Overseas Private Investment Corporation. It will provide long-term financing for commercial investment in sustainable energy solutions that reduce, avoid or sequester carbon.
- Triple the currently paltry federal investment in basic and applied energy research and development. Create public-private partnerships—with federal baseline funding matched by state and private investments—to foster regional test beds and large-scale pilot plants for new energy technologies. Also, finance start-up companies and support existing small and medium-size clean energy businesses.
- End inequitable subsidies to select energy sources, equalizing competition. Direct the Office of Management and Budget to create a cross-governmental group that identifies barriers to various energy sources. Issue a presidential executive order, or propose legislation, to establish a consistent federal investment framework for all energy options—one that requires a full life-cycle analysis, including consideration of environmental impacts, legal liabilities, tax incentives, and distortion from trade subsidies and tariffs.
- Hasten the creation of a National Electrical Transmission Superhighway, which would enable significant expansion of alternative energy supplies. The president should convene governors and regulators to plan how to replace the current patchwork of transmission regulations within and between states with a single set of interoperability standards for a truly nationwide, intelligent, self-healing power grid. Also, spur creation of consortia that can model the technical characteristics of that smart grid.