"We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature's inexhaustible sources of energy - sun, wind and tide. I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that." - Thomas Alva Edison (1847 - 1931)

WHAT AMERICA NEEDS NOW

Peter Lynch

What America Needs Now by Peter


by Peter Lynch

 

 It is a Presidential election year. Everyone is talking about Bush and Kerry and who is going to win the fall election. The discussions are almost totally centered on Vietnam, Iraq and Terrorism. One topic that seldom if ever comes up is the MOST important of all - Energy and the Environment. Trust me, when you are sitting in your home in the dead of winter and you have no power, there are NO other problems in your life. Access to energy, specifically electricity on demand is the KEY to our way of life. Why is this not a major topic in the election?

 

What is most important is: Do the American people win as a result of the election or do they lose? If we don't focus on and discuss the most critical issue of our day, we all lose.

 

What America needs NOW are fewer Democrats, fewer Republicans and fewer politicians and more Americans who will put politics second and the future of our planet and our children and grandchildren first.

 

What America needs now is viable LONG TERM consistent planning to ensure the energy future of America and the entire world! The world is totally dependent on fossil fuels, which are limited in supply and are rapidly being depleted.

 

In actuality, we are not running out of oil, we are running out of "cheap" oil. It is predicted that sometime in the very near future (3 to 15 years) the world's supply of oil will be HALF gone. Once this "tipping point" is reached, the demand for oil will always exceed the supply (since demand will be increasing and supply can only go down), this will result in constantly increasing prices, growing balance of payments problems for importing countries and tremendous inflationary pressures on the world's economies.

 

"The stone age did not end because we ran out of stones, and the oil age will not end because we run out of oil." -  Don Huberts, CEO Shell Hydrogen

 

Fossil fuels are the primary cause of global warming and like it or not, global warming is the most serious problem mankind has ever faced. In fact, even if was an abundance of fossil fuels available at cheap prices the earths environment may not be capable of absorbing the constantly increasing levels of carbon in the atmosphere

 

We are not going to solve this problem overnight or in 10 or 20 years, there is no "quick fix". The keys to solving the problem are simple, but seem to be elusive to many:

 

  1. Acknowledge that a problem exists
  2. Take immediate steps to address the problem

 

Acknowledge The Problem

 

Many of the countries in the world have acknowledged that there is a major problem and are moving forward quickly to address it. Countries such as Germany and Japan are moving forward with innovative legislation and comprehensive awareness and education programs to educate their populace to the existence of a global environmental problem.

 

The U.S. however does not seem to be aware of the problem or feels that it does not exist. That it is not proven "scientifically", that it is merely a natural course of events and there is nothing to worry about. We must be careful to understand the difference between what we "know" and what we "think" we know. This is a very dangerous method of analysis and it often leads to failing to see the forest from the trees.

 

What is missed in these type of analysis is that although the amount of change seems small, i.e. the amount of warming globally, since the last ice age (approx. 10,000 years ago). What is not being recognized is the exponential "rate of change" or acceleration of this warming. To illustrate, roughly half of this warming has occurred in the last decade. This is a serious problem that needs to be recognized and dealt with immediately. There may be no time to take a "wait and see" attitude, the consequences are just too great to take that risk.

 

"There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction." - John F. Kennedy

 

As a result of the magnitude of this problem it is critical that the U.S. play a leading role in solving this problem. The U.S. is the richest and most powerful country in the world and is acknowledged by most to be the world leader. Unfortunately, it is also the worlds leading energy user, leading energy waster and environment polluter. Consequently it is the U.S. that must take the lead and join with the rest of the world to address and solve this problem. The American public must be made aware of the problem and educated as to its cause and potential solutions. At the current time the general publics awareness of energy or environmental problems is minimal. Compared to the average citizen in Europe, most Americans are quite simply "energy illiterate". There is absolutely no reason for this current situation; government and the media must get serious and address it. Many people still think there is plenty of oil and gas and that the big bad oil companies are secretly taking advantage of us. The American public needs to be told the truth (even though they don't want to hear it) and armed with the truth move forward to effectively address this problem.

"Human history becomes more and more a race between education and catastrophe"  H.G. Wells, The Outline of History

The only possible way to halt the spread of global warming is to reduce the amount of carbon that is released into the atmosphere. Since fossil fuels are the major source of carbon, the only way to effectively reduce and reverse the current trend is to stop or minimize the use of fossil fuels and turn to renewable sources of energy - solar, wind, biomass, geothermal, hydropower and others sources which emit little or no carbon.

 

"No one can be comfortable at the prospect of continuing to pump out the amounts of carbon dioxide that we are pumping out at present ... with consequences that we really can't predict but are probably not good." Lord Ron Oxburgh, Chairman of Shell Oil

 

Steps to address the problem

 

There are a number of steps that I think the U.S. and the rest of the world need to take to immediately to start to effectively address the problem.

 

The good news is that many of these steps have already been tried in other countries and proven to work amazingly well. As a result it is clear to me that we have the technology and the knowledge to implement it, what we lack is the political will to face the facts. What we have to understand is, the big picture, that we are in the midst of a global paradigm shift from a fossil fuel (non-renewable) based economy to a renewable energy based economy and that this transition will take at least 50 years or more and that the time to start is NOW.

 

 

Steps  

  1. Understand that government legislation and tax policy can greatly assist in making major changes in society and that it must be implemented wisely. All policies must be consistent and long term and structured in a way that eliminates uncertainly for individuals, corporations and investors.

  2. "Best Available" technology must be put into place in all areas of industry, commerce and residential structures and processes.

  3. Energy conservation must be implemented nationwide. Intelligent conservation is not only possible but is by far the largest source of "new energy" to preserve the current fossil fuel sources long enough to accomplish the transition to a renewable energy base economy. It is also the most cost effective method.

  4. The "true costs" and benefits of all energy forms must be utilized in the calculation and determination of which source or sources to utilize in a given situation.

  5. The energy sources must be diversified and the most appropriate used in each case

Synopsis of Steps

 

Legislation and Tax Policy

 

Legislation and tax policy in many ways "makes the world go round" and much of it is really based upon subsidies, many of them age old and very well hidden.

 

For example, you can write off your mortgage interest payments as a tax deduction. Why is that? Your home is not a "productive" asset. But it is a tax break that has played a very significant role in making homes in America the average persons largest asset.

 

What we need to do is to put in place a national policy, with the proper incentives, that encourages renewable energy sources, allows them unimpeded access to the electric grid and applies more accurate "costs" to fossil fuel sources. There are two basic existing methods of accomplishing this:

 

1        Renewable Energy Tariffs or Feeder laws

2        An energy quota system

 

Renewable Energy Tariffs

 

Feeder laws are legislated polices that guarantee renewable production access to the grid, at a guaranteed minimum price and duration of time (10 to 20 years).

 

For example, in Germany the government guarantees a fixed payment for energy generated from all renewable sources for a period of 20 years. Each year the guaranteed price for new systems goes down 5% to account for technical advancements and the formula is reviewed every 2 or 3 years to keep it flexible.

 

Energy Quotas or Renewable Portfolio Standards (RPS)

 

With Renewable Portfolio Standards the government (Federal or State) set a target percent that will be generated by renewable energy sources and the market determines the prices that will be paid.

 

Fourteen states currently have RPS's, each of them different. This is confusing and needs to be coordinated on a national level. What we need is a National RPS with the federal government taking on a leadership role to setting the standard and moving forward.

 

I see no societal or technical reason for not starting out with a national RPS of 20% by 2020 and 50% by 2050.

 

How will it be paid for?

 

Both the feeder laws and RPS will be paid for by a fee, called a Systems Benefit Charge, which will be added to the monthly utility bill of all customers.  The Union of Concerned Scientists estimated that this charge would be approximately .002 cents per kilowatt hour of electrical usage or approximately $1.00 per month per user. This is certainly an absurdly low price to pay for helping to ensure the future of our world. I am quite confident that if the American people were "educated" on this situation that they would be willing to contribute far more than $1.00 per month to save our planet.  How about everyone giving up one Cappuccino's PER MONTH? This would represent a four-fold increase to approximately $4.00.

 

Feeder laws are more popular in Europe and other place around the world, while the RPS is catching on (slowly) in the U.S.  I personally think the feeder law concept is superior because of its simplicity and the fact that it has worked very well in Germany, Denmark, Spain, and is being considered in many other countries around the world including China.

 

For example, since the feeder laws have been in place in Germany (early 1990's) Germany has installed 14,609 Megawatts of wind power (one megawatt will power approximately 1,000 homes) and the U.S. has installed 406 Megawatts of wind power. Keep in mind that the U.S. is literally, the Saudi Arabia of wind, and has over 50 times the wind potential of Germany.

 

Best Available Technology

 

There are plenty of cutting edge technologies that can be used to save considerable amounts of energy.

 

Examples are: fluorescent lighting in every house (75% savings), high efficiency air conditioners and appliances (25% to 50% savings) and boilers (25% savings) and the list goes on and on. In addition, none of these efforts will product any discomfort or change in lifestyle; they are all transparent to the user

 

To illustrate a critical area that should be a major FOCUS of the U.S. is the widespread use of hybrid vehicles instead of current internal combustion automobiles. The fuel saving would be enormous, the average auto or light truck today barely gets 20 MPG, whereas the new hybrids get between 35 and 50 MPG and the change could occur very rapidly.

 

Transportation utilizes roughly 70% of the oil used in the U.S. Even a minor increase in the average MPG of the average automobile, i.e. 5 MPG, would eliminate all oil imports from the Middle East. This sort of increase (5 MPG) can be accomplished via hybrids  (gas/electric cars), which can easily increase average mileage, by over 20 MPG.  Once again, the technology and knowledge is here but is the political will?

 

Energy Conservation

 

Energy conservation is the easiest and cheapest way to save energy. Simple things like home roof insulation, storm windows and weather stripping can literally save hundreds of dollars a year with a paybacks of than a year.

 

The other major item that can be implemented is a nationwide enhanced set of building codes. These would require new residential and commercial buildings to meet minimum energy efficiency requirements.

 

This is very important because, unlike an automobile, a building or a house can last 50 years or more. So, if you design it inefficiently now, you will be paying for your mistake for 50 years.

 

The technology and knowledge are ready to go. What is needed is an aggressive government policy of education and raising awareness of the problem.

 

True Energy Costs

 

How can one expect to make a decision if you do not have all the facts? It is a very difficult thing to do. When it comes to energy, it is virtually impossible to determine the true cost of different forms of energy.

 

Let me illustrate with nuclear power. Nuclear power is a relatively "clean" source of power in that it does not generate large amounts of carbon that contribute to global warming. It also generates electricity at a very low price per kwhr. Or does it?

 

The nuclear industry is heavily subsidized by the federal government for example, over the first 15 years of the nuclear industries lifetime the government paid the industry $39.4 billion in DIRECT subsidies, in the first 15 years of the wind industry the government paid the industry $600 million, over 60 times less. Also I doubt that an accurate cost for the decommissioning of a highly radioactive facility has be included in the initial cost projections.

 

In addition, there is a law called the Price Anderson Act which limits the liability of insurance carriers in the U.S. to $9 billion dollars in the event of a nuclear accident. The balance of any liability would fall on the shoulders of the American taxpayer, a number probably in the $300 billion area for a major nuclear accident. This is a perfect example of an enormous indirect subsidy that is hidden from the public and NOT counted in the cost of an energy source.

 

How expense is nuclear power?  I am not sure, but it is MUCH more than what we are being told it is and the "cost" number that is being used when comparing it to alternative projects is most likely inaccurate.

 

Similar points (additional subsidies and hidden costs) can be shown for oil and coal. Oil costs the U.S. taxpayer billions of dollars per year in pollution costs and military costs to protect our middle east oil sources and coal burning destroys the water, air and the health of people in the region it is burned.  None of these hidden taxes, environmental or health costs are include in the "cost" when the American people are told how much the various alternatives cost. We are all paying a much higher  "price" than we realize. If these cost factors were included in a decision it may change the decision, if they are NOT included (as is the case today) we may be making critical long term decisions based upon inaccurate cost numbers.

 

"Socialism collapsed because it did not allow prices to tell the economic truth. Capitalism may collapse because it does not allow prices to tell the ecological truth."

 Oystein Dahle, retired VP of Esso Norway

 

Generation Diversification

 

No one form of Renewable Energy generation will be able to address and solve the world's energy problems. All forms (solar thermal, photovoltaics, hydropower, wind power, biomass, geothermal, tidal power) must be utilized in a diversified portfolio of energy sources that most effectively address the various needs and applications worldwide.

 

Conclusion

 

The problem is obvious and the answer is clear. We just have to open our eyes to see, the answer rises in the east every morning!

 

We must move immediately toward a global economy based upon renewable sources of energy NOT on non-renewable sources like fossil fuels. The transition may take 50 years or more, but there is no time like the present to start.

 

The father of the most valuable form of power - electricity, saw it clearly over 100 years ago, why can't we see it now?

 

"We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature's inexhaustible sources of energy-sun, wind and tide.  I'd put my money on the sun and solar energy. What a source of power!  I hope we don't have to wait until oil and coal run out before we tackle that." - Thomas Alva Edison (1847-1931)

 

Mr. Lynch has worked, for 27 years as an independent equity analyst and private investor in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this field. He was the contributing editor for the past 17 years to the Photovoltaic Insider Report, the leading publication in PV that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. He is currently a financial and technology consultant to a number of companies, among them DayStar Technologies (www.daystartech.com), a public company developing the next generation of thin film Photovoltaics. He can be reached via e-mail at: SOLARJPL@aol.com.


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