The Fourth of July has very special meaning to Americans as our official proclamation of political and economic independence, couched in terms of human rights. 2013 also marks the 150th anniversary of the bloodiest battle ever waged by Americans – the Civil War’s Battle of Gettysburg in 1863. It was our second war of independence – this time to end slavery. The Civil War eliminated an economic model that benefited a small minority of owners of assets in the form of cheap labor.
So what, you may be asking yourself, does this have to do with energy? It ‘s all about understanding the lessons of history and finding inspiration in them. With Smart Grid technologies that modernize and revolutionize the electricity grid, we have the opportunity to convert our energy supplies from brute force extraction methods such as mountaintop removals, cooking tar sands, drilling a mile deep into ocean floors, and hydraulic fracturing of geologic formations. These extraction methods carry big carbon footprints and heavy environmental costs that are borne by society in the forms of poisoned air, water and land, not to mention climate change impacts. We have the opportunity to convert our energy supplies for electricity to much more benign energy harvesting methods focused on clean renewable sources like solar, wind, and hydro. Extraction and carbon costs are virtually eliminated with renewable energy sources. In 2013, American energy independence means the opportunity to free ourselves from an energy-intensive, water-intensive, and carbon-intensive supply chain for electricity generation.
Today’s energy model concentrates the assets that produce electricity into the hands of relatively few owners. Consumers are captive to the owners of generation, transmission, and distribution grid assets. Smart Grid technologies make it possible for electricity generation to occur at hyperlocal levels such as our rooftops or community solar gardens. That means revolutionary changes to the electricity markets to accommodate a greater number of producers. In 2013, American energy independence means freedom to produce our own electricity and freedom to sell it at fair market rates.
There’s one other real weakness to today’s energy model. It has inherent risks of price volatility. The energy supplies that are extracted are transportable. Transportable means exportable. Exportable means price volatility. Just because natural gas is extracted in the USA doesn’t mean it will stay onshore. It will go to the highest bidder. Contrast that to renewables. Do you think the sun is going to jack up its prices anytime in the future? In 2013, American energy independence means freedom from price volatility in energy sources.
There are encouraging signs here and around the world that people recognize the current energy model is overdue for a restructuring that will be both evolutionary and revolutionary. The International Energy Agency just released a report that projects a global increase in renewables – particularly in developing countries. It’s very smart that they are choosing to adopt the model that guarantees price stabilities.
If Ben Franklin, an early experimenter with electricity and inventor of the Franklin stove were alive today, he would recognize the potential of Smart Grid technologies to revolutionize our energy model, and he’d embrace them. He’d be CEO of a Silicon Valley startup focused on renewable energy generation and storage at the distribution grid level. Franklin understood the concept of power to the people in 1776. We should be as prescient now and apply his innovative thinking to a new model that promotes American independence in energy.
The USA could learn a number of valuable lessons from Sweden about energy policy. The Swedish Trade delegation recently sponsored a Smart Grid roundtable in San Francisco with Anna-Karin Hatt, Minister for Information Technology and Energy in the government of Sweden’s Ministry of Enterprise, Energy and Communications. Several Silicon Valley Smart Grid organizations, including resources from Oracle, Silver Springs Networks, EPRI, and the Smart Grid Library participated with moderation by Lars Friberg, the Swedish attaché for Climate and Energy.
Ms. Hatt set the knowledge foundation for the roundtable by describing Sweden’s energy policy targets for 2020:
- Achieve 50% renewables. This is the highest target in the European Union, and they are on track to achieve it as they were at 48.9% in 2010.
- Deliver 20% more savings through energy efficiency measures than today – and Sweden already scores well here too
- Reduce emissions 40% from 1990 levels, and by 2030, eliminate fossil fuels from their vehicle fleets.
By 2050, the country aims to be carbon neutral. These are serious energy policy goals that starkly contrast to the conflicted USA energy policy. The Swedish government understands that 80% of the world’s current energy consumption is fossil fuels, and that’s a significant problem for energy security, environmental balance, and economic competitiveness. The leadership concluded that they don’t need to remain part of the problem. With the support of their citizens, Sweden intends to become part of the solution – which is to achieve independence from fossil fuels. Sweden plans to be in the forefront of the energy market evolution – and indeed they already have been.
There are three cornerstones for their policy objectives that cover economic competitiveness, economic sustainability, and security of energy supplies. To do that will require increasing renewables at utility-scale and through distributed generation with renewables in the distribution grid. The Minister acknowledged that renewables create a challenge for grid operations insofar as their variabilities need to be managed, but that isn’t impeding their planning. They are careful to structure policy goals and conditions for actions, but not dictate how the transitions to more renewables should occur. As Ms. Hatt noted, “we’re only at the beginning of a truly transformative period world wide, in which there will be enormous investments in energy efficiency and renewables technologies and services.”
The government in Sweden recently established a Smart Grid Council and charged its appointees with establishing a national knowledge platform for its citizens that would raise awareness of Smart Grid benefits for all stakeholders and create an action plan that identified evolving business models and research gaps. The minister indicated that there is much to learn about consumer reactions to electricity price variations and detailed consumption data.
Sweden is making significant advances to modernize their electrical grid and integrate clean energy sources into it and transportation infrastructures. So why did this forward-thinking government ministry convene with Silicon Valley Smart Grid players? To collaborate on technology development, business and financial model innovations, and consumer/prosumer transformations. This roundtable was just the first step to exchange ideas and information, such as the Property Assessed Clean Energy (PACE) programs and other creative approaches to finance renewables in the distribution grid for residential and commercial customers. One key takeaway for us American participants – we shouldn’t limit our thinking in terms of the ambitious goals we could and should set for an energy policy that promotes energy independence from fossil fuels, and therefore delivers energy, economic, and environmental security.
The Swedish Trade delegation is planning a seminar in the San Francisco Bay Area in the first half of 2013 to continue this discussion, so stay tuned for more information and inspiration.
Now that the presidential election is over, perhaps we’ll see some reality injected into our energy policy. The existing energy policy professes to encourage “energy independence”. That policy in action embeds permanent subsidies, tax credits, and tax breaks in the US federal tax code for highly profitable fossil fuel industries.
Have these favorable treatments given us energy independence? No, and that’s because reliance on fossil fuels is at odds with price stability or economic security. We don’t get price stability with fossil fuels. Some readers will remember the price shocks and economic fallout from the first oil embargo in the 1970s; and others may recall the historical volatility of natural gas prices. And the future could be much more expensive than the rosy projections of today. No one in the energy business today thinks that natural gas will always be as cheap as it is now – for the reasons noted by Vice Admiral Dennis McGinn (USN, ret.) in my previous article. Fossil fuel prices are inherently unstable because they are subject to global economic and political forces.
Capitalism dictates that commodities will flow to the highest prices, onshore or off. There’s no guarantee that any oil or natural gas extracted within the borders of the USA will stay here. There’s no guarantee that any oil transported via a Keystone pipeline from Canada to Houston will stay in the USA either. Building a policy of energy independence on assumptions that these commodities will remain inexpensive and onshore is shortsighted and wishful thinking.
And here’s the question we should pose to everyone that expresses concerns about subsidies for renewables. Why complain about subsidies for renewables and remain silent on the subsidies for fossil fuels?
There’s a great story relayed in Matthew and Luke in the Bible’s New Testament in about people who focus on removing the motes in their neighbors’ eyes when they are utterly ignorant of the planks in their own eyes. For the renewable subsidies critics, it’s time to remove your planks. If you are upset about the subsidies for renewables, then you should be apoplectic about the permanent subsidies for fossil fuel businesses – which have always dwarfed the temporary subsidies for renewables. This website offers an interesting visual on fossil fuel subsidies.
The Big Five oil companies alone – Exxon, BP, Chevron, Shell, and AmocoPhillips – get $2.4 Billion USD annually in tax deductions. In our current fiscal situation, why should American taxpayers be this generous to hugely profitable multi-national corporations when we do not get energy independence in return?
If renewable subsidies critics really want a level playing field for energy, if they truly want economic and energy security via energy independence, then they need to strenuously advocate for the elimination of every tax break, investment credit, and loophole for fossil fuels. They should consider doing likewise for the subsidies going to the nuclear industry.
Should we give serious credence to criticism of temporary governmental subsidies for renewable energies while the permanent fossil fuel energy subsidies exist? No. That criticism is akin to focusing on the mote instead of the plank.
We’re modernizing the electric grid into a Smart Grid that can take advantage of all the benefits of clean, domestic, and renewable energy sources. Renewable energy sources do not suffer from price instability like natural gas or gasoline. Armies don’t need to be deployed to protect the sun, wind, or tide, like they are for fossil fuel supply lanes. A realistic energy policy that eliminates fossil fuel subsidies in favor of these domestic and clean renewable energy sources helps us gain the short and long-term benefits of the Smart Grid, and true energy independence too.