I just got back from the Bloomberg New Energy Finance Summit in NYC. It was a mixed bag, like all conferences — not sure I understand the rationale behind inviting so many fossil-fuel shills to an event like this (Canadian oil minister Joe Oliver? really?) — but the ratio of new-and-interesting to Christ-how-many-times-have-I-heard-this was substantially above average. Congrats to the crew at BNEF, whose work, I hardly need to point out, you should be following.
One of the highlights of the event, as I expected, was BNEF head honcho Michael Liebreich's keynote address on trends in clean energy investment. It was centered around the conference’s theme of a “new ROI,” i.e., resilience, optionality, and intelligence. (I wrote a piece on that theme a little while back.)
If you have a few minutes and are interested in the present and future of clean energy, I recommend watching it:
I’m strapped into my backward-facing seat on a COD, or “carrier onboard delivery” plane, the U.S. Navy workhorse that ferries people, supplies, and mail to and from its aircraft carriers at sea. I cinch the four-point harness holding me in place. Then I cinch it some more. When it’s as tight as it can go, an aircrewman walks by and yanks it so hard it squeezes the breath out of me. The hatch closes. Steam rises from the floor. Shit. I’ve watched the YouTube videos. I know what’s coming. Takeoff, a 30-minute flight, then landing on the USS Nimitz, decks pitching, plane wings waggling, tailhook dangling from the underside of the aircraft to catch one of four arresting cables stretched across the flight deck. Since it’s not hard to miss them all, the pilot will gun the engines at landing to enable an immediate relaunch. Which means that if he succeeds at trapping a cable we’ll decelerate from 180 nautical miles per hour to zero in about one second.
To get to the Nimitz, 100 miles off Honolulu, our turboprop is flying a 50-50 blend of biofuel and standard JP-5 shipboard aviation fuel. The biofuel is made from algae plus waste cooking oil. This makes us part of history, my aircrewman says, players in what the Navy calls the Great Green Fleet demonstration of July 2012. It’s paired with a three-year, $510 million energy reform effort in conjunction with the departments of Agriculture and Energy as part of a larger push to change the way the U.S. military sails, flies, marches, and thinks. “As a nation and as a Navy and Marine Corps, we simply rely too much on a finite and depleting stock of fossil fuels that will most likely continue to rise in cost over the next decades,” announced Navy Secretary Ray Mabus at the launch of the program back in 2009. “This creates an obvious vulnerability to our energy security and to our national security and to our future on this planet.”
The Navy has set five ambitious goals to reduce energy consumption, decrease reliance on foreign oil, and significantly increase the use of alternative energy. Part of one target is to demonstrate a Great Green Fleet by 2012, and that’s what’s sailing this July day in Hawaii’s cobalt-blue waters: a carrier strike group comprising an aircraft carrier, two guided-missile destroyers, a guided-missile cruiser, and an oiler. All are running at least partially on alternatives to fossil fuels: the Nimitz on nuclear power, the other ships on that biofuel-diesel blend. The 71 aircraft aboard — Super Hornets, Hornets, Prowlers, Growlers, Hawkeyes, Greyhounds, Knighthawks, and Seahawks — are burning the same cocktail as my COD. All of today’s biofuels are drop-in replacements for marine diesel or aviation fuel and are designed to run without any changes to the existing hardware of ships or planes. “No [nation] can afford to re-engineer their navies to accept a different kind of fuel,” Vice Adm. Philip Cullom, deputy chief of naval operations for fleet readiness and logistics, tells me.
The Great Green Fleet is debuting at the 2012 RIMPAC (Rim of the Pacific) exercise, the largest ever international maritime war games, engaging 40 surface ships, six submarines, more than 200 aircraft, and 25,000 personnel from 22 nations. For the first time Russian ships are playing alongside U.S. ships, and naval personnel from India are attending. Many fleets here are sharpening their focus on alternative fuels and working to assure the formulations are co-developed with their allies. “ We’ve had dialogue with the Australians, the French, the British, other European nations, and many others in the Pacific,” and they all want to take “the petroleum off-ramp,” Cullom tells me. “We don’t want to run out of fuel.”
You can’t live off the land at sea, which is why the Navy has always looked far into the future to fuel its supply lines; the job description of admirals requires them to assess risk and solve intractable problems that stymie the rest of us. Peak oil, foreign oil, greenhouse emissions, climate change? Just another bunch of enemies. So when the Department of Defense set a goal to meet 25 percent of its energy needs with renewables by 2025, the Navy found itself fighting on familiar ground. Four times in history it has overhauled old transportation paradigms — from sail to coal to gasoline to diesel to nuclear — carrying commercial shipping with it in the process. “We are a better Navy and a better Marine Corps for innovation,” Mabus says. “We have led the world in the adoption of new energy strategies in the past. This is our legacy.”
It goes beyond supply lines. Rising sea levels lapping at naval bases? A melting and increasingly militarized Arctic? The Navy is tackling problems that freeze Congress solid. What it learns, what it implements, and how it adapts and innovates will drive market changes that could alter the course of the world.
But not without a fight. Six weeks before RIMPAC 2012, Republicans and some coal- and gas-state Democrats tried to scuttle Mabus’ Green Fleet by barring the Pentagon from buying alternative fuels that cost more per gallon than petroleum-based fuels — the biofuel blend cost more than $15 a gallon — unless the more expensive alternative fuels come from other fossil fuels, like liquefied coal. This tricky logic made sense to Sen. James Inhofe (R-Okla.) — “[The Pentagon] should not be wasting time perpetrating President Obama’s global warming fantasies or his ongoing war on affordable energy” — even though seven years earlier, Inhofe helped secure a $10 million taxpayer fund to test renewable military fuels, more than half of which went to a company in his home state. Sen. John McCain (R-Ariz.) agreed, calling the purchase of biofuels “a terrible misplacement of priorities” and adding, “I don’t believe it’s the job of the Navy to be involved in building … new technologies.” Mabus, who’d already bought the biofuels for the RIMPAC demo, fired back: “If we didn’t pay a little bit more for new technologies, the Navy would never have bought a nuclear submarine, which still costs four to five times more than a conventional submarine.”
En route to the Nimitz I’ve managed to snag a seat next to one of only two windows in the COD’s dark cabin. Through the porthole I watch our transect over Pearl Harbor, the USS Arizona Memorial, and the sunken and rusting remains of much of the 1941 Pacific fleet. Beyond Pearl we climb over the Pacific Ocean, at 60.1 million square miles nearly half of Earth’s total ocean area. That’s a lot of territory over which to maintain maritime supremacy, while guarding the far-flung energy supplies needed to do it. Some 75 percent of the world’s fuel travels by sea, with 20 percent passing through vulnerable choke points like the Strait of Hormuz and the Gulf of Aden, many guarded by U.S. forces. Partly in defense of those lines, the Department of Defense burns more than 12 million gallons of oil a day. About a third of the DOD’s fix goes to float the Navy, the world’s largest, with a battle fleet tonnage exceeding the next 13 biggest navies combined.
Out over the ocean my turboprop hums merrily along on its biofuel blend, and so do I, until I catch my first glimpse of the Nimitz out the window — a toy miniature in a turbulent bathtub. Suddenly 1,092 feet of flight deck wedged into a ninth the space allotted a commercial landing strip seems insanely small acreage. “Go, go, go!” shout two aircrewmen, their backs to me, waving their hands in the air. This is the signal to prepare for the controlled crash of a carrier landing. We jam our heads into backrests, cross arms over our chests, hook hands into harnesses, and wait. It’s an unnerving interlude, all noise dampened by the cranial I’m wearing, a helmet with built-in headphones clamped so tight my jawbone aches. Goggles down, I await what I can’t see. A minute drags by. Ferociously. Another. Inflatable rafts twitch in overhead cargo nets. Then the sounds of a mass pileup on a steel interstate. Legs whiplash in the air. An unidentified flying object clips my head. It feels exactly like a tragedy at 180 nautical miles an hour — only nothing breaks, burns, or drowns at the end of it. And now here I am, on an aircraft carrier cruising at 30 knots of speed, safe and sound.
It’s the Navy, so there’s history. The Great Green Fleet was named after the Great White Fleet launched by President Theodore Roosevelt in 1907: four squadrons of 16 battleships painted bright white and manned by 14,000 sailors and Marines on a 43,000-mile cruise around the world. It was the first ever armada of coal-powered steam battleships built entirely of steel — the product of years of government subsidies paying three times the market rate to develop a fledgling American steel industry. When Congress moved to blockade the fleet’s around-the-world funding, Roosevelt snarled at them to “try and get it back.” So the fleet sailed to 20 ports on six continents over 14 months, boldly going where no U.S. military had gone before and announcing the debut of the United States as a player on the World Ocean.
Even then the fight over a newfangled Navy was old. For a time in the 19th century it proved so psychologically difficult to get away from sail that hybrid naval ships sported steam funnels alongside acres of snowy white canvas. Naysayers swore the Navy was giving up reliable propulsion for dangerous and infernal machines. The great 19th-century naval strategist Alfred Thayer Mahan wrote: “Sails were very expensive articles … but they were less costly than coal. Steam therefore was accepted at the first only as an accessory, for emergencies.” Acting on the principles Mahan laid out in The Influence of Sea Power Upon History — a seminal book in naval strategy — the United States methodically and expensively procured ports and territories around the world specifically for use as Navy coaling stations: Guam, Guantanamo Bay, Hawaii, Puerto Rico. Yet by the time the Great White Fleet sailed home again in 1909, the coal era was over and the Navy was converting yet again, this time to oil-burning steamships. It took a lot of oil to drive a steamship, and the realization that oil wasn’t going to last forever dawned far earlier in the military than among civilians. To keep the Navy afloat as long as possible, Congress passed the Pickett Act of 1910, commandeering lands in California and Wyoming, and later in Alaska, as Naval Petroleum Reserves, some of which ultimately ranked among the highest-producing oil and gas fields in the country.
The same year the Great White Fleet sailed home, 24-year-old Ensign Chester Nimitz, the man destined to be the namesake of the nuclear-powered USS Nimitz, took command of an early submarine, the USS Plunger. It was a crap assignment; young officers wanted battleships, the sexy beasts of the Navy. But Nimitz was in disgrace for having run a ship aground in the Philippines. Derisively, he called his sub “a cross between a Jules Verne fantasy and a humpbacked whale.” Yet he took the job seriously and began to lobby for an undersea fleet that ran more safely and efficiently on upstart diesel engines, in contrast to the gasoline-powered Plunger. By 1911, he had successfully skippered another energy transformation, overseeing the development of the first diesel submarine, the USS Skipjack, followed by the first diesel surface ship, the USS Maumee (an engineering task that cost him a finger). Thirty-five years later, as chief of naval operations, Nimitz changed the fleet’s course once again when he championed Capt. Hyman Rickover’s fiercely contested bid (Rickover’s opponents reportedly exiled him to an office in an abandoned women’s bathroom) to establish a nuclear-powered Navy.
“Every single time there were naysayers,” Secretary Mabus has said. “And every single time those naysayers have been wrong.”
Mabus has touched down aboard the Nimitz for the Great Green Fleet demo in a biofueled Seahawk helicopter. Wearing his flight helmet rakishly askew, looking more the politician than the former sailor, he’s piped aboard with a time-honored bosun’s whistle before passing through a hatch freshly stenciled with the Navy Energy Security logo, a blue and green wave. Maneuvers get under way on the flight deck where F-18s — today called “Green Hornets,” with their nose cones striped green — are taking off at 60-second intervals. The entire ship, all 97,000 tons of it, shudders from the muscle of 67,000-pound warbirds shot into the air from steam catapults. Water for the catapults comes from the Nimitz‘s four distilling units, which make 400,000 gallons of freshwater daily, mostly to cool the twin nuclear power plants that allow the Nimitz to sail the seas for 25 years between uranium fill-ups. In the skies above, in perfect formation flybys, jet fighters buddy-fuel each other through a hose-and-drogue system. Off our bow, while all three ships steam at 13 knots, the oiler USS Henry J. Kaiser refuels the cruiser USS Princeton, off-loading the last of today’s 900,000 gallons of 50-50 biofuel blend — the largest ever purchase of alternative fuel by the U.S. government.
“We’re seeing the Navy once again leading in the type of fuel we use and how we procure it,” Mabus tells an all-hands assembly in the vast interior space of a hangar bay on the Nimitz. “Today shows we can reduce our dependency on foreign oil.” The crew is jammed shoulder to shoulder: sailors in marine camouflage or “blueberries,” Marines in woodland camouflage, aircrew in jumpsuits, deck crew in bold-colored turtlenecks that signal at a glance their jobs on the floating war port. It’s so orderly and polite, what I imagine a small-town political rally of the 1950s to be, complete with stage bunting, an American flag the size of Kansas, and testy microphones. Except there’s a giant ocean heaving by outside the bay door, advanced electronic aircraft parked in the wings, a cluster of admirals wearing Green Fleet caps on the stage (of the hats, McCain griped a week later: “I do not believe this is a prudent use of defense funds”), plus a handful of reporters, a few looking seasick. Today’s demo is a milestone in Mabus’ energy plan. But it’s also a day for the sailors, one pilot tells me, since the media presence here will raise awareness among the rank and file better than anything the Navy itself says about the seriousness of its green purpose.
“You have the senior Navy leadership here today,” crows Mabus, as the chief of naval operations, Adm. Jonathan Greenert, takes the stage to praise the crew of the cruiser USS Chafee. “What I saw today was theory of practice,” Greenert says. “We didn’t have some scientist come down into the engine room and say, ‘One day you’ll see this.’ You hear it today and see it on gauges.” He’s talking about the technologies developed to further stretch whatever fuel the Navy procures: low-tech add-ons like stern flaps to reduce ships’ drag and increase fuel efficiency; high-tech plug-ins like energy dashboards with Prius-type feedback on fuel consumption; energy savers like LED lighting; plus your basic turn-off-the-lights mindset. “If we deploy these energy efficiencies fleetwide,” Mabus says, “we can save up to a million barrels of oil a year. And with what we’re paying, about $150 a barrel, that’s $150 million the Navy can save a year.”
Those aren’t the Navy’s only goals. Wide-reaching targets include: awarding Navy and Marine Corps equipment contracts based on better fuel efficiency; deploying (not just demonstrating) a Great Green Fleet carrier strike group by 2016; phasing in hybrid fuel and electric vehicles to halve petroleum use in the Navy’s 50,000 commercial vehicle fleet by 2015; requiring that by 2020 each base — the Navy owns 2.2 million acres of land plus 65,000 buildings — be at least 50 percent self-powered by renewables like solar, wind, and wave energy; and ensuring that at least 50 percent of the Navy’s total energy consumption comes from alternative sources by 2020. These changes will ripple out to the civilian world, too — just as military demand propelled the development that eventually drove down the cost of American steel, radar, GPS, and microchips.
But there are naysayers. In an op-ed in US News, Thomas Pyle, president of the Institute for Energy Research – a nonprofit tied to Koch Industries – calls the Navy’s biofuel goals “ridiculous” and an “inexcusable example of government cronyism.” And Noah Shachtman, editor of Wired‘s influential national-security blog, Danger Room, blasted Mabus for not shoring up political or statistical support before going full steam ahead on his biofuel mission. That said, the $12 million spent so far on biofuels is four one-hundredths of 1 percent of the Navy’s annual fuel consumption, what the department would pay for an increase of less than a cent per gallon of oil, according to Mabus. In fact the entire biofuels budget currently totals less than a 100th of 1 percent of the Pentagon’s nearly $650 billion annual budget.
Remarkably, there’s very little opposition inside the Navy. “Some of the oldest, most experienced officers, if you’d asked them 10 years ago, they’d say we should never change our energy ways,” Capt. James Goudreau, director of the Navy Energy Coordination Office, tells me. “But now they’re in the position that they actually have to run the fleet, have to manage and pay for its operations. They see that we can’t afford to do what we used to do.”
Plus petroleum isn’t the bargain it seems. Factor in the price of guarding and moving it from the Middle East. Factor in the battlefield cost of transporting a gallon of fuel across oceans to a coastal facility in Pakistan, or airlifting it to Kandahar, then loading it onto a truck, guarding that truck, and delivering it to a battlefield. In extreme cases, that single gallon of gasoline can cost the DOD up to $400. “That’s too high a price to pay for fuel,” says Mabus, a former governor of Mississippi who became a renewables convert while serving as U.S. ambassador to Saudi Arabia in the Clinton administration. “In the drive for energy reform, and this is critical, the goal has got to be increased warfighting capability. Too many of our platforms and too many of our systems are gas hogs.”
The lethal costs of petroleum are even higher. For every 24 fuel convoys the United States transported in Afghanistan in 2007, a soldier or civilian contractor was killed or wounded. And extreme volatility can make it difficult to judge what the worst-case scenario could be. “Every time the cost of a barrel of oil goes up a dollar, it costs the United States Navy $31 million in extra fuel costs,” Mabus says. When oil spiked in 2008, the Navy suddenly had to forecast “our fuel bill rising from roughly $1.2 to $5.1 billion” over a few years, says Vice Adm. Cullom. “When your fuel bill goes up that much, you’ve got to ask yourself, ‘What are you not going to do?’ You’re either going to buy fewer ships, fewer planes and tactical vehicles, or you’re going to buy less fuel and not send your ships out.”
“The cheapest barrel of fuel is the one we never burn,” Goudreau tells me. “Eighty-five percent of what we do each year is chasing efficiency.” To foster this kind of thinking, the Navy is grooming a new generation of “energy warriors” at its Naval Postgraduate School in Monterey, Calif. Fuel-saving incentives are factored into promotions servicewide. In 2011, these efforts saved 11 percent of fuel costs, awarding the Navy an additional 56,500 hours of “free” steaming time at sea. The initiative was so successful that a similar program has been launched to optimize fuel consumption aboard the Navy’s 3,700 aircraft. Meanwhile, in Afghanistan, Marines using solar panels have reduced their need for fuel and battery deliveries at forward operating bases by up to 90 percent.
As for the thorny problem of scaling up to operational biofuel, the Navy is investing $170 million in American biofuel companies, an amount matched by the departments of Agriculture and Energy. And not just any (or only) biofuels. “The Navy is mindful of not trading one fuel problem for another,” Goudreau says. “Our alternative fuels can’t compete with food crops. We don’t want to alter the price of food and then cause regional instability that we have to respond to. That would be shortsighted. We can’t drive up big irrigation requirements. Plus our fuels have to meet congressional language requiring a carbon footprint the same or smaller than petroleum.” This reflects the way the Navy bills itself in an era where “It’s not just a job, it’s an adventure” has been superseded by “A global force for good,” a philanthropic-sounding slogan thought to appeal to recruits less excited by pure martialism. Goudreau describes how U.S. ships were forced to turn away from relief work off Japan after the 2011 earthquake. “Because our ships consume energy at the rate they do, we had to steam over the horizon to refuel, and then come back,” he says. “The ability to operate more efficiently means we could stay on station an extra day or three when it absolutely counts the most.”
Goudreau echoes what all the Navy people tell me: Where the Navy leads, others will follow. That’s no small matter when you consider that in 2008 more than 90 percent of global trade traveled by ocean aboard 90,000-plus cargo ships burning the foulest of fuels, making shipping the sixth-biggest CO2 emitter after China, the United States, Russia, India, and Japan. Goudreau is confident that once the Navy tests and finds the best fuels, commercial fleets — both shipping and aviation — will drive the price to competitiveness and, in a virtuous cycle, further relieve the pressure on the Navy to protect oil supplies. “If we do this right,” he says, “we’ll turn vulnerability into capability.”
“We’re definitely motivated,” says Robert Sturtz, formerly of United Airlines, one of several industry executives on the Nimitz today to see firsthand how fighter jets and other naval aircraft fare with the Navy’s biofuel in their tanks. “We’re already facing carbon emissions taxes in European airports,” he says. “We have to find ways to bring those costs down.”
The Navy pilots aboard the Nimitz are cool with biofuels. “I’m happy to be part of history,” says Lt. Adam Niekras, an MH-60R Seahawk helicopter pilot. “And I saw no difference in performance at all.” Lt. Commander Jason Fox, pilot of an E-2C Hawkeye, a radar early warning plane, reflects: “The military has done a lot of things that started a tidal wave in our culture. Plus, I’d really rather not fight to defend fossil fuels if there are alternatives.” Fox flies with the VAW-117 “Wallbangers” squadron. In their ready room, which boasts a banner that reads “Bangers Lead the Way,” they’re peddling squadron T-shirts to press and dignitaries that read: “Keeping the Earth Green, One Bag of Biofuel at a Time.”
Sure, the Great Green Fleet demonstration is a public-relations gesture. But it seems to be spin in defense of a genuine sea change. Last May, the House and Senate armed services committees voted to kill biofuels, but after the RIMPAC demo, Congress reversed that decision. Congress also voted to remove obstacles preventing the Navy’s plan to invest $170 million in companies building advanced biofuels refineries — an amount matched by both the Agriculture and Energy departments. Along with more than $53 billion in future public-private investments, this plan opens the door for at least 13 billion gallons of advanced biorefinery production capacity to come online in the next decade, according to cleantech analysts Pike Research. These will be among America’s first commercial-scale biorefineries, forecast to create up to 17,000 new jobs. Which may well mark the tipping point Capt. Goudreau suggested, the moment when the reassurance from long-term military contracts begins to propel a competitive and self-perpetuating market. Already, since the Navy starting buying biofuels in 2009, the price per gallon has dropped by more than half. “The Navy’s leadership has already sped up the commercialization of advanced biofuels by at least a decade and set this important option on a path to commercial viability at scale,” says Amory Lovins, chair and chief scientist at the Rocky Mountain Institute, who helped prod the Navy toward clean energy. “It has primed the pump for great flows of scaling and innovation.” Mabus is optimistic: “I believe that if the Navy can fully pursue its initiatives, [biofuels] will reach cost-competitiveness in 2016 — four years ahead of the 2020 target date.”
When recently asked by Esquire about his most important legacy as defense secretary, Leon Panetta cited the energy paradigm, especially in the Navy: “Our ability to develop alternative energy and energy independence not only saves money, but it’s an investment in our national security.”
I’ve taken one bite of my lunch in the officer’s wardroom when Capt. Kevin Mannix, commander of the carrier air wing, runs up and tags me on the shoulder. “Wanna see the Australian helicopter land?” I do. But what about lunch? He shrugs and jogs for the door. Everything in the Navy moves fast. Already I’ve hiked miles at a punishing pace up and down countless ladders connecting decks to get from one end of the ship to the other while circumventing the things the Navy doesn’t want me to see. The Nimitz crew is frustrated by the Royal Australian Navy (RAN), which is running an hour and a half behind schedule for the meeting. Tardiness, I gather, is keelhauled out of sluggish U.S. sailors, and my escorts struggle to hide the WTF looks on their faces. Australians, on the other hand, have pubs on their navy ships. Since I’m half Australian, I find myself enjoying the clash of cultures.
Mannix drives me up 12 levels at breakneck speed, shoves a cranial and two “foamies” (earplugs) at me, and tells me to protect myself. Then he ushers me out to Vultures Row, the viewing deck six levels above the flight deck, to watch a Seahawk helicopter from the Australian frigate HMAS Perth set down: a battleship-gray butterfly alighting on the Nimitz‘s stern. As its passengers unfold from the interior, Nimitz deck crew wearing the purple jerseys of fuelers run out a hose to top it off with biofuel nectar — the first RAN aircraft ever to feed on the stuff.
The Aussie fleet commander, Rear Adm. Tim Barrett, is piped aboard and ushered below to the stage of a hangar bay reconfigured for the day’s historic signing. Behind a small table that looks like it might double for a poker game later that night, he delivers to Secretary Mabus a statement of understanding that the navies will cooperate on stabilizing biofuel prices and supplies toward the common goals of a permanent Green Fleet deployment in 2016 and on helping the U.S. Navy attain its goal of having its nonnuclear fleet powered by a 50-50 biofuel blend by 2020. The Aussies are here because Australian government-funded research has shown that algal biodiesel is cheaper than fossil diesel in terms of both money and carbon, and because government-funded companies are already scaling up toward large algae-growing operations in open saline ponds. “Western Australia has some great places and an ideal climate to grow and develop algae in saltwater,” U.S. Navy Vice Adm. Cullom tells me. Better than anywhere in the United States. Add algae to other advanced biofuels and you might just get enough to meet the Navy’s 2020 goal of 8 million barrels per year. “We are here to learn what we need to do to remain interoperable with the U.S.,” Barrett told the Australian. “We’d be mad not to be involved.”
Practically speaking, the Aussies are also here because of a fundamental geopolitical shift under way in the United States. “After a decade in which we fought two wars that cost us dearly in blood and treasure,” President Obama told the Australian Parliament in 2011, “the United States is turning our attention to the vast potential of the Asia Pacific region.” That includes deploying 2,500 Marines to Australia’s Northern Territory and sending more warplanes, ships, and submarines through Down Under ports. China is the concern, along with the South China Sea, a body of water that lies closer to Australia than Chicago is to San Francisco and is believed to sit atop vast oil and gas reserves. China calls it the second Persian Gulf and now claims much of its waters as its own – to the alarm of the Philippines, Vietnam, Malaysia, Taiwan, and Brunei. The scramble over who can drill a hole where in that seafloor is already escalating into battles between Chinese and Filipino fishing boats while drawing warning shouts from faraway Russia, India, and the United States.
The Navy worries that a growing Asian demand for oil will inevitably drive prices higher. A newly seagoing China — Beijing just landed its first jet on its new aircraft carrier — along with the expected gas rush in the South China Sea, have reportedly focused the roving U.S. military eye on a few unlikely morsels of sand barely rising above the waves off Australia’s northwestern coast: the Cocos (Keeling) Islands. This Australian archipelago boasts a total landmass “about 24 times the size of The Mall in Washington, D.C.,” reports the CIA World Factbook. Tiny, but strategically placed to spy on the 1.7-mile-wide choke point of the Strait of Malacca, through which 15.2 million barrels of oil flowed daily in 2011. The United States is reported to be vetting the Cocos as an advanced spy base for Global Hawk drones, and maybe more. The latest Australian defense review suggests upgrading the islands’ single airfield to support aerial refueling tankers and “unrestricted” anti-submarine aircraft and drones.
Clearly the great green war game is still a hybrid: defending fossil fuels — and those who get access to them — while charging full steam toward alternatives.
I’ve never been to the Pentagon before. It reminds me of a Stanley Kubrick set, the surreal love child of Dr. Strangelove and 2001: A Space Odyssey: miles of corridors, some with embedded sparkle confetti, miles of closed doors. And then, oddly, a New Balance store, an eyeglasses store, a jewelry store featuring engagement rings, plus Starbucks, Subway, McDonald’s, and Dunkin’ Donuts. Roughly 23,000 people work in what is one of the world’s largest office buildings, some on one of the world’s most expensive problems: the effects of global warming on warfighting capability.
“Since we know climate change is not only coming but it’s here,” says Rear Adm. David Titley, a meteorologist and physical oceanographer by training, “the U.S. Navy needs to figure out what we’re going to do about it.” A fit Navy geek who bikes to the Pentagon most mornings, the admiral looks cooped up in the tiny office assigned to him as the oceanographer and navigator of the Navy and director of Task Force Climate Change. (After this interview he moved to the National Oceanic and Atmospheric Administration.) The task force mission “to address the naval implications of a changing Arctic and global environment” was born from the Navy’s examination of the scientific evidence, from which they concluded: “Climate change is a national security challenge with strategic implications … [affecting] U.S. military installations and access to natural resources worldwide.”
One issue bearing down fast is rising sea levels. Take Naval Station Norfolk, the Atlantic fleet headquarters and the world’s largest naval station, strategically built a century ago on the low-lying Virginia Tidewater. Today it sits in the crosshairs of ocean waters climbing a quarter inch a year. That’s among Earth’s fastest rates of sea-level rise and the fastest in the United States outside of Louisiana. Moreover, the ocean along the entire East Coast north of Cape Hatteras — a 620-mile stretch home to nine other naval bases — is rising at three to four times the global average, probably because warming ocean waters are redrawing the larger circulation of the Atlantic.
Offshore, nobody moves faster than the U.S. Navy. But onshore, political aversion to the C-word has slowed its efforts. “The Australians have already assessed the effects of climate and sea level rise on their defense establishments,” Titley says. “And that’s something we’ve got to do.” In 2008, the National Intelligence Council reported more than 30 U.S. military installations already facing elevated risks from rising seas, though the actual number is believed to be much higher and the list remains classified. Currently the DOD is investigating how a warming and expanding ocean will affect a mere five of hundreds of Navy, Marine Corps, Army, and Air Force bases, including Norfolk. One thing’s for sure: There won’t be any universal rescue plan. Each base responds differently to neighborhood conditions: bathymetry, tides, winds, river flows. Each has unique frailties: barrier islands, hurricane paths, El Niño effects, coastal erosion, saltwater intrusion. The costs won’t be limited to military real estate either. “Our bases aren’t islands,” Titley says. “Our sailors and civilians live in nearby communities where services — power, freshwater, electricity, internet, sewage — are also vulnerable to rising sea levels. When we consider mitigation and adaptation, we’ve got to work all that out, too.”
Like sea-level rise, the Navy’s problems are global, since it has bases in 12 nations, including overseas islands. The coral atoll of Diego Garcia, for instance, the core of U.S. spy missions in the Indian Ocean since the 1960s, rises less than 10 feet above sea level in most places, and the Navy may be forced to abandon it to the waves when the lease runs out in 2016. Its potential replacement is Australia’s Cocos Islands, where the highest point rises only 16 feet above the waterline. Decisions on whether to retrofit, adapt, close, or move installations will tax the Navy’s mental and financial bandwidth for the foreseeable future. “I call it the Goldilocks strategy,” Titley says. “We don’t want to get caught behind climate change and sea level rise because then we’ll be forced to spend a lot of money quickly, and we don’t always do that wisely. Conversely, in these fiscal conditions, it’s not wise to spend money too soon either.”
Meanwhile, the Navy has sailed into dire straits in the climate battlefront they deem most critical: the Arctic. Navy submarines crossing the North Pole were first to notice an ominous thinning of sea ice in the 1990s. Yet it took more than a decade for the Naval War College to game Arctic scenarios, with bleak results: “The U.S. Navy is inadequately prepared to conduct sustained maritime operations in the Arctic [due to] an inability to reliably perform and maintain operations in the austere Arctic environment.” The No. 1 problem is that the Navy no longer owns any operational icebreakers, which will be needed even decades into the future, since an “ice-free” Arctic is still susceptible to freezing at any time. The Coast Guard owns one icebreaker, the scientific research cutter Healy (I sailed aboard her last October for an upcoming piece in Mother Jones), which the Navy has been forced to call upon in every Arctic war game scenario to break ice for its warships. The Coast Guard Commandant, Adm. Bob Papp, called the U.S. icebreaking fleet “woefully inadequate” but hoped Congress would fund Obama’s $8 million request to develop one new polar-class icebreaker. (It did, but the Russians own six nuclear-powered icebreakers — and are in the process of building the world’s largest — plus at least 29 government and commercial diesel-powered icebreaking vessels.) The No. 2 problem is that the Navy no longer owns any ice-hardened surface ships, and retrofitting would run between a quarter and a half of each vessel’s cost. Which means no Navy ships are currently even capable of following in an icebreaker’s wake. Last but not least, there are no year-round supply lines or naval bases in U.S. territory north of the Aleutian Islands, nearly 1,000 brutal nautical miles from the Arctic Ocean. By any measure the United States is not an Arctic Ocean player.
In the meantime, none of the world’s armed forces are wasting time doubting global warming, and all the Arctic nations, plus others, including China, are ramping up their focus on the far north. “I’ve got to thank the Russians for planting that flag on the seafloor of the North Pole in 2007,” Titley says. “That got Washington’s attention more than any think tank ever could.” It got oilman George W. Bush, in one of his last acts in office in 2009, to sign two presidential directives acknowledging “the effects of climate change and increasing human activity in the Arctic region.”
What’s at stake? The U.S. Geological Survey calculates that the Arctic holds 25 percent of Earth’s undiscovered and recoverable conventional petroleum products: 16 percent of its oil, 30 percent of its natural gas, and 26 percent of its natural gas liquids, with about 84 percent of those resources lying offshore. Those fossil goodies will be claimed by whichever military gets them first. And some have better access than others. “The Russian coastline,” Titley says, “covers half the Arctic coast, with three Russian rivers each the size and scope of the Mississippi flowing into it. It’s like the Gulf of Mexico on steroids.” A fifth of Russia’s GDP and 22 percent of its exports already come from north of the Arctic Circle, most from energy production. Russia’s then-deputy prime minister, Sergei Ivanov, voiced the fears of many nations, Arctic and non-Arctic, when he said: “If we don’t develop the Arctic, it will be developed without us.”
“If you look at the Arctic nations’ top-level strategy,” adds Titley, “it’s to be safe, stable, and secure. No one sees conflict in anyone’s interest.” That seems an ahistorical, rosy assessment, and indeed territorial disputes among the eight Arctic nations are blooming as fast as plankton in the ice-free waters, including the unresolved boundary between Russia and the United States over the 58-mile-wide Bering Strait. “Whenever the shipping routes across the Arctic open, the Navy will focus on the Bering Strait,” Titley says. “It’s the Arctic version of the Strait of Hormuz, through which the fossil fuels of the north will flow south.”
It’s clear the superpowers of the 21st century will grow from the north down. So picture this not-so-futuristic scenario: a biofueled U.S. Navy defending a critical fossil fuel choke point in melting Arctic waters along disputed shorelines receding under rising sea levels while fossil fuel booty unburied by climate change is burned to make more climate change. War gaming nature. Now that’s going to be a wild ride.
My night aboard the USS Nimitz gets me a bunk in a DV (distinguished visitor) stateroom called the Texas Cabin. I’m given a standard hotel-type key card by sailors working in, no kidding, Hotel Services. My cabin is spacious, the bunk seductively comfortable. At the end of the day I’m handed off from a weary male lieutenant to two female petty officers, MC1 Sarah Murphy and MC2 Nichelle Whitfield, who are clearly amazed at the DV digs. “Wow,” they say, admiring the brushed stainless steel walls and inlaid floor. They live in spartan enlisted berthing areas with triple-tier bunks cloaked in perpetual darkness because of round-the-clock duty watches and daytime sleepers. “You have a curfew,” they warn me, “at 2130 hours.” They look exhausted. RIMPAC and the Great Green Fleet demo have burned all their fuel.
They take me to dinner in the enlisted mess, a crowded, noisy cafeteria, where we hand over our trays for glops of desiccated frozen vegetable medley, naked fusilli noodles, and slabs of corned beef. Since there aren’t any clean knives, we retreat to a table armed only with forks. I try to cut the meat with a fork. I work hard at it and get nowhere. MC1 Murphy is genteelly tearing at it with her hands. OK. But I can’t tear it, not even a little. “I’m gonna use my teeth,” I say. “Go for it,” Murphy says. “Whatever works,” Whitfield says. The slab looks uncannily like the sole of a shoe. I put it between my teeth and yank. I give it everything I’ve got. But it’s so tough that not one bite makes it down my gullet. New respect is born for those who survive eight-month deployments at sea.
Murphy and Whitfield ask me about the story I’m working on. I tell them about the melting Arctic and rising sea levels, fossil fuels, war, climate change, and the positive feedback loops between them all. Their eyes grow wide. The Navy plans for everything, the admirals all tell me, but not apparently for their petty officers to know much of anything about the big problems that may well define their careers and their lives and the lives of their children. Of course, the Navy’s not alone in that strategy. And maybe it’s not the absolute shitshow of a tragedy that it seems. I look around the cafeteria. Sailors large and small are doing battle with their corned beef and pulling off what I couldn’t: slaying it. I laugh. Our nation, our species, is nothing if not boss of the last-minute improvisation of the save-our-ass variety.
The next day I’m strapped in my seat in the same COD by the same window. All the dread I should have felt prior to the outbound flight but didn’t has taken hold of me now. I realize my entire future hinges on getting shot from a catapult at 165 miles an hour. “Wait,” I say, grabbing the same aircrewman who strapped me in back in Honolulu, “what am I supposed to do?” He explains — “lean forward into your harness, tuck your chin to your chest, cross your arms” — then sees the worried look in my eyes and smiles. “Don’t worry. It’s gonna be fun.”
A few months ago, I called Michigan’s Proposition 3, which would have amended the state constitution to raise the state’s renewable energy standard to 25 percent by 2025, “the most important clean-energy vote this year.”
On Tuesday, Prop 3 went down in grisly, spectacular defeat, last reported losing 63 to 37 percent. That’s quite a romp. What went wrong? Does this mean voters don’t like renewable energy?
Probably not. But it does mean that dirty energy has access to a firehose of money that can overwhelm an electorate’s preference for clean energy, seemingly without much difficulty.
Opposing money wasn’t the only obstacle for Prop 3, of course. Five of the six initiatives on the ballot — the five aiming to amend the state constitution — were rejected by similar margins. It may be that Michigan voters simply became suspicious of all efforts to meddle with the constitution.
And it may be that they got sick of outside money flooding the state. Some $141 million was spent on ballot initiatives in the state this year — more than was spent on all Michigan races combined in 2010 — and from all reports the advertisements were incessant and annoying.
So voters were overwhelmed and irritated. Background conditions were not good. In terms of Prop 3 specifically, it was the second most expensive initiative. The spending contest came down to greens vs. utilities and their allies. Greens — including the Michigan League of Conservation Voters (the leading contributor, with $3.1 million), the national League of Conservation Voters, the Green Tech Action Fund, the Blue Green Alliance, and the American Wind Energy Association — poured unprecedented amounts of money into the fight.
And they were easily outspent, by more than two to one, by Michigan’s big utilities. Consumers Energy and DTE Energy dropped around $11.5 million each.
Green groups didn’t do much to publicize their work on this campaign, since part of the negative perception in the state was that outside groups were trying to usurp Michigan energy policy, but behind the scenes they worked hard on it. It wasn’t just the money — they held phone banks in which a good dozen green groups participated; tons of work was done mobilizing the youth vote; endorsements came in from Bill Clinton and former Gov. William Milliken (R).
Yet a flood of dirty-energy money simply swamped those efforts, driving voter approval from 49 percent to 39 percent in a single month. The utilities didn’t even break a sweat.
I’m sure there were messaging and organizing errors too — the 25×25 campaign got defined by its enemies early on, and never defined their enemies in return — but it really looks like this was a money thing.
As the federal level has gotten gummed up, I’ve often said that the road to success on clean energy is through the states. After all, it’s the state renewable energy standards (RESs) that have done most of the grunt work getting renewable energy on the ground in the U.S. Why not just go state by state, building the clean energy industry from the ground up?
The experience of Prop 3 is enough to give pause to that line of thought. It’s hard to see how greens can keep up when dirty energy can muster enough money to carpet bomb a state at will.
And have no doubt: The forces of dirty energy know the action is in the states and they are gearing up to do a carbon-fueled Sherman’s March. The American Legislative Exchange Council (ALEC), a Koch-funded right-wing advocacy group, came up with “model legislation” to yank states out of regional carbon-trading programs and shopped it around to states with newly Republican governors last year. This year they are at it again, pushing model legislation to repeal state RESs. They call it a “high priority.”
ALEC’s claims — that RESs raise energy prices, crush freedom, etc., etc. — are bogus, but they have a lot of money. And as of this week’s elections, there are at least 30 Republican governors in the U.S., more than either party has held for over 12 years. For example, North Carolina, which passed its first, tentative RES in 2008, just got its first Republican governor in 20 years, Pat McCrory, who spent his race flirting with Tea Partiers. What will he do when ALEC runs its “Electricity Freedom Act” through North Carolina’s conservative legislature and it ends up on his desk?
The action is in the states. And the folks behind the Michigan clean-energy push aren’t giving up. But do green groups have the power to win those battles in the face of effectively unlimited fossil-fuel money?
Illinois is a big deal where power is concerned: of U.S. states, it’s the sixth largest consumer of electricity and the fourth largest producer. It has more nuclear power plants than any other state and is unusually dense with underutilized transmission lines, which are at a premium these days. It has a thriving wind power industry (though it is a sad 18th in installed solar capacity), and a bustling, green-minded metropolis in Chicago, which boasts nearly 80,000 green jobs.
So it’s too bad the Illinois power system makes the Talmud look like The Da Vinci Code. I’ve been talking to people about it for a week and I feel like my brain got mugged in a back alley.
Nonetheless! States are where it’s at, in terms of clean-energy policy, and significant things are going on in Illinois. I shall attempt to make sense of them for you.
Here’s the top line, for those of you with short attention spans: Illinois has a renewable energy standard (in dork-speak, known as a renewable portfolio standard, or RPS), which on its own is a good thing. It also has a law allowing communities to take responsibility for their own power supply, and a growing number of communities choosing to do so, which on its own is also a good thing. Unfortunately, because of poor design, the latter policy is on a collision course with the former. The answer? Fix the RPS.
This is your Illinois clean-energy bumper sticker: Fix the RPS!
On to the full story.
——
Illinois has a deregulated power market, which means that the state’s two big utilities (Ameren and ComEd) are in charge of power distribution and billing, but they don’t own power plants or sell power. Power companies compete to provide power, in an open market. (At least that’s the theory. The reality is considerably messier. For example: ComEd’s parent company is Exelon, which does own power plants and sell power. Just not through ComEd.) Deregulation originally happened in 1997 and has had a rather checkered history in Illinois since.
Long story short, three important things happened toward the end of the 2000s.
Thing one: the creation of the IPA
In 2007, in response to a spike in power prices, the state created the Illinois Power Agency (IPA), which was charged with negotiating wholesale power contracts on behalf of Ameren and ComEd customers, insuring that they get “adequate, reliable, affordable, efficient, and environmentally sustainable electric service at the lowest total cost.” The IPA doesn’t generate or sell power, it just brokers contracts between power companies and the utilities.
The IPA couldn’t just step in and immediately negotiate new contracts from scratch. It had to take over the contracts that the utilities had already negotiated. Some of them were six-year contracts signed in 2007 … shortly before IPA took over, the recession hit, and power prices plunged. As older contracts have expired, IPA has negotiated new contracts and gotten lower power prices. But it is saddled with those expensive 2007 contracts until mid-2013.
That means IPA has been getting power for utility customers that’s considerably cheaper than what they were paying pre-IPA, but nonetheless considerably more expensive than what can be procured in today’s power market. This is a key fact that shapes the rest of the story.
Now, Illinois utility customers — individual, commercial, and industrial — don’t have to buy the IPA-brokered power. If they choose, they can procure their own power directly. And because IPA contracts were more expensive than the prevailing market price, especially early on, most customers could save money by doing so. In practice, procuring power directly proved too much of a hassle for most smaller customers. For large commercial and industrial customers, however, the hassle was worth it, and almost all of them eventually opted to procure their own power from Alternate Retail Electric Suppliers, or ARES.
So in 2010, about half the state’s power load (mostly residences and small commercial) was served by IPA and about half (mostly large commercial and industrial) was served by ARES.
Thing two: municipal aggregation
In 2009, the Illinois legislature passed a Community Choice Aggregation (CCA) law, which allowed for what’s called “municipal aggregation.” That means cities or counties can procure their own power directly from ARES, pooling the ratepayers in their jurisdiction into what is effectively one big customer. And in late 2010, a key follow-up order simplified billing and made municipal aggregation even easier.
So in 2011, if you were, say, a mayor or city council in one Chicago’s suburbs, you faced an extraordinarily tempting opportunity. You could bail on the IPA, procure your town’s power from other suppliers, and save your constituents tons of money on electricity bills — sometimes up to 30 or 40 percent at a stroke.
In fact, the savings were so substantial that several communities, like Oak Park and Elgin, opted to purchase 100 percent renewable energy (well, sort of — more on that in a second) and still saved a ton of money.
Not surprisingly, municipal aggregation proved popular. As of May 2012, over 250 Illinois communities had passed referendum measures enabling municipal aggregation. (Over 100 of them have opted for 100 percent renewables.) The share of the state’s power load served by IPA has fallen to about 30 percent.
And the list keeps growing: This November, over 220 communities have municipal aggregation measures on the ballot. Among them, most significatly, is Chicago, where the measure is supported by Mayor Rahm Emanuel (D).
If all these ballot measures pass, IPA will be left representing a mere 10 percent or so of the state’s power load. (That unlucky 10 percent is going to be stuck paying off those expensive contracts.)
Grassroots greens in Chicago are excited about the city controlling its own power supply. They are still riding high on the euphoria of a massive victory: A few months ago, after years and years of activist effort, the two dirtiest power plants in Chicago, the Fisk and Crawford coal-fired plants, finally shut down. Activists want to keep the momentum going, so the Chicago Clean Power Coalition, which spearheaded the Fisk/Crawford fight, is rallying behind municipal aggregation. They say it will give the city a chance to craft its own energy portfolio, with lots of energy and renewables.
I think these folks have their hearts in exactly the right place, but they are rallying just a touch prematurely. Lemme explain why.
A brief diversion to discuss RECS vs. PPAs
It’s important to note that the communities purchasing “100 percent renewable power” via municipal aggregation are actually buying renewable energy certificates, or RECs. When a renewable energy generator produces power, it can sell that power to the commercial grid in exchange for RECs, which can then be sold or traded on power markets. RECs are frequently purchased by utilities or businesses in order to comply with renewable mandates.
There’s a good bit of debate over the propriety and validity of RECs. However, even if one assumes that they do in fact reliably represent renewable energy, they don’t do much to stimulate demand for new renewables. They are mainly a revenue stream for existing renewable energy producers. And over time, most of the RECs being purchased by towns in Illinois have come from out-of-state energy producers, which does even less to stimulate demand for Illinois renewables.
Luring investments in new, in-state renewable energy installations requires a different instrument: power-purchase agreements, or PPAs. A PPA is a contract that commits a customer (or customers) to buying the power produced by a generator at a set price for a set period of time.
So, say Illinois was trying to persuade Vestas to invest in a new wind farm in Illinois. It could say, “lots of Illinois towns buy RECs, though the number of RECs they buy is constantly fluctuating depending on power prices, and we’re not sure how many towns will be doing it from year to year.” Would that give Vestas the confidence to invest tens of millions of dollars? Probably not. Instead, the state could sign a PPA with Vestas, promising to buy the power produced by the new farm at $40/megawatt for 20 years. That’s the kind of assured demand that might move Vestas to action. Think of RECs like one-night stands and PPAs like marriages.
Now, back to our story.
Thing three: the Illinois RPS
In 2007, Illinois established a (reasonably ambitious) renewable portfolio standard requiring that 25 percent of the state’s electricity come from clean sources by 2025. At the outset, the RPS only covered the power providers contracting with IPA, but in 2008 it was amended to cover ARES as well. After much political haggling and deal-making, those 2008 amendments also worked out a system of compliance rules … which have turned out to be an unholy mess.
In all cases, complying with an RPS means coughing up money to be used buying renewable energy. But there are different ways of coughing up money and different ways the money can be used. Illinois decided, in its wisdom, to try a little bit of all of them.
The best way to think of this is to imagine the Illinois RPS compliance money going into three buckets. One bucket is filled by the power producers contracting with IPA, the other two are filled by ARES.
Bucket one: Power producers contracting with utilities through IPA send their compliance money into a common fund administered by IPA. That fund is used to purchase a mix of short-term RECs and 20-year PPAs.
Bucket two: Up to half of the compliance money from an ARES can be used to buy renewable energy, mainly through RECs.
Bucket three: The other half (or more) of the compliance money from an ARES comes in the form of Alternate Compliance Payments, which go into the Renewable Energy Resources Fund, another, separate fund also administered by IPA.
A few things to note about this Rube Goldberg monstrosity of a system.
First, notice that the money for RPS compliance is split up and spread all over the place.
Second, notice that most of the money, rather than going to long-term PPAs with new Illinois renewable energy projects, goes to short-term RECs, mostly via out-of-state power producers. It’s doing very little to create stable demand for new renewable energy, which one would think is the point of an RPS.
Third, note that the Renewable Energy Resources Fund, which might have served to attract large-scale investment in renewables, was raided by the governor and the legislature the very first year it existed. The minute there was a pool of money, state leaders swooped in and stole it to pay down other parts of the state’s beleaguered budget. Ever since then, the money that’s gone into the fund has just sat there, unused. After all, if you were a renewable energy company, would you make a large, long-term investment on the promise of money that might get stolen by politicians at any moment? No.
Fourth, notice that this leaves bucket one as the only sizable remaining pool of stable money — the only source that might attract new clean energy projects to the state.
But remember the poor IPA? Its commercial and industrial customers bailed. Then municipal aggregation took off and its residential customers started bailing. If all the municipal aggregation measures on the ballot this year pass, IPA will be left representing about 10 percent of the state’s energy load.
As IPA’s customer base shrinks, its need to procure power shrinks. In fact, it has announced that it does not plan any more renewable energy procurements until 2018 (at the earliest!). And it gets worse. Because IPA’s coverage is shrinking, its RPS compliance funds are also shrinking. So little is coming in that IPA may not be able to cover existing renewables contracts.
So this is where our long, looong story takes us: Municipal aggregation is shrinking the IPA consumer base, and as the IPA consumer base shrinks, the only money available in the state for long-term renewables contracts shrinks. At this rate, the RPS will stimulate virtually no more renewable energy development in Illinois. It will just send a stream of revenue out of state via RECs. It looks like municipal aggregation is going to take a rickety, poorly designed RPS and shake it to pieces.
How to save municipal aggregation and the RPS
This is not to say that municipal aggregation will have no positive effects. As time passes and municipal governments learn what works and what doesn’t, it may well be that some of them will get more ambitious. Polls do show that the people of Illinois, in both parties, are squarely in favor of moving to clean energy. Instead of just buying RECs, some of them may set aside money to buy actual renewable energy capacity — rooftop solar panels and so on. They may get aggressive on energy efficiency to keep costs down. Theoretically, municipalities could go well beyond the RPS. This is distributed experimentation. It’s local control. It’s energy democracy — and y’all know I love me some energy democracy.
However, it would suck if it helped kill an ambitious RPS in an important energy state like Illinois.
So what’s the answer? Fix the RPS!
How to fix it? Well, remember the main problem: The money is getting split up, disaggregated, and thus having much less impact than it could. The solution, then, is to scrap the dippy three-bucket system and put all the RPS compliance money into one big bucket, where it can be used to establish long-term power contracts with clean-energy developers that promise to come to Illinois. More renewable energy in the state, more jobs, more local money staying in local economies. Woo.
As it turns out, there’s a dead simple way to accomplish that. Right now, RPS compliance payments are charged on the generation side, which, as we saw, is all kinds of fragmented. Instead, they could be charged on the distribution side, where, you’ll remember, all customers are served by the same two big utilities. There would be an RPS compliance charge on the power bill of every single utility customer, with the money channeled into a single, common fund. This wouldn’t cost ratepayers any more than they already pay. It would merely move the cost from one place to another. (New charges on utility bills are obviously a political hot potato, but it’s worth noting that this is exactly how the state’s Energy Efficiency Standard has worked since 2007, and there have been no consumer complaints. And recall that German electricity customers pay a charge like this without complaint, because they see the benefits.)
This simple change would create a large, stable pool of money that could spur real progress on in-state renewable energy. Best of all, it would allow municipal aggregation to go forward without any perverse consequences. Communities could get absolutely as creative as they wanted in finding their ideal mix of power sources (and efficiency). They could experiment like crazy. The RPS money would be safe, serving as a baseline for local efforts.
Why doesn’t the Illinois legislature just do this? From what I’ve heard, the need for the fix is widely understood and it would probably pass if it came to a vote. Problem is, the measure is virulently opposed by Exelon, which would just as soon let the RPS die a slow death, since the addition of cheap wind energy to the Illinois grid is messing with its profits. (That’s also why it’s lobbying against the extension of the wind production tax credit.) Exelon is the 800-pound gorilla in Illinois. Its ComEd PAC gave $108,000 to candidates (of both parties) in the fourth quarter of 2011 — more than any other PAC. A great many Illinois politicians are beholden to it.
One of them is Speaker of the House Michael Madigan (D), without whose cooperation no bill can go to the floor of the Illinois legislature for a vote. So … that’s a little sticky. But it’s not an insurmountable problem, by any means. It will just take some political muscle. (Happily, Illinois finally boasts a small but growing clean-energy PAC.)
In my always humble opinion, this fight is what greens in Chicago and the rest of Illinois should be rallying around. Yes, the municipal aggregation ballot measures are great, but most of them, including Chicago’s, are expected to pass. It’s the RPS that needs the concerted attention of an engaged grassroots movement.
If the RPS is fixed and municipal aggregation spreads across the state, Illinois will be a damn interesting place for renewables — a hotbed of experimentation and innovation. Here’s hoping they can pull it off.
Michigan: Great Lakes, great expectations. (Image courtesy of Shutterstock.)
Probably the most important energy-related vote this November is happening in the swing state of Michigan, where voters will decide whether to substantially boost the state’s renewable energy standard (RES). It’s a big deal for all sorts of reasons, many of which extend beyond the state itself. So let’s walk through the background.
In 2008, Michigan passed a law to require the state’s utilities to generate 10 percent of their power from renewable energy sources by 2015. It was an extremely cautious RES, full of defensive provisos prohibiting anything that would cost more than coal power or raise electricity rates.
This year, the Michigan Public Service Commission, which oversees compliance, issued an updated report [PDF] on how implementation is going. The top-line conclusion is that implementation is going smoothly and “providers are on pace to hit the 2012 interim targets as well as the 10 percent by 2015 renewable energy standard.” Whee!
Renewable energy in the state is exploding:
Click to embiggen.
Between 2008 and 2011, the RES attracted more than $100 million in new investment to the state. Michigan electricity prices are down, due to the recession and cheap natural gas, but the report notes that renewable energy doesn’t seem to have had any discernible effect at all on prices: “The electricity market has absorbed this initial level of capacity injections and demand reductions with little to no fluctuation in prices.”
In the last year, according to an appraisal [PDF] by the commission, the state’s electricity prices have started creeping back up, but that’s due to imported coal power, not renewables. Costs for renewables have been lower than expected, causing utilities to repeatedly lower their clean-energy surcharge. In fact, the combined average price of all Michigan’s new clean energy was lower than the price of electricity from conventional coal plants.
In 2010, there were almost 80,000 green jobs in Michigan. The report notes that new jobs generated by the RES haven’t yet been clearly quantified (an assessment is due later this year), but that “Michigan has the potential to become a regional leader in development and manufacturing of renewable energy systems.”
So: new jobs and investment without raising costs to consumers. It’s going pretty well!
Earlier this month, a coalition of local business and environmental groups called Michigan Energy, Michigan Jobs submitted 530,000 signatures (the state requires 322,000) to put a new proposal on the ballot that would expand the renewable energy standard. The new target would be 25 percent clean energy by 2025. The proposal is widely popular among small businesses and state energy experts.
This year, the Illinois Power Agency issued an assessment [PDF] of that state’s RES, which happens to be 25 percent by 2025. It found that “renewable resources, in particular wind, have played a dramatic role in reducing electric energy prices in Illinois and the entire Eastern Interconnection” and that the RES has “enabled significant job creation and economic development opportunities as well as environmental benefits.” Sounds pretty good.
Right now, energy bleeds money out of Michigan. Check out this grim diagnosis from the state’s Public Service Commission last year:
Michigan is relatively limited in most energy resources and imports 97 percent of its petroleum needs, 82 percent of its natural gas and 100 percent of coal and nuclear fuel from other states and nations. These imports account for about 72 cents of every dollar spent for energy by Michigan’s citizens and businesses. Michigan spent a total of $31.3 billion on all forms of energy in 2009 and of that amount $22.6 billion was for the energy resources imported from other states and nations.
The thing is, it doesn’t have to be this way. Michigan is not limited in its energy resources. In fact, Michigan has enough local renewable energy to power itself three times over:
The more Michigan develops its local renewable resources, the more electricity generation becomes a boon, an economic growth engine, rather than merely a cost. Energy money stays in the state and circulates in local communities (Michigan already has a substantial wind and solar supply chain [PDF]) rather than being transferred to out-of-state fossil-fuel companies. Michigan wins: more economic activity, more jobs, more pollution-free energy, more pride.
None of that sounds good to the Michigan Chamber of Commerce and the state’s big utilities. They have united behind a front group called Clean Affordable Renewable Energy for Michigan (CARE) that is battling to defeat the proposal. CARE has raised more than twice the money of clean-energy proponents and begun bombarding Michigan voters with $5.2 million worth of advertising pushing bogus scare stories about the high costs of clean energy.
This is part of a broader war on state renewable energy standards being waged by ALEC and other conservative groups. They face an uphill battle: Voters in Michigan and other Midwestern states overwhelmingly support clean energy, as do voters across the country. Most importantly, independents side with Democrats on this. And some of the most important swing states are also the ones with the most renewable energy potential. The more cleantech establishes itself in these states, the more their governors will start acting like Chris Christie and the more clean energy will be freed from its partisan connotations.
The only way conservative fossil-fuel interests can win on that unfavorable terrain is with big money and big lies. That’s the contest in Michigan in November. Its outcome will reverberate in other states.
Last month, Michael Noble of Fresh Energy put up a fascinating list of projections made by energy experts around 2000 or so. (I got there via Brad Plumer.) Suffice to say, the projections did not fare well. They were badly wrong, and all in the same direction — they underestimated the growth of renewable energy. It’s worth quoting the whole list:
WIND
In 2000, the International Energy Agency (IEA) published its World Energy Outlook, predicting that non-hydro renewable energy would comprise 3 percent of global energy by 2020. That benchmark was reached in 2008.
In 2000, IEA projected that there would be 30 gigawatts of wind power worldwide by 2010, but the estimate was off by a factor of 7. Wind power produced 200 gigawatts in 2010, an investment of approximately $400 billion.
In 1999, the U.S. Department of Energy estimated that total U.S. wind power capacity could reach 10 gigawatts by 2010. The country reached that amount in 2006 and quadrupled between 2006 and 2010.
In 2000, the European Wind Energy Association predicted Europe would have 50 gigawatts of wind by 2010 and boosted that estimate to 75 two years later. Actually, 84 gigawatts of wind power were feeding into the European electric grid by 2012.
In 2000, IEA estimated that China would have 2 gigawatts of wind power installed by 2010. China reached 45 gigawatts by the end of 2010. The IEA projected that China wind power in 2020 would be 3.7 gigawatts, but most projections now exceed 150 gigawatts, or 40 times more.
SOLAR
In 2000, total installed global photovoltaic solar capacity was 1.5 gigawatts, and most of it was off-the-grid, like solar on NASA satellites or on cabins in the mountains or woods.
In 2002, a top industry analyst predicted an additional 1 gigawatt annual market by 2010. The annual market in 2010 was 17 times that at 17 gigawatts.
In 1996, the World Bank estimated 0.5 gigawatts of solar photovoltaic in China by 2020, but China reached almost double that mark — 900 megawatts — by 2010.
What should we take from this?
Well, mainly that fossil-fuel energy was really cheap in 2000. Oil was about a third the price it is now, coal for electricity about half. That colored those projections. But that’s a boring lesson. Let’s speculate about some others.
The projections weren’t just off, they were way off. You can find similarly poor projections from the ’70s that underestimate the spread of energy efficiency and other demand-side technology solutions. (They thought they were going to need hundreds of nuclear plants. See Alexis Madrigal on this.) Similarly terrible projections were also common in the early years of cell phones.
What do cell phones, energy efficiency, and renewable energy have in common? One, they are dynamic areas of technology development and market competition, which makes straight-line projections pretty useless. And two, they are distributed, with millions of loosely networked people and organizations working on them in parallel. Distributed, human-scale technologies come in small increments. They replicate quickly, so there’s more variation and competitive selection, and thus more evolution.
Nuclear power, in contrast, comes in gigantic increments only (at least for now). There’s a limited number of people doing the R&D, a limited number of entities capable of building or financing the power plants. It’s a little easier to know the potential.
When it comes to complex, parallel, loosely linked networks, the dynamics are more fluid and nonlinear changes more likely. They’re harder to quantify and predict. And so we consistently underestimate them. Something to keep in mind when pondering what today’s projections are going to look like in 2020.
Speaking of keeping things in mind, it seems to me that when projections are consistently wrong in the same direction, it bespeaks a need to update the models and techniques used to project — or at least update our expectations.
For example: Every time there’s a new air or water regulation proposed, industry predicts a level-10 economic apocalypse. EPA counters by saying it will only be a level-5 economic apocalypse. Invariably, it’s a level-0 economic apocalypse — low costs, lots of lives saved. Yet the political class approaches each new regulation with a peculiar Zen-like no-mind, as though it is the first such argument and all perspectives are equally supported by past experience. Same with projections of energy efficiency and renewables.
So why aren’t projections being updated to match what’s been observed? It’s a complicated question, but at least part of the answer is that projections are not ideologically neutral. There are assumptions and value judgments obscured behind the spreadsheets. Is efficiency a cost or an investment? What externalities are counted and for how much? To what extent is political economy taken into account? What value is placed on the welfare of our descendents (i.e., what is our “discount rate“)?
There’s no way to do projections without value judgements and assumptions, of course. But it’s good to be clear about them and, when they come into friction with experience, to be willing to rethink them. Otherwise we get stuck in a status quo sustaining feedback loop, where fossil-friendly assumptions produce fossil-friendly projections which are then used to justify fossil-friendly policies and investment decisions.
For visions of a clean energy future, brothers and sisters, look not to the soothsaying of thine “experts,” but to history, and to hope. Amen.
The International Energy Agency recently issued its annual progress report [PDF] on clean energy. Here’s the five-cent version:
The transition to a low-carbon energy sector is affordable and represents tremendous business opportunities, but investor confidence remains low due to policy frameworks that do not provide certainty and address key barriers to technology deployment. Private sector financing will only reach the levels required if governments create and maintain supportive business environments for low-carbon energy technologies. [my emphasis]
Progress is inadequate — relative to the goal of limiting global temperature rise to 2 degrees C — on virtually every low-carbon technology except onshore wind and solar (click for a larger version of this chart):
What will it cost to turn this around and hit the 2 degrees C target? A good chunk in the short term and negative dollars in the long term:
Globally, the near-term additional investment cost of achieving these objectives would amount to USD 5 trillion by 2020, but USD 4 trillion will be saved through lower fossil fuel use over this period. The net costs over the next decade are therefore estimated at over USD 1 trillion. More impressively, by 2050, energy and emissions savings increase significantly as CO2 emissions peak, and begin to decline from 2015. In this timeframe, benefits of fuel savings are also expected to surpass additional investment requirements for decarbonising the energy sector. [my emphasis]
This is key to understanding both the difficulty and the promise of the so-called Third Industrial Revolution. The up-front investments are huge. Personally, I’m an optimist — I think savings will exceed costs by 2020. Either way, though, we’re talking about enormous investments made on the basis of faith and projections. Machiavelli said it best:
It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them.
We are asking the governments of the world to spend trillions of dollars to construct a new order with which they have virtually no experience and only the barest familiarity. It’s a heavy lift.
Here are the IEA’s big recommendations:
Level the playing field for clean energy technologies by pricing energy appropriately and addressing energy systems holistically (this latter is a particular challenge).
Unlock the potential of energy efficiency by tightening standards and enlisting the help of energy providers (utilities).
Last week, the Apollo Alliance and the BlueGreen Alliance, two of the
most important national nonprofits supporting clean energy development and
good jobs, announced that as of July 1, they would merge. The much larger
Minneapolis-based BlueGreen Alliance, a
five-year-old collaboration of big green groups and unions, will become the
parent of San Francisco-based Apollo, which was founded in 2003 and gained its
renown for being the first organization to understand that the transition to an
economy primarily fueled by something other than oil and coal could produce a
flurry of useful results—jobs, climate action, energy security, and
industrial innovation.
The merger is good for both organizations. It consolidates Apollo’s strong
policy work with its parent’s considerable networking strength in states and in
Washington, D.C. It also reflects the need for one big progressive voice
touting the benefits of clean energy in an era, hopefully temporary, in which
national interest and public investment in solar, wind, geothermal, and other
renewable and non-fossil alternatives is in treacherous decline.
That’s because the right—heavily financed by Big Oil, gas, coal, and
utilities—loathes what it calls government intrusion in the market, and sees
no justification for curbing carbon emissions because it is convinced climate
change is a scientific hoax. At the grassroots, it’s no better. Civic
coalitions that defy conventional description—joining left, right, and
centrist activists—have formed hundreds of campaigns in more than 35
states that are devoted
to killing renewable energy projects they regard as just too damn big.
China, meanwhile, has no such problem. By the end of the decade, China
will produce over 700 gigawatts of electricity from wind, hydro, nuclear, and
solar. If that kind of development occurred in the U.S., it would amount to
roughly 65 to 70 percent of our projected electrical generating
capacity in 2020. Hundreds of thousands of jobs have developed in China’s clean
energy and non-fossil fuel sectors.
Meanwhile the United States is busier than it’s been in decades perpetuating
the domestic fossil fuel economy. Big Oil last year spent $100 billion
accelerating a hydrocarbon boom at the center of the continent. Canadian tar
sands have become the largest single source of oil imports to America. An
extensive new
oil and gas transport and processing infrastructure is under construction from Alberta,
Canada through the Great Plains, Rocky Mountain West, Great Lakes states, and on
to the Gulf Coast. It includes new pipelines, as well as modernized and
expanded refineries. Hundreds of the nation’s heavy onshore drill rigs are
tapping oil and natural gas in the northern Great Plains in shale formations
nearly two miles deep. North
Dakota looks to be on the way to supplanting Texas as the No. 1 oil producer among
the states.
I know a little bit more about the BlueGreen-Apollo merger than your
average bear because I worked at Apollo for 16 months in 2008 and 2009, as
communications director, when the “clean energy, good jobs” attained a rare
salience in policy circles and electoral politics. The email message announcing the merger, sent on Thursday by Apollo Chairman
Phil Angelides, reminded me of those heady days and especially one morning
meeting in Denver that synthesized the movement’s influence at the time.
It was the second day of the Democratic National Convention and a select
group of America’s senior labor and environmental leaders met for an hour with
T. Boone Pickens, the Texas oil billionaire who’d announced a month earlier his
interest in investing a good portion of his fortune in wind power. I attended
the meeting for the Apollo Alliance and documented some of the participants in
the picture to the right—(right to left) Rich Trumka, now president of the AFL-CIO,
Leo Gerard, head of the United Steelworkers, Carl Pope, then the executive
director of the Sierra Club, and Bracken Hendricks of the Center For American
Progress.
When T. Boone Pickens articulates much the same thing as the leader of the
Sierra Club, never mind a major party presidential nominee, that’s a conversation
you don’t forget. Quite a few of the people who’d helped tee up the United
States for what looked to be a momentous transition were gathered at that
table. Bracken Hendricks, an author and capable strategist, was the founding
executive director of the Apollo Alliance. Carl Pope and Leo Gerard were Apollo
board members and in 2006 founded the BlueGreen Alliance, a joining of the
Sierra Club and the Steelworkers. Rich Trumka, who once headed the United
Mineworkers Union, was talking jobs in the same breath he mentioned wind and
solar energy.
Emily Dickinson once called hope “the thing with feathers that perches in
the soul.” In 2008 and 2009, clean energy looked to be an idea set to soar.
Barack Obama campaigned on “clean energy, good jobs” and won the nomination and
presidency. Congress passed a $787
billion stimulus bill in February 2009 that
contained $100 billion or so for renewable energy, energy efficiency, transit,
and other clean energy initiatives. The House, in June 2009, beat back a fierce
assault from the fossil fuel industry and passed a comprehensive energy bill
that was the first time a chamber of Congress set mandatory limits on greenhouse-gas
emissions. Clean energy and climate action were prominent ideas in global
economic and diplomatic meetings, including the Pittsburgh G20 conference in
September 2009, and the U.N. climate summit in Copenhagen in December 2009.
In the 18 months since the Copenhagen climate summit, the
clean energy and climate action messages have been in eclipse. Foundations
and advocacy organizations are searching for new tools to revive the public’s
interest. Jeff Nesbit, the former director of the Office of Legislative and
Public Affairs at the National Science Foundation, just
accepted the executive director’s post at Climate Nexus, a New York-based
climate and clean energy communications group formed by a consortium of big
philanthropies. The newly merged BlueGreen Alliance has a big job ahead of it,
too. We wish them well.
The Federal Housing
Finance Agency solidified its opposition to the home-greening program Property
Assessed Clean Energy (PACE) in a letter to members of Congress Thursday,
telling them it doesn’t see a way to let the program move forward.
FHFA Acting Director
Edward DeMarco rejected the possibility of a PACE pilot
program, seen as the last best hope for bringing the suspended finance tool
back to life in the near term.
“Discussions have
failed to produce concepts that would mitigate the threat to FHFA-regulated
institutions or to broader financial markets,” DeMarco wrote to PACE-supporting Reps. Ed Perlmutter (D-Colo.), Steve Israel (D-N.Y.), John Sarbanes
(D-Md.), and Mike Thompson (D-Calif.). “FHFA, therefore, has determined that
its guidance to its regulated entities must remain in place.”
The remaining options
for saving the popular PACE program are a court battle, legislation, or
possibly intervention from the Obama administration. That last option seems
remote since the administration has so far refused
to put its top people on the case.
Here’s the background
(borrowed from Grist’s previous
coverage): PACE works by letting homeowners pay for rooftop solar arrays
and energy-saving retrofits through a surcharge on their property tax bills.
The cost is paid back over 10 to 20 years. In this way PACE removes high
upfront costs and ensures that property owners don’t lose out if it they sell—the new buyer inherits both the home improvements and the tax assessment.
The Berkeley-born
model creates work for building contractors, cuts carbon pollution, and
essentially runs on private capital, since cities and towns that offer PACE
fund it through municipal bonds.
Until late spring, PACE
was spreading at a steady clip: Twenty-two states had endorsed the model and
encouraged municipalities to set up programs. San Francisco had just launched a
program and Los Angeles was preparing for one later in the year. The Obama
administration backed the model with $150 million in stimulus it funding and an endorsement from the vice
president’s Middle Class Task Force.
But in May FHFA threw
the nation’s first programs into confusion by warning
lenders to stay away from properties with PACE assessments. The agency
objects to the liens that PACE puts on properties, which get paid off ahead of
mortgages if a borrower defaults. That adds a theoretical risk into an already
jittery credit market.
It’s an unfounded fear,
since well-designed energy retrofits add to a homeowner’s financial security,
cutting their utility bills and making them a safer bet for lenders. A report
commissioned by a major financial institution last year found that energy-efficient homes had default and delinquency rates 11 percent lower
than typical homes. PACE advocates have worked to integrate standards to ensure
the quality of retrofits, but that work can’t continue with programs stalled
out.
DeMarco raised the
question of quality standards in his letter this week:
No satisfactory conclusion has been reached to address
problems associated with liens created after a mortgage is in place, thereby
transferring credit risk to banks, secondary market parties and investors in
mortgage-backed securities. Further, consumer protections and appropriate
underwriting standards need to be uniform and mandatory to protect homeowners.
… I
believe that FHFA has done its utmost to seek constructive alternatives.
PACE advocates in the
building trades, local governments, and Congress disagree with his “utmost”
assertion.
“Every single
issue raised by FHFA was raised previously and resolved, from almost
everybody’s perspective, with excellent answers,” PACE creator Cisco
DeVries told Grist last month. “It’s clear they didn’t want to take ‘yes’ for an
answer.”
The chances of a
legislative fix this year are slim, given the level of dysfunction in the
Senate. Majority Leader Harry Reid said he’d consider pushing a PACE bill if it
got a Republican cosponsor, but that hasn’t happened yet. In the House, Bob
Inglis (R-S.C.) signed on as the first Republican cosponsor of a PACE bill
earlier this month.
That raises the
question of where the other Republican supporters are, according to Cliff
Staton, vice president of marketing at DeVries’s company Renewable Funding, which helps towns and
counties set up PACE programs.
“PACE has not been a
partisan issue at the state and local level,” Staton wrote in an email. “… But
in DC, everything seems to be partisan.
“Now that one
Republican has crossed the line, though, the question for other Republicans
becomes: ‘Why not co-sponsor?’”
PACE isn’t the only
innovative financing tool for making green improvement affordable for
homeowners. But it has been one of the most effective ones during its
three-year life. Now supporters know a little more about their options for
saving it.
If you read everything that bloggers declared a
“must read,” you’d have time for little else. I’ll just say that if you want a
lucid tour of the Obama administration’s work to remake the country’s energy
and transportation landscape, it’s tough to beat Michael Grunwald’s new TIME piece “How
the Stimulus is Changing America.”
Most coverage of the stimulus—the American
Recovery and Reinvestment Act—looks at the “recovery” portion—the goal of saving and creating jobs. Grunwald looks into the 16 percent of
funds marked for “reinvestment”—the long-term projects of confronting
climate change, cutting oil addiction, building a 21st century economy (and
also modernizing health care and education):
Yes,
the stimulus has cut taxes for 95% of working Americans, bailed out every
state, hustled record amounts of unemployment benefits and other aid to
struggling families and funded more than 100,000 projects to upgrade roads,
subways, schools, airports, military bases and much more. But in the words of
Vice President Joe Biden, Obama’s effusive Recovery Act point man, “Now
the fun stuff starts!” The “fun stuff,” about one-sixth of the
total cost, is an all-out effort to exploit the crisis to make green energy,
green building and green transportation real; launch green manufacturing
industries; computerize a pen-and-paper health system; promote data-driven
school reforms; and ramp up the research of the future. “This is a chance
to do something big, man!” Biden said during a 90-minute interview with
TIME.
For
starters, the Recovery Act is the most ambitious energy legislation in history,
converting the Energy Department into the world’s largest venture-capital fund.
It’s pouring $90 billion into clean energy, including unprecedented investments
in a smart grid; energy efficiency; electric cars; renewable power from the
sun, wind and earth; cleaner coal; advanced biofuels; and factories to manufacture
green stuff in the U.S. The act will also triple the number of smart electric
meters in our homes, quadruple the number of hybrids in the federal auto fleet
and finance far-out energy research through a new government incubator modeled
after the Pentagon agency that fathered the Internet.
There’s very little in the story about who likes the $787
billion stimulus, who doesn’t, and how political consultants are using it in the midterm elections. Instead Grunwald reports on what the stimulus is
actually doing (what a novel concept).
The $8 billion for high-speed passenger rail is
the the boldest federal transportation initiative since the interstate
highways, Grunwald notes. Investment in advanced batteries for electric cars
will bring the number of U.S. factories from two to 30.
“Any one of those programs would have been a
revolution in its own right,” he writes.
But should the government be picking winners and
losers? I’ve harped enough lately about how that’s a bogus question unless you consider
how the government already subsidizes winners in
energy (oil and coal) and transporation (automobiles).
Grunwald takes a look the administration’s plan
for keeping waste out of the stimulus:
Every
contract and lobbying contact is posted at Recovery.gov, with quarterly data
detailing where the money went. A Recovery Board was created to scrutinize
every dollar, with help from every major agency’s independent watchdog. And
Biden has promised state and local officials answers to all stimulus questions
within 24 hours. It’s a test-drive for a new approach to government: more
transparent, more focused on results than compliance, not just bigger but
better. Biden himself always saw the Recovery Act as a test—not only of the
new Administration but of federal spending itself. He knew high-profile
screwups could be fatal, stoking antigovernment anger about bureaucrats and
two-car funerals. So he spends hours checking in, buttering up and banging
heads to keep the stimulus on track, harassing Cabinet secretaries, governors
and mayors about unspent broadband funds, weatherization delays and fishy
projects. He has blocked some 260 skate parks, picnic tables and highway
beautifications that flunked his what-would-your-mom-think test. …
So
far, despite furor over cash it supposedly funneled to contraception (deleted
from the bill) and phantom congressional districts (simply typos), the earmark-free
Recovery Act has produced surprisingly few scandals. Prosecutors are
investigating a few fraud allegations, and critics have found some goofy
expenditures, like $51,500 for water-safety-mascot costumes or a $50,000 arts
grant to a kinky-film house. But those are minor warts, given that
unprecedented scrutiny. Biden knows it’s early – “I ain’t saying mission
accomplished!” – but he calls waste and fraud “the dogs that haven’t
barked.”
The
Recovery Act’s deeper reform has been its focus on intense competition for
grants instead of everybody-wins formulas, forcing public officials to consider
not only whether applicants have submitted the required traffic studies and
small-business hiring plans but also whether their projects make sense. Already
staffed by top technologists from MIT, Duke and Intel, ARPA-E [the
administration’s in-house venture capital arm] recruited 4,500 outside experts
to winnow 3,700 applications down to 37 first-round grants. “We’ve taken
the best and brightest from the tech world and created a venture fund—except
we’re looking for returns for the country,” Majumdar says. These change
agents didn’t uproot their lives to fill out forms in triplicate and shovel
money by formula. They want to reinvent the economy, not just stimulate it.
Sadoway, the MIT battery scientist, is tired of reporting how many jobs he’s
created in his lab: “If this works, I’ll create a million jobs!”
Skeptics
may roll their eyes at this, but they shouldn’t. Mike, whom I know well, is a famously
skeptical journalist who has won a slew of
awards for his tough coverage of government agencies. (Just
ask the Army
Corps of Engineers.)
If he is enthusiastic about the Recovery Act, then you should be, too.
