By Kennedy Maize
Washington, D.C., January 25, 2012 — For as long as most of us can remember, both U.S. political parties have been shouting from the partisan tree tops that the country needs an “energy policy,” whatever that might mean. The parties disagreed on just what it should be. The GOP’s mantra has always been “produce, produce, produce” with a solid soupcon of nukes. The Dems have pushed “conserve, conserve, conserve,” all green at the gills.
But, as President Obama made clear in Tuesday night’s State of the Union speech, America does NOT need an energy policy. He didn’t say it outright, but his message clearly demonstrated that we are doing just fine without some sort of over-arching, politically-driven command-and-control guidance from above on how to find, make and use energy and power.
Here’s the relevant portion of what Obama said about energy in the U.S.:
“Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my Administration to open more than 75 percent of our potential offshore oil and gas resources. Right now, American oil production is the highest that it’s been in eight years. That’s right – eight years. Not only that – last year, we relied less on foreign oil than in any of the past sixteen years.
“But with only 2 percent of the world’s oil reserves, oil isn’t enough. This country needs an all-out, all-of-the-above strategy that develops every available source of American energy – a strategy that’s cleaner, cheaper, and full of new jobs.
“We have a supply of natural gas that can last America nearly one hundred years, and my Administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade.”
That’s right, the nation is on a steadily descending path on use of foreign oil, through a combination of new production – Bakken and Marcellus come to mind – and conservation from market-driven energy prices. Thank goodness the government has not intervened to try to control gasoline prices. And, yes, recession played a role in the conservation but I doubt that either party wants credit for that.
Take a look at this graphic from the Energy Information Administration:
The president didn’t mention, but he could, that the U.S. is now a net exporter of petroleum products. I haven’t done the math, but I strongly suspect that current U.S. natural gas prices, adjusted for inflation, are the lowest in U.S. history. At $3-$4, they are astonishingly low even unadjusted. What accounts for that? Mostly the rise of shale gas, a development (Obama to the contrary notwithstanding) almost entirely driven by the free market with very little input from government “energy policy” or federal funds.
“Energy policy” is a beguiling phrase. Uttering it, particularly with an Eastern European or British accent, makes the utterer sound profound. “Harrumph, what the United States desperately needs is an Energy Policy.” But at bottom, it’s a bogus concept, as recent history demonstrates. The federal government, regardless of who has been at the wheel, has tried to steer energy markets in various, usually feckless, ways. The government turns the wheel to the left and energy markets go right. Hard right turns yield a careen to the left. Go figure. Maybe the best course, as I’ve often argued in this blog, is to do nothing.
The best advice I’ve seen recently on energy policy comes in a broader context from Stanford economics professor John Taylor, writing in today’s Wall Street Journal. In the article, and in his new book — First Principles: Five Keys to Restoring American Prosperity (WW Norton) – Taylor writes that the key to sound, long-term economic development is that “families, individuals and entrepreneurs must be free to decide what to produce, what to consume, what to buy and sell, and how to help others. Their decisions are to be made within a predictable government policy framework based on the rule of law, with strong incentives derived from the market system, and with a clearly limited role for government.”
To extrapolate, a point illustrated by the facts Obama cited Tuesday night: We don’t need no stinkin’ energy policy. What we have now works.
“We don’t need no stinkin’ energy policy. What we have now works.”
Except that many states have RES/RPS, forcing utilities to purchase or install inefficient, expensive, undispatchable energy sources, and then pass those costs off to the consumer who has no choice but to pay whatever the utility is charging if they want their power to stay on.
For example, here in southern NM, EPE touting the solar power from the Santa Teresa and Hatch arrays. You can even see the daily power output on EPE’s website. But EPE never mentions that the Santa Teresa power costs EPE 12.745 c/kWh, and from Hatch, the solar power costs 11.9 c/kWh. That’s almost 2.75 times the “base fuel” cost of 4.396 c/kWh. After applying this month’s Fuel & Purch. Power Cost Adj. of minus 1.04 c/kWh, that solar power is over 3.5 times what EPE pays for fuel. Bluntly, EPE is paying more for the wholesale power from solar arrays than they are charging residential customers for retail power. The only reason EPE has to buy triple-cost solar power is the NM Renewable Portfolio Standard.
In addition, EPE by regulation recovers from all customers the expense of buying RECs from owners of individual solar and wind power installations. Those RECs cost EPE anywhere from 8 to 15.5 c/kWh, in additon to EPE paying retail rates for spot-market power (aka net-metering).