Have We Learned Anything From Past Energy Policies?

The book of Ecclesiastes says “There is nothing new under the sun.” (Admittedly, I learned that not from the Bible but from Ed Fischer’s Domesday Book, a collection of cartoons my parents owned.) That was thought to be written over 2,500 years ago, and certainly there are things that are new under the sun since then, but human nature is not one of them, including the continual failure to learn from history. I gave an entire presentation back in 2010 (a video is here (64) Deja Vu All Over Again – YouTube) called “Won’t Get Fooled Again?” which described many of the arguments being made about energy that had been also made—and proved wrong—in the 1970s.

Amazingly, there are any number of proposed energy and climate policies that appear to demonstrate that the lessons learned have been forgotten or are being ignored. These policies are likely to fail or prove not to be cost-effective, but the question of whether or not we can learn. More likely, we will get the Bullwinkle response: “next time for sure!” The following is a short list of things we seem to be repeating.

Don’t choose technologies: In the early days of environmental regulation, it was thought that the government should simply mandate the use of specific control equipment, such as scrubbers for power plants to remove sulfur dioxide from their emissions. This was known as “best available control technology,” and it was found that not only were there methods other than equipment or technology that could reduce emissions (switching to low sulfur coal, for example), but by the time the government had approved any given technology it was likely to be obsolete. Yet now, governments are mandating ‘zero emission vehicles’ which don’t fully eliminate emissions and are a particularly expensive approach to fighting climate change.

Don’t Work Backwards: To me, the best scene in “Who Killed the Electric Car?” was when the California regulator said it wasn’t his job to promote electric vehicles, it was his job to reduce air pollution. But to all too many, electric vehicles are promoted without regard to the actual goal of reducing greenhouse gas emissions. Notably, hailing the sales surge of BEVs in China completely ignores the dominance of coal in power generation in that country, which greatly reduces the benefit of BEVs. Spending money on additional imports of LNG would probably cut emissions much more cheaply.

Set Goals not Actions: One of the biggest lessons of the last four decades was in the reduction of sulfur dioxide emissions, which was originally planned as requiring scrubbers under the rubric of ‘best available control technology’ as mentioned. It was eventually realized that technology wasn’t the only approach and that the government designating a given technology as the best was flawed. Instead, by mandating reductions through whatever method, emitters had the incentive to find the best overall approach and the cost of reducing sulfur emissions proved much less than expected.

Governments should not set prices: Many experts have bemoaned the repeated failures to analysts to produce reasonable long-term energy price forecasts, but while private companies have regularly made bad forecasts, they do not set prices. Governments, however, often do although with less regularity at the present than in the 1970s. Some governments tried to determine natural gas prices in past decades (England, France, the U.S.) and generally found they overpaid, believing the false notion that nonrenewable resource prices need to rise over time. Still, in the U.S., state regulators often approve prices in long-term contracts for renewable projects based on expectations of rising prices, and a number of governments set ‘feed-in-tariffs’ for power generated by renewables at absurdly high levels, having to later back off when the expense proved unbearable.

Don’t pay above-market prices for some supplies: Regulated markets, and especially those where price controls are used, have often seen governments and regulators decide that high prices for some supplies was acceptable if they could be averaged in with cheaper supplies. This caused a major problem with natural gas markets in the 1980s (England, France and the U.S. among others), when demand weakened and the average price climbed to (politically) unacceptable levels. The same thing was seen more recently in countries like Germany, where high feed-in-tariffs for renewables saw investment soar, which seemed a success except it meant average prices (for consumers) surged, causing a backlash.

Governments are bad at setting prices: A famous Soviet-era joke (probably told by President Reagan) went thusly: Joseph Stalin wakes up in a hospital, surrounded by Soviet officials and doctors, who inform him that it is the year 2050 and that not only has Soviet medicine brought him back to life, but all of the world is now Communist except for New Zealand. Why not New Zealand? He asked. Well, he’s told with a shrug, somebody has to tell us what prices are.

Most people have now forgotten that for years, oil and gas prices in the United States, Canada, and many other countries were set by the government, and the effect was generally detrimental, encouraging more consumption and discouraging production. The phased decontrol of natural gas prices, where the concept was to encourage, for example, drilling for ‘deep’ natural gas, proved a nightmare, creating a decade-long surplus. Government-negotiated prices for imported natural gas from Canada, Mexico and Algeria were equal to roughly five times the current price for gas (adjusted for inflation) and the contracts had to be renegotiated or abandoned.

Yet now, there have been repeated attempts by governments (including some state governments in the U. S.) to encourage renewable energy by setting ‘feed-in-tariffs’ or prices for solar and wind power that proved to be far too generous. 

The past is not predictive of the future: Many assume that trends once set in motion are never reversed. (This is particularly a problem for physicists, I think, because it is generally true for physical laws.) The past failures of renewable energies to live up to expectations should not have been taken as evidence that they never would. In that vein, it could be argued that the poor performance of nuclear power (compared to early optimism) could be reversed as new designs, such as Small Modular Reactors, could prove to be both cheaper and more palatable politically.

It’s complicated: The public space tends to be dominated by simplistic slogans such as ‘No Fossil Fuels!’ which ignore the complexity of the situation. Two decades ago, the ‘landfill crisis’ was all the rage and there was an immediate call to ban disposable diapers as a major component of America’s trash. However, careful analysis showed that cotton diapers were not really better for the environment, needing lots of energy to produce, collect and clean. Similarly, now, many in the public push for measures that are not necessarily cost-effective, or even effective at all, based on slogans they hear, websites they see, or supposedly expert speakers they listen to. (Yes, I ended a sentence with a  preposition, I’m a rebel.) If you wonder if you are guilty of this sin, read Tom Nichols’ The Death of Expertise and consider if you recognize yourself.

Read The Full Story