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By Robert Rapier on Jan 23, 2007 with no responses

My Reaction to the State of the Union

I think it’s great to set ambitious goals. It’s true that if you set stretch goals, but fall a bit short, you still probably did OK. But it is also important to set goals that have a reasonable chance of success, especially when the consequences of falling short are high.

In President Bush’s State of the Union address tonight, he called for a 20% reduction in our gasoline consumption in the next 10 years. That’s a noble goal, and one that I fully support. For this goal, President Bush deservedly received a standing ovation. In fact, a 20% reduction would still have the U.S. using significantly more energy than the average European (we currently use about double the energy of the average European). So, one might think that we might look to Europe – given their current energy usage – as a model for helping us to lower our consumption here in the U.S.

But, as you might have noticed we like to do things our own way in the U.S. Sure, the Europeans (as well as most other countries) have had success, but we live in the land of the non-negotiable lifestyle. Therefore, we can’t emulate the Europeans. We have to find a way to keep running those gas-guzzlers so we can shun public transportation and drive anywhere, anytime we wish.

Bush’s proposal would be to increase our level of biofuels production by 35 billion gallons in the next 10 years (although some have informed me that this is actually for all alternative fuels, which would include coal to liquids). Not surprisingly, this was well-received by Iowa Senator Charles Grassley. I think “giddy” would accurately describe his demeanor as the camera panned on him. The president then got back on track and recommended improving the economy standards on cars to save another 8.5 billion gallons of gasoline in the next 10 years. He in fact said a lot of things that, if followed through, would greatly benefit the U.S. He discussed solar power and plug in hybrids, two of my passions. But I fear that we are too heavily counting on biofuels to deliver.

Look, I have no problem with the goal of increasing biofuels production. I think it’s a good goal, but as we know it can have unwanted consequences. Clearly we do not produce enough corn and soybeans to achieve this goal, so the technology that is being counted on is almost certainly cellulosic ethanol. And while cellulosic ethanol has great potential, we need to realistically understand that there is a reason that cellulosic ethanol plants are not up and running today.

Certain Silicon Valley entrepreneurs would have you believe that we just have to fund enough start ups and the technology breakthroughs will come. But it isn’t always as simple as calling your shot and then delivering it. Some people point to Moore’s Law and think it’s that simple. It is not that simple. Moore’s Law has only recently started bumping up against basic chemistry and physics. Production of cellulosic ethanol has been bumping up against these limits for years. I have previously weighed in on the current status of cellulosic ethanol technology, as well as the amount of biomass required for implementation. Clearly the technology is not yet ready for prime time.

And that brings me to my major concern: Is there a contingency plan? Cellulosic ethanol will see technology improvements. No doubt. What if they aren’t enough? What if, as is the case with a number of medical issues like cancer, we are still struggling with this issue in 10 years? Based on where we are right now, I think there is a pretty decent probability of that. Others, like Vinod Khosla, think the can do attitude of Silicon Valley will ensure success. But just in case, what is the backup plan? Are we going to operate without one? If world oil production peaks in the next few years, as I think is likely, where will we be if cellulosic ethanol doesn’t deliver? Will we merely count on sky-high prices to destroy demand (while also destroying lives)? Will we send troops to Venezuela to keep the oil flowing?

When we are serious about attacking our energy dependence, we will go after the demand side. I believe that a revenue neutral gas tax would seriously cut into our demand over time. This is, of course, the main reason for Europe’s success in maintaining a much lower level of energy usage. Such an approach works, and Europeans enjoy a nice standard of living. Perhaps we will decide to take this proven approach for reducing consumption before declining oil production forces higher prices on us before we have time to prepare.