“All of the Above” vs. “Best of the Above”
Energy’s Brief Appearance in the State of the Union Address
Energy issues received scant mention in Tuesday’s State of the Union speech, consisting mainly of a victory lap for the President’s “all of the above” formulation and a somewhat contradictory promise to place even more federal lands off-limits to drilling. While browsing through reactions from various energy leaders and environmental groups I was intrigued by one critique of Mr. Obama’s approach from an environmental NGO, arguing that he should instead be placing the country’s bets on “best of the above” energy. They weren’t the only ones to object to the current approach.
It’s clear from their statement that Earthjustice has definite ideas about what’s best and what isn’t, but their comment merits further discussion. After all, who could argue against supporting the best energy sources? And isn’t all of the above just a sop to the status quo, in which a diverse array of energy sources dominated by fossil fuels provides the energy for the rest of the economy?
Obama and “All of the Above”
As President Obama noted Tuesday, his reference to an “‘all of the above’ energy strategy”–a debatable characterization in itself–referred to a key phrase in his 2012 address to Congress. It’s worth recalling the context, in an election year in which the Republican nominee was certain to focus on conventional energy when it was delivering US production growth in both oil and natural gas that couldn’t have been imagined just a few years earlier.
“Drill baby, drill”, a slogan from the 2008 election, was actually delivering via highly productive horizontal drilling and hydraulic fracturing in shale gas and oil formations: “fracking.” His administration had done little to foster shale development in his first term, and a fair amount to impede it, at least on federal lands. So it was crucial to neutralize this potential political liability. All of the above was a clever and ultimately successful stratagem to co-opt one of his likely opponent’s best arguments. It also represented a dramatic shift from then-Senator Obama’s energy proposals in the 2008 campaign.
Yet while the wording of this slogan implies the avoidance of choice, the Obama administration has consistently attempted to “pick winners” by means of its strong support for renewables and other advanced energy technologies in the 2009 stimulus, and with regulatory constraints on fossil energy, especially coal. Nor was an average listener Tuesday night likely to be aware, when the President highlighted the growth of solar power in the US at the same time he repeated his call to stop “giving $4 billion a year to fossil fuel industries that don’t need it,” that solar energy already receives far more generous federal tax benefits than oil and gas. Specific subsidies for ethanol and wind power have lapsed, perhaps temporarily, but both still receive valuable preferences in the form of the federal Renewable Fuel Standard and numerous state renewable portfolio standards. These are all conscious choices driven by at least one vision of best.
What’s Your Definition of “Best”?
That brings us to the difficult question of how to arrive at a consensus on the best energy sources. In addition to metrics for greenhouse gas emissions and local pollutants, a government still focused on economic recovery and job growth should also be concerned about cost-effectiveness, reliability, and meeting consumer and business demand. These aren’t just abstract concepts; oil and gas added roughly 20 times more new energy production than wind and solar power combined in 2012, for roughly comparable expenditures of “subsidy,” and are fueling a revival in US global competitiveness.
Virtually every energy source embodies some aspect of “best”, or it wouldn’t be in our current energy mix. Nuclear power provides abundant zero-emission electricity, at a low cost–at least from existing facilities–and with high reliability. Hydropower and geothermal energy likewise provide dependable low-emission power and furnish the grid with flexibility that will be increasingly necessary as more wind and solar are added. Natural gas has become the backbone of the grid’s flexibility and is making inroads into baseload power, thanks to the development of decades’ worth of low-cost reserves from shale. Solar power, while minuscule today, shows great promise and becomes more competitive each year. Even coal can claim some aspects of best, in terms of cost and the scale of its reserves, although without the capture and sequestration or reuse of its large CO2 emissions it is far from best, environmentally.
And then there’s oil, which despite its high cost, especially compared to US natural gas, remains unrivaled for energy density and convenience. Liquid biofuels might offer advantages in terms of emissions–though clearly not on measures of water intensity–but they have a very tall mountain to climb to become capable of delivering energy on the scale required for the world’s growing air, sea and land transportation needs, including not just developing Asia but now also Africa.
Without belaboring the point, it’s hard to imagine a divided US Congress and an embattled administration agreeing on how to define which source of energy is best.
Conclusion – Neither “All” nor “Best” Is Driving US Energy Policy
Fortunately, US energy policy isn’t determined by rhetorical devices like “all of the above.” Unfortunately, while it should be guided by precisely the kind of consensus prioritization that “best of the above” would require, it has largely been a reactive process driven by the latest perceived crisis or opportunity. It also remains far too focused on inputs and preferred pathways and insufficiently defined by a clear articulation of outcomes.
The US isn’t unique in that regard. This is precisely the argument now playing out in the EU as the European Commission grapples with setting a new target for emissions reduction that for the first time will not include binding national targets for the adoption of renewable energy. If that approach can withstand the pressure that Europe’s renewable energy industries can bring to bear, it might just encourage a rethinking of the current US pattern of carving out specific subsidies for preferred technologies, while the market rewards other technologies on the basis of their performance. That’s the reality behind “all of the above.”