An Energy Policy That Makes Sense

This post began as an email to a friend who is about to take up an energy policy position at a major NGO. It was an attempt at giving my thoughts on energy policy from the perspective of a small entrepreneur who has dove into the deep end of the energy pool. This is coming from someone who understands all of the major renewable energy technologies and is trying to make a living by predicting how things will play out in the next five years. Two other things you should know about me is that I have a revulsion for government participation in markets (based on my years as a journalist on Wall St. and seeing how corrosive they can be to functional systems) and yet I have a strong appreciation for how powerful they can be when applied intelligently (based on my expertise on Korea--I'm writing a book now for the American Management Association about the Korean economy).

With that in mind, here's what I would do if I had the next President's ear:

*Scrap the ITC and PTC--they've done their appointed jobs and are now hurting the industry as much as helping it.

*Heavily subsidize the $300 billion T&D buildout that will be necessary to bring all that bulk solar and wind to the markets. If need be, nationalize this process.

*Target the far ends of the downstream and uspstream portions of the energy chain with government incentives (loan guarantees, subsidies, tax credits, whatever...). 

*Avoid subsidizing the consumer (i.e. Obama's idea of a $7000 tax credit for buyers of new PHEV's). 

*Avoid Feed-In Tariffs at all costs (the ultimate sledgehammer approach to fixing the system). 

*Avoid a cap-and-trade system at all costs (it will end up being needlessly expensive for the economies involved and will become a massive bureaucracy that will become a political patronage system).

The fundamental thing that I understand that most people don't understand (yet), is that we've already reached the promised land of grid parity. In preparation for launching Panea, I spent a year doing very fundamental research and modelling regarding the state of all the various energy technologies. The fundamental truth that I learned from all that data sifting is that wind and solar are now competitive with coal. There are severe capacity bottlenecks for both, but in terms of fundamental science and economics, renewables have finally fulfilled their promise. They don't need subsidies anymore.

If we want to hasten the advent of a renewable-based economy, our energy policy should be based on addressing the physical limitations that are now the only barriers standing in the way: manufacturing capacity, commodity shortages, transmission & distribution, energy storage and smart grid applications. I'll keep posting on this theme in the coming days. In the meantime, good luck with the new gig Samir.