How Did US Renewable Energy Policy Get So Off Track?

July 4th, 2014 by Guest Contributor

Energy Post

By Allan Hoffman

In 1978 a monumental multi-departmental study was submitted to President Carter concluding that “solar energy could make a significant contribution to U.S. energy supply by the end of this century”. The study, backed by 30 federal departments, stated that “even with today’s subsidized energy prices, many solar technologies are already economic.” Yet no action was taken and solar power and other renewable energies stagnated for over 30 years. Until now? Allan Hoffman, former senior official at the U.S. Department of Energy, who personally delivered the report to the White House back in 1978, recalls what went wrong – and what lessons the U.S. should draw if it is to avoid another failed renewables revolution.

On December 6, 1978 I personally delivered a multi-agency report to the staff of the Domestic Policy Advisor to President Carter entitled ‘Domestic Policy Review of Solar Energy: A Response Memorandum to The President of the United States’. It is popularly known as the DPR. The report had been requested by the President in a May 3, 1978 speech in Golden, Colorado, dedicating the newly formed Solar Energy Research Institute (SERI). SERI has since become the National Renewable Energy Laboratory (NREL).

The DPR was the final report of the first comprehensive review by the U.S. federal government of its policies for renewable energy. It involved 30 federal departments and agencies, and at its peak this 6-month study involved the efforts of 175 senior government officials detailed to the DPR task force. As the U.S. Department of Energy’s senior representative to the DPR, and just one month after I had joined DOE as a political appointee, I was designated to head the effort by my new boss, the head of DOE’s Policy Office.

My hopes were dashed when President Clinton tried to put a price on carbon by raising gasoline prices by five cents a gallon and ran into a political firestorm. He never tried again.

The next six months were rather intense, starting with the fact that the other 29 departments and agencies didn’t trust the 30th, DOE, because of some recent history. Shortly before the DPR was announced the Carter Administration had released a National Energy Policy, also a multi-agency effort chaired by DOE. The story I was told by non-DOE staff was that DOE, at the last minute, had pulled out a draft it had prepared on its own and submitted it as the multi-agency report. As a result I inherited a problem of trust and spent much of the DPR’s first month building relationships with the non-DOE detailees to reestablish that trust. The DPR was completed in early December 1978, and delivered to the White House shortly thereafter. The full report, with appendices, was formally published in February 1979 and is available in DOE’s archives.

Point well taken

The reason I am writing about it now is that my wife recently happened to read it for the first time, and had a ‘strong’ reaction. She asked me, quite forcefully, WTF has it taken the U.S. so long to implement what we recommended more than 35 years ago? Point well taken! She also recommended that I write about this failure and “name names”. As a government retiree (as of September 30, 2012) I feel free to do that without constraint, recognizing that others may have different views on the subject. In fact, I will let the readers of this piece make up their own minds by reproducing the seven-page Executive Summary in full below before offering my views. It also serves as a piece of history that most people today are not familiar with.

Here it is.

Domestic Policy Review of Solar Energy: A Response Memorandum to The President of the United States

(February 1979, TID-22834/Dist. Category UC-13)

EXECUTIVE SUMMARY

INTRODUCTION

In your May 3, 1978, Sun Day speech, you called for a Domestic Policy Review (DPR) of solar energy. Stuart Eizenstat followed on May 16 with a memorandum defining its scope to include:

A thorough review of the current Federal solar programs to determine whether they, taken as a whole, represent an optimal program for bringing solar technologies into widespread commercial use on an accelerated timetable;

A sound analysis of the contribution which solar energy can make to U.S. and international energy demand, both in the short and longer term;

Recommendations for an overall solar strategy to pull together Federal, State and private efforts to accelerate the use of solar technologies.

In response to this memorandum, an interagency Solar Energy Policy Committee under the chairmanship of the Secretary of Energy was formed to conduct the review. Over 100 officials representing more than 30 executive departments and agencies have participated since early June.

This review was conducted with significant public participation. Twelve regional public forums were convened throughout the Nation during June and July to receive public comments and recommendations on the development of national solar energy policy. The response of the public was impressive, and reflected the growing support for solar energy identified by several recent opinion polls. Several thousand people attended the meetings and over 2000 individuals and organizations submitted oral or written comments.

In addition, briefings were given to members of the Domestic Policy Review by representatives of solar advocacy groups, small businesses, state and local government, public interest and consumer groups, utilities, the energy industry and solar equipment manufacturers. This public input was an important part of the Review.

In large part, themes reflected in the public comments are consistent with the findings of the DPR and the premises of the National Energy Plan. These premises include an emphasis on conservation as a cornerstone of national energy policy, awareness that energy prices should generally reflect the true replacement cost of energy, and recognition of the need to prepare for an orderly transition to an economy based on renewable energy resources. The public forum comments also reflected a deep concern that the poor and the elderly have access to affordable energy.

SUMMARY OF MAJOR FINDINGS

The results of the Domestic Policy Review can be summarized in nine major findings.

1. With appropriate private and government support, solar energy could make a significant contribution to U.S. energy supply by the end of this century. Renewable energy sources, principally biomass and hydropower, now contribute about 4.8 quads or six percent to the U.S. energy supply. Since estimates of future energy supply and demand are imprecise, three generic forecasts of possible solar use were developed. They can be distinguished most readily by the level of effort that would be required to reach them. In the Base Case, where present policies and programs continue, solar energy could displace 10-12 of a total of 95-114 quads in the year 2000 if energy prices rise to the equivalent of $25-32 per barrel of oil in 1977 dollars. A Maximum Practical effort by Federal, state and local governments could result in solar energy displacing 18 quads of conventional energy by the end of the century. Thus, if one assumes the higher future oil price scenario and this Maximum Practical effort, solar could provide about 20 percent of the nation’s energy by the year 2000. The Technical Limit of solar penetration by the year 2000, imposed primarily by the rates at which changes can be made to existing stocks of buildings and equipment, and rates at which solar techniques can be manufactured and deployed, appears to be 25-30 quads.

2. Solar energy offers numerous important advantages over competing technologies. It provides the Nation with a renewable energy source which can have far fewer detrimental environmental effects than conventional sources. To the extent that increased use of solar energy can eventually reduce U.S. dependence on expensive oil imports, it can also improve our balance of payments, alleviate associated economic problems, and contribute to national security. Widespread use of solar energy can also add diversity and flexibility to the nation’s energy supply, providing insurance against the effects of substantial energy price increases or breakdowns in other major energy systems. If oil supplies are sharply curtailed or environmental problems associated with fossil and nuclear fuels cannot be surmounted, solar systems could help reduce the possibility of major economic disruption.

In addition, because solar systems can be matched to many end-uses more effectively than centralized systems, their use can help reduce a large amount of energy waste. Although the U.S. now consumes about 76 quads of energy a year, less than 43 quads actually are used to provide energy directly in useable form. The rest in consumed in conversion, transmission and end-use losses.

3. Even with today’s subsidized energy prices, many solar technologies are already economic and can be used in a wide range of applications. Direct burning of wood has been economic in the private sector for some time, accounting for 1.3 to 1.8 quads of energy use. Combustion of solid wastes or fuels derived from solid wastes is planned for several U.S. cities. Passive solar design can significantly reduce energy use in many structures with little or no increase in building cost. Low head hydroelectric generation is currently economic at favorable sites. Solar hot water systems can compete successfully in many regions against electric resistance heating, and will compete against systems using natural gas in the future. A number of solar systems installed by individual users are cost-effective at today’s market prices. In addition, other solar technologies will become economic with further research, demonstration, and market development, and if subsidies to competing fuels are reduced or removed.

4. Limited public awareness of and confidence in solar technologies is a major barrier to accelerated solar energy use. Public testimony continually emphasized the need for more and better solar information. New programs to educate designers, builders, and potential solar users in the residential, commercial and industrial sectors are needed. Because consumers lack information, they often do not have confidence in solar products. Programs to provide reliable information to consumers, to protect them from defects in the manufacture and installation of solar equipment, and to assure competition in the solar industry can help build consumer confidence in the future.

5. Widespread use of solar energy is also hindered by Federal and state policies and market imperfections that effectively subsidize competing energy sources. These policies include Federal price controls on oil, and gas, a wide variety of direct and indirect subsidies, and utility rate structures that are based on average, rather than marginal costs. Also, the market system fails to reflect the full social benefits and costs of competing energy sources, such as the costs of air and water pollution. If solar energy were given economic parity with conventional fuels through the removal of these subsidies, its market position would be enhanced.

6. Financial barriers faced by users and small producers are among the most serious obstacles to increased solar energy use. Most solar technologies cannot compete effectively with conventional fuels at current market prices, in part because of subsidies, price controls, and average-cost utility rate structures for these conventional fuels. The tax credit provisions in the National Energy Act (NEA) will improve the economics of certain solar technologies, particularly in the residential sector.

Other barriers exist because the high initial costs of solar systems often cannot be spread over their useful lives. Industry and consumers have yet to develop experience in financing and marketing solar systems. Some of the provisions of the National Energy Act will help expand credit for residential/commercial solar systems. In addition, the new Small Business Energy Loan Act will provide credit assistance to small solar industry firms. Other existing Federal financial programs, which were created for other purposes, could also help finance solar purchases if they were directed toward this end.

7. Although the current Federal solar research, development and demonstration (RD&D) program is substantial, government funding priorities should be linked more closely with national energy goals. Solar RD&D budgets, which have totaled about $1.5 billion in the Fiscal Year (FY) 1974 to FY 1979 period, have not adequately concentrated on systems that have near-term applications and can help displace oil and gas. Electricity from large, centralized technologies has been over-emphasized while near-term technologies for the direct production of heat and fuels, community-scale applications and low-cost systems have not received adequate support. Basic research on advanced solar concepts has also been under-emphasized, limiting the long-term contribution of solar energy to the nation’s energy supply.

8. Solar energy presents the U.S. with an important opportunity to advance its foreign policy and international trade objectives. The United States can demonstrate international leadership by cooperating with other countries in the development of solar technologies, and by assisting developing nations with solar applications. Use of decentralized solar energy can be an important component of development planning in less developed counties which do not have extensive power grids, and cannot afford expensive energy supply systems. In many cases, solar may be the only energy source practically available to improve rural living conditions. Through such efforts, the U.S. could also help to develop new foreign markets for U.S. products and services, thereby increasing opportunities for employment in solar and related industries at home. And, as solar energy eventually begins to displace imported oil and natural gas, the U.S. will enjoy greater flexibility in the conduct of its foreign policy. Insofar as solar energy systems reduce the need for nuclear and petroleum fuels in the long-term, they can help reduce the risk of nuclear proliferation and international tensions arising from competition for increasingly scarce fossil fuels.

9. Although the Federal government can provide a leadership role, Federal actions alone cannot ensure wide-spread use. Many barriers to the use of solar energy, and opportunities to accelerate its use, occur at state and local levels. In order to overcome these barriers and take advantage of these opportunities, a concentrated effort at all levels of government and by large segments of the public will be required. Nevertheless, the Federal government can set a pattern of leadership and create a climate conducive to private development and use of solar energy in a competitive market. These efforts must also recognize the wide variation among solar technologies and the resulting need to tailor initiatives to specific solar applications.

This was 35 years ago and in hindsight it is clear that the powerful recommendations in our study were largely ignored. We thereby missed a great opportunity to transform our society in a way that would have enabled us to avoid many of the traumatic geopolitical, economic and environmental problems we faced in the ensuing years.

Why? Allow me to offer some personal reflections on this. My views take issue with both political parties and with vested interests in traditional energy industries. They are based on my experiences over nearly forty years in Washington, including service as Staff Scientist for the Senate Committee on Commerce, Science and Transportation, and many years as a senior official at the U.S. Department of Energy. Let me start with President Carter.

I served in the Carter Administration for nineteen months as head of the renewable energy policy division in the newly established Department of Energy. The DPR was my primary responsibility during that time and was received by a President who was favorably disposed towards renewable energy technologies. In fact he installed solar hot water heating panels on the White House roof and used the DPR as the basis of his dedication speech in April 1979. Where I take issue with his promotion of renewable energy is in his denial of a requested increase in the R&D budget for renewables, arguing that we had to balance the FY1981 budget. I accepted his argument at the time but rejected it later when the President somehow found $88 billion for a new synfuels program, probably motivated by his then poor standings in the polls. I was sufficiently upset by this development that I left DOE shortly thereafter.

Of course President Carter lost to Ronald Reagan in the 1980 presidential election and the following eight years were terrible for renewable energy, and for DOE in general. President Reagan and his aides set out to eliminate two Federal Departments – DOE1 (Energy) and DOE2 (Education), but succeeded in neither. Nevertheless, they did remove the solar panels from the White House roof and serious damage was done in those years to the renewable energy budget – it was reduced by a factor of eight! Only the determined efforts of a few dedicated DOE managers (particularly Bob San Martin, the head of the renewable electric programs) kept the programs alive. It was also during this period that oil prices took a dive to below $10 a barrel and public interest in alternative energy was diminished significantly.

These studies [attacking solar power] were misleading and required a great deal of effort to refute. I’ve always thought of them as similar in intent to the studies sponsored by the tobacco companies.

Things improved in the four years under George Bush Sr. – budgets edged up slightly and SERI was designated as a National Laboratory, NREL. The 1992 election also saw Bill Clinton elected as President and Al Gore as Vice President, and hopes were high that renewable energy R&D budgets would increase. I was now back at DOE helping to run the renewable energy programs, first as Associate Deputy Assistant Secretary, and then as Acting Deputy Assistant Secretary for more than three years. While annual budgets did increase somewhat to about $300 million, I knew that this was less than required for a fully effective program (the budget covered solar, wind, hydropower, geothermal, biomass, ocean energy, energy storage, and superconductivity), which I estimated to be $450 million.

Political firestorm

Not expecting much action in a first Clinton term (there were lots of other ‘fish to fry’) I looked forward to Clinton’s second term. Of course my hopes were dashed when the President tried to put a price on carbon by raising gasoline prices by five cents a gallon and ran into a political firestorm. He never tried again. Vice President Gore was also responsible for a serious setback when he insisted that all programs aimed at reducing global warming be so labeled in the FY1996 budget request, which many of us argued against strongly.

We were unsuccessful, the Republicans won both the House and Senate in that off-year election, and the Gingrich Revolution that followed used the Gore budget identifications as a guide to reducing the renewable energy budget by 25%. This had serious consequences for NREL, which received 60 % of its operating funds from that budget, and NREL was forced to lay off 200 of its 800 staff. It was a devastating time for renewables, about which I still carry strong feelings. One of those feelings is that we had a President and Vice President who understood energy issues and the need to move toward a renewable energy future. In my opinion they should have taken more steps to put us on that path, and they didn’t. I’m still angry.

The Clinton/Gore years were followed by the Bush/Cheney years where the energy focus was on fossil fuels and nuclear power. It was a discouraging period for renewables and we lost valuable time while the rest of the world began to make significant progress in their development and deployment of renewables. We clearly lost out on the economic activity and jobs that were going to other countries as the new, clean energy industries were being developed. It was only with the coming of the Obama administration that this situation began to change, but our progress has been seriously slowed down by a dysfunctional Congress these past few years, the worst I have seen in all my years in Washington, DC.

Let me also say a word about the role of traditional energy companies in the oil, natural gas, and coal industries. Clearly their role in supplying energy would be affected by the penetration of renewable technologies, and they have reacted as one might expect. In the mid 1990s, as renewables began to emerge, the coal industry sponsored several studies that attacked the ability of renewables to provide a significant fraction of national energy needs. These studies were not accurate, even misleading, and required a great deal of effort to refute. I’ve always thought of them as similar in intent to the studies sponsored by the tobacco companies to raise doubts about the health effects of smoking and slow down regulatory activities. Modern analogs are the studies sponsored by fossil fuel companies to disprove global warming and climate change and slow down efforts to reduce dependence on carbon-based fuels.

A plague

This is not to say that fossil fuels don’t have an important role to play in our future energy supply. Renewable technologies are not ready yet to provide the large amounts of energy required to power our economy and fulfil our international responsibilities, and probably won’t be for several more decades. Nevertheless, recent studies document that renewables can provide the major share of our electrical energy requirements in 2050 if we have the will to do so and make the necessary investments (see ‘Renewable Electricity Futures Study’, NREL, June 2012). It is also true that our transportation fleets are highly dependent on petroleum-based fuels, and will be for many years until they are electrified and alternate liquid fuels are developed. Also, natural gas has always been recognized as a needed transition fuel to a renewable future. With the U.S. and other countries entering a new natural gas era with the emergence of large amounts of shale gas via fracking , and the ability of natural gas to substitute for coal in power generation and thus reduce carbon emissions, it will be an important part of our energy supply for decades to come. Unfortunately, this glut of shale gas may lead to reduced investments in renewables if national energy policies don’t take this into account.

Recent studies document that renewables can provide the major share of our electrical energy requirements in 2050 if we have the will to do so.

To sum up my views on why more hasn’t happened in the U.S. since February 1979 when the DPR was released to the public and provided an excellent framework for moving toward a renewable energy future: a plague on all houses. Too many Republicans and some Democrats have been too protective of traditional energy companies, Democrats have often failed to provide needed leadership when opportunities presented themselves, and fossil fuel companies, particularly coal companies, are generally doing what they can to protect their vested interests. However, it is also fair to recognize that several oil companies did invest resources in the early days of photovoltaics to help get things started, as Peter Varadi well documents in his newly published book about the history of PV ‘Sun Above the Horizon’ (Pan Stanford Publishers). Nevertheless, they mostly retreated from these investments when they realized that short term profits were not available, and that a long term perspective would be required.

Today, in my opinion President Obama ‘gets it’ about the promise and importance of a renewable energy future. I believe he is doing what he can to put the U.S. on that path but is facing serious opposition from a too often recalcitrant U.S. Congress. In my view Congress has an obligation to look down the road, anticipate national needs, and take positive steps to address those needs before they become crises. This is an obligation I believe recent Congresses have often not met. We can do a lot better and must if the U.S. is to derive its fair share of benefits from an emerging and inevitable clean energy industry that other countries are working hard to develop and know is the future.

Editor’s Note

The footnotes to the DPR report are available from the author. For inquiries please send a note to the editor karel.beckman@energypost.eu

Allan Hoffman keeps a weekly blog, Thoughts of Lapsed Physicist, where he writes about energy, water and related issues. This article has also been published on his blog here.

Source: Energy Post. Reproduced with permission.









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