July 20, 2011
Senator Murkowski’s Wise Words on National Energy Policy
In a recent speech at the Renewable Energy Technology Conference & Exhibition, Senator Lisa Murkowski (R-AK) outlined a thoughtful and well-reasoned energy policy strategy built on a limited but targeted role for government, with self-funded programs rationalized around an innovation-focused strategy to make America's energy system "clean," "diverse" and "affordable." Her words strongly recall the proposals outlined in "Post-Partisan Power," a collaborative report by scholars from the Breakthrough Institute, American Enterprise Institute and Brookings Institution, which argued for "a limited but direct approach to energy innovation" that strongly resonates with Sen. Murkowski's remarks.
As the ranking Republican on the Senate Committee on Energy and Natural Resources, Murkowski's words carry great weight. Instead of echoing the familiar Republican attacks on federal technology investment as "picking winners and losers," she brings a historical literacy and an intelligent policy framework to the debate.
Emphasizing the looming collapse of federal clean energy policy, Senator Murkowski cited Breakthrough's recent research directly. "Budget cuts have now begun here at home," she cautioned, "and the Breakthrough Institute has determined that more than 70 percent of the federal support for renewable energy has either expired already or will expire within the next three years." As the Senator clearly realizes, the coming collapse of federal policy is setting our nation up for a clean tech crash - and creating an urgent imperative for rational energy policy reform.
Towards those ends, Murkowski outlined the broad contours of an energy policy for moving forward as the existing, hodge-podge of temporary federal clean energy support expires in the coming years. The senator call on industry leaders to get clear about what they need from government, and for Congress to get clear about consistent national energy policy. "For about three years running, we've had a near-constant prospect of an energy debate on the Senate floor," she declared. Her message was clear: policy uncertainty coupled with an industry dependent on federal support is not a recipe for successful innovation.
Going forward, Senator Murkowski put an emphasis on targeted investments in advanced energy innovation:
In these tough budgetary times, the most defensible spending will largely relate to front-end research and development, where the benefits become more substantial over time - the type of research that agencies like ARPA-E are helping to promote right now, and that may not be undertaken otherwise. I also believe that an independent Clean Energy Deployment Administration would help take some of the politics out of energy policy, and replace it with high-level financial and technical expertise.
The Senator's invocation of the highly successful ARPA-E and the proposed Clean Energy Deployment Administration (CEDA) are encouraging signs, indicating bipartisan support for key elements of a functional American energy innovation system.
The senator also placed a strong emphasis on securing long-term and stable funding for these key innovation agencies. Her suggested "pay-for" mechanisms: increased revenues from domestic oil drilling profits and royalties.
By directing these dollars towards a clean tech trust fund that supports programs like ARPA-E and CEDA, the government would create a permanent revenue stream for energy innovation and insulate these valuable agencies from perpetual budget battles in Congress. Such a mechanism would also go a long way towards dispelling the myth that, as Senator Murkowski put it, "the various sectors of the energy industry will be at war with one another."
The Senator promises to work to build a national energy supply that is "abundant, affordable, clean, diverse, and domestic." Just as we advised in "Post-Partisan Power," the best path towards that energy future is through limited by energetic investment in innovation, smart and sustained federal funding mechanisms, and public-private partnerships that bring together the best qualities of government and industry to make clean energy cheap and independent of perpetual subsidy.
Senator Murkowski's words also recall the recent work of the business titans behind the American Energy Innovation Council. Murkowski drew attention to the expertise of Bill Gates, Norm Augustine, and others on the Council, who have warned of the failure of current federal energy policy. In a report released last week, the AEIC present largely the same innovation-centric framework articulated by "Post-Partisan Power." That a ranking Senate Republican is taking a cue from this framework is highly encouraging.
Senator Murkowski's strong endorsement of the innovation framework proves that innovation does not need to be a partisan issue. Where the hodge-podge and muddled mass of federal energy policy is about to collapse, a new unified and rationalized innovation strategy must replace it. Limited but energetic government programs, supported by appropriate and dedicated funding sources, can revive the national energy innovation system and steer the way towards clean, cheap energy, economic productivity, and national prosperity.
Read the full text of the speech here:
"Good afternoon, and thanks for the invitation to join you this afternoon. Admiral McGinn, I appreciate that kind introduction. I'd also like to thank you for your leadership at ACORE and your hard work on RETECH.
"I'm told this conference could draw more than 3,000 attendees over the next couple of days. Not only will the 50 states be represented - so will some 50 foreign countries. That's pretty impressive. It shows the growth and the gains that the renewable energy industry has made in recent years. It shows that the potential we've known about for so long is starting to be realized.
"As a senator for Alaska, I'm reminded of the potential of renewable energy every time I return home. For those of you who haven't been to the Last Frontier, it's the biggest stage for renewables that you'll find anywhere. We have two-thirds of the nation's coastline - more than all the other states combined - we're more than twice as large as Texas, and all throughout, we are literally an energy storehouse. We have tremendous potential for wind, geothermal, hydropower, ocean energy, biomass, and for solar. And the need for clean, affordable energy is not anywhere greater than in rural Alaska, which includes our nation's true frontier towns.
"I'm also reminded of the potential of renewable energy just about every day that I'm here in Washington, DC. That's due to events like this one, and it's due to my position as the Ranking Member of the Senate Energy and Natural Resources Committee. We have jurisdiction over the Department of Energy and much of our nation's energy policy, so we regularly hear from scientists and entrepreneurs who are working to make renewable energy into a global reality.
"There's a lot of reason for optimism about clean technologies. New ideas are emerging, costs are coming down, and deployment is increasing. All of those are welcome developments for our energy supply and the global environment. Federal policies have played a role, but much of the progress we've seen is the direct result of your creativity and determination.
"At the same time, there's also genuine reason for concern. It's not just our economy that's faltering - it's the global economy. Many nations, including our own, are deep in debt and unable to support even existing programs. Budget cuts have now begun here at home, and the Breakthrough Institute has determined that more than 70 percent of the federal support for renewable energy has either expired already or will expire within the next three years.
"We've also seen the private sector slow down significantly. According to news reports, venture capital investments in clean technologies fell last quarter, both in terms of dollars invested and deals made. Several IPOs have been cancelled, some companies have laid off workers, and a few have shut down entirely. Most recently, we saw the sudden and dramatic failure of Solyndra, which is forcing Congress to re-evaluate how it invests in clean energy start-ups.
"Right now, a lot of people wonder whether things are going to turn around for the better, or if it's possible for them to become even worse. I don't think anyone can be certain of the answer, but I would like to share my perspective on how we can ensure that renewable energy enjoys a brighter future.
"It starts with my overarching philosophy about what our nation's energy policy should look like. I'm a strong believer in an 'all of the above' approach - and that certainly includes a place for renewable energy. In fact, I believe our policies should reflect five primary goals, many of which favor renewable resources: we should continually strive to make our energy supply more abundant, affordable, clean, diverse, and domestic.
"Coming from Alaska, I know that our nation's tremendous resource base can help us reach those goals. By harnessing all of our resources, we can grow our economy, create jobs, and strengthen our national security. We should promote everything from energy efficiency to hydropower and clean coal. But we also have to be careful. Our policies can't sacrifice the economy or the budget for the environment. We have to protect all three.
"So how can we do this? I believe there are a number of steps that can be taken - by the federal government, by state and local governments, and by private companies - that will lead to meaningful progress on clean energy.
"We can start by looking at ways to reduce your industries' costs of regulatory compliance. I think the best example of this was provided by an article in the New York Times back in January. A fellow by the name of Ken Button was quoted, explaining how his company faced "50 different permitting authorities within 50 miles" of its offices. As he put it, "They all have different documentation requirements, different filing processes, different fee structures. It's like doing business in 50 different countries - just in Southern California." "Mr. Button's point is backed up by several studies. According to one, also cited by the New York Times, local permitting and inspection costs may be adding 33 percent to "out-of-pocket costs for a homeowner installing solar panels." That's a serious impediment. Streamlining the regulatory and permitting requirements for new technologies could provide a significant boost to their competitiveness, at little to no cost to the government. So that's an endeavor that should be undertaken at all levels. That's a challenge that should be tackled immediately.
"Next, Congress can provide greater certainty in legislation. For about three years running, we've had a near-constant prospect of an energy debate on the Senate floor. Not once during that time has the Senate actually debated energy policy, but the chance that we will has had a detrimental effect. The anticipation and uncertainty that results from a promised debate cannot possibly be helpful to your ability to draw private investment dollars. So when leadership plainly states that the Senate will debate energy policy, I think there ought to be a firm commitment to do it in that working period - before the next recess.
"Beyond that, we can provide greater certainty and stability in federal policy. Here, you can really help us out. Instead of coming to Capitol Hill and asking for what sometimes seems like a dizzying array of policies, I implore you - work together to determine your top priorities, and then make a concerted, coordinated effort to see them through to enactment. Find "pay-fors," find offsets, and agree to eliminate authorizations that are no longer relevant. And be judicious about the types of support you ask for, as well.
"In these tough budgetary times, the most defensible spending will largely relate to front-end research and development, where the benefits become more substantial over time - the type of research that agencies like ARPA-E are helping to promote right now, and that may not be undertaken otherwise. I also believe that an independent Clean Energy Deployment Administration would help take some of the politics out of energy policy, and replace it with high-level financial and technical expertise.
"Last week I was participated in a roundtable discussion on energy innovation with Bill Gates, Norm Augustine, and several other distinguished business leaders. One of them remarked that while we're very good at coming up with plans, we're terrible at sticking to them. And I think that's particularly true for energy. We regularly authorize programs that have little chance of being funded. We pass short-term tax credits, change them up or let them lapse, and then wonder why they weren't successful. We need to design policies that can endure both the passage of time and shifts in party lines, and that will receive consistent funding for five years or ten years or longer.
"That brings us to one of the toughest subjects: funding. We are $15 trillion in debt right now. Twelve members of Congress have less than two months left to identify $1.5 trillion in savings over the next ten years. Suffice to say, it's a lot easier to cut spending than to increase it right now.
"So I urge you - as I urge every industry and interest group - to prepare for a time when federal funding is greatly restricted. If Plan A is the government, events like this provide a perfect opportunity to develop a strong Plan B, where you can form new partnerships and focus on building up your supply chains with less help from the government. We're already seeing some of this happen in states like Indiana and among businesses like Ford and Best Buy.
"Government cuts could be a threat to your industry - but this is also an opportunity to demonstrate just how far your industry has come. So I urge you to focus intensely on competitive business models and on driving your costs down. When government funding is available, make sure it's exactly what you need. If it doesn't work for you, don't hesitate to say so. It's certainly in our interest to promote new technologies that can lower the cost of energy. But, clearly, it's against our interest to focus on sources of energy that will depend on continuous, long-term subsidization.
"So, now, the biggest question. Is it possible to ensure a steady stream of funding for renewable energy? My answer is yes - absolutely. Again, I support an 'all of the above' approach to energy policy. I look at forecasts and see that our nation now imports about nine million barrels of oil per day, and that 25 years from now, that number is projected to be largely unchanged. Think about that: eight or nine million barrels a day, at $100 a barrel or perhaps higher, for the next quarter century. That will cost our nation trillions of dollars that we can't spare, and the truth is, we have resources right here at home to dramatically reduce those costs.
"If we can agree to develop more of our conventional resources, that would provide billions and billions of dollars in revenues for the Treasury each year. And if we're smart enough to dedicate a significant portion of those revenues for clean energy, that will finally provide the makings of a legitimate long-term energy policy - a policy where the substantial government revenues from fossil fuels are used to speed up the development of their replacements. Our best energy policy will not rely on new mandates or higher taxes - it will instead help fossil fuels work themselves out of a job.
"At this point, we're almost conditioned to expect that the various sectors of the energy industry will be at war with one another. To do our best to change that dynamic - and enact a balanced long-term policy that works - would mark a big and positive shift.
"So I ask that you give it full consideration. The government takes in billions of dollars from resource extraction each year, and even a small portion of that money could have a positive impact on renewable energy. With the federal budget in generally terrible condition, we don't have the luxury of simply diverting that money without finding some way to replace it. So when I consider the best ways to keep energy prices low, to create new jobs, and to bolster our national security, one approach stands out. Our best path forward is to increase domestic energy production, and ensure that some of the returns to the Treasury are used wisely to develop the resources we will depend on in the future.
"Like you, I believe that the transition to a clean energy economy is inevitable. I believe there is a role - limited, but real - that the government can play to help accelerate that transition. And I look forward to working with all of you to develop smart, innovative, and sustainable policies to help reach that goal.
"Thanks again for inviting me here today. I hope RETECH 2011 proves to be an informative and productive experience for all of you."