The Secret of Where Good Energy Comes From

November 14, 2011 | Michael Shellenberger, Ted Nordhaus,

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In the wake of Solyndra's failure, pundits have latched on to a simple, compelling narrative: government can't do energy right.

From synfuels to solar panels to "clean coal" (written, inevitably, with knowing quotation marks), demonstration projects funded by the Department of Energy are described as one failed white elephant after another. Today the DOE is the agency everyone loves to hate (and, at least in Texas Gov. Rick Perry's case, the agency to forget).

What gets left out (and forgotten) is that virtually every one of today's major energy technologies exists thanks to sustained US government investments in research, development, and demonstration. Consider:

To be sure, not every DOE investment has succeeded. But even the projects frequently named as failures were often secret successes.

Take synfuels. After the oil shocks of the 1970s, the US government created the synthetic fuels program. The program worked to produce fuel competitive with oil at $60 a barrel -- the program's objective. But when the price of oil dropped to $10 a barrel in the early 1980s, Congress sensibly abandoned the program. The total amount spent by Congress on SynFuels ended up being just $2 billion -- cheap insurance against future oil embargoes and price shocks, which had sent the United States into a costly recession.

Most people are surprised to learn that the SynFuels program was a success in another way: it led to the development of the technologies today used for coal gasification and carbon capture and storage, which captures coal plant emissions.

Clean coal is ridiculed by greens and libertarians alike as pie-in-the-sky. In fact, carbon capture and storage has been demonstrated around the world. One descendent of SynFuels, Dakota Gasification, is to this day still producing gas and sequestering several million tons of CO2 each year at Weyburn in Canada.

Or consider the case of an abandoned next generation nuclear plant on the Clinch River. The Washington Post singled it out to make a sweeping case against all public investments in advanced energy. What the Post didn't mention is that, since 1949, the U.S. government has successfully demonstrated and tested more than 50 experimental reactor designs at the National Reactor Testing Station (now Idaho National Labs). One of them -- the EBR-II -- ran for 30 years at the testing station and was the technological predecessor to the integral fast reactor (IFR), which is increasingly viewed by experts as promising since it is so efficient, burning conventional nuclear reactor waste as fuel.

Sometimes pundits point to natural gas drawn from shale as an example of how the private sector does the job better. They claim fracking and horizontal drilling were developed by a solitary entrepreneur named George Mitchell in the 1980s. In fact, the key breakthroughs in the development of shale gas technologies occurred thanks to intensive DOE demonstration efforts pursued by President Jimmy Carter, the frequent butt of energy-related jokes, in response to the 1970s oil embargoes.

Look at what industry and independent experts say. "The Department of Energy was there with research funding when no one else was interested," said the head of Julander Energy, a member of the National Petroleum Council, "and today we are all reaping the benefits." A Senior Director at Halliburton said, "In the early 1980s, the industry as a whole did not have a clear vision for producing gas from shales, and benefited from DOE involvement and funding of [electro-magnetic telemetry] EMT technology... there is a clear line of sight between the initial research project and the commercial EMT service available today." Dr. Terry Engelder of Penn State calls the DOE's Eastern Gas Shales Research Program "one of the great examples of value-added work led by the DOE."

In the case of the "shale gas revolution," as in so many examples of breakthrough American innovations, it is this key interplay between public sector research, demonstration, and testing and private sector ingenuity and entrepreneurship that drives major advances in technology.

To be sure, US investments in energy must be reformed. We should stop bluntly subsidizing the deployment of more of the same energy technologies -- whether current-generation wind, solar, biofuels, or nuclear -- and retool energy incentives to demand steady and continual innovation and cost improvements. Firms that out-innovate their competitors with next-generation clean energy improvements should be rewarded, and clean tech industries should put themselves on a clear path to subsidy independence over time. The big story about energy innovation remains unwritten. For most insta-experts on energy, it's easier to just recycle the old one.

This post was updated 11/14/2011 at 3:34PM PST.