US energy policy directions in the short and long term

National leaders debate plans to free US from foreign oil dependence. Verdict: We can do it.

Shell oil rig in Gulf of Mexico-one of 717 manned platforms and more than 2500 unmanned rigs that supply the US with 25% of its oil and 15% of its natural gas.

Vice President Al Gore

One of the most ambitious energy programs comes from a politician who is not even running for office-former Vice President Al Gore. In a Jul 17 speech before the Daughters of the American Revolution, he called for the US to produce all of its electricity from carbon-free sources by 2018.

Gore chose the target date of 10 years because that is the maximum time he believes the country can maintain focus on a single goal. He also believes that it is long enough to achieve his purpose.

Gore the activist points out that, more than 30 years ago as a new congressman, he listened to experts who testified that renewable energy would be economically competitive if the price of oil ever reached $35 per barrel.

If they were correct then, renewable energy should be viable now. Over those 3 decades, also, the price of renewable technologies has come down-for example, silicon for photovoltaic cells used to cost $300 per kilogram. It is now about $50 per kg.

In Gore's view, the time has come to make alternative energy happen. Thus far, his energy proposal is more a call to arms than a detailed plan. However, the components of a greenhouse-friendly electric system are clear.

Former VP Al Gore: "If we make a big commitment to renewable sources, we'll have less pollution, lower cost and a better national security guarantee."

Energy would come from the Sun in the southwestern US and from the wind in the center of the country, and it would need to be transmitted to the coasts. That means developing massive solar powerplants, wind farms, and a "Unified National Grid." Washington might ease the transition by funding Detroit's development of electric cars.

Some other components of the scheme include a CO2 tax to discourage the use of polluting energy sources, a cap-and-trade program to help drive the shift to renewable energy, and programs to aid those whose jobs would be displaced by the change.

For example, he suggests that coal miners should be guaranteed good jobs in a healthy environment in return for their years of hard, dangerous work. In an interview on CBS, Gore put the cost of building solar farms, wind farms and a whole new electrical grid at $1.5-3.0 trillion.

While this is a lot of money, Gore believes that building the new oil rigs and coal-fired power plants that will be needed if the US continues relying on fossil fuels would cost even more. And renewable energy is largely a one-time investment-once the solar and wind farms are built, the energy itself is virtually free.

As Gore notes, competition from China will not drive up the price of the Sun.

T Boone Pickens

One of America's best-known oil men, T Boone Pickens, has re-examined the industry in which he has worked for most of his 80 years and finds it wanting.

He believes that the current output of crude oil-about 85 million barrels per day-is as much as the world will ever produce. But since the demand for energy will keep rising, the cost of oil will also continue to rise unless we find other sources of energy.

At the same time, burning fossil fuels really does cause-or at least contributes heavily to-global warming, which the world also cannot afford. Fortunately, Pickens points out, the US has plenty of alternative energy to go around.

Texas oil billionaire T Boone Pickens: "We've got $700 billion going out of the country every year. We can't afford to do that. The security of the country is in grave danger."

The center of the North American continent, from the Texas panhandle to the Canadian border, is one of the world's most productive wind energy corridors. According to the US Dept of Energy (DoE), 20% of the country's electricity could eventually come from wind.

North Dakota alone could provide electric power for more than 25% of the country. Pickens estimates that harnessing this power would cost about $1 trillion for wind turbines and another $200 billion for new power lines. Compared to the $700 billion the US spends on foreign oil each year, he calls this a bargain.

And, as Al Gore pointed out, production facilities for renewable energy are a one-time investment. The second half of the Pickens plan is natural gas. It is the cleanest energy source now available for transportation, producing 30% less greenhouse gas emissions than gasoline. It is also cheap and abundant.

In places like Oklahoma and Utah, where natural gas is produced, its price is equivalent to gasoline at less than $1 per gallon. And natural gas is the country's 2nd largest energy resource, with domestic reserves at least twice those of petroleum.

At present, 22% of electricity in the US is generated by power plants fueled with natural gas. Pickens sees wind and natural gas as 2 complementary power sources. The US can generate enough electricity from midwestern wind to replace that now produced from natural gas.

Once service stations are retrofitted to handle the gas, it can be used to power cars and trucks. At that point, oil imports should drop by about 40%, saving the country some $300 billion per year and repaying the cost of new wind-energy infrastructure in just 4 years. And Pickens is putting his money where his plan is.

His company, Mesa Power, is assembling an enormous wind farm in Texas at a cost he estimates at $6-10 billion. The publicity campaign alone for his energy plan is reportedly budgeted at $58 million.

Forecasting Intl analysis Discussions with colleagues in the DoE and within the energy industry revealed very similar conclusions to those of Forecasting Intl. What follows is a look at the plans of Pickens and Gore, plus a more detailed examination of the programs of the presidential contenders. The Pickens plan is simple good sense.

As Pickens puts it, the US is the Saudi Arabia of wind. The country has perhaps 10% of the world's natural gas, and transportation is clearly a better use for that natural gas than electric power generation, which can be accomplished from renewable resources.

Wind is the obvious choice, but solar energy should be added to the mix, and undoubtedly will be. Natural gas is not an unlimited resource. The US already imports about 16% of the gas it consumes-a proportion that is expected to grow to 23% by 2025, even as consumption grows from 22.8 trillion cu ft in 2002 to 31.2 trillion cu ft.

However, an unlimited resource is not required. The Pickens plan is a buffer for the period when the US is weaning itself from imported oil. An all-renewable energy economy is still the long-term goal.

This, of course, is where Al Gore's challenge comes in. Logically, deriving all our electricity from renewable resources is the next step after the Pickens plan. Pushing to get it done within a decade is a lot more ambitious, and Forecasting Intl senses that it may be too much so.

We don't expect to see Gore's vision of an all-renewable electric supply realized on his schedule, but setting a national target date of 2018 and trying to achieve it is likely to bring major advances even if we miss the target.

It is a challenge worth accepting. That leaves the energy plans of the 2 presidential candidates. If neither is ever enacted in its entirety, one is likely at least to form the basis for the next administration's energy policy.

To help us weigh their merits, Forecasting Intl consulted 2 experts in the energy industry-a career professional at the Dept of Energy and a senior executive at one of the largest US oil companies. Our DoE contact found merit in both the Obama and the McCain plans.


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