There's Safety in Diversity

There's Safety in Diversity

In the wake of terrorist attacks in New York and Washington, national security compels energy policies that reduce, not increase, the number of targets vulnerable to assaults. We need energy policies that expand, not decrease energy independence. This involves a searching second look at the National Energy Plan (NEP) passed by the House of Representatives just weeks before these attacks took place. This plan assumes the need for conventional, large, centralized power plants. But the world turned upside down on Tuesday, September 11. Our ideas about national security must now be re-conceptualized. So must our ideas about energy policy. Does it make sense for America to build more large power plants and thousand-mile-long oil pipelines? And if so, how will they be safeguarded?

To serve national security goals, and meet a near term objective of reducing our reliance on imported energy supplies, we need a National Energy Plan that starts quickly, is cost-effective, and offers measurable and enduring results.
  • Starting quickly means learning from California about how conservation can be done quickly. This past summer, Californians swiftly and almost effortlessly reduced energy demand in significant amounts. That's what America needs: results now, not years from now.
  • Cost effective means grabbing and using every last kilowatt that can be derived through conservation (making do with less), efficiency (doing more with less) and technological innovation (increasing supplies from renewable sources).
  • Measurable results come from determining how much conservation and efficiency can reduce energy demand. For example, how many barrels of imported oil are Californians saving each day through conservation and increased efficiency? Based on this experience, we need to set national targets and timetables.
  • Enduring results means insuring long-term reliability of supply and avoiding persistent volatility in pricing. Moving energy sources closer to where they are used increases reliability. There's no strung-out transmission line or thousand-mile long oil pipeline to blow up. Diversifying energy sources also helps insure reliability. If one system fails, another is available.
We have a way to do all this that makes economic sense. To start with, the new National Energy Plan should meet the needs of the new economy, an increasingly decentralized economy. Big businesses, after all, are getting smaller. They are downsizing to become more efficient and profitable. Downsizing transfers many functions formerly performed by large firms to smaller contractors. As a senior executive at Pitney Bowes told me recently, "We don't manufacture anything anymore. Small and medium sized manufacturers do it all. And the more outsourcing we do, the more money we make." Thus it is that many big business products -- automobiles, for instance -- now consist largely of components made by small businesses.

The result is a small business boom. America's 23 million small businesses now make up one-half of the economy. Today, 51 percent of the private gross domestic product comes from small business. Forty-seven percent of all sales in the country are by small businesses. Fifty-three percent of the private non-farm workforce is employed by small business.

The small business half of the economy accounts for more than half of all commercial energy use. And that doesn't count energy consumption by small manufacturers, who produce much of this nation's factory output.

For example, approximately 85% of U.S. manufactured goods are produced by the 14,000 member companies of the National Association of Manufacturers. About 10,000 of these companies are small and medium-sized firms. In addition, there are now more than 60 million people working at home. Of that group, about a third are estimated to be home-based businesses. Home-based businesses are the fastest-growing segment of the U.S. economy, with an annual growth rate of 10%.

Because small business is decentralized, its energy needs can best be met by decentralized power generation systems. Now, spurred by national security needs, we must hasten such a transition with policies that favor decentralization. Indeed, the best way to secure our power supply may well be to get it off the national grid as much as possible. Accelerated development and deployment of micropower technologies can do this.

Micropower technologies include fuel cells, photovoltaics, microgenerators, small wind turbines, and modular biomass systems. When deployed on a large scale, they will affect our lives as dramatically as have the wireless cell phones and portable laptops that replaced traditional grid-connected phones and huge mainframe computers. (Some distributed energy technologies such as photovoltaics, solar thermal, and wind energy are now produced in either fully automated or semi-automated manufacturing plants, and some microgenerators and fuel cells are now available, but as markets expand, so will advancements in mass manufacturing. That's exactly why the NEP should provide policies and incentives needed to move us in this new direction.)

Micropower technologies permit "distributed generation," meaning that power is generated at or near where it is used. This contrasts with large-scale, centralized power stations, which are often thousands of miles away from consumers. Distributed generation makes energy facilities less vulnerable to terrorist attack because they do not offer large concentrated targets. For example, a business can operate on energy provided by a fuel cell located in the basement of its building or by a rooftop solar collector.

It's important to note that a distinct affinity links micropower and the small business half of the economy. By definition, micropower is decentralized; so is small business. They fit together. Here scale of consumption is the key. Solar water heaters, for example, often make more economic sense for small operations that use a lot of hot water, such as cafeterias and laundries, than for large corporations or for homeowners.

Finally, it's clear we are not going to throw out the old centralized system and replace it with a system that is entirely new and entirely decentralized. What's needed is a balanced combination of the two that maximizes the advantages of both, much like diversifying an investment portfolio. Our new circumstances compel a much greater emphasis on conservation, efficiency, micropower and distributed generation. The National Energy Plan must be considered anew. If we're going to spend billions of dollars on renovating the nation's outmoded energy production system, let's do it in a way that maximizes the potential for efficiency and energy productivity and minimizes the threat of danger.

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Byron Kennard is executive director of the Washington, DC-based Center for Small Business and the Environment.