6 Urgent Energy Questions Prompted by Crises in Japan, Middle East

6 Urgent Energy Questions Prompted by Crises in Japan, Middle East

Looming behind the earthquake in Japan and turmoil in the Middle East is the persistent question of US energy policy, or (as Thomas Friedman so eloquently reminds us) the lack thereof.

There are many ways to wade into this issue: national security, balance of payments, economic stability and of course climate change and environmental impact. But for the moment, let me just offer three questions for the CEO of the United States and three more for the CEO of your company.

You see, like many, I was startled (though in truth, not surprised) to see that one of President Obama's responses the Japanese nuclear crisis was to reaffirm his commitment to US nuclear policy in his budget request for an additional $36 billion of loan guarantees (on top of $18.5 billion previously authorized under the Energy Policy Act of 2005) to finance new nuclear power plants. Contrast that to $12.2b in subsidies for "traditional renewables".

Hence, these questions:

1. Why invest so much money in nuclear generating capacity when energy efficiency and renewables are much better investments, in terms of both effective energy yield and net financial yield?

2. Why continue to subsidize a 60+ year old industry?

Public investment is usually justified as a risk-sharing kick-start of new technologies or new industries that the public interest requires but that private markets are not yet prepared to support.

The Union of Concerned Scientists estimates that "legacy subsidies [to the nuclear indusry] are estimated to exceed seven cents per kilowatt-hour (¢/kWh)-an amount equal to about 140 percent of the average wholesale price of power from 1960 to 2008, making the subsidies more valuable than the power produced by nuclear plants over that period. Without these subsidies, the industry would have faced a very different market reality-one in which many reactors would never have been built, and utilities that did build reactors would have been forced to charge consumers even higher rates."

Or as the Heritage Foundation (which I'm not in the habit of quoting) put it in recent congressional testimony, "Limited loan guarantees can help overcome some near-term financing obstacles, but they are subsidies. If not used prudently, they will only act to prop up non-competitive industries."

Isn't 60 years long enough for the nuclear industry to either succeed on its own two feet or to fail and be outcompeted by more appropriate technologies?

3. In a time of major budget struggles, and pressure on government programs or all kinds, why provide what are essentially transfer payments from taxpayers of the United States to the shareholders of these companies?

The answers, as is so often the case, go to money, power and deeply ingrained habits of thought. And those problems don't just make for crazy in Washington. Hence, these questions for your CEO (or you, Mr./Ms. CEO, if you're reading this):

1. What is your company's potential exposure to significant increases in energy price, wide fluctuations in energy prices, or significant disruptions in energy supply? If you don't know, shouldn't you?

2. Do you have systematic plans in place to reduce that exposure and to do so in ways that simultaneously strengthen product performance, brand and profit? If not, do you have plans to get those plans into place?

3. Do you know what KPI's you need to track in order to drive your company's performance across the risk studded, carbon constrained landscape of upcoming decades? Are you and your colleagues in the C-suite tracking those KPI's? Is your entire organization managing to them? Do you have the systems in place to support that? If not, when will you? (Do you even know where to start?)

One additional question, for both of you:

What is the value to you and your shareholders (and your family) of good answers to these questions?

The original version of this post appears in the author's blog at http://blogs.natlogic.com/friend/.

Top image by Pete Souza, WhiteHouse.gov.