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Divided Opinion PUBLIC ACCESS

[+] Author Notes
Adam Christensen, Peter Friedman

Debate the role of the federal government in shaping the U.S. energy industry.

Mechanical Engineering 134(07), 40-41 (Jul 01, 2012) (2 pages) doi:10.1115/1.2012-JUL-4

Abstract

This article explores the need of a government regulation that will play a vital role in US long-term economic/environmental/energy stability strategy. It is also important to remember that at every stage of the rulemaking process, there are opportunities for the general public to voice opinions about the rule, and the agency is often required by law to consider each of these comments. The regulatory uncertainty is nearly as detrimental as the regulations themselves, and it is often counterproductive to the goal of improving the environment. Expert points out that the regulatory uncertainty is nearly as detrimental as the regulations themselves, and it is often counterproductive to the goal of improving the environment. The United States has abundant natural resources and the technical expertise to harness them. Now there is only a need to put in place policies that positively impact our energy picture and carefully consider policies that interfere with that goal.

Article

Energy enables productive economies, and in many ways it is foundational for further productivity. As a result, companies (as well as individuals) will pay just about anything to get energy, whatever the form.

I have concerns that, as conventional supplies of energy become harder to obtain, the world will be forced to rely on non-conventional energy sources that will be harder to extract and convert into useable forms, and consequently will be much more expensive. Extraction and conversion of these new energy sources are likely to be more damaging to the environment and to human health than current practices.

Many speculate that there will be an energy crisis in humanity's future. I don’t believe that. Instead there will be an ever-widening economic and environmental/health gap between the haves and the have-nots, unless we plan a bit more than we do now.

Much of the planning that is needed relies on placing appropriate market forces in place to drive industry change. Right now those forces do not exist naturally within the energy industry. Therefore, I see government regulation playing a central role in our country's long-term economic/ environmental/energy stability strategy. When thinking about government regulation it is important to remember that agencies are directed, by law, to develop rules and enforce them. The underlying law was, at some point, passed by Congress and signed by a president. It is also important to remember that at every stage of the rulemaking process, there are opportunities for the general public (including industry) to voice opinions about the rule, and the agency is often required by law to consider each of these comments.

It would seem that companies facing regulation would have a natural incentive to devote resources to an accurate regulatory process. However, after working in Congress for two years, I can tell you that all too often regulation becomes a public relations war.

Industry often argues how burdensome rules will be and lobbies Congress to stop the process at all costs. During my time on the Hill I often wondered what the outcome would be if they dedicated their resources to finding a fair and balanced solution through the formal process.

How does regulation translate into actual benefits felt by consumers’ wallets? By fixing broken markets. Consider the instance of the light bulb. Lighting constitutes about 10 percent of a typical family's electric bill. The technology of the traditional incandescent light bulb is over 100 years old. Why hasn’t there been much technological change? When a bulb burns out, we grab any bulb we can find as a replacement. Consumers, for a large part, don’t care about their light bulbs and are underinformed about their energy use.

Compact fluorescent light bulbs exist and have found applications in niche markets. Their introduction did, however, raise the issue that a lot of energy is wasted by traditional lighting technology.

This awareness bubbled up to the federal level and resulted in President George W. Bush signing a light bulb efficiency standard in 2007. This standard was supported by light bulb manufacturers representing 95 percent of the market. The new standard resulted in a technological change that would improve the efficiency of light bulbs by about 30 percent. It did not eliminate the traditional incandescent bulb, but made it better.

Adam Christensen is currently the staff engineer for the Appliance Standards Awareness Project, where he focuses on regulatory issues. He spent January to December 2011 as an ASME Congressional Fellow for Senator Dianne Feinstein (D-CA).

The Department of Energy estimated that these new bulbs could save about $50 per year for consumers who replace 15 inefficient bulbs in their homes. There are many other examples, such as fuel economy standards, which translate into immediate benefits for consumers.

I have also alluded to the environmental benefits of regulation. Consider the electric utility industry. Utilities are in many ways still a regulated monopoly (even with the passage of the Energy Policy Act of 1992 and the Public Utility Regulatory Policies Act of 1978). It may not be common knowledge, but state commissioners regulate the rate of return on a utility's capital investments. As a result utilities have little incentive to change their behavior; law guarantees their profit. In lieu of upending the industry's entire legal framework and rebuilding, it is often easier to build new laws on top of other laws. It's often not pretty, but it can work, as in the case of California where they are approaching 20 percent renewable energy as a result of their renewable portfolio standard (the RPS was passed as a law, but is implemented and enforced by the California Public Utilities Commission and the California Energy Commission).

Do not misunderstand me; agencies are not infallible. Even so, I strongly support government regulation. Manufacturers in energy-related industries are often large, international companies, and internal policy change means combating company and industry inertia. This is difficult to do, particularly when there is a lack of consumer awareness. It is the role of government to help correct these market failures.

Despite repeated warnings over the last four decades that we are on a collision course with an energy crisis, as a nation we continue to steam toward it full speed ahead. But unlike the Titanic, which collided with an unseen iceberg in the dead of night, our impending rendezvous is both predictable and avoidable. To avert it, we only need to develop an effective energy policy, which carries research and development through to completion and provides energy companies with the assurance that their investments will not be undercut by regulatory changes.

Last year, I worked as an ASME Congressional Fellow for Congressman Mike Simpson of Idaho, where I participated in developing energy policy through the appropriations process. I’ve had an opportunity to interact with members of Congress, congressional staff, high ranking governmental officials, as well as representatives of environmental groups, academia, and industry. While each of these groups brings important perspectives, we have a leadership cacophony that has developed over many years and is more the result of structural deficiencies than of the personalities involved.

Peter Friedman is chair of the Mechanical Engineering Department at the University of Massachusetts Dartmouth. He spent January to December 2011 on sabbatical as an ASME Congressional Fellow where he served as an advisor to Congressman Mike Simpson (R-ID).

Industry, for example, all too frequently focuses on short-term economics, while the public, for the most part, lacks technical understanding and generally ignores problems until it is too late. Although many in Congress, including Congressman Simpson, have been working to provide focused leadership, progress there is impeded by competing agendas and parochial interests. Within the Department of Energy, the importance of energy itself is subservient to other interests including nuclear weapons and defense environmental cleanup, and much of the research conducted, although important, is not focused on energy.

Another problem is that the Environmental Protection Agency, which is engaged in a virtual ideological war on coal, frequently issues environmental regulations without adequate concern for their impacts on energy policy. EPA has recently proposed crippling regulations on all aspects of the industry, including mining, cooling discharges, coal ash, conventional emissions, and even CO2. At the request of Senator Lisa Murkowski, the Federal Energy Regulatory Commission admitted that new EPA regulations alone could shut down 81 gigawatts of electrical generation in the near term. In the long term, eliminating coal would place 92 percent of our fossil energy reserves off limits.

Likewise, expensive closed cycle cooling systems, required under rule 316(b) of the Clean Water Act, in locations where they are unnecessary increase cost, reduce power plant efficiencies, and increase the amount of fuel needed to produce the same amount of electricity. Corporate average fuel economy standards were increased from 35.5 to 54.5 mpg without evidence that the goal is even feasible.

The regulatory uncertainty is nearly as detrimental as the regulations themselves, and it is often counterproductive to the goal of improving the environment. It is hard to fault coal-burning utilities for being reluctant to invest billions of dollars in emissions control equipment or higher efficiency units if the EPA might force them out of business by blindly regulating CO2 emissions. As a result, old inefficient plants continue to operate without upgrades.

These various forcing functions all push us to the path of least resistance, which is currently natural gas as a result of its low cost, present abundance, and friendly environmental picture. However, a longer term view would consider that coal is currently estimated to represent 92 percent of our domestic fossil energy reserves and natural gas has historically fluctuated greatly in price. One can reasonably assume that the increasing demand for natural gas, fueled by transportation, power generation, and industry will result in higher future costs, especially if there is diminished competition from other supplies.

Although my experience on Capitol Hill has made me concerned about our current path, it has also given me reasons to be optimistic. The United States has abundant natural resources and the technical expertise to harness them. We only need to put in place policies that positively impact our energy picture and carefully consider policies that interfere with that goal.

We should start by restructuring DOE to focus on what ought to be its core mission—how to produce, distribute, and consume energy, both now and in the future—and removing from its jurisdiction non-energy related activities. Balance should be restored by giving DOE a role in reviewing regulations from other agencies, such as EPA, that affect energy policy. We can avoid the impending iceberg if we change course now, but the longer we wait, the harder we will have to throw the rudder.

Copyright © 2012 by ASME
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