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President Obama Thinks He is the Christopher Columbus of Energy Policy

Adam Peshek
March 21, 2012, 10:20am

They dismiss wind power. They dismiss solar power. They make jokes about biofuels. They were against raising fuel standards. I guess they like gas-guzzlers. They think that’s good for our future. We’re trying to move towards the future; they want to be stuck in the past. We’ve heard this kind of thinking before. Let me tell you something. If some of these folks were around when Columbus set sail they must have been founding members of the Flat Earth Society. They would not have believed that the world was round. -- President Obama, March 15.

These remarks, given by President Obama at a Maryland community college, deserve a closer look.

The President's overall premise is that those who are skeptical about billions-of-dollars in government loans directed to wind, solar, biofuels, etc. are luddites -- scared of new technology that we are too dumb to understand. Aside from the fact that we have been using wind and solar for centuries (did he get to read Don Quixote in school?), the truth is that energy subsidies discourage innovation.

If the government is already picking a winner, there is little incentive for firms to invest in new and improved technologies. Why spend money on R&D for new, unproven technologies if the government is willing to give you million-of-dollars in loans to produce a certain technology and then pay you for merely producing energy from the product you are being paid to produce? Wind and solar are far from cutting-edge; improvements to the technology have occurred, but the technology itself is nothing new. Biofuels are no panacea either - despite strict mandates and large subsidies, many types of biofuels are not commercially available yet (which make them hard to replace oil).

Another problem with government-backed energy policies is that every president tries to assert themself as the pioneer for these new, clean sources of energy. This is ammusingly clear from the Institute for Energy Research's video highlighting half-a-century of presidents espousing "energy independence" through tax advantages and subsidies for the same technologies discussed here.

When you think you are the first to do something it is very easy for vested interests to play the "young, vulnerable industry" card. Secretary of Energy Steven Chu recently signaled that he was open to the idea of ending subsidies for wind power but that the wind industry "just don't want to see a cliff, they just don't want to see it ended suddenly. So over a period of time, especially as -- and no dates were discussed -- but over a period of time, a road map of phasing out, you see where the prices are going and you can see" how to eliminate the subsidies. The problem with this argument is that the tax credit for producing wind energy started as a temporary tax credit in 1992. To say that 20 years of government subsidies isn't enough time to mature into a self-sufficient industry is equivalent to a parent saying a 20 year old child is too young and vulnerable to leave home.

The President's own, patronizing remarks work against him. Without a doubt, the newest, most-affordable, game-changing innovation in the energy field is the adaptation of hydraulic fracturing (fracking) and horizontal drilling in natural gas extraction. In the past decade we have developed technology that allows drillers to extract the same amount of natural gas from one well as they used to be able to get from eight wells. That is an eight-fold increase in efficiency, and does not even begin to discuss how the technology has allowed us to open up vast deposits that were once too difficult to reach. This amazing feat of technology was done without government subsidies, and to many, was done despite an administration with a "limit production now, ask questions later" mentality.

I am not anti-innovation, I am against the government distorting the market by propping up technologies with no viability. If it was a good technology, the private sector would invest and make many people rich from their wise investment. Giving taxpayer money to companies that can't secure outside funding is an indictment of the very idea you are espousing. Americans want affordable, reliable energy, not expensive, unreliable pet projects driven by a handful of elected officials and bureaucrats.


Adam Peshek is Research Associate


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