We’re Dropping the Ball on Renewable Energy (guest post)   (June 25, 2011)

Fellow blogger Kevin Mercadante summarizes the opportunities for local development of renewable energy outside the Big Oil/Big Government, oligarchy-cartel capitalist Status Quo.

As the world’s largest energy consumer and importer, the U.S. should be taking the lead in renewable energy. We consume at least 25% of the world’s oil, and are the single largest importer as well. The stakes are higher for us than for any other single nation on earth. It could be said that our doom as a great nation will be all but sealed if we don’t come up with a permanent solution to our energy needs, yet we seem to have no clear direction.

A lost opportunity from a decade ago

The Bush Administration may have made a strategic error when it chose a primarily military response to 9/11. We’ve spent a couple trillion dollars in the decade since with precious little to show for the expense and effort. Would a national effort to develop renewable energy have had a greater impact? Probably not at the time—the slow pace of technological progress could not have competed with the primal thrill of military conquest.

But the tangible benefits of a renewable energy thrust would certainly be evident by now. Lower dependence on foreign oil imports, the rise of new technologies, the creation of new businesses and new jobs and a sense of a hope for a better future might be apparent today had the leadership of the time embraced the long view. And it could have been accomplished for a fraction of what we’ve paid to date for the wars in Iraq and Afghanistan.

Even today, a truly massive investment in renewable energy could reinvigorate and reindustrialize the U.S. Our economy is well past quick fixes and tweaks—we’re in desperate need of new systems that can be built from the ground up. Such systems would generate new technology, millions of new jobs and the economic surge that would follow.

Imagine a world in which electric cars—capable of going more then 200 miles between charges—are powered by electricity generated by solar and wind systems? Is it hard to imagine that combination igniting the Second Industrial Revolution? New technology powered by unlimited, clean energy. The possibilities are endless, but if we ever go in that direction it looks like we’ll do it kicking and screaming.

The “Land of the Free” has become the home of “We can’t”

The U.S. has mostly decided to sit on the sidelines to see what other countries come up with, but this will be unworkable on several fronts. First, as the world’s largest economy and energy consumer, we need to get into the game first. It will take longer for energy alternatives to make their way through our system than it will in smaller countries, and hesitation is raising both the cost and the time horizon.

Second, by letting other countries lead we’re conceding the technology, implementation and the economic benefits that will come to the nations on the cutting edge. Coming late to the party could mean not coming at all. We’re already showing ourselves to be dependent on the foreign production of goods once manufactured here—how much worse will it be with products and technologies we’ve never made at all?

Europe is well ahead of the U.S. in the implementation of renewable energy—wind and solar. Many European nations are actively moving toward wind power for electricity; in

Denmark as an example, about 20% of electricity comes from wind mills. Brazil has taken the lead on ethanol, while Japan is the clear front runner in electric car technology and implementation. In the U.S. we hear the quasi-patriotic chant of drill-drill-drill as if more oil is the only workable solution to our oil problem—but if it isn’t do we have a Plan B?

Our only identifiable energy “policy” is a bad economy driving down consumption. Only when the economy is in decline does our energy consumption recede. As long as the economy is expanding, the U.S. consumes more energy each year. Meanwhile, unofficial government policy is to do what ever it takes to ensure the free flow of cheap oil even at the point of a gun.

This single factor explains our permanent military occupation of the Middle East and offers de facto evidence that the energy situation is far graver than anyone will publicly admit. Why else would the United States commit trillions of dollars and hundreds of thousands of military personnel to maintain the occupation of a region which so clearly doesn’t want us there?

The “high cost” of renewables is quickly becoming academic as the cost to produce fossil fuels rises. Not only are we paying an enormous military cost to suppress the price of oil in the Middle East, but the costs to bring new supplies into production outside the region are escalating. We would not even be discussing tar sands, shale oil, coal conversion, heavy oil or drilling in the Artic Ocean if light sweet crude oil were plentiful in the U.S. or anywhere else in the world outside the Middle East.

Onshore light crude production is a pretty simple affair; sink a well and oil blasts out. Cap it, pipe it to an oil refinery and you’ve got just about the cheapest energy source available. Virtually every other form of oil production involves some sort of conversion process at the site, the risk of significant environmental damage, a large labor force, the burning of a significant amount of energy, and usually takes place in a remote and often hostile environment. Every one of those obstacles adds to the cost of the oil produced. Why would we even bother to go that route if cheap light crude were plentiful?

Renewable energy may be expensive to produce right now, but as processes and technology grow, we should fully expect the cost to come down. But that can only happen if their use becomes more common. Capital, talent, technology, innovation and economies of scale will naturally gravitate to renewables as they become more common in everyday use. So, why the economy-wide aversion to plunging forward?

The return of the Robber Barons

A narrow gate has been created in the form of a dozen or so big oil companies and maybe a couple hundred power utilities, through which nearly all of the nations energy needs are supplied. We can liken this arrangement to the robber barons of old who, building their fortresses at strategic locations along important European rivers, were able to extract tolls from the ships that passed—no payment, no passage. And so it is with the current energy complex. No one will release that kind of power willingly, neither the conglomerates who control it nor the government authorities who can easily collect billions in tax revenues on the flow.

Until about 100 years ago, most energy that was consumed by the average citizen was produced locally, often by the final consumer himself. Animals, water and wind, timber, coal and even oil (in the days before pipelines and refineries) were used to provide every energy need from transportation to lighting and cooking. But this type of dispersed energy production does not lend itself to automation of revenues and profits the way grand systems do. Thus in a move from the top down, energy production was gradually and systematically institutionalized removing all control over it from the ultimate consumer.

Renewables have the potential to restore consumer control. Because it can be produced with windmills and solar panels—locally and even by individual consumers—renewable energy has the very real potential to cause massive decentralization of energy production. That would have consequences that extend well beyond energy itself. Yes, oil companies and utilities would be greatly diminished in both size and importance, and some even eliminated permanently, but there’s more.

The Status Quo’s biggest fear: that we’ll change the game

A renewable energy revolution could release a surge of human energy not seen since the waning days of the industrial revolution. And that’s the problem. As Charles has written again and again, those who control the system are vested in the status quo. They have no interest in the decentralization of energy production, or of anything else in the economy.

An individual or local community with a home grown supply of what would ultimately be cheap energy would be an empowered individual, and an empowered community. The effects of that metamorphosis would be felt throughout the organizational world. If I can produce my own energy, maybe I can grow at least some of my own food too. And maybe I can start trading with my neighbors, or with people far away—we already have the internet enabling us to do that. And if I can drive an electric car—powered by energy from the solar panels on my house, I never have to buy gasoline. And maybe we can use barter…

I’m getting a bit ahead of myself, but all of that potential is real. If you’re an organizational chieftain it could very well mean that the wave you’ve been riding on for decades is about to crash on the beach. If you’re in the upper echelons of government, you know that that type of economy would be infinitely more difficult to collect taxes in because far less money is changing hands.

Solar/wind power means no checks written to power utilities; electric cars running on home grown electricity means no credit cards are swiped at gas stations; home grown food means less money changes hands at grocery store check outs, and so on. The status quo and its supporters want no part of that.

In the current economic conglomeration, we’re system-dependent. And we’re taught to be that way--take care of the system, and the system will take care of you. This has bred a level of dependency not seen in human history.

But a new energy source, one that we ourselves could produce, and the technology and economic force it would release would empower us to take control of our lives and the future. We’d no longer look to the system, but to ourselves and to the people closest to us, where it should have been all along. Can we imagine the magnitude of such a shift, especially against the constraints of the tightly controlled system we live in now?

The Ultimate Energy Solution: We’re on our own

There’s no reason to believe that the renewable energy revolution will come from the top. There’s no serious interest in renewable energy in the ivory towers of America, and for all the reasons stated above we should expect none. Sure, we get the usual machismo speeches from political leaders at election time, or when oil prices spike suddenly or an anti-Western thug comes to power in an oil rich country, but action never follows the bold words. No, this quiet revolution will come from the ground up—from people and small businesses responding to crisis.

There’s always a way forward for someone who’s determined to chart a new course. For example, an energy system that may be too expensive for one family to implement may be quite practical for a group of households forming a cooperative. Most of the wind power generated in Denmark is from wind mills owned by individuals and cooperatives, not corporations or government. To say that it can’t be done is to defy the facts--it IS being done right now.

Gasoline prices will probably be the deciding factor. At $4 a gallon, we’re starting to see a slow but visible shift to solar power and electric cars. With real wages in decline, any movement beyond $4 a gallon should accelerate the shift quickly. At $6 or $8 pain will force individuals to take action, even if the Status Quo refuses to cooperate—which we should fully expect to be the case.

Kevin Mercadante is a regular reader of Of Two Minds, a professional blogger and the owner of OutOfYourRut.com, a website about careers, business ideas, money and more.

CHS: Thank you, Kevin, for an excellent "big picture" context of energy and the risk of having no Plan B. As I have often noted here, renewable energy won't "pencil out" as a straight financial investment until it's too late to build a renewable energy infrastructure. At that point we'll be the classic "day late and a dollar short."

As for Kevin's point about the cost of our wars to secure oil vs. the cost of replacing that energy with renewable sources, please read my entry from three years ago: Cost of Iraq War: $3 Trillion; Cost of Solar Plants to Power all 105 million U.S Households: $500 Billion (April 10, 2008).

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