Building Our Energy Future:

How to Plan in an Inconstant World

I was struck the other day by the report of another bankruptcy of a solar venture. I was not struck by the event itself so much as by the fact that it signals to me that one fundamental difficulty we face in building our energy future is that the landscape keeps changing around us.

In this case, the bankruptcy of Solar Trust of America is apparently the fallout of insolvency proceedings in Germany for its majority owner, Solar Millennium AG.

This is not an isolated event. All current nuclear projects are being questioned because of the low cost of natural gas. Everyone recognizes that the price of gas is unlikely to stay so low in the long term, but it is difficult to make a decision to invest billions of dollars in nuclear power plants that may not be economical for many years. Likewise, just as solar power projects seemed to be reaching a stage where the costs were starting to come down, China entered the market selling the same products at lower prices.

It's no surprise that energy is affected by a lot of outside forces. Many other commodities are as well. Food, clothing, gasoline, cars, appliances...you name it. In our global economy, we can be affected by events on the other side of the world--wars, droughts, floods, repressive dictators, terrorists, and foreign governments manipulating the prices or availability of exports.

What is at least somewhat different about electricity we are crucially dependent on an adequate, reliable supply of electricity. What is also somewhat different is that very large projects are involved in developing our electricity supply infrastructure, and they require substantial investments and long-term commitments.

I must confess that, until Solyndra went into bankruptcy a few months ago, I wasn't really aware that solar manufacturing facilities were receiving the same kinds of loan guarantees as nuclear power plants. I might have heard about it, but I probably thought they were for small sums of money. The mantra about solar power has been that it is small and distributed, and doesn't require the large investments that a nuclear power plant requires. The complaint about nuclear power had been that it was so costly that it couldn't stand on its own two feet--it needed government support.

But the truth is that both solar power and nuclear power are big businesses. Starting a new solar manufacturing facility, or starting a new nuclear power plant both require large investments over a period of time. And both can be derailed by unexpected changes in the marketplace.

Jim Rogers, the CEO of Duke Power, captured the concern when he noted that natural gas is cheap now, so everyone builds natural gas, yet it would be a mistake to have "all gas all the time." He argues for a balanced portfolio of energy sources that includes natural gas, coal, nuclear power, renewables and energy efficiency.

But the question is always how to get to that state when one source--natural gas--is cheaper today. Likewise, the question is how to build a domestic solar industry for the future when it isn't the most economical source of power today.

It is difficult to get anyone to think about the long term. It is an age-old problem. We need only think of the fable of the ant and the grasshopper.

Different countries have approached this problem in different ways. Some have 5-year or 10-year plans. Some have nationalized power generation and distribution systems.

In the US, we want the marketplace to work, but we are willing to use certain kinds of government intervention--support of research, loan guarantees, power purchasing agreements, etc.

So far, I think that we have used these measures in a short-term fashion, but have not fully faced the problem of how we will assure that we have in place a diverse, ample electricity generating capacity to be available when the price of natural gas inevitably goes up, when China raises the prices for its solar panels, or when any of a host of other unanticipated events around the globe suddenly increase the cost of a "cheap" energy source, or decrease the availability of an "abundant" energy source.

We need to get past our normal short-term thinking and consider how we can achieve an energy supply portfolio that will work in the longer term. I know that is easy to say, but much, much harder to accomplish. However, it is vitally important to assuring a future with adequate supplies of clean, reliable and affordable power.

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