Budget Crunching: What Happens Now?
Nuclear power and renewable energy won out over the fossil fuel industries in the administration's FY2011 budget proposal. The Energy Department plan would triple nuclear loan guarantee funding, yank its application to store nuclear waste in Yucca Mountain, and cut tax subsidies for the oil and natural gas industries. DOE would allocate $11 billion of its $28.4 billion budget to nuclear security, an increase of 14 percent. It also would dedicate between $4 billion and $5 billion to clean energy projects. Unlike last year, the budget doesn't include a specific estimate for revenue from a market-based climate change bill.
What's the likely impact of this year's budget proposal? Will the additional money for nuclear loans -- which Energy Secretary Steven Chu said could fund up to 10 reactors -- finally usher in the next generation of nuclear power plants? Will domestic oil and gas development be hindered? What signal is the administration sending Congress by including a placeholder for market-based climate bill revenue? Are the changes likely to withstand congressional scrutiny?

February 4, 2010 2:13 PM
Look To The Private Sector Instead
By Paul Sullivan
Professor of Economics, National Defense University
The budget proposal is more than just a budget proposal. It is a starting point for the negotiations on energy industry funding, regulation, taxation, subsidies and more to come. It is not the final word, but an initiating salvo. One should not read too much into this just yet.
The political environment on The Hill is not the most receptive on new energy and environment ideas. The House and Senate are loaded for bear. Many are worried about their reelection chances. Many should be.
Health Care, energy and the environment are now not the priority issues. Jobs and the economy are. Some on The Hill think that the bills that have been developed with so much hard work by so many are either on life support or dead in the ego-filled and echoing hallways of The Hill.
One person in the know I met recently told me that many of the bills coming out of The House into the Senate are in dead stop due to the shock of the Massachusetts election result and due to the House bills being unpalatable to the majority of Senators. Not only that there have been some procedural m...
The budget proposal is more than just a budget proposal. It is a starting point for the negotiations on energy industry funding, regulation, taxation, subsidies and more to come. It is not the final word, but an initiating salvo. One should not read too much into this just yet.
The political environment on The Hill is not the most receptive on new energy and environment ideas. The House and Senate are loaded for bear. Many are worried about their reelection chances. Many should be.
Health Care, energy and the environment are now not the priority issues. Jobs and the economy are. Some on The Hill think that the bills that have been developed with so much hard work by so many are either on life support or dead in the ego-filled and echoing hallways of The Hill.
One person in the know I met recently told me that many of the bills coming out of The House into the Senate are in dead stop due to the shock of the Massachusetts election result and due to the House bills being unpalatable to the majority of Senators. Not only that there have been some procedural moves by both parties that have angered the other. Partisanship is sinking the ship of change. Some are happy about this, but I fear the country may lose in the end.
There is nothing new to petty partisanship ruining even the best of ideas. But things seem different this time. It is not the case of the worst ideas being filtered out. The process of developing new energy and environment (and other) legislation has become a dysfunctional system.
Maybe the President’s budget proposal was a way to give some shock therapy to The Hill. It may also be an attempt to break some logjams in the process.
Frankly, we are all at risk of a great failure of leadership and a significant restriction in the vision needed for a better future due to the obvious lack of strategic thinking by many in the Congressional leadership. Also, there seem to be very few really new ideas being presented. It is almost as if someone’s MA thesis on energy and the environment written in the early 1990s finally made it the offices of the important folks. But the pages are somewhat yellowed with age.
There seems to be almost no medium to long term thinking on the important issues as most of our Congressional leaders are diving for political cover. They now seem to be working to gather up votes and funding for campaigns, rather than engaging in the good works that are needed to ensure the prosperity and security of the nation.
This is a time for strategic thinking. This is a time for long term thinking. This is a time for making the tough deals that will take a lot of give and take. What do we have instead? We have bunch of cubs scratching at each other for the next scrap and morsel of short term Pyrrhic personal and party victory at the expense of the country.
It is just what the founding fathers would have admonished as government failure at a time of great need. Being a person who also has a balding pate I can clearly imagine Benjamin Franklin pulling at his post-revolutionary locks in frustration as he hears about what the grand debates have become.
Where are the lions of the negotiated deals across party lines and across ideologies, such as the late Senator Edward Kennedy? Where are they indeed? There is a vacuum of leadership and this vacuum is pulling in all of the new ideas for energy and the economy and chewing them up. To the point: I am repulsed by this gross failure to fulfill even the basic responsibilities of governance.
Now we can move on from these lofty philosophical worries to the day-to-day tactics of the issues at hand:
Did renewable energy win over oil and gas? Well, for now it seems that way, but in the future we will likely see otherwise as the wheels and machinations of partisan “debate” fueled by external ideas (translated: lobbyists) gets under way. My guess is that a lot of the tax breaks and subsidies to oil and gas will be back, but maybe in diminished capacity and effect. But they will not go away as some might hope.
We still are a hydrocarbon economy mostly based on oil, gas, and coal. There is not going to be any quick transition from it. The transition from oil to another fuel source will take decades and will require the cracking of one of the biggest and most profitable codes out there: how to have transport on a large scale without oil. Natural gas will be with us longer, but we will eventually hit peak gas as well, but much farther into the future. Coal will be with us for even longer most likely. We need to look at the future energy mixes for the country in practical and realistic terms of what can be done in certain time period and at what social costs, not as ideological prescriptions to fill the to-do lists of those who see a new energy future and want to move far too quickly. I am all for a new energy and environment future, but we need to be reasonable in its transition.
The subsidies, R&D funding and the like for efficiency and alternative fuels in the budget proposal are good ideas, but puny in relation to what needs to be done to move us forward. The greatest potential source of energy for the US is increased efficiency. I am disappointed in how little regard this is held in dollars terms in the budget proposal.
The loan guarantees to the nuclear industry may be a boost to some thinking about investing in the industry, but policy stability and predictability on nuclear power are far more important. We are not seeing this stability and predictability. Also, there is a significant contradiction in giving money with one hand and taking it away with the other. The suspension of the Yucca Mountain nuclear waste facility is an odd move. One of the major blocking points in the development of nuclear power here in the US is what to do with the nuclear waste. This move will push some investors back on the heels and get them thinking about moving away from nuclear power. This would be a very big mistake. Nuclear power is 20% of our electricity generation. It is also an aging industry that needs new facilities and needs new intellectual blood and new financial sources.
The canard that nuclear power developments are directly related to the development of nuclear weapons is contradicted by the facts. Please take a look at the nuclear energy states and compare those with the nuclear power states: http://www.euronuclear.org/info/npp-ww.htm vs. http://www.armscontrol.org/factsheets/Nuclearweaponswhohaswhat Sweden and Finland don’t have nuclear weapons, but do have nuclear power, for two of the many examples.
It is a blatant non sequitor to conclude that the expansion of nuclear power in the US will somehow increase proliferation worldwide. The President sees the sophistry of some of the arguments against nuclear power and backs up his support for nuclear power with the calming influence of increasing nuclear security funding. However, security of nuclear weapons is not the same as security for nuclear energy facilities. The President is smart enough to see that and makes a point of differentiating things in his budget proposal.
Overall, my expectations for the budget proposal were pretty much met. However much this proposal may seem shocking and “game changing” for some I see it as a negotiation ploy in an environment that is against game changing. Will any game changing happen in the near future? It will not likely happen in the legislative branch. The executive branch is limited in many ways by what the legislative branch does. Where will the big changes that will lead to our new energy and environment future come from? Mostly likely this will be from the private sector. With all of the focus on the costs to energy and environmental changes many have failed to see the giant green elephant in the room. There is a massive amount of profits awaiting those who crack the codes of the new energy and environment futures. It will be businesses, small, medium and large, who will likely bring about the needed changes. We cannot rely on a dysfunctional legislative branch to solve much of anything.
Read More
February 4, 2010 9:50 AM
A Good Start
By Marian Hopkins
The President made some very good points in his State of the Union address last week; he discussed the need for America to continue investing in energy efficiency, nuclear power and sustainable coal technologies. This week’s budget is a good start towards turning some of the promises he made into concrete action – to be sure, it contains a few excellent policies and some that could use refining. However, overall, it is a good start on the path to greater energy security and a healthier climate.
I’m especially encouraged by the Administration’s large increase in funding for nuclear security and loan guarantees. This forward-looking approach could result in as many as a half-dozen new plants in the United States. Nuclear is an exciting option because it is an essentially emissions-free solution to our current and future energy needs. A point of concern, however, is the Administration’s proposal to shut down the Yucca Mountain storage site. It’s vital we implement a practical and effective program for the management and disposal of spent nu...
The President made some very good points in his State of the Union address last week; he discussed the need for America to continue investing in energy efficiency, nuclear power and sustainable coal technologies. This week’s budget is a good start towards turning some of the promises he made into concrete action – to be sure, it contains a few excellent policies and some that could use refining. However, overall, it is a good start on the path to greater energy security and a healthier climate.
I’m especially encouraged by the Administration’s large increase in funding for nuclear security and loan guarantees. This forward-looking approach could result in as many as a half-dozen new plants in the United States. Nuclear is an exciting option because it is an essentially emissions-free solution to our current and future energy needs. A point of concern, however, is the Administration’s proposal to shut down the Yucca Mountain storage site. It’s vital we implement a practical and effective program for the management and disposal of spent nuclear fuel – Yucca does not have to be the answer, but an alternative, workable solution is necessary to make this technology as safe as possible.
The budget includes also a host of incentives for the development of cleaner and renewable sources of energy, such as solar, geothermal and wind. These alternative energies are critical components of a comprehensive energy and climate strategy, so these are welcome investments. I would also urge the Administration to reconsider its proposal to rescind incentives for American oil and natural gas. The transition to a low-carbon economy is going to take many years, and it is essential we ensure the availability of affordable, domestic supplies. In the end, it’s going to take a diverse portfolio of technologies – including both traditional and alternative sources – to reduce emissions and enhance energy security in an economically sustainable way.
Read More
February 3, 2010 4:03 PM
Focus On Facts Not Associations
By William O'Keefe
CEO, George C. Marshall Institute
The CEO of the Wildlife Federation would be well served to take a deep breath before going off on the irrelevant. The numbers cited in my response come from DOE and not the Marshall Institute. The continued dependence on fossil fuels for decades to come is a reality that is accepted by most people knowledgeable about energy. Advocacy to force the nation onto renewables before their time shows little regard for the effect on the economy or impact on lower income people.
The reference to funding is an old political trick, if you can't discredit the message, attack the messenger. He would also be well served to recall the admonishment of Ted Koppel to Al Gore who engaged in the same kind of tactics with people who didn't agree with him. Koppel told him that it is not the politics of the scientist or who they associate with that matters. It is the immersion of hypothesis in the acid bath of truth.
Let's keep the dialogue on the issues and the facts and leave the politics of guilt by association to who stoop to them as a profession
February 3, 2010 1:34 PM
Budget Sets Right Goals in Tough Times
By Larry Schweiger
President and CEO, National Wildlife Federation
It's no surprise to see the George C. Marshall Institute advocating for continued dependence on dirty fuels -- from 1999 to 2007 alone, the Marshall Institute received $840,000 from ExxonMobil.
But as we look to pull ourselves out of our interconnected economic, energy & climate crises, if there's anything we don't need, it's more of the same failed policies that got us into this mess in the first place. We need a new direction to create jobs & save money. President Obama’s budget strikes the right balance in tough times, slashing taxpayer subsidies to oil companies and instead investing in clean energy jobs without increasing the national deficit.
Importantly, the president has called for a climate bill that is deficit neutral while investing polluter payments to invest in clean energy technologies, help Americans on their energy bills, and help deal with the impacts of climate change here at home and in poor nations. That's good news for consumers, for work...
It's no surprise to see the George C. Marshall Institute advocating for continued dependence on dirty fuels -- from 1999 to 2007 alone, the Marshall Institute received $840,000 from ExxonMobil.
But as we look to pull ourselves out of our interconnected economic, energy & climate crises, if there's anything we don't need, it's more of the same failed policies that got us into this mess in the first place. We need a new direction to create jobs & save money. President Obama’s budget strikes the right balance in tough times, slashing taxpayer subsidies to oil companies and instead investing in clean energy jobs without increasing the national deficit.
Importantly, the president has called for a climate bill that is deficit neutral while investing polluter payments to invest in clean energy technologies, help Americans on their energy bills, and help deal with the impacts of climate change here at home and in poor nations. That's good news for consumers, for workers, and for wildlife. It was encouraging to hear President Obama reiterate his call for comprehensive clean energy & climate legislation today, telling Senate Democrats "don't give up" on putting a price on carbon pollution. He also praised the efforts of Senators Kerry, Lieberman & Graham to find common ground.
The budget President Obama presents indicates his strong desire to sign a bipartisan clean energy & climate bill this year, and he continues to show his willingness to work across party lines on a bill that delivers on real pollution limits, clean energy jobs and energy independence.
Read More
February 3, 2010 7:50 AM
A One Handed Secretary of Energy
By William O'Keefe
CEO, George C. Marshall Institute
The proposed DOE budget is simply a veneer, masking the Administration’s misguided efforts to reshape the economy and our energy systems. If we are lucky, Congress -- which has been chastened by recent elections -- will reject Secretary Chu’s proposal as more pork and wasteful spending.
DOE’s Outlook shows fossil and nuclear providing the bulk of our energy needs through 2035. Even with very optimistic and unrealistic estimates, renewables only account for approximately 12 percent of our energy needs, which are expected to grow by 25 percent over that time period.
Right now, nuclear power is more expensive than coal or gas-powered electricity. Part of the cost premium is due to permitting and siting delays, bureaucracy, the lack of standardized designs, and excessive litigation. Removing barriers and streamlining the regulatory process should be DOE’s focus. If nuclear power cannot compete under those improved circumstances, then what justificat...
The proposed DOE budget is simply a veneer, masking the Administration’s misguided efforts to reshape the economy and our energy systems. If we are lucky, Congress -- which has been chastened by recent elections -- will reject Secretary Chu’s proposal as more pork and wasteful spending.
DOE’s Outlook shows fossil and nuclear providing the bulk of our energy needs through 2035. Even with very optimistic and unrealistic estimates, renewables only account for approximately 12 percent of our energy needs, which are expected to grow by 25 percent over that time period.
Right now, nuclear power is more expensive than coal or gas-powered electricity. Part of the cost premium is due to permitting and siting delays, bureaucracy, the lack of standardized designs, and excessive litigation. Removing barriers and streamlining the regulatory process should be DOE’s focus. If nuclear power cannot compete under those improved circumstances, then what justification exists for increasing an over bloated deficit to give money to utilities? Loan guarantees create a moral hazard. We saw the consequences of that in the financial meltdown and don’t need to go down that road again.
On the one hand, Secretary Chu wants to subsidize up to 10 new reactors. But on the other hand, he wants to yank the application to store nuclear wastes in Yucca Mountain. (Wouldn’t it be nice to have a one handed Secretary of Energy?)
The oil and gas industry doesn’t need DOE funding research for R&D. It’s doing well with its own capital in advancing technology. For instance, advances from private capital have discovered new methods that make it economical to produce shale gas and increase proven reserves to the point where they can meet our needs for 100 years according to some estimates.
A sensible energy policy would be to look to natural gas as the bridge to lower carbon energy systems and to make sure that incentives are aligned so that it can make an even larger contribution to electric power generation.
When government has to subsidize an energy source and mandate the use of certain forms of energy, it’s a clear sign that those sources are not economical. The end result is to burden consumers with higher costs and distort capital investments.
Read More