The energy status quo

I have written about the lack of political will to alter the energy status quo. So what is this status quo? I would divide it into the incumbent fossil fuel businesses and the current alternative energy challengers.

It’s easy to understand the motives and behavior of the fossil fuel side of the energy status quo.  A more interesting issue is the alternative energy side of the status quo.  The science and technology community, the environmental community and the section of society influenced and supported by these communities have mostly accepted that CO2 is a problem. They also have accepted that the alternative energy technologies to solve the problem are wind, bio and solar. Because these communities add up to a sizeable political constituency they have persuaded governments to subsidize these uneconomic technologies to varying extents. In the US these constituencies are mostly on the Democratic side, so subsidies ebb and flow with the fortunes of the Democrats. This leads to boom and bust and no consistent US energy policy.

A deeper problem is that by supporting uneconomic technologies, success is directly related to government support and the degree of success is tied to the amount of subsidy.  Subsidy amount in the US has been small. This and this alone has determined the small scale of current energy that comes from alternative energy, mostly wind. 

The other element of policy that has been pursued is carbon taxes.  The motivation is that raising the cost of fossil fuel energy will make alternative energy sources more competitive.  However this is putting the cart before the horse.  The current alternative energy technologies only directly compete with fossil fuels in a small fraction of the energy market, mostly electricity generation.  Oil is the economic king of energy, tied almost exclusively to transportation where it holds a virtual monopoly.  Bio fuels cannot replace oil, and no alternative energy is cheap enough to make synthetic oil without unrealistically high carbon taxes. Interestingly ExxonMobil is in favor of carbon taxes. Obviously they don’t think it’s a problem for them. This means blanket carbon taxes are mostly not going to have the intended consequences, but could easily have considerable unintended consequences.

The economic limit to subsidy and the ineffectiveness of carbon taxes is not appreciated by the broad science and environmental constituency who think that wind and now solar have crossed into economic viability and are being held back by unseen forces.  The economic reality is far from this perception, but so long as these constituencies are backing this losing horse, they are blocking the development of technologies that might be viable competitors.  This blocking is a form of self-defeating political-correctness blinders within the constituency.