Saviors and Skeptics

Today, as in the 1970s, there is no shortage of new energy solutions vying to displace fossil fuels, and oil in particular. Many of these are much farther along in their development than the options we were offered during the first energy crisis. However, now as then, we need to be alert to premature or exaggerated claims and retain a healthy skepticism. Yesterday's Washington Times op-ed advocating a comprehensive energy policy based on ethanol, by Sen. Richard Lugar and Vinod Khosla, provides a good justification for such reserve.

When someone claims that any particular technology or approach can solve our energy problems, we need to ask tough questions, even when the credentials of those making the claims are as impressive as these. For example:

• How do its economics compare to conventional energy and other alternatives, on a pre- and post- tax and incentives basis?
• How mature is the technology in question, and how much technological risk must be eliminated before it can be deployed widely?
• Can it be scaled up to a level at which it could provide at least 10% of our primary energy needs? How much could it ultimately provide? How quickly can this happen?
• Does it require entirely new infrastructure, and who will pay for it and why?
• How does it compare to conventional energy and other alternatives in terms of its life-cycle ("well-to-wheels" or "well-to-outlet") pollution and greenhouse gas emissions?
• Would it create new shortages in other areas, and how quickly could that happen?

Applying these questions to the two ethanol technologies underpinning the op-ed is instructive. The technology for corn-based ethanol is mature and low-risk. However, it has taken 30 years for it to reach a volume equal to 3% of our gasoline consumption, and targets to expand this to 7% still appear ambitious. Scale remains a major challenge. Nor are the economics and energy balance of corn ethanol as unambiguously positive as the authors indicate. A wide range of studies suggest ethanol produces up to 20-30% more energy than it uses. That means it can stretch fossil fuels, not replace them. As to emissions, after accounting for the "upstream" emissions from the coal, natural gas and diesel fuel that provide process heat, fertilizer, and cultivation and transportation of the corn, it is still lower than gasoline in its overall GHG output. Derivative shortages could be serious, though. As a major consumer of water and natural gas, corn ethanol will eventually force serious trade-offs. Who will thank us if we exchange oil depletion for depletion of the Mid-continent aquifers upon which much of our agriculture depends?

Turning to cellulosic ethanol, which is derived from non-food crops, or from the non-food portions of food crops, many of the above objections go away. What doesn't disappear is technology risk, which in this case remains large. As promising as it appears, cellulosic ethanol has neither been proved at industrial scale, nor can it yet compete economically even with corn-based ethanol. These conditions are expected to change within a few years, but until they do, it is premature to boast that it could supply the equivalent of 12 million barrels per day of oil at a price we can afford.

Nor would I single out ethanol for this scrutiny. The same tests need to be applied to other technologies, such as the wave and tidal power highlighted in yesterday's New York Times. If they are truly at the stage at which wind power was 15 years ago, as the article suggests, then they would have a hard time satisfying most of the above checklist.

Being skeptical doesn't mean being negative about the potential of new technologies to replace hydrocarbons. Whether Peak Oil is here, around the corner, or decades away, we must reduce our dependence on oil for all the reasons articulated by Senator Lugar and Mr. Khosla. However, the worst thing we could do now would be to make an early selection in favor of solutions that have not proved themselves, or that contain fatal flaws. Just as diversity of petroleum suppliers was the key strategic choice that kept oil prices low for nearly two decades, diversity of alternative energy solutions--at least until clear economic and technological winners emerge--looks like our best strategy today. Focusing on one too soon could even slow down the development of ultimately better solutions. The situation calls for urgency, not haste.