Madam Speaker, I rise today to highlight an article by Dr. Kurt House entitled, ``Putting the Price of Going Green in Context.'' The following column was coauthored by Benjamin Urquhart, a research associate at Harvard University's Center…
Madam Speaker, I rise today to highlight an article by Dr. Kurt House entitled, ``Putting the Price of Going Green in Context.'' The following column was coauthored by Benjamin Urquhart, a research associate at Harvard University's Center for the Environment, and Mark Winkler, a Ph.D. student at Harvard's School of Engineering and Applied Sciences.
Over time, the global energy infrastructure must change
because the continued combustion of fossil fuels is altering
Earth's climate in potentially dangerous ways and because the
large wealth transfer from mostly democratic oil-importing
countries to mostly autocratic oil-exporting countries is
propping up repressive regimes worldwide. So, we know that
the world's energy infrastructure must change. But, the
interesting questions are: how big an investment are we
willing to make to bring about that change and how fast are
we willing to make that investment?
Many groups have tried to answer these questions. In the
last year alone former Vice President Al Gore, Google, oilman
T. Boone Pickens, Greenpeace, and the International Energy
Agency all have published hypothetical scenarios for how the
United States could transform its energy infrastructure over
the next two decades. Gore's ``Repower America'' calls for
generating 100-percent renewable electricity by 2020.
Google's ``Clean Energy 2030'' would eliminate coal- and oil-
burning power plants by 2030, while retaining natural gas
power plants to maintain grid stability. Greenpeace is
strongly anti-nuclear, while Pickens promotes wind power and
natural gas as alternatives to foreign oil.
The quantity of new electricity-generating capacity
proposed in the Gore and Google plans has led to criticism
that they are unrealistically expensive. We try to place such
commentary in a more quantitative context by comparing the
industrial and financial commitments necessary to achieve the
Google and Gore plans to two large-scale, government-led
efforts from the twentieth century--the industrial buildup
that accompanied World War II and the construction of the
Interstate Highway System. These massive projects serve as
tangible benchmarks for the magnitude of financial commitment
and public support that will be required to rebuild the U.S.
power sector.
Let's start with a bit of history: The U.S. industrial
commitment to World War II was staggering. At its peak, the
war occupied almost 40 percent of the nation's total economic
capacity, and it required massive quantities of raw
materials--at least 100 megatons of steel to build among
other things more than 80,000 tanks, 250,000 planes and
helicopters, and 15 million tons of munitions. The inflation
adjusted annual cost of the war effort averaged close to $700
billion between 1943 and 1945, while the total cost of the
war effort topped $2.5 trillion (in 2006 dollars).
In comparison, constructing the Interstate Highway System
demanded a less intensive effort--but one of far longer
duration. With the majority of its 47,000 miles covered by 11
inch-thick concrete--and weighing an impressive 700
megatons--it remains the largest public works project in U.S.
history. During its peak years of construction, from 1970 to
1980, 17 megatons of concrete were used annually to create
1,100 miles of roadway a year, at a real annual expense of
almost $11 billion, or about 0.3 percent of the nation's
annual economic output over that time. The project--from its
start in 1956 until its symbolic completion in 1995--cost the
nation close to $350 billion (again, in 2006 dollars).
How do current energy transformation plans compare to these
massive governmental efforts?
To determine the answer, we calculated the overnight
capital cost--the cost of a project without interest
payments, as if it were finished in one night--as well as the
requirements in steel and concrete for the Gore and Google
plans. We also calculated expenditures for the U.S. Energy
Information Agency's (EIA) Annual Energy Outlook, the
traditional policy-neutral, business-as-usual scenario. We
then compared the total and annual expenditures of capital,
steel, and concrete using World War II as a baseline for
capital and steel consumption, and the highway project as a
baseline for concrete consumption. (Note: Although the cost
of steel and concrete also are included in the total capital
numbers, we wanted straight comparisons for the total mass of
steel and concrete to complement the more traditional capital
comparisons.)
The results are summarized in two charts we have generated.
The first chart shows that achieving Gore's vision of
removing fossil fuels from electricity production by 2020
will require 50 percent of the capital and 60 percent of the
steel required to wage World War II as well as 25 percent of
the concrete that was used to construct the Interstate
Highway System. (Google's requirements are a bit higher
because its forecast assumes a higher U.S. growth rate for
electricity consumption.) The other chart shows that the
annual expenditures required to achieve the Gore and Google
plans would require 60 and 90 percent, respectively, of the
concrete used annually for the highway system and about 20
percent of the steel consumed annually during the peak of war
spending.
Take a moment to consider these numbers. Achieving either
plan would require both an annual investment of concrete
equal to the amount used to build the Interstate Highway
System and an annual steel investment equal to one-quarter of
that required to defeat the Axis powers. This is a massive
industrial investment! Furthermore, these are only the steel
and concrete requirements; the quantity of photovoltaic
panels, for example, required to achieve the Gore or Google
plan would be 28 and 74 times current global production,
respectively.
The material requirements to achieve the Gore plan are
significantly lower than those required to achieve the Google
plan primarily due to their radically different estimates for
the growth in electricity production. Google estimates that
U.S. electricity production will grow by 4 percent to roughly
1,024 gigawatts by 2020, which essentially matches the EIA's
forecast. The Gore plan, on the other hand, assumes that U.S.
electricity production will decrease by a staggering 27
percent! That decrease--Gore claims--will result from huge
increases in energy efficiency, but the EIA forecast already
includes significant efficiency improvements.
We should note that the energy plans would last longer than
World War II, making the annual rate of spending about 15
percent of the peak annual war expenses ($100 billion-$124
billion versus $800 billion per year). Also, because the U.S.
economy is about six times larger today than it was in the
1940s, these costs represent a much smaller fraction of the
country's total economic output (about 1 percent of gross
domestic product). Put another way, the economic demands of
the war effort were equivalent to diverting two days of every
worker's five-day work week, the energy plans--over their
lifespans--would demand only about 24 minutes from every
worker's week.
Although each plan has other aspects that merit critical
analysis (e.g., estimated capacity factors, load growth
rates, and balance of peak and base-load power) our analysis
yields an interesting conclusion regarding the required
financial and industrial investments. Specifically, we have
identified two precedents for large-scale, governmental
projects with industrial and financial investments that
exceed the total requirements of both the Gore and Google
plans. When measured against historical extremes, the cost
and physical requirements of these ambitious energy plans are
within the country's reach.
That doesn't mean they'll be cheap. After all, fighting
World War II was incredibly expensive--the modern economic
equivalent would be passing a $700 billion stimulus package
every eight weeks for the next three years. Furthermore,
defeating the fascist powers was of utmost importance as
those powers represented a material and immediate threat to
every living person in the free world. Although we strongly
believe that the world's energy infrastructure must change,
we don't believe that either climate change or energy-driven
trade imbalances are remotely as scary today as Hitler was in
1941; and thus, while we could rebuild the energy system as
we rebuilt industry for the war effort, the impetus to do so
is far smaller today than in was in the 1940s.
Rather than waging war, rebuilding our energy
infrastructure according to these plans would be more like
keeping the peace: Consider that were the government doing
all of this spending, it would require an annual budget of
about one-third the average peacetime budget of the Defense
Department. When we recall that Defense employs more than 3
million people, includes a massive research, design, and
procurement system, and maintains a system of facilities
worldwide, we get a sense of the magnitude of these proposed
energy plans.
Another important fact to consider is that neither the Gore
plan nor the Google plan assumes that the government will pay
for everything transforming the U.S. power sector entails.
Rather, both groups believe--admirably, in our opinion--in
the endless capabilities of the American entrepreneur. In
other words, these plans are betting that free enterprise
will spring into action with the necessary capital. (With one
proviso: Said entrepreneurs are given the proper policy
incentives such as a stiff price on carbon emissions.) While
we also believe in the power of individual initiative coupled
with enlightened policy, we are cognizant of the fact that
both World War II and the Interstate Highway System were
entirely funded by U.S. taxpayers. So taking on an industrial
transformation similar in scope to either the war effort or
the highway system with mostly private capital is--to put it
modestly--a challenging proposition.