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“Energy security is a goal that should unite all of us.”

On Wednesday, the BPC hosted a Bridge-Builder Breakfast entitled “It’s All About Security: The Importance of Diversifying America’s Energy Future”with panelists Brent Erickson (Executive Vice President, Biotechnology Industry Organization), Tom Hassenboehler (Vice President, Policy Development and Legislative Affairs, America’s Natural Gas Alliance), and Diarmuid O’Connell (Vice President, Business & Corporate Development, Tesla Motors). Former Senator Byron Dorgan, now a BPC Senior Fellow, moderated the discussion.

General Jim Jones provided the opening remarks, noting that the past year “hasn’t been a good time for energy,” with several major accidents reminding us that “none of our major energy sources is entirely safe.” General Jones then discussed the effect that high oil prices might have on the fragile economic recovery, lamenting that “we’ve been here many times before” and yet “all of the things that we say we’re going to do about it never seem to prevent it from happening again.” General Jones provided two reasons for this failure:

  1. Though the U.S. is the world’s largest oil consumer, it has a small percentage of reserves
  2. Efforts to diversify the fuel mix in the transportation sector have failed

The second point provided the focus for the remainder of the discussion, which began with Senator Dorgan asking the panelists’ thoughts on the recent Senate vote to repeal ethanol subsidies. Mr. O’Connell addressed the issue from a business perspective, explaining that the monopolistic nature of the oil suppliers is a very risky business model and that the elimination of subsidies for alternative fuels such as ethanol is harmful to the development of variety within the industry and sends a “very negative message.” Mr. Erickson identified a silver lining in the vote, which he saw as an indication that the ethanol industry has matured enough to survive without subsidies. However, he went on to say that subsidies remain critical to speeding the development and commercialization of technology that will enable widespread use of biofuels. Mr. Hassenboehler agreed about the importance of incentives for the successful adoption of alternative fuels, and expressed frustration that subsides were being almost “tarred and feathered.” He said that it will be interesting to watch the funding conversation develop as the U.S. tries to shift away from foreign oil.

The panelists dismissed the idea that the government should step aside and let the marketplace choose the best technologies, saying that in a system with such a clearly established incumbent (oil), it would be nearly impossible for nascent technologies to overcome market barriers without government assistance. The panelists noted that the most important thing was to have consistent market signals from the government, and they agreed that incentive methods outside of the tax code should be investigated, given the current political impossibility of something like a gas tax.

When asked what they envision for the transportation sector 10 years from now, the panelists painted cautiously optimistic pictures—though they expressed excitement about the technological advances being made in their respective fields, they acknowledged the challenge of establishing an entirely new refueling infrastructure and talked about drop-in fuels as a solution. Mr. O’Connell also addressed the need for changes in consumer behavior, and said that he sees a future where consumers don’t expect one car to meet every purpose, and households may instead have a small electric car for short trips and a more conventional model for longer trips. Mr. Hassenboehler said that he could possibly foresee fleets and even light duty vehicles equipped with LNG given the increasing amount of natural gas reserves in the U.S., which he expects to lead to favorable pricing of natural gas in the long-term.

The overall message of the breakfast seemed to be that the federal government needs to come to a decision on what the policies for alternative-fuel vehicles will be, and make that decision clear to industry so that automakers can begin seriously pursuing these new fleets. Without a significant shift away from oil, the U.S. will not meet its goal of energy security and will remain vulnerable economically.

Brandy Chambers contributed to this post.

2011-06-22 00:00:00

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