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Commentary: The new US energy policy approach. What does this mean for the renewable energy sector?

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By Quinn McKew

In the United States, “energy policy” essentially means one thing: oil policy. The New York Times reported today that the U.S. Congress is serious about producing a new energy policy after years of stalemates and inaction. But read carefully. All the talk about a new energy policy is driven by one thing: consumer anxiety about the high cost of gasoline (petrol). It is not unreasonable to assume that any energy policy will be a reactionary response to this concern versus a much-needed re-alignment of production and consumption incentives to usher in a new energy economy in the United States.

European audiences may find it difficult to fully understand the magnitude of panic caused by a doubling of gas prices over the last year. Imagine you are an average American. Your wage has not effectively increased in decades, the value of your home (the main personal economic asset in the U.S.) has decreased, and you have very little, if any savings. Suddenly, your energy costs go through the roof. You were already living paycheck to paycheck, and a near total lack of public transportation outside of city centers means you have no choice but to pay the higher gas prices and try to cut other costs. But since the higher fuels costs are rippling through all sectors of the economy, now everything is more expensive. And yet, you make no more than you did before, and the housing and credit crisis means you can no longer borrow against equity to make up the difference. People are panicked.

To be sure, commentators frequently point out American consumers consistently chose not to emphasize energy efficiency in their home and transportation purchasing decisions. However, those decisions were not economically irrational from a consumer perspective (as much as I disagree with them personally). They reflected the economic policy incentives built into the American economy. A recent article in the New York Times documents how “over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries.”

So, the situation is dire. Does this mean the dawning of serious federal support for renewables and measures to reduce consumption? Let’s take a look at the last energy legislation for guidance. The Energy Independence and Security Act became a law in December 2007 at a time when energy and gas prices were already increasing. What did the law do? Mostly provide more subsidies for oil and gas companies at a time they were experiencing record profits. It also sent a dagger into the heart of the renewable energy industry by refusing to adopt a modest mandatory renewable energy portfolio or extend tax incentives for the industry beyond December 2008, with the exception of providing support for corn-based ethanol production.

The good news: the urgency to reduce American demand for oil points towards institutional support for renewable energy as a way of reducing dependency on foreign oil. Both the presidential candidates have called for more support for renewable energy technology and take climate change seriously. Over twenty states have already adopted policies which mandate that a certain percentage of electricity generation come from renewables.

The bad news: just three weeks ago the American Congress failed to pass legislation that would have extended tax credits for the solar and wind industries. A colleague of mine was trying to organize a field hearing on solar energy for the Subcommittee that develops energy policy in the House, only to be told to cancel it because “nobody cares about solar.” Perhaps most discouraging, the Chairman of the Subcommittee represents the leading solar technology producing state in America. Finally, a concerted campaign has been launched, led by the White House, to encourage more drilling for oil and gas as a direct means of reducing gas prices, despite the fact that no economist believes this would have any immediate effect.

Ultimately, because it is an election year, no one wants to seem like they are doing nothing. Since the Democrats are pushing measures to decrease demand, and the Republicans are pushing to increase supply, any energy policy will most likely be a compromise of both principles. But, in the end, even if the US Congress does take some action on renewables an alternative technology supporter can take heart in knowing that none of the measures currently proposed will have an immediate effect on energy prices.

Those high prices increase the attractiveness of renewables for private sector investment. And at this point, a betting man would place his money on a combination of state initiatives and the private sector over the federal government to make renewable technology a success in America.

About the author: Quinn is an environmental entrepreneur and policy consultant with expertise in climate change, public lands, water and energy policy. With her MBA and experience in non-profit management, she seeks to leverage the best practices of the non-profit and business communities to foster a truly sustainable business culture. Quinn is a member of The Sustainability Writers Network (TSWN).