My reaction to the State of the Union

Well, it's not really my reaction since I didn't watch it (i.e., too cool for school). I much prefer the State of the Union review. Here is the environmental econ-relevant part from the WSJ's Morning Brief:

The president asked Congress to join him in finding a way to "reduce gasoline usage in the United States by 20% in the next 10 years." But his aides explain to the Washington Post that the goal isn't 20% off today's levels but 20% off projected annual gas use. The Wall Street Journal notes that achievement of Mr. Bush's goals "rests on the uncertainty of technological breakthroughs, and the administration is promising relatively little money to subsidize what would be a major redirection in the country's energy markets." And while he wants to "reform and modernize fuel economy standards for cars," he still rejects the idea of legislation that would mandate specific higher fuel standards. ...

Enthusiasm for more environmentalist energy policy in his administration -- which long insisted the country's energy problems could be solved with more domestic wells -- may also have been undercut by Vice President Dick Cheney's reaction during the speech. Mr. Cheney rose to applaud many times during the nearly 50-minute address. But, as the Post reports, when Mr. Bush called for saving "up to 8.5 billion more gallons of gasoline by 2017," Speaker Nancy Pelosi and many others leapt to their feet, while Mr. Cheney remained where he was.

In short, don't get excited.

Comments

[Mike@HCVN]

My expectations and equally low despite the fancy talk. I remember the rhetoric from the 2006 SOTU and the talk of breaking America's dependent on foreign oil. I also remember the Energy Secretary coming out later that week and making sure that it was clear that the President was talking metaphorically (or hypothetically) and that they weren't actually going to do anything and that, really, he didn't mean it.

I'll be watching for that again this year...

Mike

[joshua corning]

One does not have to be a genius to know that that energy security and energy independence are mutually exclusive.

Its like saying our food supply is better off if we only eat food grown in the USA; Moronic.

[thirsty dinosaur]

so our food supply would be safer if we imported more food?

does anyone ever know what josh is talking about?

[Digitalgalt]

'Energy independence' is a nice flashy term for reduced sensitivity to a cartelized market that we don't control. Isolationism in the energy sector isn't even feasible. Don't be silly.

[Mark C R (Chemist) UK]

josha - actually energy independence and energy security ARE NOT mutually exclusive...

If you can grow LOCALLY (or nationally in this case of biofuel/biochemicals) with a minimal input of mass/energy - everything you need for energy, commodities (chemicals) and food ...

You are inherently more secure - as outside influences of supply disruption are minimised - and you can you can grow as you require to support your population. Then theres the enrgy expenditure of TRANSPORTING materials... A MAJOR POINT! This security is backed up by other alt-energy technologies also...

Then geopolitical problems become minimised.

But note - high energy and mass utilisation efficiencies are required for that - DURING THE WHOLE LIFE-CYCLE. Not like in the US currently in particular in energy consumption / efficiency.

Thats the theory anyway... (although that would be the "ideal" situation ... where everything worked at 100% which is unrealistic... but which is what we should aim for).

Anyway - now for my point:
I've just seen a report here in the UK where the foreign correspondent said - he believed that all this newfound focus on the environmental issues by the Bush administration are only a "smokescreen" (because of Iraq).
I was a little unhappy about it actually - as I thought it was some progress... in convincing the GOP of the neccessity of tackling sustainablity and climate change

Then thinking about Cheney's "body language / actions" during the speech, it seems that further education of possibilities of Alt-energy and clean technologies are required for the politicans.

I still maintain applications of clean technologies (with inherent economic benefits) - will only benefit the global economy ... and the environment.

I have a number of examples on my growing site now - with microwave-assisted chemistry research a professional interest of mine.
The Green Chemistry Technical Blog
*NB "GREEN CHEMISTRY" is APOLITICAL... personally - I merely try to understand some of the relevant geopolitics ... unlike my "green chemist peers" - who deal only with the fundamental science

This and similar technologies - we have to persuade the politicans to truly understand. I observed Bush's visit to a NREL related lab today - if it were truly an new embracement of the possibilities - he would have visited that PRIOR to the speech on Monday.

If once the current difficulties in Iraq go off his desk - and he forgets about alt-energy , it will be apparent that the executive branch in the US isn't thinking long term in the US AND is merely HOPING progress is going to be made.

There's political debates ongoing now here in the EU on all this. I suspect these will be mirrored soon in the US - particuarly since the Democrat-dominated congress seems more open to Alt-energy and clean tech - ideologically. (Thats what I percieve sat here over the pond).

See this article from the BBC which seems quite good - but again - I think shows that the European "corporations" mentioned, seemingly agains this - ARE NOT THINKING LONG TERM enough (or are thinking very 1-dimensionally about Climate Change).

I mean "long term" enough to compete with Japanese/Korean auto-manufacturers.... like Toyota, Honda et al.

See the article at:
EU stumbles on the low-carbon road, By Stephen Mulvey, EU reporter, BBC News

Note most of this is debate - not definitive. I think most of Jose Manuel Barroso's plans will go through e.g. "EU energy plan" / "The Energy Efficiency Action Plan (EEAP) ....

[Mark C R (Chemist) UK]

I just read something that brought me back out of my little post-speech media analysis malise...

I thought it would be worth reading to anyone genuinely interested in Alt-Energy... as it's a little more uplifting!

- and because I thought it was pretty good at describing the variables

Over at AltEnergyStocks.com:
Altenenergystocks.com

What has Changed in the Alternative Energy Investment Landscape?
Is the time right to invest in alternative energy? We’ve seen a lot of this before in the 1970s and 1980s. Solar and biomass hot, big regulatory pushes, and then companies and investors lost a lot of money when things changed. We’re still a bit skeptical. We’re also all about not getting pulled in to each and every overpriced hype (read, the ethanol race) – but fundamentals are fundamentals. And they’re hard to ignore and pretty darn impressive. We think the real question today is not “are alternatives a good investment?”, but “which ones have legs and make a good investment bet?”

In four words – broad-based critical mass – Unlike alternative energy of yesteryear, this alternative energy explosion has been slowly building for 10 to 15 years, and is reaching critical mass in multiple markets. Take a couple of examples – the solar market is on pace for a $20 Billion per year number globally within 3 years (SolarBuzz.com), across several major jurisdictions (in the 1980s we were talking less than 5% of that). World ethanol production is on the order of $12 Billion/year. In the US wind capacity production has growing at 25%+ per year for the last 2 years wind generation capacity additions have been second only to gas-fired generation adds in the US mix.

“It’s the global economy, stupid” -Don’t forget, this is global now, and it wasn’t really like that 25 years ago. The US pioneered solar photovoltaics, but Japan and Germany (with China catching up) are the biggest markets today. The US pioneered large scale wind power (remember Altamont Pass?), but 3 of the top 4 wind turbine companies today are European. The US engineered cap and trade in carbon, but Kyoto is a European driven engine. Lots of examples of why it’s not just us anymore. For an investor worried about the legs of the industry, that’s a really big point.

In two words – cost structure – alternative energy is still more expensive than conventional energy - that’s why we call it “alternative”. But the cost curves for each and every alternative energy source have fundamentally changed for the better over the last 10 years (NREL), are moving into striking distance, and continue to improve. This trend is not going to reverse, so it’s just a matter of time.

In three words – carbon, carbon, carbon - The carbon credit trading market, driven by Kyoto protocol was $21.5 Billion in the first 3 quarters of last year (World Bank and IETA) - that’s up from virtually zero three years ago. Now we’re talking real numbers. The US has been left out of this so far, but not for long. California is committed, the Democrats are in control of Congress, and we will likely be seeing a strengthening of some sort of cap and trade system before long.

The bottom line– alternative energy is cool and the consumer cares. Of all this activity, it’s really high gas and electricity prices and climate change that have put alternative energy on the map in the consumers minds. And they care. And they vote. And they blog. And they are buying hybrids, uneconomic hybrids, lots of them. And as the battery technology continues to advance (think lithium ion overtaking nickel metal hydride), they’ll start buying HEVs and Plug-in HEVs in massive quantities. And they are buying green power. And little pieces of paper certifying their green power. In enough quantities for Toyota and Walmart and GE and Google to brand green as part of their core strategies. How’s all that for impact?

And finally, the regulations are here. Don’t kid yourself, alternative energy has ALWAYS been a regulatory driven market. But now the regulations are pretty widespread. Take electric power, for example – it’s not just the federal production tax credit anymore, or just the solar tax credit, or the state solar subsidy programs - 23 US states now have Renewable Portfolio Standards for electricity production (Pew Center) , including Texas, California, Pennsylvania, Arizona, Illinois, etc. That’s up from 1 in 1991. Put another way, if you could swing the electoral votes from just the RPS states, you’d have a landslide presidential victory.

Yes, it’s still possible that if oil and gas prices prices fall back to 1990s levels (we expect them to pull back somewhat, but are scared to make a precise prediction) and we have 5 or 6 normal, cool winters that make the climate change debate disintegrate, then a new political wave will come in (in 30 different western countries), and each and every major alternative energy regulatory program along with all the consumer demand will collapse – in a dozen major nations worldwide. But as the saying goes, that ain’t the way to bet it.

Author Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is the founding contributor of Cleantech Blog, and a Contributing Editor to AltEnergyStocks.com.

[Tim Haab]

I Think Mark C R (Chemist) UK easily wins the price for longest and most confusing name and comments.

[Mark C R (Chemist) UK]

I proudly accept that honour Tim.

(apologies -its because you say "tomate-o and I say tomar-to"...)

[Mark C R (Chemist) UK]

Tim,

The reason for my Neil Dikeman quotation was to try and relieve some of the negativity that seems to have set in due to all the pre-speech hype.

It seemed to me that - despite what Bush said (or neglected to say OR said to try and throw up a "smokescreen" by mentioning the CC words...), that the marketplace in the US, and consumers may pull the US in the right direction anyway regardless of lack of political leadership in the executive branch. And that support will come for changes in the markets from a congress where such arguments will get a fair hearing in any event.

I also concur with the GLOBAL statement - in that alt-energy and clean technologies are indeed global - and that developments in the EU will influence affairs in the US, both in R&D and consumer opinion. The same goes for China and India - since the economy really is global, and that its a "knowledge economy".

Did you know less than 4% of the UK population generates more than 16% of the annual wealth in the UK?....

If the US suddenly finds itself at a disadvantage in the markets, like in automotives because they didnt apply technology for better fuel economy - the arguments for GHG reductions and R&D for clean tech will only strengthen.

Similar things will happen in other sectors outside of transport in my view. Theirs economic arguments for it - I'm sure you can make far better than me!

I was therefore trying to reduce my pessimism - as I usually leave that to you economists!

Mark

[joshua corning]

so our food supply would be safer if we imported more food?

does anyone ever know what josh is talking about?

So we have one bad flood or freeze and we have no oranges for a year...or no wheat...yes importing food from multiple sources is inherently more secure then getting it from only one.

[joshua corning]

You are inherently more secure - as outside influences of supply disruption are minimised - and you can you can grow as you require to support your population.

So we are left with only one source of energy from one geographically area...that if it fails we are guaranteed to have zero energy...and somehow that is more secure....

Truly bizarre.

I think I have found the first step in becoming an environmentalist: stop thinking

[Dano]

yes importing food from multiple sources is inherently more secure then getting it from only one.

Only if you don't know how to count caloric expenditure on fuel for shipping.

D

[Mark C R (Chemist) UK]

Josh, look at how big the US is in land area...

Your telling me that that isn't sufficient????

And Dano is correct in the expenditure of transport issue.

The US spent $300 Billion on oil imports last year...

Thats a lot of dough!

[joshua corning]

Only if you don't know how to count caloric expenditure on fuel for shipping.

security dano security

but that is not your argument...you might even be smart enough to understand i am right and networks are more robust then single source supply chains...you just feel that there are more important things then security to worry about...which is fine.

by the way Mark...if not spending 300$ was less expensive then spending 300$, then shipment of oil would stop...period.

but again we are not talking about price or even efficiency (of course if this wasn't efficient then why the hell is the market encouraging it) but in fact we are talking about security and how it is inconsistent with independence.

[Erin O'Sullivan]

It is hard to argue about the invisible hand of the US market for oil when it is so distorted by government subsidies.