Sunday, November 8, 2015

The Case for Energy Subsidies

Energy is unambiguously unsexy.  It runs our cars, warms and cools our houses, which are necessary functions, but we really want it to be as invisible and inexpensive as possible.  This distinguishes it from nearly every other purchase we make, where both price and features enter into our decision.  We do not all buy the least expensive car, least expensive sofa, least expensive shirt, etc. However, we do want our energy to be the least expensive available.

This assumption that all energy is fungible is inherent in the alternative energy conversation where comparison of 'cost per unit' becomes the primary, and in some cases only, consideration.  However, a growing number of people are inclined to inject the features of cleanliness and renewability into the conversation.  These are not benefits that redound to the individual consumer, but rather to society as a whole.  As such, there is an altruistic element to it.

A problem arises in the implementation of any additional features to energy supply because the ability and willingness to subsidize these features varies substantially among citizens.  The typical two wage earner professional family with a household income of, say, 150,000 USD is likely to be willing to pay 50% more for electricity in order to subsidize clean and renewable sources.  A single mother of three with a household income of 30,000 USD may simply not be able to afford it.

Given that we want a clean, functionally inexhaustible source of energy, the best base load will likely be Enhanced Geothermal Energy (EGS), though it will likely never be the least expensive.  The essential technology is to drill a hole until a depth is reached where the rock is of an optimal temperature.  A chamber of fractured rock is created, water is dropped down which converts to steam and is used to run a turbine.  Water is condensed and recycled.  

The technology is particularly attractive because it has minimal surface presence, unlike solar and wind that require enormous 'farms' covered with energy collection equipment.  In fact, the power plant could be built underground so that all that is visible on the surface is the transmission cables.

Of course, much of our energy usage is currently in the form of hydrocarbons.  We use gasoline to move our cars and natural gas to heat our buildings.  However, technologies are emerging that will allow both to be accomplished using electricity.

Modern heat pumps will cool building interiors and heat them when the outside temperature falls as low as -20F.  Fuel costs are competitive with natural gas and less expensive than heating oil.  With populations consistently moving to lower latittudes, this will eliminate nearly all carbon based heating.

The ultimate transportation solution, which may be upon us prior to 2030, will be self driving electric cars that get their energy by induction from the roadway rather than being stored in on board batteries.  This will likely be less expensive, in total, than our current gasoline driven system, however, transitional periods may be more expensive.

The ability to subsidize energy premiums related to benefits that accrue to the common good increases exponentially with income.  I am not in favor of subsidies for the cost of goods and services as a remedy to income disparities.  It is more efficient to subsidize income directly.  Also, by subsidizing specific products and services the government is making lifestyle judgments which reduces liberty.  However, here we are recognizing that the cost of energy has two identifiable components, 1) the cost of energy by the least expensive source and 2) a premium related to specific choices for the sake of cleanliness and renewability.  It is not only acceptable to subsidize the second, one my justifiably argue that since the benefit is to the community, the cost should be borne by the community.

The U.S. has attempted to subsidize energy sources directly which has led to large payments to energy equipment manufacturers that have subsequently become bankrupt and thus benefited nobody.  It is much better for the government to mandate a percent of energy supply that must be clean and renewable and then compensate the producer so that they may charge the ultimate consumer the price that would prevail with a least cost supply.

In my ongoing planning of a Polymathican microstate, this is precisely what I propose.  The microstate will subsidize the production of electricity, with base load satisfied with an Ocean Thermal Gradient System (OTEC), with the difference between the microstate's cost of service and the average of Southeast U.S. rates.

We will use OTEC because the island, Samana Cay is very close to deep water and the surface water temperature is extremely high.  Using the open cycle design, it will produce truly enormous quantities of fresh water.  Peak Shaving will start with the daytime burning of garbage.  Excess base load will be converted into synfuel that will then be burned during peak load times.  A strategic supply of synfuel will be retained to provide emergency supplies.

The net effect of the above is that we will not develop piles of garbage, all energy production will be local and the supply is secure from interruption.  This will not be as cheap as building coal fired plants, but the benefits to the community are worth the additional cost.  It just shouldn't be borne by individuals but rather by the community as a whole.  I hope that this model becomes the norm as North America and Europe moves toward renewable energy supplies.