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Chasing the Elusive Energy Policy

Strong energy policy is needed now more than ever, but the chances that Congress will pass one in 2012 are slim.
January 3, 2012

Prospects for passing some sort of long-term energy policy were good just two years ago, but a lousy economy and some aggressive lobbying by opponents of climate change policy derailed those efforts, and there’s no reason to think things will get back on track in 2012.

The closest possibility may be clean energy standards legislation being crafted by Jeff Bingaman, a Democratic senator from New Mexico. But Republicans have already lined up against such a measure, and even existing clean energy policies are being questioned, especially after the failure of the solar cell maker and loan guarantee recipient Solyndra. (See “Solyndra: We Told You So.”) Election year politics may force legislators to steer clear of hot button issues like climate change.

In the absence of a comprehensive energy policy, expect increased use of natural gas, which is cheap because of large newly economical resources in the United States, and decreased use of coal, which is the subject of new EPA regulations. Without policy support, or sudden, big improvements to battery technology, it’s hard to see electric vehicles taking off quickly, and as the cellulosic ethanol industry has been slow to get going, don’t expect biofuels to make a big dent in gasoline consumption. Indeed, the country may grow yet more dependent on oil as large new resources are exploited in places such as North Dakota and Texas, and friendly neighbors such as Canada. Some experts are starting to suggest that within a decade or two, the Americas would no longer need to import any oil. That might sound good, but oil prices will still depend on the worldwide market for oil—as long as demand is growing as it has been in recent years, prices will stay high, and volatile, even if the U.S. starts sending more money to Brazil and Canada and less to the Middle East.

Looking ahead, we can also expect to see more failures in the solar industry, as low prices force many out of business. One thing that will be interesting to watch is the extent to which the survivors manage to succeed, even in a climate of reduced government incentives. The U.S.-based solar panel manufacturing giant First Solar recently announced that it plans to stop targeting fickle subsidized markets, and instead sell to places where its technology makes economic sense on its own merits. Prices for solar panels may have decreased enough in recent years that the industry can survive on its own–serving areas with lots of sun and high electricity prices—albeit at a smaller size than it could with government support.

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