Energy policy for the future

1 January 2002

The September 11 attacks have highlighted the need for a comprehensive energy plan in the USA. Recently, in a speech to the Hoover Institution, secretary of energy Spencer Abraham spoke about ways in which the country can achieve energy security.

The issue of energy security is now clearly before us. The need for us to think very seriously about domestic and international energy policy could not be more pressing. As with so many other matters, September 11 has clarified and intensified what needs to be done. So long as I am in this job, I will make sure energy security is my primary concern.

What we must understand is that America's energy challenge is now connected with the same issues of national resolve and commitment that we face in foreign and military policy. How we prepare to meet the nation's demand for energy, no less than how we meet the challenge on the battlefield, will send a signal to the world about our willingness to make difficult decisions in the national interest.

Energy security is not the same thing as energy independence. Imported energy is just a reminder that we live in a global economy. The recognition that complete energy independence is unlikely does not mean we should ignore the consequences of growing more and more dependent on imported oil and natural gas. When it comes to energy we have a buyer-seller relationship with a host of countries, and these relationships entail all the tensions one would expect.

We must come together as a nation to do what we can to meet our growing demand for energy, and we must be willing to make difficult decisions to solve our own problems. We often hear that nothing we do to boost domestic supply in the USA, such as explore for oil in the Alaska National Wildlife Refuge (ANWR), is going to make us independent, so we just shouldn't bother. ANWR will not make us independent of foreign oil, but it will help increase our energy security by giving us a substantial source of domestic energy that we can turn to if disruptions occur in external supply.

Determination on our part to meet the full range of our energy challenges — from improvements to the electricity grid to more nuclear energy — will show the world that we will not allow ourselves to be at the mercy of others. No one step, of course, is going to make the difference between energy security and energy insecurity. But it seems to me that we can no longer easily dismiss the need for a national energy policy that looks first to energy security — and looks first to making the hard decisions, not the easy ones.

Achieving energy security

Energy security demands we pay attention to the kinds of fuels we use, and where and how we get those fuels. It demands we pay attention to how we process energy here in this country, how we deliver it to customers and how those customers use that energy. And finally, energy security demands we pay attention to the marketplace. Greater competition in energy markets here at home, and around the world, will only strengthen our ability to access abundant and affordable power.

We believe energy security rests on three main pillars:

• Greater energy diversity.

• Increased domestic production, combined with enhanced efficiency and conservation.

• A modernised energy infrastructure.

We need an assortment of fuels and a multiplicity of sources. Dependence on one type of fuel, such as natural gas, leaves us vulnerable to price spikes, while excessive dependence on one supplier, or one group of suppliers, leaves us vulnerable to reductions or cutoffs.

If we are going to meet a 45% increase in demand for electricity over the next two decades, we must build somewhere between 1300 and 1900 new power plants. As things now stand, most of those plants will be fired by just one fuel: natural gas. We believe this is a risky course of action — risky economically, and risky in terms of energy security.

We also believe we need to diversify our supply sources. This means taking a global approach — working with nations around the world to increase production, open markets, break down trade barriers, and reduce burdensome regulations that discourage foreign investment.

For too long, Americans have thought that our only important international energy relationship was with the Persian Gulf. Certainly, that region is important, but our administration is looking beyond the Persian Gulf. We are expanding our relationships with other energy producers, and building new partnerships to strengthen our overall energy security.

This means working with Canada and Mexico and other nations in the hemisphere to develop a new regional energy collaboration. It also means encouraging development of resources in areas as varied as Africa and the Caspian region.

Foreign investment, free trade, more open markets and advanced technology are critical to seeing that the energy potential for Africa, the Caspian region and other areas is available to fire the global economy. We recognise each of these as essential to broadening our choice of suppliers and diversifying our access to energy.

The second pillar of energy security looks to enhanced domestic production and to greater energy efficiency, and wise conservation.

We are simply not going to meet the expected rise in energy consumption in this country over the next 20 years without new production and without greater gains in efficiency. Just consider the numbers. The USA currently consumes some 99 quadrillion BTUs, or quads, of energy each year. By the year 2020, that number jumps to about 175 quads. But our projections also assume dramatic improvements in conservation and energy efficiency improvements which will reduce the projected demand by 48 quads, so our annual consumption will actually average about 127 quads.

We will also need to increase the role of renewables by revamping research and development and increasing the movement of mature technologies, such as solar, wind, and geothermal energy, to the market. We will also concentrate more resources on promising technologies that represent the next wave, such as distributed energy systems, fuel cells, hydrogen-generated energy, and fusion.

Energy efficiency, conservation, and renewables, however, will never do the job alone. We will still have to fill a gap of 28 quads over the next two decades, no simple task. In the last decade America added just one quad of increased domestic production. So where do we go to fill that gap? If not from imports, then how do we address this challenge domestically?

There is no easy solution. But still I'm told time and again that simple measures, such as raising automobile fuel economy standards, can absolve us from any increase in domestic energy production and can — painlessly — hand us greater energy independence. But that is simply not the case. So we must increase domestic production of energy. We must develop the full array of power sources — clean coal, natural gas, oil, hydropower, wind, solar, and nuclear.

We believe the expansion of nuclear power in the USA is essential. New reactor designs show enormous promise. They are inherently safe, more efficient, and can help us move beyond the idea that nuclear power should be forever defined by the accident at Three Mile Island. We need to judge nuclear energy on today's reality, not the fears of those who are 20 years behind the times. So, we must accelerate licensing of new advanced-technology reactors, and the relicensing of existing safe nuclear plants.

But just as important as enhancing diversity of types and sources of fuel, and increasing domestic production and efficiency, we need the third pillar of energy security: a modern energy infrastructure.

The network of pipelines, transmission lines, and refineries that makes up our energy delivery system is enormous and complex. We have 150,000 miles of transmission lines, over 2 million miles of oil and gas pipeline and millions of barrels of oil reach America's harbours every day.

In recent years, many studies have been done on this system. They all tended to conclude that physical security is good, but greater attention needs to be paid to cyber-security. Now we have to be concerned about both. In fact, where our infrastructure is stretched thinnest and is most antiquated — such as our refinery system — these areas turn out to be precisely the points where we must pay the greatest attention to physical security.

We can have the capacity to generate mega megawatts, but if we can't move the power from where it's produced or refined to the homes, businesses and gas stations that need it, the energy does us little good. Transmission bottlenecks, like Path 15 in California, are a frequent source of supply disruption and price volatility. As demand grows, these problems will only get worse. In fact, the persistent Path 15 problem was responsible for two blackouts in California last winter.

New technologies — like superconductivity — allow us to send more and more energy over smaller and smaller lines. These technologies will one day be the backbone of a true electricity superhighway in this country — a highway that will boost competition in our energy markets like never before.

The task ahead

We are now working with Congress on new efforts

to improve security within our infrastructure. We need to ensure that our laws permit the private sector to confidentially pool information on security issues without running afoul of existing antitrust and public disclosure statutes. And we need to continue and broaden our ability to identify and protect critical infrastructure assets.

Taken together, each of these steps will help us meet the challenge that we confronted from our first days in office, and that were brought home to us in such an unspeakable way on September 11.

Understanding energy security — and how to achieve it — demands we pay attention to the most valuable resource of all — human ingenuity.

It is true that we get energy from coal, oil and natural gas, but the ultimate source of energy for this country is the power of the human mind in a free society.

Over a decade ago, Warren Brookes, the great conservative author and commentator, made this point clearly. "The common denominator," he wrote, "is not the fuel substance itself, but the true energy of ideas and technology, and the virtually unlimited source of that is the mind of humankind. And since that power is most energised by freedom of opportunity, the nations with the greatest energy potential should be the nations with the greatest level of freedom."

If that is true, as I believe it is, we should have no trouble finding energy security for this nation. We just need to do what we do best: unleash the power of human freedom.

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