Tuesday, December 4, 2007

Using Vision to Push Reality Around

Ponder this powerful vision of clean skies and home grown American energy: buildings that draw power from the wind and sun to power themselves and the cars that visit them . But that vision can be thwarted by the realities of how we cost things and how we allocate resources in our political system. Our laissez-faire market isn't as frictionless as we might want. Some of the things that thwart:
  • Transmission. If a building's power is made and used in the same place there is little to no transmission cost. But transmission (high voltage lines, substations, and so on, maybe $1M per mile to install) is costed separately from power production. So building power doesn't get credit for this advantage.

  • Power loss. More of the power generated on-site gets to the end user, it isn't lost in transmission. No credit here, either.

  • Peak Shaving. If solar panels are deployed incrementally to handle peak power needs to avoid building new power plants, the avoided cost is much more than the otherwise too expensive solar panel.

  • Oil subsidies. Oil is subsidized more generously than emerging renewable energy sources. The subsidies made sense given oil's national strategic significance during and after World War II . It now makes sense to transition to (that is, to subsidize) alternatives, given that they can now be used instead of oil, and offer significant advantages over oil. (With the building powered car electricity becomes an alternative to oil.)

  • Start Up. Given new energy's national strategic signficance, and that it faces the traditional hurdles of the start up, it deserves national subsidization (just as oil and other undertakings did in previous situations).

  • Reduced Health Care Costs. Improving air quality probably means less people visiting the doctor for asthma, allergies, lung and heart disease, and so on. So, we can expect, but probably can't price well, lower health care costs and higher productivity.

What is asked is a visionary leader (visionary like FDR or Ronald Reagan or Winston Churchill or John F. Kennedy) to gloss over these pesky realities, and draw us to this place. Why should such a grand vision not materialize because of a dozen or so worth less realities?