Americans are being reminded that we live in dangerous times. Here at home, the threat from COVID seems to be easing, but inflation is not. Overseas, Russia is asserting itself by invading Ukraine and threatening the post-World War II power structure. With all the talk about climate change, secure power generation sources have never been more important.
This is when it pays to have an “all of the above” energy policy that ensures energy security while we transition to a future of cleaner secure power generation sources. That means using every possible source of power today – natural gas, nuclear, solar, wind, geothermal and yes, even oil and coal.
>>>READ: American Fossil Fuels Have Key Role in Global Power Generation
When a country takes this approach to energy policy, it allows the free market to set prices. Price signals guide producer and consumer behavior. When one source becomes more expensive, users will switch to another, less costly, source.
In the United States, for example, petroleum was widely used to generate electricity until the 1970s. The oil shocks in that decade drove utilities to use coal instead. When the development of hydraulic fracking made American natural gas less expensive, most utilities swapped again. That increased efficiency and slashed CO2 emissions because natural gas burns more cleanly than coal.
Unfortunately, the Biden Administration seems to be following the lead of the EU and the UN, which rely on an outdated command and control approach rather than free market economic principles.
Start with oil policy. Instead of encouraging more development here in North America, the administration is restricting supplies. On his very first day in office last year, the president killed the Keystone XL pipeline, which would deliver crude oil from Canada to refining facilities on the Gulf Coast. The AP reported that Biden nixed the project “over longstanding concerns that burning oil sands crude could make climate change worse and harder to reverse.” He made that determination even though the Obama administration’s State Department said otherwise in its environmental review of the project.
>>>READ: How Policymakers Can Counter Russia, Rise in Energy Prices
But now that the price of a gallon of gasoline is topping $4.00, the president suddenly wants more oil. He recently pressed Saudi Arabia to increase its production, he is talking about releasing oil from the strategic petroleum reserve, and Democrats in Congress are calling for a repeal of the federal gas tax.
But that doesn’t explain why it is delaying a decision on granting new oil and gas leases in western states such as Montana and Wyoming. “Agencies are experiencing significant delays and wastes of resources as they scramble to rehash economic and environmental analyses prepared in connection with a broad array of government actions,” Biden’s own Justice Department wrote in a legal filing last month.
The president needs to slash through that red tape and approve these permits. That would allow the market to operate more efficiently and deliver the fuel the country needs. In fact, the administration should slash red tape for all energy and energy infrastructure projects.
For instance, the administration should make it easier to run electric lines from one state to another. Nearly everyone agrees that renewable energy is important. But few people live where the wind always blows or the sun always shines. To reap the benefits of renewable sources, it’s crucial to move the electricity generated in those areas to more populated areas, where it can boost the electric grid.
Finally, the United States needs to learn a key lesson from Germany.
Until 2011, Germany generated 25 percent of its electricity using nuclear power plants. These provide an uninterrupted source of carbon-free power. That year, then-Chancellor Angela Merkle overreacted to the Fukushima accident in Japan and vowed to shut down all the country’s reactors. It has since dropped from 17 reactors down to three, and those are scheduled to be shut down this year.
The government’s decision to wean itself off nuclear power generation meant Germany needed to turn to Russian natural gas as a “bridge fuel” to get to its supposed carbon free future. It couldn’t rely on renewables, because there it is so difficult to store green energy. Roughly 40 percent of the natural gas used in the EU comes from Russia. That leaves the Germans overly reliant on Moscow.
There are signs that the German government realizes its mistake. Reuters reports that the country’s economy minister is “floating the possibility of extending the life-spans of coal and even nuclear plants to cut dependency on Russian gas.” That is sensible. However, the minister, Robert Habeck, seems to have missed the point. One problem, he says, is that the natural gas market is deregulated, and he thinks the government may have to impose some regulation.
That’s a way to make this bad situation even worse. The problem isn’t a lack of regulation; it’s that the German government hasn’t been allowing the market to work.
The world needs more energy, and the free market is the best mechanism to deliver secure power generation sources. An “all of the above” energy strategy, which eliminates favoritism for all energy sources and technologies and allows for markets to pick energy winners and losers, will stimulate innovation as it creates a more robust economy and healthier environment. There is no time like the present to start building a cleaner and more reliable future.
The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.
