Energy Policy

"As the saying goes, the Stone Age did not end because we ran out of stones; we transitioned to better solutions. The same opportunity lies before us with energy efficiency and clean energy."

America's energy policy is mired in a socio-economic battle unseen in recent history. Climate change, whether you believe it to be man-made or a natural cycle of the Earth, is real. The problems that is creates are real. We have an opportunity to curb those changes instead of adding to them. I would very much rather err on the side of caution than risk future generations simply because we could not get passed the "cost" factor.

There are many angles and perspectives to the energy debate, ranging from the social side of climate change as I just mentioned to the economic side where businesses don't want to lose billions of dollars and tens of thousands of workers don't want to lose their jobs. Both perspectives must be looked as objectively as possible if we are to make the necessary changes going forward.

As this is a long page with tons of information, feel free to use these links to more quickly navigate.

America's Current Energy Makeup
Energy Volatility
Health Considerations with Fossil Fuels
Renewable Energy
Nuclear Energy
Carbon Tax vs Cap and Trade/Dividend

Steve's Energy Plan

Concluding Thoughts

America's Current Energy Makeup

In recent years, America has shifted towards cleaner energy sources, in part because of climate change affecting the planet. This has led to an uptick in renewable energy sources. In 2009, renewable energy production was 7.64 quadrillion Btu compared to 2014 which was 9.68 quadrillion Btu, an increase of 27% over five years.1 Over that same timeframe, fossil fuel production increased from 56.7 quadrillion Btu to 69.4 quadrillion Btu, an increase of 22%.2 Not all is gloomy with that picture, as consumption habits show exports playing a more prominent role with fossil fuel production.3 Over that same 2009-2014 timeframe, renewable energy consumption increased 26% while fossil fuel consumption increased just 3%.4

Energy production and consumption goes into many different sectors of our economy. The two largest energy consumers are electricity producers (coal and natural gas being the prominent sources) and the transportation sector (petroleum usage).5 Those electricity providers generated 3.9 trillion kWh worth of electricity in 2014, an increase of 5% since 2009.6 Stock of coal and petroleum by energy producers dropped over those 5 years by 20% and 18%, respectively.7 Nuclear energy is been responsible for 17-20% of total electricity generation since 1998, essentially flat given the last reactor to come online was in 1996.8 In 2014, 67% of all electricity was generated by fossil fuels, followed by 19% from nuclear, 6% hydropower, and 7% renewables (wind, solar, and biomass, etc).9

The average retail price of electricity was relatively flat from 1984 to 2000, ranging from $7.13/kWh to $8.44/kWh.10 However, beginning in 2002, prices rose across all sectors (residential, commercial, industrial, and transportation) from 39% to 55%, depending.11 General consensus indicates the increased cost is due to transmission infrastructure investment, from $2.7 billion in 1997 to $14.1 billion in 2012, an increase that defied a 30 year declining trend.12 The blackout in August 2003 followed by Congress acting to prevent future outages in 2005 (they act slow) helped spur that investment along, as did the need for new transmission infrastructure accommodating renewable energy sources (that is, transfer wind/solar from source to load centers).13

For 2016, the Energy Information Administration (EIA, a division of the Department of Energy) estimates 26GW of utility scale generating capacity to be added to our power grid.14 Most of that will come from solar (9.5GW), natural gas (8GW), and wind (6.8GW).15 One new nuclear plant, the Watts Bar 2, is expected to come online and provide 1.1GW of generating capacity by itself.16

Energy Volatility

Oil has not done well lately. In the last two years, the price of WTI crude oil has nearly been cut to a third- going from $101.67 in March 2014 to $34.06 on March 1, 2016.17 Even in the last year, the price was nearly halved as supply outpaced demand.18

Coal has fared a little better, but exists on a decline. From a peak in 2012 to the last full year of data (2014), total coal exports have decline 23% with average price per short ton declining 26% as well.19 The EIA, as of this writing, has estimated 2015 exports to have dropped another 23%, estimates another 11% drop in 2016, and a further 8% drop in 2017.20 Met coal, that is, metallurgical coal used in steel making, is down over 70% in the last four years, eliminating a huge source of profit as met coal prices are typically much higher than the price of steam coal used to generate electricity.21 The four largest US miners by output- Peabody Energy, Arch Coal, Cloud Peak Energy and Alpha Natural Resources, which account for nearly half of US production- were worth ~$34 billion at the coal peak in 2011; in February 2016, they are worth ~$150 million.22

chart of coal price history from 2001 to 2015

The reason for these declines? Global volatility. In the oil world, OPEC and other oil producing countries have kept production levels high which, when combined with US production, leads to an increase in world oil supply, which leads to lowering of prices even further.23 Coal, especially met coal, has suffered because of excess supply around the world from Japan, Australia, and especially China. China's booming economic buildup put on the breaks, no longer needing that much steel.24 It's funny what kind of rhetoric is thrown out regarding trade and China, but the slow down of China's economy resulted in less consumption of exports like steel and coal around the world. Oil producing countries determining $30/barrel oil is doable also hinders the US. Sure, we may have a ton of shale and other oil wells, but it has to be economically viable for US businesses to employee workers and sell those products on the market. That includes exports if domestic demand is not there or if international buyers will pay more.

shift in China's energy and commodity landscape, 2002 to 2015

This is the point I wish to make concerning energy volatility with fossil fuels. They may be abundant and cheap, but those factors are what keep margins and profits low. A large chunk of the fossil fuel sector was betting on a future that has not- and may not- come to pass. It results in tens of thousands of people losing jobs over a few year timeframe. It results in pension and other retirement funds dealing with multi-million dollar losses.25 It results in entire states suffering massive GDP losses because the main driver of growth is fossil fuels, an energy source that is incredibly subject to market forces.26 If supply remains high, prices and exports will remain low. If OPEC suddenly decides to cut production in half, supply will drop, prices will go up, and it will be a viable business model again... until it's not. That kind of volatility is not something Americans should be at the mercy of when it comes to energy policy.

Health Considerations with Fossil Fuels

Ignoring the issue of emissions and climate change for a moment, not only are those fossil fuels subject to market volatility, but they are the source of numerous health related issues as well. The US established two trust funds to help alleviate those burdens in the form of the Oil Spill Liability Trust Fund and the Black Lung Disability Trust Fund.27 They do not cover all the health problems (chronic or otherwise) that can result from both fossil fuel energy sources, nor do they cover potential problems with natural gas leakage as we recently saw in California.28 The jury is still out on the complete health risks associated with fracking, though it seems to be generally acknowledged that fracking can lead to water contamination as more and more studies are conducted.29

Coal, especially, raises numerous health considerations. Blasting, collapse of mines, and dispersal of coal dust all affect the ecosystem of surrounding communities. This includes the human inhabitants of that ecosystem, from the miners to their families and children. Even something as natural as rain can lead to contamination as water runoff soaks into the ground. Purposeful coal washing creates slurry, which itself is quite toxic. After coal is burned, the ash needs to be disposed of in an ash dump site, hundreds of which have been around for decades and pose health risks to the surrounding territories.30

These health issues need to be taken into account when crafting energy policy. Now, with regards to harmful emissions (but not climate change), the burning of coal, natural gas, and oil contributes to numerous health problems ranging from asthma, chronic obstructive pulmonary disease, and lung cancer to acute myocardial infarctions, delays in neurological development in children, and possibly stroke.31 The cost to human life at every step of the fossil fuel lifecycle shows how potentially dangerous these energy sources are, even before they are converted.

Renewable Energy

Renewable energy is that which uses the natural aspects of our environment to harness and generate power. This includes solar, wind, and biomass energy. Unlike fossil fuels, these sources come to life regularly on planet Earth, meaning they will not run out- hence the name "renewable." In recent years, renewable energy uptake has surged across the nation due to the high cost of oil (at the time), the attractiveness of living "off the grid," a desire to combat climate change, or any one of a dozen reasons people use to justify the switch. The economics of renewable energy most likely played the greatest role is this push. Money's influence should never be ignored!

Hydroelectric power generation can (and should) be included in this category due to it being a steady, zero-carbon based source of electricity. Around 6% of all electricity in 2014 was generated via hydropower.32 The issue with hydropower as "renewable" is that it is somewhat tapped out; there are only so many rivers and water sources to dam. Even though we haven't hit that cap yet, the EIA estimates only 2GW of additional hydropower to be added by 2040.33 That being said, studies from the Oak Ridge National Laboratory finds a potential of 61GW of hydroelectric power for America.34 The Department of Energy also reports 12GW of additional hydropower available via retrofitting of non-powered dams- a roughly 15% increase to hydropower or a near 1% increase to the contribution of hydropower to total US electricity generation.35

Outside of hydropower, wind power provides the most electricity on the renewable energy front, while solar power remains the most accessible to consumers. The sun shines everywhere, while massive wind turbines take up too much space for a residential property or urban center to construct. However, wind and solar suffer from a unique problem that fossil fuels don't: intermittence. Winds can be calm, sunlight can be obscured by clouds or shade, and nighttime produces minimal photovoltaic electricity generation due to the lack of photons triggering solar panel electron release. The worst is when it's both nighttime and a nice summer breeze is nowhere to be found.

Thus we run into the first problem with renewable energy adoption on a wide scale: storage. We must be able to power our systems 24/7/365 in rain or shine. Unused energy from renewables goes to waste without storage, hence the need for large scale batteries. Tesla's lithium-ion Powerwall, for example, has a 7-10kWh energy storage capacity. Other lead-acid batteries could augment lithium-ion. No matter which storage solution you go for, the amount is quite staggering. Assuming storage needs for 3TW of electricity (3,000GW), that's about 500 billion kWh of storage for 7 days worth of power. To store that in lead-acid batteries, you would need about 7 billion tons of lead- a problem when known lead reserves worldwide are in the 87 million tons range as of 2015.36 Lithium-ion storage- or other next-gen battery technology, like lithium-oxygen- is more feasible, but no matter which direction you go, storage costs are quite high. They also need regular servicing and face lifecycle efficiency issues; Tesla's Powerwall, for example, has 5,000 cycles under warranty, which means a 10kWh capacity version can store about 23,000 kWh over it's lifetime at a rough cost of $0.13/kWh- meaning electricity from your Powerwall costs more than electricity from the grid.37 Powerwalls will not serve as batteries for the nation, but the idea is important to be aware of. Energy storage is a major consideration with renewables.

The second problem we run into is geography. Not all land around the United States is suitable for wind and solar. They take up a lot of real estate. Some solutions suggest putting solar on the roof of every home and every building. According to a National Renewable Energy Laboratory report, available rooftops have a potential capacity of 664GW, or roughly 818TWh which is in the 20% range for total electricity needs in the US.38 Costs still remain high, not just for the panels, themselves, but for maintenance and efficiency; technology five years from now will be superior to the tech available today. Much like the problem with internet service providers needing to upgrade their systems to increase speeds, mass changes to the nation's solar panels on every rooftop would be a logistical battle. Concentrations of land dedicated to wind and solar power on a utility-scale would be a more preferable solution due to their making of overall energy cheaper (centralized location, easier maintenance/upgrades, etc).39

This leads to the third and final problem I'm going to raise in this section: distribution. Off-shore wind energy, energy from solar farms out in the middle of the desert, and similar remote setups require transmission of electricity across large distances to locations all across the United States. Our current power grid is not prepared for such a setup. While this problem is more of an infrastructure one than an energy policy one, I want to discuss one option that comes up a lot: HVDC (high-voltage direct current). Studies show that HVDC would be a tremendous benefit to the country. For example, setting up regional nodes and connecting them with HVDC while increasing wind and solar energy sources could cut emissions by up to 80% from 1990 levels while saving Americans $47 billion per year.40 HVDC is not new. The effectiveness is not even in question. We most certainly could build a 100% renewable energy grid and distribute power through HVDC. The big hurdle, as always, is cost.

HVDC lines are not cheap. To power the country, we're talking about terawatts over tens of thousands of miles of HVDC lines together with stations for the important DC to AC conversion (wall outlets use AC power). HVDC lines will run you anywhere from $750,000 to over $1 million per mile with installation, coupled with converter stations, transformers, etc. and you're looking at a nationwide buildout cost in the hundreds of billions of dollars range.41 That's hundreds of billions before the buildout of renewable energy wind/solar farms, which themselves would cost hundreds of billions to trillions of dollars. Such a system would be the greatest undertaking in American history since the interstate highway system was put to ground. That isn't to say the cost isn't worth it, even if it's only estimated to save us ~$47 billion per year.42 Keep these costs in mind.

Nuclear Energy

Americans tend to have an unfavorable view towards nuclear. Radiation and contamination bring out fears of Chernobyl or even the recent Fukushima incident. The potential of nuclear waste does nothing to alleviate such fears. Even if nuclear is the most used clean energy source in the country, by far, there exists a powerful stigma around it.

We desperately need to move past that.

Nuclear is the unrivaled leader in cheap, clean energy generation- that cannot be denied.43 The main issue with nuclear, as stated above, is fear. Unsafe reactor designs are a legitimate worry, as is completely incorrect operation- both of which lead to Chernobyl and Fukushima, though Fukushima endured a veritable perfect storm of problems before everything fell apart. That would not happen in the United States. Wikipedia has a nice list of all the nuclear incidents in US history, the vast majority of which you never heard of, didn't cause any lasting damage, and didn't kill anyone.44 All the fatalities (nine in total) involved non-nuclear accidents such as electrocution from handling a live cable.45 Remember as well that we trust nuclear power enough to put our brave men and women in uniform aboard nuclear powered subs, expecting them to sleep not 50ft from nuclear naval reactors. Nuclear is a big part of our naval system, showing that many fears around the technology are unnecessary in this day and age.

Designs and safety have improved incredibly in recent years. Generation III (gen-3) and Generation IV (gen-4) reactor designs are magnitudes safer and make far more efficient use of the energy source- be it uranium, thorium, or some other element. Theoretically, gen-4 molten salt reactors (MSR's) offer us incredible safety- they can't really "melt down," overheating safety is built-in through frozen salt plugs, destruction of the containment vessel would only leak out liquid fuel that solidified on cooling to prevent wide-spread contamintion, and radioactive by-products are physically bound to hardened coolant that never leaves the container site.46 There are also developments in nuclear waste recycling, such as GE Hitachi's Advanced Recycling Center (ARC) that takes care of existing light water reactor (LWR) waste47 Some reactor designs are classified as "breeders" which create more fissle material (uranium, plutonium, thorium, etc) than they consume and consume all the radioactive actinides, exponentially cutting back on nuclear waste.48 Gen-4 reactors are also far more efficient, producing potentially hundreds of times more energy from the same amount of fuel as current reactor designs.49

I say "theoretically" and "potentially" because gen4 reactors and MSR's, specifically, are not in production. The timeline for such is 2020-2030. China will beat America to the punch as they push for advanced nuclear reactors, giving them both an energy advantage and a production advantage- being able to sell design to other countries, like our allies in the UK (which it is doing already).50 Not to sound alarmist, but the that is kind of a big deal. America needs to push for next gen nuclear plants to provide clean, cost effective energy sooner rather than later.

As of this writing, the Nuclear Energy Innovation Capabilities Act (NEICA) has been introduced in both a House and Senate version. They are fairly similar. Within a year of the NEICA's passing, the Department of Energy will provide Congress three 10-year plans for nuclear energy research and development. What bugs me about this is the timeframe; it will be 2030 before the US even considers writing regulations for a gen-4 reactor, let alone building one. We should not be mired down in politics while the rest of the world goes down this path.

Carbon Tax vs Cap and Trade/Dividend

Energy upgrades will not pay for themselves. Even if every energy company in America knows fossil fuels are on the decline, it costs a lot of money to change. Thus, one suggestion favored by myself and most every economist is a tax on carbon emissions from fossil fuels. A tax on the carbon contents of fossil fuels is the less expensive way of reducing emissions compared to a collection of policies like "required fuel econonmy."51 Unfortunately, there is no way to reduce carbon emissions for free; to end fossil fuel usage you need to provide an alternative energy source (costs money) or get people to stop doing activities that require the burning of fossil fuels in the first place, like electricity generation from coal power plants. Hence the tax on carbon emissions.

Such a plan can take multiple forms. The big three versions are cap and trade, cap and dividend, and a direct carbon tax. I support any tax on emissions, but strongly favor a carbon tax while other candidates favor cap and trade or cap and dividend. To explain why requires understanding of the different programs.

Cap and Trade programs do what their name implies: cap emissions to certain levels under strict penalty. A central authority (ie, federal government) sets the overall emission cap for a period of time and then offers up "allowances" to affected upstream carbon producing/importing sources via auction. Those carbon producers are not allowed to exceed the allowances they are given. Under cap and trade, if a producer finds they need less allowances to comply with the emission limit, they can then sell/trade excess allowances to other producers. This allows firms to craft policies that best suit them economically- be it buying allowances to stave off internal upgrades or selling off excess allowances if internal changes for compliance cost less.

Cap and Dividend programs are very similar to cap and trade. A central authority (ie, federal government) again sets the overall emission cap for a period of time and then offers up allowances to affected upstream carbon producing/importing sources. However, unlike cap and trade, money raised through sales of allowances will be returned to US citizens in the form of a quarterly dividend. If there are 300 million active Social Security numbers and allowance sales generate $30 billion over one year, the dividend gives back $25.00 each fiscal quarter for a total of $100 over the whole years.

There's also been a variance proposed dubbed a fair-share cap and trade which functions like a cap and trade, but allowances are distributed in equal share to each US citizen. Those citizens would then be able to sell their allowances to power companies for cash. The theory is that any rise in energy prices due to the carbon cost to upstream producers and importers of fossil fuels is offset by the money paid by the energy companies to the individuals for their allowance.

A Carbon Tax differs from the cap programs in that there is no cap on emissions. Instead, there is a no-limit tax on carbon emissions. Upstream producers/importers can pollute all they want if they are willing to pay (a lot) for it. The tax is levied on a per metric ton basis established by a central authority (ie, federal government).

All three of these concepts- cap and trade, cap and dividend, and a carbon tax- can work towards climate change; all three would generate a significant amount of revenue for the federal government at the same time. In each case, the cost is applied upstream because those producers/importers will ultimately pass the cost downstream to consumers, making accountability much easier to track (ie, we aren't counting carbon emissions from individuals).52 But of these three policies, as stated earlier, I strongly favor a carbon tax due to its simplicity in all aspects. The downsides to cap and trade or cap and dividend outweigh the good, I feel.

To start, under cap and dividend, you run into the logistical challenge of identifying/locating every eligible individual in the country. Having the IRS be responsible won't work because many folks- such as retirees who might benefit under this system- don't pay taxes and, thus, aren't reachable in that regard. Social Security could possibly reach more folks, or the government could conduct outreach programs. All of these create more overhead and eat into dividend returns or increase necessary federal budget outlays- something we don't want.

Next, you need to establish a broker for buying/selling allowances under cap and trade or cap and dividend. Brokers add another layer of complexity with the additional overhead and cost. Is the broker a government agency or in the private sector? What rules and regulations govern them to ensure impartial equality of opportunity?

Then you need to consider the economics of allowances. If a firm were to hoard their allotment for a long enough period of time, prices on trades would rise due to scarcity and the potential for market disruption increases tremendously. Imagine hedge funds who own energy companies messing with allowances under a cap system. Knowing how keen Wall St. is to maximize ROI, expecting these companies to behave properly is not a good idea.

Finally (for this thesis, at least), cap systems are far more likely to run into the border adjustment problem with international trade. The WTO allows for border adjustments- that is to say, additional fees on imports- if the adjustment does not discriminate like imports against domestic options nor does it discriminate imports from one country against another country. This is referred to as national treatment (NT) and most favored nation (MFN) treatment under the General Agreement on Tariffs and Trade (GATT).53 The first question becomes one of whether the need for an allowance constitutes an "internal tax" or "internal charge of any kind" under GATT, Article III, section 2.54 Once that is resolved, we would need to decide how the whole allowance system works with imports. Do you measure the end result stateside or do you measure total emissions as a result of the creation process? For example, if steel is imported, do you need allowances for the steel made of met coal or do you need allowances for the steel and for the production emissions abroad? That is where NT and MFN issues arise, further complicating any capping system where allowances are involved. After all that, you need to decide if the "likeness" requirement under GATT messes with imports too much. Is a ton of cement produced by a plant running on solar energy "like" a ton of cement produced by a plant running on coal? Under WTO standards, they would probably be considered "like."55

Most of these issues can be overcome with a cap system... just after a lot of hardship and millions (if not billions) of dollars in cost. The goal here is to combat climate change as simply and effectively as possible while raising revenue that can be used for expanding other energy projects such as renewable farms or next-gen nuclear facilities. This is why I favor a carbon tax. KISS applies here. The one area that will be difficult to overcome is the "tax" designation. Capping systems are most likely to fall under the category of "regulations" as defined in GATT, Article II, section 4.56 Indeed, the European Court of Justice determined emission-based allowances to fall under the "regulation" designation, increasing potential pushback and WTO problems with a cap system more-so, potentially even becoming a violation of the Agreement on Technical Barriers to Trade.57 "Regulations" are also not covered under the Subsidies and Countervailing Measures (SCM) Agreement... but taxes and duties are.58

A carbon tax can be just as effective as a cap system while also avoiding the major pitfalls involving the WTO and international trade.59 Economists and trade law experts favor a tax due to its greater transparency and efficiency. As I said at the start, I support any system that combats climate change, but the best way to tackle the issue, with the least amount of overhead and trade hurdles, in my opinion, is through a carbon tax.

Steve's Energy Plan

A lot of detail was given above, important details to help us understand the issues we're facing as it relates to energy and climate change. It takes into account cost, it takes into account sources of production, the amount consumed, electricity usage, the affects of international trade on volatility, discusses carbon taxes, and more. All that background helps us design an energy plan that, theoretically, is clean, efficient, effective, affordable, and that combats climate change.

To start, we must implement a carbon tax. It is the most effective way to combat externalities resulting from fossil fuels. A carbon tax is simple, efficient, and most likely to pass WTO scrutiny while also applying to domestic goods/services and imports. The real question is what level to set the tax at. If the tax is cheaper than the cost of reducing pollution, companies will just pay the tax; if it's too high, you run the risk of crippling the energy sector in rapid fashion. Having a tax too low also means raising it too quickly, potentially ruining investments already made by firms to curb emissions to a certain level. In an ideal economists world, the tax would be set to the dollar amount equal to the marginal social cost of emissions such that the market determines the overall pollution level, but in reality that cost is impossible to calculate.60

For pricing, I would follow the CBO's estimate.61 The tax would start at $20 per metric ton of emissions and increase it 5.6% per year thereafter. It's estimated this will raise about $1.2 trillion in additional revenue over the next 10 years while also curbing emissions at a good pace. Because this is a tax, it can go up or down as needed, but probably shouldn't be adjusted more than a few percent due to the potential effects such changes would incur on investments.

I have already included this carbon tax in my tax reform plans that I've laid out. The revenue generated will be extremely helpful in building out a 21st century energy infrastructure over the next 10 years- and further down the line. A carbon tax will result in higher prices for energy and, possibly, other goods and services. This is one reason why I also proposed much lower taxes for the majority of Americans. Cutting the corporate tax nearly in half helps businesses stay ahead of those increased costs. Lower income taxes (3-10%) more than cover increases to the individual and families as a result of this carbon tax. Yes, those businesses and families would be slightly more ahead without a carbon tax, but the social and economic cost outweighs the burden. Most everyone is net positive from this plan. I hesitate to call my plan "revenue neutral." Revenue neutral carbon taxes essentially balance out the carbon tax brought in with lower taxes elsewhere. While I am lowering taxes in many areas, my tax plan has too many moving parts to call this carbon tax "revenue neutral." It's a small but important distinction.

Because my tax plan has other reforms which generate revenue, flexibility exists in how that money is spent. As mentioned in my tax reform plans, I'm estimating a $4-500 billion investment in energy production over the next 10 years. The focus will be in two areas: renewables and nuclear.

Nuclear is the area I want to invest in the most. Advances show incredible energy efficiency, power generated is very clean, and the lifetime cost is lower than renewables. From a capacity factor standpoint, nuclear runs at approximately 90%, wind at 33%, hydro at 37%, and solar at 20-30% with a theoretical high of 35%.62 What this means is that if you build a 1GW capacity power plant, you'll get about 900MWh from nuclear, 330MWh from wind, 370MWh from hydro, and 200-300MWh from solar. To generate the same amount of energy as nuclear with wind, you'd need three times the wind farms; to generate it with solar, you would need 4-5 times the number of solar installations. Economically, nuclear is the cheaper option.

But nuclear also takes time. Nuclear plants don't go up overnight. They take 5-7 years on average to build, not including licensing. Cost for gen-3+ reactors is in the $6-8 billion range, but new gen-3 and gen-4 small modular reactor (SMR) designs are bringing about lower buy-ins with faster startup times.63 SMR's should be a part of our energy future for this very reason.

Of the $4-500 billion in estimated energy spending, I would like to see a breakout along these lines (real costs would need a more thorough planning):

  • $10 billion - upgrade existing dams and hydroelectric plants to maximize efficiency and effectiveness of existing infrastructure
  • $25 billion - towards next gen nuclear energy research and design
  • $300 billion - towards cost sharing measures for gen-3+/gen-4 nuclear plants and SMR installations
  • $100 billion - towards expansion of utility-scale solar farms

This doesn't cover the entire $4-500 billion I estimated, but that's more out of caution that anything. As the years roll on, we'll have a more clear picture of the tax/revenue situation and can always change allocations. Note this is on top of the ~$50 billion per year we're currently investing in clean energy initiatives.64 Existing clean energy investments are a reason why I'm dedicating much less towards renewables in comparison to nuclear. I would dedicate more towards nuclear if we could get started right away, but regulations and time to build mean years without added benefit. This is where renewables come in. From a renewable standpoint, I focus on solar because wind turbine lifetime is around 30 years before replacement whereas solar panels suffer degradation but still function at around 80% effectiveness, lowering long term costs.

Also missing from this plan are transmission lines. A full HVDC buildout would be beneficial for renewable energy transmission, curbing our need for massive (expensive) storage arrays. Offshore wind or even solar farms in remote desert regions require line build-outs to avoid wasting collected energy. I wish to begin a fair chunk of that over the next 10 years, but the budget plan will be part of my infrastructure policy that is forthcoming.

Remember, all this investment is on top of the changes firms will engage in to avoid the carbon tax. It's a two-pronged approach to the problem, not to mention the potential for energy producing firms to take advantage of nuclear cost sharing options to upgrade and/or diversify their portfolio. Depending on how you look at it, the tax and outlays can be viewed as getting the energy companies to paying for their own upgrades. Tax is levied, company begins build-out of clean energy, government helps with the cost using the money collected from the company via the tax, etc.


There are a lot of details and nuances to take into account when discussing energy. The technology exists today to bring about a full, 100% clean energy grid... if cost was no option. I'm cognizant of the costs associated with each energy resource and, after weighing them all, find a nuclear/renewable hybrid approach to be the best bet for America's future. Renewables by themselves are too expensive and nuclear by itself takes too long to roll out. This hybrid approach, together with the necessary infrastructure upgrades (forthcoming) over the next 10 years will help setup our 21st century energy needs. Fighting climate change is also a nice perk! :)

(1) See Total Energy, Primary Energy Production by Source chart from the EIA. Focus on renewable production. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(2) Ibid. See also Total Energy, Primary Energy Consumption by Source chart from the EIA. Focus on fossil fuel and renewable consumption. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(3) See Total Energy, Coal Overview and Total Energy, Petroleum Overview and Total Energy, Natural Gas Overview charts from the EIA for export numbers. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(4) See Total Energy, Primary Energy Consumption by Source chart from the EIA. Simple math was done to compare increases/decreases over the given timeframe. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(5) Really it's electricity production and the industrial sector, but if you strip out electric retail sales and electric energy losses from industrial consumption, the transportation sector consumes more energy. See the Industrial Sector Energy Consumption chart compared to the Transportation Sector Energy Consumption chart, both from the EIA.

(6) See Total Energy, Electricity Overview chart from the EIA. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(7) See Total Energy, Stocks of Coal and Petroleum: Electric Power Sector chart from the EIA. 2014 was the last year with full data at the time of this writing, so numbers given account for the previous 5 years from that (2009-2014).

(8) See Total Energy, Nuclear Energy Overview chart from the EIA. The last reactor to come online was the Watts Bar 1 in May 1996.

(9) See What is U.S. electricity generation by energy source from the EIA. After fossil fuels, nuclear is way, way ahead of solar and wind, with only hydropower helping to close the gap.

(10) See Total Energy, Average Retail Prices of Electricity chart from the EIA.

(11) Ibid.

(12) See Investment in electricity transmission infrastructure shows steady increase from the EIA.

(13) Ibid.

(14) See Solar, natural gas, wind make up most 2016 generation additions from the EIA.

(15) Ibid.

(16) Ibid.

(17) See Crude Oil Price History Chart. Change the timeframe to 5 years in order to see the full drop.

(18) Ibid.

(19) See Coal Data Browser, Export price to total world, Annual chart from the EIA. Change the timeframe to 5 years in order to see the full drop.

(20) See Short-Term Energy Outlook, Coal from the EIA.

(21) See Met Coal Hits Lowest Price in a Decade. See also The Hidden Cause of America's Coal Collapse for more details and insight into the sources of coal volatility.

(22) See The Hidden Cause of America's Coal Collapse.

(23) See Oil Market Report from the International Energy Agency (IEA). See specifically the world oil supply, world oil demand, and oil price charts.

(24) See The march of the zombies - China's excess industrial capacity harms its economy and riles its trading partners.

(25) See Fossil Fuel Holdings Cost State Pension Fund Half a Billion Dollars. Other examples of volatile fossil fuel investments harming pension funds surely exist, too.

(26) See Retail Trade Led Growth Across States in the Third Quarter from the BEA. This release examines GDP by state for Q3 2015. Note that mining, overall, declined 8.3% which had a major impact on the economies of North Dakota, Wyoming, West Virginia, and Oklahoma.

(27) See 26 U.S. Code § 9509 - Oil Spill Liability Trust Fund and 26 U.S. Code § 9501 - Black Lung Disability Trust Fund.

(28) See The Worst Gas Leak in California's History Isn't Close to Being Fixed. The natural gas leak resulted in mass relocation and even a no-fly zone.

(29) See Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources from the EPA. See also Hydraulic Fracturing and Water Quality study from Duke University.

(30) See High and Significant Hazard Coal Ash Dump Sites. 81 sites are deemed "high hazard" while 250 are deemed "significant hazard."

(31) See Coal's Assault on Human Health.

(32) See What is U.S. electricity generation by energy source from the EIA.

(33) See EIA Projections show hydro growth limited by economics not resources from the EIA, citing this Oak Ridge National Laboratory (ORNL) study for the Department of Energy on new stream-reach development to assess hydropower potential in the US.

(34) Ibid. Note that Alaska, Hawaii, and federally protected lands are excluded from potentialities.

(35) See Powering up America's Waterways from the Department of Energy. This data is from 2012, but the contents are still relevant.

(36) See Minerals Commodity Summary 2015 from the USGS (a Department of the Interior group).

(37) See Powerwall - Tesla Home Battery. At 5,000 cycles with 92% efficiency, storing 10kWh, and using a 50% depth-of-discharge (DOD), you get... 5000 * 10 kWh * 0.92% efficiency * 0.5% DOD = 23,000 kWh. Then you take the $3,000 cost of the unit, divide by 23,000 kWh and get $0.13/kWh. For current average electricity prices, see Average Price of Electricity to Ultimate Customers by End-Use Sector from the EIA. US average electricity price is $0.1236/kWh for residential and $0.10/kWh across all sectors.

(38) See U.S. Renewable Energy Technical Potentials: A GIS-Based Analysis from the National Renewable Energy Laboratory. For a more up-to-date study on photovoltaic (solar) potentials, see Theoretical limits of photovoltaics efficiency and possible improvements by intuitive approaches learned from photosynthesis and quantum coherence.

(39) See Utility-Scale Solar 2013 study funded by the Department of Energy.

(40) See Better power lines would help U.S. supercharge renewable energy, study suggests which cites Future cost-competitive electricity systems and their impact on US CO2 emissions, the source of that $47 billion amount.

(41) See CAPITAL COSTS FOR TRANSMISSION AND SUBSTATIONS for rough estimates. Analysing the costs of High Voltage Direct Current (HVDC) transmission also discusses costs to some degree. My guess is an average of ~$1 million per mile, not counting the hundreds of millions needed for converter stations.

(42) See US could cut power emissions 78% by 2030 using existing technology, says study.

(43) See What is U.S. electricity generation by energy source from the EIA.

(44) See Nuclear reactor accidents in the United States. Pay attention to the type of accident, when it occurred, and the type of nuclear facility (many are older designs).

(45) Ibid.

(46) See Molten Salt Reactors: The Future of Green Energy?.

(47) See GE nuclear reactor eats its own waste and also Technical Evaluation of the Hitachi Resource-Renewable BWR (RBWR) Design Concept.

(48) See Breeder reactor from Wikipedia. Yes, I'm sourcing a wiki page. It's not a bad one.

(49) See 4th Generation Nuclear Power.

(50) See China Could Have a Meltdown-Proof Nuclear Reactor Next Year and also Hinkley Point nuclear agreement reached for the story on the UK reaching an agreement with China for a nuclear plant at Hinkley Point.

(51) See Carbon Tax from the IGM Forum. The question is "A tax on the carbon content of fuels would be a less expensive way to reduce carbon-dioxide emissions than would a collection of policies such as 'corporate average fuel economy' requirements for automobiles." The vast majority of respondents agree.

(52) See Greening State Energy Taxes: Carbon Taxes for Revenue and the Environment.

(53) See Principles of the trading system from the WTO. This page explains the concepts of National Treatment (NT) and Most-Favoured Nation (MFN) status, amongst other topics.

(54) See General Agreement on Tariffs and Trade, Article 3, section 2. See also this European Court of Justice ruling in 2011 saying emission allowances (like under cap and trade/cap and dividend) do not fit the description of a charge or tax on purchase price paid, lending weight to the carbon tax side of things.

(55) See Carbon Leakage Measures and Border Tax Adjustments under WTO Law.

(56) See Border Carbon Adjustment from the International Institute for Sustainable Development. See also General Agreement on Tariffs and Trade, Article 3, section 4 for the "regulations" language in the GATT.

(57) See this European Court of Justice ruling in 2011 saying emission allowances (like under cap and trade/cap and dividend) do not fit the description of a charge or tax on purchase price paid, lending weight to the carbon tax side of things. See also Agreement on Technical Barriers to Trade from the WTO.

(58) See the Agreement on Subsidies and Countervailing Measures (SCM). It refers to and explicitly permits adjustments at exportation (ie, rebates) on taxes and duties, but not regulations.

(59) See Carbon Leakage Measures and Border Tax Adjustments under WTO Law for a more detailed discussion on carbon regulations and the WTO issues.

(60) See The Tragedy of the Commons and the Myth of a Private Property Solution.

(61) See Effects of a Carbon Tax on the Economy and the Environment from the CBO.

(62) See Capacity Factors for Utility Scale Generators Not Primarily Using Fossil Fuels, January 2013-December 2015 from the EIA.

(63) See Small Modular Reactors (SMRs) from the Department of Energy Office of Nuclear Energy.

(64) See US Clean Energy Investment Grows In 2014 To $386 Billion.


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