Governing Energy

Alvin Alm, director of the Harvard Energy Security Program, served as assistant secretary of of Energy in the Carter Administration. Henry Lee, a lecturer at the Kennedy School of Government's Energy and Environmental Policy Center, is a former director of the Massachusetts Energy Office. Crimson reporter John D. Solomon spoke to them at the Kennedy School earlier this week.

Crimson: Do you agree or disagree with President Reagan's handling of the energy issue?

Lee: I think the biggest disagreement that I have with the President is that he gives the impression that the energy problem is gone for good. He seems to be a believer in the William Tucker theory that energy is now a nonexistent problem, and if we can only get government out of natural gas and possibly out of electricity, we'd be in good shape. I think that that view has had an enormous effect on the public's perception of the problem Reagan is a tremendously effective shaper of public opinion, he's a very effective speaker I think in terms of what he has done. I think he should be applauded for finally decontrolling oil. I think that was a good move I think his instincts are right on gas you ought to deregulate it, but politically it might kill you off if you put a bill up there. So far I think that's been a smart move.

So I think he's done some good things, and I think the main problems I have with his policy is the impression, and I think it's symbolized by his attempt to get rid of the Department of Energy. I think it's more the image that he's projecting that I have a problem with.

Alm: I think the appointment of Hodel is a hopeful sign. They've obviously appointed some one who wants to make the department into an effective instrument as far as I can tell I think in the emergency preparedness area, the department is doing a pretty good job. Other areas I think the expenditure's been cut back too far. I think that's basically it.

Crimson: What energy resources should the nation be developing in the short term and in the long term?

Alm: Well, some of that obviously depends on what the world oil price is. Most of the energy investment will be dictated by basic economics Beyond that, of course, there is a role for government. There are a range of technologies that will not be developed by the private sector, and in particular, would not be developed if oil prices were very low. This includes a limited number of synthetic fuel plants. Certainly more research and development on solar options, particularly photovoltaics should be undertaken.

Lee: I think I would make two points here. First, you're looking at a very volatile oil market. Some people characterize it as a peak-and-valleys syndrome. It's very difficult to expect the private sector to invest large amounts of capital banking on a specific oil price, to insure the profitability of that investment. Therefore, during this period it is highly likely that private investment and alternatives and options for the future will decline. I think that this puts a burden on government to try to enter the breach.

The second point is that if government wants to minimize the risks that it takes, it should invest in a portfolio of alternative energy so that if oil prices don't meet their expectations, or it's very hard to peg the investment to a certain oil price, we have a number of options to choose from. It also makes sense from a technological point of view, because our ability to get the price down on some of these things will differ from one option to another, and it's very hard to tell which of those we will be able to make breakthroughs in. For example, we've always been five years away from having photovoltaics; we've been five years away since 1970. I think that there's a lot of investment out there, and I hope we have some breakthroughs, but if it doesn't come. I think I'd like to make sure that someone's looking at things like fuel cells.

Crimson: What kind of programs and what kind of role do you think the government should have in the next few years?

Lee: I think that you've got to figure what is possible. If you were to ask me in an optional world what should they be doing. I think they should be using this as a window of opportunity to continue to push conservation programs, build a strategic petroleum reserve, got an emergency preparedness program in effect, and develop working relations with our allies so that if there is a disruption we can all work together on it, and push renewables and do all of these things. Now will it happen? I don't think one-third of those things are going to happen in this environment. I think you've got to think of what is politically possible, rather than what is always economically efficient or optimal. I think what is politically possible in this environment is an emphasis on research and development for the '90s. I don't think you can sell energy conservation without tying it to another priority which is higher than energy on the public's agenda.

'The biggest disagreement I have with the President is that he seems to believe energy is a nonexistent problem.'

-Henry Lee

Alm: I think the highest priority by far is the emergency preparedness area. And the highest single priority there would be to fill up a Strategic Petroleum Reserve. We have an opportunity to take advantage of lower prices. If the world oil market is going to be tight by the end of the decade, as I predict it will, it takes a maximum effort just to achieve a 750-million barrel target. If the reserve is not filled, it will not be available even in the 1990s. And I think if one looks at where all the military expenditures are going, the contingency that most worries military planners, other than Central Europe, is the Middle East And a Strategic Petroleum Reserve represents a real important component of our security effort in the area.

Crimson: Do you think a national energy consensus is needed.

Alm: I don't think you'll ever get a consensus among citizens. I think what's really important is how citizens react to market signals, and they certainly don't react to reach optimum decisions, but they do react. We look at demand for heating oil or demand for gasoline and they're down People do react responsibly to higher prices. But in terms of any new consensus, may be in a new generation. I mean, my daughter is certainly better than our generation at turning off lights and that sort of things, but I'm not optimistic about creating a consensus, as a matter of fact I think it's rather unfortunate that energy's the kind of issue where people get very excited and concerned about it, and then as spring approaches and prices go down, interest wanes.

Lee: I think that if you look over the course of the 1970s, the country went through four or five different stages, beginning by blaming the oil companies for it, and we ended up blaming the government for it, and in between we blamed everybody else. I suspect that a consensus, in our political system, on an issue that involves policy decisions that relate to income distribution to the extent that energy does, probably will never come about issues like price controls, which pit the producing states against the consuming states, issues that pit small industries with big industries--it is hard to reach a consensus on these things. It's like the budget--you will always fight over it, and sometimes you reach compromise policies that are ripped apart the following year. I think that in terms of the American public in a soft oil market, you can't expect them to make energy one of their top priorities, especially when you've got an economic recession going on, when you've got double-digit unemployment. I think that energy is going to be put on the back burner in the minds of a lot of the public.

Crimson: What role should nuclear power play in the country's future?

Alm: Well, first of all, nuclear power is the fastest-growing source of energy. And the reason for this is simply that there are a number of plants that are in the backlog or in the pipeline that are nearing completion. The real issue of nuclear energy is how many of the 60 or so plants currently under construction will actually be built? And that's going to be heavily dependent on demand, on the financial viability of the utilities that are building the plants, and on the attitudes of public utility commissions. In terms of new orders, I don't think there'll be a new order in this country for a decade. The economics of the utility companies right now, at least in financial incentives, are not to build new plants. The advantages of nuclear over coal are so modest, and the only advantages are in certain areas of the country anyway, and those advantages are extremely modest compared to the risk.

Lee: I think that if nuclear power is to play a role, it's got to find a new niche for itself--it's got to really repackage itself into smaller facilities possibly, into something that is affordable. Four billion bucks for a plant is just not going to fly in this present economy whether it is here, or it's in Italy, or it's in Japan, or any of these countries, not to say anything about the Third World. I don't think you're going to see a new nuclear plant coming on the drawing board in the United States for at least a decade.