The State of the State (of Energy)

State of the State addresses, much like their federal counterpart are full of lofty goals and optimistic language while remaining ever short on useful specifics. Some speeches adopted overarching themes while others read like a shopping list. Visionary or idiotic (depending on your point of view) author Thomas Friedman provided the vision for not one but two State of the State Addresses this year. Both Tom Vilsack of Iowa and Mark Sanford of South Carolina succumbed to the vision of tomorrow painted by Friedman’s The World Is Flat (piece of) work.

Most addresses contained similar topics deemed most import to each state’s particular electorate. In 2006, the most commonly mentioned item actually had to do with the Iraq Conflict. Virtually every governor that made a speech this year, spoke to the honor, bravery or sacrifice of that state’s soldiers or reservists. After that, the usual hot-button topics of education (always the crowd pleaser), health care, crime and transportation were frequently discussed. Parochial issues relevant only to that particular state were never far behind either. This year, for a change, energy was back on the minds of state politicians as well. 23 of the 45 governors (annual addresses are not required in every state) making State of the State speeches in 2006 referenced energy in one form or another. Even those states not included in this State of the State coverage did posses some links to energy policy articulated recently by their respective governors.

This of course is not surprising given 2005’s dramatic price surges. How each governor addressed the issue differed slightly from state to state. The Unplanning Journal reviewed all of the archived transcripts available at the time of writing (Oregon, Connecticut and Louisiana speeches were still pending) and tried to draw some conclusions.

So after last week’s energy fiasco during the President’s State of the Union speech, the question begs itself: did our governors do any better?

The simple answer would have to be no.

While no governor utilized the President Bush “Addicted to Oil” line and only one (Delaware Governor Minner fixated on price gouging by the oil majors) made a really incoherent proposal in seeking to address the energy issue none really “got it” either.

No one acknowledged the issue of Peak Oil or the fact that North American natural gas supplies have slipped into decline. (Not a big surprise really).

No one discussed or contemplated the long term implications of even continued price increases in the cost of energy.

Not one made the connection that a decline in available energy was not only inevitable, but imminent. Many did at least acknowledge the importance of energy to the economy however.

And finally, not a single governor grasped the concept that unlimited growth (be it economic, transportation-wise or even population) is not possible without an unlimited amount of natural resources to support it.

What the governors did propose generally focused on the following issues.

On the energy production side we had proposals for new:

• Ethanol/Biodiesel facilities – Twelve state governors cited specific projects or programs to increase biofuel production. Even those governors not speaking this year had ethanol links up such as North Dakota’s.
• Power plant construction – Mentioned directly by just one governor, several others alluded to the need for increased power plant construction.
• Oil, gas and coal production – Three energy rich states and an energy poor one called for the stepping up of fossil fuel production.
• Alternative Energy – The catch all category for increased wind, water and solar power generation was also popular with six governors.

On consumption side there were calls for:

• Home heating subsidies – While mentioned by just six governors directly (mostly northern ones) it is an issue for all but the warmest states. Most calls were for increased state funding of LIHEAP or other assistance programs.
• More overall energy efficiency – Discussed or alluded to by a number of governors, most took the form of better building standards.
• More energy efficient vehicles – Discussed by four governors, alluded to by others.
• Technology innovation – Echoing Bush’s theme, six governors asked for increased funds to spur innovation to find a technological solution to any energy shortfall we might face.

Let’s examine some of these ideas in-depth.

Biofuels

Ethanol and Biodiesel production was the hands-down winner in popularity, having been mentioned by almost half of the governors that spoke on energy matters. As expected, the Corn Belt governors all touted their states’ contribution to ethanol…

“Three new ethanol plants were permitted last year and two more are in the process. Once these projects are completed, South Dakota will be ranked fourth in the nation in ethanol production with over 600 million gallons of ethanol being produced every year.” Gov. Mike Round, South Dakota.

…or its virtues.

“Ethanol is clean, it’s renewable, it’s less expensive, it helps Wisconsin farmers, and it reduces the demand for foreign oil. Let’s pass this bill, because America ought to be more dependent on the Midwest, and not the Mideast.” Gov.
Jim Doyle, Wisconsin.

Never mind the questions on whether or not corn-based ethanol actually consumes more energy than it produces.

Non Corn-belt states advocated other crops or plant matter, such as Gov. Pataki (and President Bush’s) call for switch grass-based ethanol or Gov. Sonny Perdue of Georgia interest in utilizing peanut shells. Although Louisiana’s address is not scheduled until the end of March, any ethanol proposal from Gov. Blanco’s office would probably echo that of Gov. Lingle’s of Hawaii in utilizing sugar as the primary feedstock.

The fact that so many states are seeking to increase production of liquid fuel replacements to gasoline and petro-diesel indicates a growing consensus that the increasing costs of oil and the growing dependency on foreign producers is not a good thing. Unfortunately none of the proposals sought to reduce vehicular travel or increased efficiency. Most aimed to replace some of their respective state’s petroleum consumption. All would inevitably require large subsidies to work and raise the question of scalability. It’s fine and dandy to replace 5% or even 10% of a particular state’s liquid fuel needs. It is another thing altogether to try and fuel 90 to 95% of the existing vehicular fleet.

Plant Construction.

Only one state governor, Mike Rounds from South Dakota discussed power plant construction specifically (the Big Stone plant). On the other hand, several governors did allude to the need to build more “clean coal” fired power plants. With the increase in natural gas prices, no governor has called for new gas plants, though the Pennsylvanian governor sought an increase in land fill gas fired generation. Interestingly enough, Gov. Carcieri of Rhode Island mentioned the need to increase LNG supplies for his state, something no other governor discussed. No governor discussed the radioactive subject of new nuclear power plant construction.

More Fossil Fuels

No, they are not dead. Not by a long shot. The three governors from energy rich states called for increased oil, natural gas and coal production. Gov. Rendell cited [in a separate, energy related press release] the increased oil and natural gas drilling in Western Pennsylvania and along with Joe Manchin of West Virginia, called for the increased production of coal. (Incidentally, both governors have also called for stronger mine safety protections as well – updated link). Presumably the other coal-rich states of Wyoming and Montana are also in agreement with these ideas. Gov. Rendell also mentioned a new plant about to go online that will convert tons of coal waste into “clean” diesel fuel. Gov. Pataki of New York also reiterated the need for clean coal production.

Then there is Alaska.

This state, which still possesses far more oil than it could reasonably consume internally is still pushing ANWR production. (Given the world status of petroleum production, they will get it eventually …) Additionally, they are making long term plans to finance part of the planned gas line from the Arctic gas fields to Canada and the Lower 48. Assuming the pipeline is constructed, the state would be financially set even after the oil production winds down. Interestingly enough for those of us living in the Lower 48, Gov. Murkowski is also planning this,

[A public relations campaign] “educating the Lower 48 about Alaska’s role in national energy policy
…
We would also propose having an experienced Alaska communications organization as part of the national effort. We would of course look to our major newspapers, T.V., and radio outlets for their professional guidance. “

Alternative Energy

Although this sector—wind, water and solar powered generation—actually has the best chance at being sustainable over the long term (as long as the sun is shining anyway), only a limited amount of resources are being directed here by the various state governments. While alternative electrical generation will not solve the issue of transportation fuels, it would contribute significantly to the overall energy picture.

Home heating subsidies

To be brutally honest, this program actually encourages wasteful energy usage and does nothing to reduce overall energy consumption. Without the subsidies, fewer people would consume less heating oil, gas or electricity during the winter months. The subsidies allow those consumers that would not ordinarily be able to afford to heat their homes in the winter to participate in the fuel market, driving up the prices. Plus their houses tend to be less efficient and as a result, consume more fuel trying to heat.

This is not to say your poor Aunt Mimi living on social security ought to freeze to death in the winter. Heating assistance is a great social program. It is a lousy energy program. As prices go up, state and federal energy policies and funds really should be directed into making those homes more efficient, and not just for the very poor either. Why continue to pay a huge bill year after year when a one-time investment to improve the unit’s efficiency could lower household bills (and overall consumption)? Make this program affordable to mid-low income residents and free for the poor or destitute. Do that on a national scale and some serious energy savings could be arrived at.

This line of thinking is seemingly lost on most governors. Not one proposed a specific low income energy efficiency renovation program. Instead, most governors called for increased funds to pay the increased monthly heating bills. The leader in home energy retrofitting, the federal government is looking to scale back their current modernization program in response to budget cuts. Aunt Mimi better buy a few more blankets.

In a related note, Georgia saw fit to suspend its sales tax on natural gas and gasoline purchases to soften the price impacts on “average Georgians.” While certainly appreciated by most lower income households, it hardly amounts to more than a one-time band aid in response to rising prices.

Energy Efficiency Programs

Perhaps the vaguest theme from the various State of the State address was the call for increased energy efficiency. No governor focused on any particular program, though a few alluded to increasing the efficiency standards for home construction and major appliances. While efficiency programs were seemingly ignored by the politicians, most states do have existing appliance replacement programs, home energy standards and various tax credits or incentives for a number of energy efficiency measures.

Vehicular Efficiency Improvements

As expected, a number of governors had difficulty separating the very different issues of transportation energy efficiency and overall energy efficiency. When it comes to transportation, fewer efficiency options exist. Never the less, four governors saw to it to point out the need for more fuel efficient cars. Approaches to this goal took one of two tacks, more incentives or better technology.

Governor Napolitano proposed the most novel incentive for increased efficiency.

“Today, I propose that we cut Arizona’s vehicle license
tax and, as an added incentive, we cut it in a way that rewards drivers who
choose to conserve gasoline. The better gas mileage your car or truck gets, the
bigger the cut in the license fee. If a vehicle gets maximum mileage per gallon,
then let’s get rid of the license tax altogether.”

No discussion on what the maximum mileage actually comes out to.

A more proactive stance might have been to penalize (via licensing fees) those vehicles that get worse mileage.

The call for better technology came from both the governors of Georgia (next section) and Michigan.

Governor Granholm (of Michigan) addressed the issue directly. Sort of.

“The Great Lakes States will be the alternative energy
epicenter of America. Since we are the home of the automobile, it is our proud,
patriotic duty to be the state that ends our nation’s dependence on foreign oil.

Our universities are already leaping into the alternative energy
field. At Michigan State University, President Lou Anna Simon is positioning our
state (and her Spartans) to lead the world in the new “bio-economy” – developing
energy and other products from our agricultural sector. Kettering
University in Flint, MAREC in Muskegon, and Next Energy at Wayne State all are
leading in the development of alternative energies. If you went to the auto
show, and I hope you did, you might have seen the national championship solar
car developed by University of Michigan students; it tops out at 80
mph"

Once again we have a good example of distinct research programs in separate fields masquerading as a comprehensive energy plan. There is a huge step between a team of engineering students producing an ultra-light solar car and mass production of vehicles at a General Motors plant.

By contrast, the Governor of Kentucky, Ernie Fletcher kept it simple. He just mentioned his state’s role in producing hybrids.

Technology

This brings us to the final category, technological innovation. Much like the President, calling for increased technological innovation, several governors championed stepped up research in their own State of the State addresses.

Perhaps the most vociferous in his call for increased research was Gov. Perdue of Georgia.

“You see, in the 21st century global economy we have only
two options. Georgia can lead or Georgia can be left behind.

I want to guarantee you this – as long as I’m your Governor, Georgia is going to
lead.

To lead, we must innovate. That means, we must become a State of Innovation.
That means making innovation our competitive advantage in every area of our economy – in our existing industries, in our homegrown small businesses and in the growth industries of the future, such as life sciences and nano-manufacturing.

These are the industries that will cure cancer … improve our food safety and supply … and provide new sources of energy to power our lives and propel our state’s economy forward. “

Unlike other governors, Mr. Perdue offered some details on funding.

“To ensure Georgia’s energy future, I am budgeting $2 million to seed research on developing alternative fuels, such as expanding our BioRefinery program at the University of Georgia.”

While two million certainly sounds impressive, it is less than % 0.001 of the state’s 2004 budget (the last one I could find online). In all likelihood, it is less than the amount of gasoline taxes that the governor suspended during last summer’s hurricane season.

Governor Sanford of South Carolina was less specific in his call to innovate but not in his justification in doing so:

“The State of our State is that we are a state in transition. Thomas Friedman wrote the book, The World is Flat, and his premise is that the world has changed in ways unimaginable to my father, and even to me or you, over the last few years. In this new found “flat world,” for the first time in world history a kid in Hampton County is directly competing with a kid in Shanghai, New Delhi or Dublin.
…
Now, with globalization and the Internet, you can stay right there and export whatever your brain has to offer to the rest of the world.”

Basically, when it comes to producing ideas we either need to innovate or die.

Unfortunately, none of the governors (or the president for that matter) grasped the concept that technology does not equal energy. No amount of brain power will be sufficient to move that Yukon Denali down the highway. Nor will technology necessarily yield us a solution either. While there certainly plenty of opportunities still out to harness new sources of energy or utilize energy existing sources more efficiently, none address the core issue of continued growth in a finite system. Even if by some miracle, some energy research team out there masters cold fusion, zero point energy or whatever, we will still have new limitations foisted upon us by nature unless we stop growing.

At the end of the day, understanding the natural limits to growth is the most important thing to remember. It is not an appealing message or even an easily understood one. As a consequence, not one governor brought this issue up. Instead we were left with the empty rhetoric of Tom Friedman, techno-optimists and the Ethanol lobby.