A National Energy Policy

Excerpts from report touted by the vice president's task force show how proposals highlight supply side, downplay demand measures

The [National Energy Policy] report...envisions a comprehensive long-term strategy that uses leading edge technology to produce an integrated energy, environmental and economic policy. To achieve a 21st century quality of life—enhanced by reliable energy and a clean environment—we must modernize conservation [and] infrastructure, increase our energy supplies, including renewables, accelerate the protection and improvement of our environment, and increase our energy security.

Our national energy policy must be comprehensive in scope. It must protect our environment. It must also increase our supply of domestic oil, natural gas, coal, nuclear, and renewable energy sources. Between 1991 and 2000, Americans used 17 percent more energy than in the previous decade, while during that same period, domestic energy production rose by only 2.3 percent. While U.S. production of coal, natural gas, nuclear energy, and renewable energy has increased somewhat, these increases have been largely offset by declines in domestic oil production. U.S. energy consumption is projected to increase by about 32 percent by 2020.

Energy challenges facing the United States

Energy efficiency is the ability to use less energy to produce the same amount of useful work or services. Conservation is...simply using less energy. Electricity demand is projected to rise by 1.8 percent a year over the next 20 years, requiring the addition of some 393 000 MW of generation capacity. At the same time, energy efficiency is projected to improve between 2000 and 2020. A decrease in demand from 1.8 percent to 1.5 percent would reduce the need for new generating capacity next year by about 2000 MW. Extending that reduction over the next 20 years would reduce the need for new generation by 60 000 to 66 000 MW.

Large amounts of new generating capacity are slated for installation from 2001 to 2004. [However, the] most pressing long-term electricity challenge is to build enough generation and transmission capacity to meet projected [demand]. Of the approximately 43 000 MW of new generating capacity that power companies planned in 1994 for construction from 1995 to 1999, only about 18 000 MW were actually built. Although plans have been announced to build more capacity than the country will need over the next five to seven years, this new construction assumes market and regulatory conditions that are not yet assured.Since 1989, electricity sales to consumers have increased by 2.1 percent annually, yet transmission capacity has increased by only 0.8 percent annually. As electricity markets become more regional [in nature], transmission constraints are impeding the movement of electricity both within and between regions.

Transportation energy needs

Transportation fuels account for about two-thirds of our oil consumption, and the industrial sector for 25 percent. Per capita oil consumption, which reached a peak in 1978, has fallen by 20 percent from that level. [Yet] net oil imports...have grown from about 4.3 million barrels per day (bpd) in 1985 to 10 million bpd in 2000.

By 2020, U.S. oil production is projected to decline from 5.8 to 5.1 million bpd under current policy. Domestic oil supply cannot be increased unless several access and infrastructure challenges are addressed. Greater price volatility for gasoline, diesel fuel, heating oil, propane, and jet fuel is likely to become a larger problem over time, unless additional refining capacity and expanded distribution infrastructure can be developed at the same time cleaner products are required.

Recommendations

The NEPD Group recommends that the President:

• the Administrator of the Environmental Protection Agency (EPA) to propose multi-pollutant legislation...to significantly reduce and cap emissions...[including (1)] mandatory reduction target for emissions of three main pollutants: sulfur dioxide, nitrogen oxides, and mercury; [(2)] phased-in reductions over a reasonable period of time;...[and (3)] market-based incentives, such as emissions trading credits to help achieve the required reductions.

• issue an Executive Order to rationalize permitting for energy production in an environmentally sound manner by directing federal agencies to expedite permits and other federal actions necessary for energy-related project approvals....

• direct the Secretary of Energy to promote greater energy efficiency [by] expanding the Energy Star program beyond office buildings...[and] extending the Energy Star labeling program to additional products, appliances, and services.

• direct the Secretary of the Treasury to work with Congress to encourage increased energy efficiency through [cogeneration] projects by shortening the depreciation life for [these] projects or providing investment tax credits.

• direct the Secretary of Transportation to...review and provide recommendations on establishing Corporate Average Fuel Economy (CAFE) standards with due consideration of the National Academy of Sciences study to be released in July 2001...and...look at other market-based approaches to increasing the national average fuel economy of new motor vehicles.

• direct the Secretary of the Interior to work with Congress to authorize exploration and, if resources are discovered, development of the 1002 Area of ANWR [Alaska National Wildlife Refuge].

• direct the Department of Energy to continue to develop advanced clean coal technology....

• support the expansion of nuclear energy in the United States as a major component of our national energy policy.

• direct the Secretary of the Treasury to work with Congress on legislation to extend and expand tax credits for electricity produced using wind and biomass [and...] to provide a new 15 percent tax credit for residential solar energy property, up to a maximum credit of $2000 [and...] to provide for a temporary income tax credit available for the purchase of new hybrid or fuel-cell vehicles between 2002 and 2007.

• direct the Secretary of Energy to work with the Federal Energy Regulatory Commission (FERC) to improve the reliability of the interstate transmission system and to develop legislation providing for enforcement by a self-regulatory organization subject to FERC oversight.

• direct the Secretary of Energy to expand the Department's [R&D] on transmission reliability and superconductivity.

• direct the appropriate federal agencies to take actions to remove constraints on the interstate transmission grid....

• Direct the Secretary of Energy, by 31 December 2001, to examine the benefits of establishing a national grid, identify transmission bottlenecks, and identify measures to remove transmission bottlenecks.

• Direct the Secretary of Energy to work with FERC to relieve transmission constraints by encouraging...incentive rate-making proposals;...[and]...to develop legislation to grant authority to obtain rights-of-way for...transmission lines....

• direct the Secretaries of State, Commerce, and Energy to continue supporting American energy firms competing in markets abroad and use our membership in multilateral organizations and...our bilateral relationships to...level the playing field for U.S. companies overseas....

• direct federal agencies to support continued research into global climate change; continue efforts to identify...ways to use market mechanisms and incentives; continue development of new technologies; and cooperate with allies...to develop technologies, market-based incentives, and other innovative approaches to address the issue of global climate change.