National Energy Policy

Power Efficiency Guide

Ultimate Guide to Power Efficiency

Get Instant Access

Because so many different interests are involved in energy issues, it has been difficult for the United States to implement a comprehensive energy policy. Prior to the late 1940s, federal involvement in energy policy was limited to regulatory oversight of utility distribution (discussed later in this chapter) and intervention in energy supply during times of war. In World War I, a mandatory energy conservation program was necessary to overcome a fuel crisis that occurred from lack of foresight in coal production. During World War II, a rationing program issued gasoline coupons to U.S. motorists (Melosi 1985, 187). Subsidies for electricity infrastructure are another way that the federal government intervened in energy production. For instance, many of the large dams in the western United States were built using federal funds. The federal government also played a large role in developing nuclear energy policy, both through subsidies and regulations regarding the purchase of nuclear fuels (nuclear energy policy is discussed later in this chapter).

Despite these early interventions, the U.S. government generally let the market regulate energy provision unless an energy crisis occurred. After World War II, the federal government played a larger role in energy pricing, requiring petroleum import quotas for the purpose of protecting U.S. companies and promoting domestic energy resources. The Mandatory Oil Import Program (MOIP) was established in 1959 by the Eisenhower administration. It created a quota system for the amount of oil imports allowed into the country. Individual oil companies were issued licenses for their imports. The effect of the MOIP allowed domestic companies to keep their prices high and also reduced global demand for oil, resulting in a downward pressure on global prices (Kapstein 1990, 132).

Other than the federal influence on pricing and subsidies provided to particular industries, a long-term plan that addressed the energy needs of the entire country was elusive. The Truman, Eisenhower, Kennedy, and Johnson administrations failed to develop comprehensive energy plans. Instead, the pattern was crisis management substituting for a well-thought-out long-term program (Smith 2004, 150).

In 1971, Nixon eliminated the MOIP but maintained price controls on the petroleum market. When OPEC raised energy prices in 1973 and the subsequent oil embargo ensued, many analysts became concerned over the uncertainty in the energy markets. Nixon responded by initiating Project Independence, a plan to make the country energy self-sufficient by 1980 (Miller and Miller 1993, 21). The Emergency Petroleum Allocation Act (EPAA) was also passed. It established pricing controls for the purpose of equitable distribution of petroleum resources.

President Gerald Ford had difficulty in addressing energy issues. His administration pursued Project Independence and emphasized the role of national planning and federal control in energy issues. Although his plan embodied many of the same measures undertaken by the Nixon administration, he was unable to develop a unified approach to energy.

The Carter administration attempted to formulate a longrange, comprehensive energy program for the country. President Jimmy Carter's agenda not only addressed long-term concerns of energy availability, it sought ways in which the United States could maintain a secure energy future. In 1977, the Department of Energy Reorganization Act created the Department of Energy (DOE). The newly created agency consolidated the many energy programs and agencies of the federal government into one bureaucratic structure (Fehner and Holl 1994, 22). President Carter emphasized that energy goals needed to reduce energy demand, reduce dependence on foreign oil, and increase energy efficiency. The creation of the DOE was essential for the accomplishment of these goals. Carter also announced his National Energy Plan (NEP) in 1977, emphasizing the serious nature of the energy crisis by calling it "the moral equivalent of war." The president recognized that by ignoring the increasing scarcity of petroleum, the United States "would subject our people to an impending catastrophe." The NEP focused on energy conservation. It called for major improvements in energy efficiency for existing buildings and acceleration of the applications of solar technology. It also contained various conservation incentives, such as insulation credits, weatherization grants, energy audits, and loans for solar energy systems. It taxed gas-guzzling cars and prohibited the use of oil or gas in new electricity generation and new industrial plants and established voluntary electrical rate designs. Additionally, the plan called for a reduction in average annual energy growth to less than 2 percent; reduction in natural gas consumption by 10 percent; and continued reductions in imported oil (Smith 2004, 151). The Natural Gas Act was also an important part of the NEP. It is discussed later in this chapter.

One of the most important parts of the NEP bill was the Crude Oil and Equalization Tax (COET). It proposed raising oil prices over the next three years to encourage the application of energy efficiency measures and thereby reduce demand. The revenues from the tax were to be diverted into several government programs. The idea behind the COET was that price incentives were needed to encourage efficiency. Higher prices not only promote efficiency, they are also necessary to reduce energy demand and promote the development of better technologies (Smith 2004, 151; Nivola 1986).

Many parts of the National Energy Plan were very controversial. Northeastern congressional representatives with constituents dependent on home heating oil, as well as westerner representatives whose constituents used their automobiles for extended travel, denounced various parts of the plan that would have increased the price of energy (Smith 2004, 151). Ultimately, the NEP failed to present a pricing strategy. While it did succeed in promoting conservation strategies among the U.S. public, the most ambitious aspects, like the COET, failed to pass Congress.

A major piece of legislation that did pass during the Carter administration was the Public Utilities Regulatory Policies Act of 1978 (PURPA). PURPA required that utilities purchase electricity from independent generators. These generators, known as "qualifying facilities," utilized their waste heat to produce electricity, a process called cogeneration. By supporting facilities that recycled their waste heat, PURPA sought to encourage greater energy savings. In order to encourage cogeneration, PURPA allowed qualifying facilities to be exempted from state and federal regulations. At the same time, utilities that wished to purchase power from qualifying facilities were required to pay what the utilities would otherwise spend to generate or procure power. Hence, an incentive existed for power plants to install cogeneration technology.

Energy policy during the Reagan administration shifted away from conservation goals. Rather it focused more on the ability of free markets to satisfy current and future energy needs. One dramatic example of this occurred just after Reagan's inauguration when he removed all price controls on crude oil (Davis 2001, 153). Reagan never adopted a unified energy plan. Instead, the administration worked to limit enforcement of existing environmental laws and promote drilling and mining on federal lands. The idea was that if energy companies were granted access to the lands, and if prices were determined in a competitive market, energy concerns would be alleviated. Not only would the market provide cheap energy, it would promote innovation in energy efficiency measures. Federal government spending on research and development of alternative energy sources was cut dramatically. Although market forces did prove to be pragmatic and energy usage as a percentage of GNP declined from the adoption of energy efficiency measures, the reduction in renewable energy research caused greater reliance on fossil energies (Smith 2004, 152).

Following the Regan administration, attitudes toward federal control of energy provision became more moderate. The Comprehensive National Energy Policy Act (CNEPA) was signed by President George H. W. Bush on October 24, 1992. CNEPA promoted increased energy efficiency, established targets for decreasing oil consumption, implemented energy efficiency standards for federal buildings, and instigated measures to address global warming.

The legislation addressed efficiency concerns in the industrial, commercial, and residential energy sectors. Efficiency standards for lights, showers, toilets, faucets, small motors, and commercial heaters and air conditioners were to be met by federal buildings and public housing. Federal technical assistance and incentives, such as utility grants, were given to states to update their building codes. Grants were also available for industry to promote efficiency. Voluntary guidelines were issued for homes along with a mortgage pilot program for energy-efficient homes and retrofitting. CNEPA also created a director of climate protection to oversee greenhouse gas research and policy-making, foreign aid, and exploration of technology to combat global warming. It also targeted a 30 percent increase in energy efficiency by 2010, a 75 percent increase in the use of renewable energy sources by 2005, and a decrease in oil consumption from 40 percent of total energy use to 35 percent by 2005 (Idelson 1992).

Although improvements in energy efficiency standards were made, CNEPA was not entirely environmentally friendly. The legislation did not promote an energy tax increase (which would have decreased demand), nor did it increase gas mileage standards. In fact, the bill provided $1 billion in tax breaks to independent oil and gas drillers. Finally, despite the devastating Exxon Valdez oil spill in Prince William Sound, Bush promoted the opening of Alaska's Arctic National Wildlife Refuge (ANWR) for oil exploration. The ANWR provision was dropped from the final version of CNEPA, but it initiated a long battle over the rights to drill in the arctic wilderness area (discussed later in this chapter).

The election of Bill Clinton in 1992 increased hopes that energy policies would be connected to environmental goals. President Clinton publicly endorsed voluntary compliance in fuel efficiency standards and promoted greenhouse gas reductions. During his administration, the White House Office on Environmental Policy (OEP) was created with an agenda to stress the economics of environmentalism, including creating jobs and business opportunities for new technologies (Sullivan 1993). Additionally, research funding for renewable energy sources was dramatically increased. Despite these measures, the Clinton administration failed to link energy policy with other issues such as conservation and environmental protection. Furthermore, Clinton was initially unable to formulate a comprehensive plan for energy policy. While an additional gasoline tax of 4.3 cents a gallon was enacted into law, it was part of an economic stimulus package and was not expected to affect consumption to any significant degree (Smith 2004, 152).

In the spring of 1998, the Clinton administration released the Comprehensive National Energy Strategy intended to provide long-term guidance for the country's energy needs. The five goals of the strategy sought to improve energy efficiency; ensure against energy disruptions; promote energy production and use in ways that respect health and the environment; expand energy choices; and enhance international cooperation (DOE 1998, viii). Specific initiatives were outlined that promoted the development of alternative fuel vehicles, promotion of natural gas over coal and oil, and a proposed mandate requiring that electric utilities obtain at least 5.5 percent of their power from renewable resources by 2010.

Electricity regulation was also an important issue in the 1990s. During this time, state governments sought to increase competition among power companies by either repealing or otherwise disabling the restrictions PURPA placed on electric utilities and how they obtain their power (Smith 2004, 153). Critics of PURPA requirements contend that the regulations interfere with competition in the energy market, resulting in higher prices for the consumer. The question of energy regulation is an important issue in U.S. energy policy, and it is discussed in greater detail later in the chapter.

The George W. Bush administration moved away from the goals of Clinton's energy strategy. In many ways, sustainable energy measures were abandoned in favor of further promoting fossil energies. Vice President Dick Cheney promoted the position of the Bush administration well when he announced in 2001 that the main energy problem that the nation will face is one of supply (Kahn, 2001a). The vice president did not mention reducing demand, only increasing supply. The focus is on technological fixes, with the more immediate concern of increasing traditional energy supplies, including obtaining more energy from the U.S. Arctic. Energy plans drafted by the Bush administration also promote tax breaks to companies that seek to increase domestic production of oil and natural gas.

The attention and incentives given to increasing supplies of fossil fuels has prompted criticism that the Bush administration is dominated by industry interests. This suspicion was sparked early in the administration with the formation of the Energy Task Force headed by Cheney. The main goal of the task force was to find ways to secure the energy supply for the United States. When the task force released its report, the General Accounting Office (GAO) requested that Cheney release information regarding the executives that advised the energy panel in closed-door meetings (Kahn 2001b). Cheney refused, and the GAO sought a court order to obtain the documents. A federal judge ordered the release of documents in 2002. It was uncovered from those documents that the Energy Task Force had met with eighteen of the energy industry's twenty-five top contributors to the Republican Party (Van Natta and Banerjee, 2002).

In August 2005, President Bush signed the Energy Policy Act of 2005. This legislation promoted a mixed approach to energy policy that on one hand expanded the use of biomass energies and biofuels and provided incentives for efficiency gains, but on the other hand provided subsides for oil and gas development. The bill also made dramatic changes to electricity regulation

(discussed later). Furthermore, it focused on increasing the use of nuclear energies by granting an estimated $7 billion in subsidies via an electricity production tax credit (UCS 2005). The Bush administration has shown strong interest in enhancing nuclear capabilities, but as the next section shows, it has been difficult to promote nuclear energy in U.S. society.

Was this article helpful?

0 0
Solar Panel Basics

Solar Panel Basics

Global warming is a huge problem which will significantly affect every country in the world. Many people all over the world are trying to do whatever they can to help combat the effects of global warming. One of the ways that people can fight global warming is to reduce their dependence on non-renewable energy sources like oil and petroleum based products.

Get My Free Ebook

Post a comment