Energy Outlook

Alumnus Thomas Mason’s perspective on alternative energy

The 2008 presidential debates focused in part on energy concerns over security, balance of trade, and global warming. There has been talk of energy independence: Al Gore put forth a challenge to eliminate the use of fossil fuels in the next 10 years; T. Boone Pickens is pushing his wind agenda; renewable energy is touted as replacing existing power generation; global warming has been tied to controllable CO2 emissions and plans to curtail those emissions are moving forward. Many of these expressed objectives, which at face value seem laudable, will not be possible in the next 10 to 20 years.

The country's recent financial turmoil is already having an impact on the rate of power demand growth and it will continue to impact growth in the next few years. Expect to see a slowing of peak demand growth as construction of new homes, production of cars and appliances, and other industrial and commercial consumption declines. Increasing hybrid and electric car use will, however, increase electricity consumption.

As a result of tight financial markets and slowing demand growth, utilities will delay near term commitments for large projects. Eventually, this will put power generators in a catch-up position.

Commodity costs will decline and construction will become less expensive, falling off of the recent run-up. Not only will we see a slowing of the development of power plants, but the refining and petrochemical industries that were pursuing recent refurbishment and expansion are now cutting back with dropping oil prices and the reduced ability of the public to purchase products.

Financing limitations will slow the renewable development as there will be little acceptance of new technology risk and there is no current investor appetite for tax incentives.

Statements regarding our national energy strategy reflect how little politicians know about how power and energy work and real world limitations. Well intentioned, massive federal subsidy of solar, wind, and other renewable energy programs will provide jobs and put money into the economy, but renewable energy will continue to play a minor role in producing electric power and fueling transportation.

-Thomas Mason