After the Deepwater Horizon spill in the Gulf of Mexico, someone said to me âWe have to stop all offshore drilling.â My response was that I could get behind that idea, but I wanted to know what sacrifices the person was willing to make. That turned out to be the end of the conversation, because usually the people campaigning against these sorts of things believe that the consequences will be all good (no more oil spills) with no real downside (like less energy available). I can tell you with absolute certainty that we can live with no offshore drilling, but I can also tell you that the price of your fuel would be greater â and probably far greater â than it is today.
Nuclear power plants fill a need -- cheap energy -- that consumers demand. Are you willing to give it up?
I believe that the reason we have so much âdirtyâ energy is that we demand cheap energy. I spoke to a reporter in Japan this week about the crisis at the Fukushima nuclear plant, and he said he couldnât help but notice that despite some rolling blackouts now, Japan remains very much a country with all of the lights on.
Root Cause: Consumers Demand Cheap, Abundant Energy
This gets right to the heart of why we have nuclear power: We demand cheap energy; energy so cheap that we can afford to leave all of the lights in the house on all day long. Both coal and nuclear-generated electricity are viewed as cheap relative to many other options â admittedly debatable given charges of government subsidies and the occasional environmental calamity â as well as reliable (again, environmental calamities notwithstanding).
My response to the reporter was that I love lobster, but I rarely eat it because it is so expensive. If they served $2 lobster at McDonalds, we would all consume much more lobster and of course the supply of lobsters would be under pressure. If we all demanded cheap lobster and got angry when our lobsters became more expensive, politicians would work to give us what we want lest they be voted out of office. We would see all sorts of lobster-related subsidies designed to bring us all cheap lobsters (which have to be paid through taxes and/or deficit spending). Consequences of our cheap lobster demands â higher deficits and possibly no more lobsters â would be pushed onto another generation.
Nuclear's share of electricity net generation jumped from just 5% in the early 1970's to roughly 20% by the late 1980's and has remained there ever since.
This of course describes our energy dilemma. We demand cheap energy. Politicians recognize that, so they strive to deliver cheap energy or they lose their jobs. When energy prices go up, finger-pointing and congressional hearings follow. And at the end of the day, it means that our energy usage is so high that we âneedâ offshore drilling, tar sands, nuclear power, and coal power. It is a self-sustaining cycle that diminishes resources and potentially spoils the environment for future generations.
Forcing a Change Begins With âUsâ Modifying Our Habits
Instead of being part of that cycle, I wish more politicians would have the guts to stand up and say âEnough! We have to break this cycle.â The problem is that many of them have idealistic views that renewable energy can step up and fill the gap if we had no nuclear power or offshore drilling. I confess that I have an idealistic streak within me, but I am mostly a realist. I understand why nuclear power rather than solar power fills a third of Japanâs electricity needs. It is all about the size of their electric bills and the convenience of having cheap electricity available around the clock.
Nuclear and fossil fuels accounted for nearly 90% of U.S. net electric power generation in 2009.
Albert Einstein reportedly once said âWe canât solve problems by using the same kind of thinking we used when we created them.â If we are to do without nuclear power, the way to lessen our dependence on it is to change our mindset on cheap energy. We just need to make electricity expensive enough that people donât leave all their lights on all day long. It is as simple as that. And we could accomplish that without further burdening consumers already struggling with high energy prices.
Shifting the Tax Burden
Imagine a family whose income is $50,000 per year, pays $10,000 per year in income taxes, spends $2,500 on gasoline, and $2,500 on electricity. I would propose to shift their tax burden from income to energy so that it ultimately ends up something like this: $5,000 in income taxes, $2,500 in additional gasoline taxes, and $2,500 in additional electricity taxes. I would exempt renewable sources of energy from these higher taxes. Note that the family is still out of pocket $10,000 in taxes, but the burden is shifted from income toward addressing our dirty sources of energy. People often complain that oil companies receive subsidies and that this puts renewable energy at a disadvantage. As I have argued, what better way to get those subsidies back than by raising the price of the product they sell via higher taxes? Again, thatâs usually as far as the conversation goes because people believe that you can take away subsidies and the consumer wonât feel a thing.
In response to the above scenario, the knee-jerk reaction from small-minded thinkers is often âYou want to raise our taxes!â But that isnât true, I want to shift them in such a way that it encourages us to conserve, while at the same time incentivizing renewable energy. As I have written before, E85 could dominate the marketplace in the Midwest if it could consistently compete with the price of gasoline. Well, what if gasoline cost $8 a gallon? The entire ethanol supply would be consumed close to the source of production, and we wouldnât need to process tar sands so Iowans could put gasoline in their cars â even as they export their ethanol out of the region.
U.S. Primary Energy Flow by Source and Sector, 2009 (Quadrillion Btu). Source: EIA.
There are admittedly many considerations for higher energy prices beyond how it might impact an average family. Consideration would have to be given to businesses that presently require high energy consumption such that an increase in taxes doesnât put them out of business. Exemptions would need to be given to hospitals, fire and police departments, and numerous other critical services that are heavy consumers of energy. In the longer term, everyone will have to become more efficient, but the low-hanging fruit is discretionary energy usage by consumers.
Conclusion â Are You Willing to Sacrifice?
So during this debate on whether we really need nuclear power, I will ask the same questions I asked when the topic was offshore drilling: How much are you willing to pay to be rid of it? If your answer is ânothingâ then you are simply engaging in wishful thinking. Personally, I would be willing to pay a price to stop some of these energy options that pose risks to our environment. I canât say that a majority would be willing to pay more, but I think the idea could be sold on the basis that your overall tax burden does not change. In that case, you are paying more for energy â potentially enabling a phase-out of nuclear plants as demand falls â but your overall budget isnât impacted.
The fatal flaw in the plan, of course, will be politics as usual. As soon as someone proposes such a thing, the focus will be âMy opponent wants to raise your gas taxes.â Of course that is the kind of thinking that got us to this point. But we will need to change our thinking to seriously consider a phase-out of nuclear power.
By. Robert Rapier
Source: R Squared Energy Blog