EcoLogic Blog

The renewable fuel industry will be paying particularly close attention to this year’s election. As you might recall, the great ethanol boom of 2007 was the reaction to the federal government’s support of renewable fuels. A little more than one year later, corn-based ethanol has experienced a roller-coaster ride of political, investor and public support. As a result the industry has a tarnished reputation that has left some American citizens questioning its role in our country’s energy independence and some politicians looking for ways to reduce federal support. This includes the 51 cent blender’s credit (which will be reduced to 45 cents in 2009) and the 54 cent import tariff on foreign-produced ethanol.

Earlier in September during the Republican National Convention, the GOP voted to support John McCain’s opposition to government mandates and subsidies for the U.S. ethanol industry. In its 2008 policy platform, the GOP stated that the free market, not the government, should control how much ethanol is blended into gasoline. McCain has long opposed tax breaks for ethanol and the tariff that protects it from imports.

This is a strong move away from the Bush Administration’s support for the U.S. ethanol industry which calls to expand the use of ethanol to reduce dependence on foreign oil and increase revenues for farmers. As a part of the Renewable Fuels Standard (RFS), the U.S. will produce 36 billion barrels of ethanol per year by 2022.

In response to the GOP’s new stance, Democratic presidential nominee Barack Obama has reasserted his support of federal requirements to use ethanol as a way to reduce reliance on oil imports.

Both Democrats and Republications do support an increased push for developments in cellulosic technology to produce ethanol from non-food inputs rather than corn. This is ultimately where the future of renewable fuels is headed in a matter of years.

Some industry analysts believe that the removing ethanol mandates only make the transition to cellulosic ethanol more difficult. These analysts argue that the development and success of the cellulosic ethanol industry will be derived from the infrastructure created by the corn-based ethanol. It is their belief that eliminating federal support for renewable fuels will ultimately discourage investors and slow the necessary technological advances needed for cellulosic ethanol.

Still there are many business and political leaders that believe a free market will be a better way achieve the needed renewable fuel advancements without the current incentives and mandates from the U.S. government.

The debate on how the country should move forward with our renewable fuels initiatives will be a heated topic during the upcoming presidential election. As our country continues its quest to become more “green,” it will be interesting to see how the public reacts to upcoming ethanol policy debates. Will the country rally behind the ethanol industry or force it to stand on its own feet without assistance from the government?

Perhaps you’ve seen the ads from wecansolveit.org, which feature unlikely allies like the Reverends Al Sharpton and Jerry Falwell agreeing that something needs to be done to fight global warming (video below).

Politicians and even some oil companies are part of this shift away from the question “Does global warming exist?” to “We have to do something about it.” That’s not to say everyone agrees on the solutions; for example, how coal or even nuclear power fit into our energy mix is a huge area of contention. We’re in to the nitty-gritty of the problem: which solutions are the best to use, who pays for what, how do we respond to markets or populations that are negatively impacted by our decisions?

With all of the solutions out there (many point out that there is no “silver bullet” to the global warming problem but rather “silver BBs”), we’re going to see an increasingly vocal debate on which technologies and policy mechanisms will create the most change, the best change, in the shortest amount of time. There are going to be growing pains as we transition to a clean energy economy. Successful points of view will come from those who frankly address how their technologies or ideas may impact certain sectors of the economy, how they plan to respond to those risks, how much the change will cost, who will pay for it and why.

Our energy system is changing, and the panelists discussed the ways their respective businesses are strategizing for it:

Trae Vassallo of the VC firm KPCB lamented, “”Private investors are spending more than government on this issue - that’s a problem!” Forty percent of all of KPCB’s investments are going towards energy. Their “greentech” portfolio emphasizes three areas: Clean electricity, energy efficiency, and clean transportation.

“This isn’t going to be a winner-take-all energy market. There are going to be lots of solutions to the problem.”

Paul Siegele of Chevron believes we should focus on three areas: Supporting rational energy policies, expanding current supplies, and conserving natural resources:

“Global demand for oil is straining the energy system. The world’s not running out of oil, but there are accumulating risks to the ability to deliver the demand. The American public shouldn’t be asked to trade off prosperity to cut greenhouse gases or diversify the energy supply. It’s unreasonable to expect other countries to expand their access to energy for our needs when we restrict our own.”

Jackalyne Pfannenstiel of the California Energy Commission noted later in the discussion that California has kept its energy consumption flat since the 1970s, thanks to energy efficiency. And its GDP has kept up with the nation as a whole. It’s not necessarily a trade-off.

To clean up their energy system even further, California is focusing on two big strategies: Energy efficiency and renewables. CA has a law that says businesses can’t have a long-term contract (longer than five years) with coal companies because of the risk of impending carbon regulation that could skyrocket fossil fuel prices.

David Victor of Stanford said that there’s going to need to be a political strategy too, and that’s something Silicon Valley isn’t used to. We need figure out what sort of regulatory strategies need to happen in tandem with all of this innovation.

Early on in the discussion on energy, the moderator, David Jefferson of Newsweek, profiled himself: He uses efficient compact fluorescent lightbulbs, but not consistently. He cares about polar bears, but cranks the air conditioner. He telecommutes, but he does it so he can work from home in sweatpants, not because he saves gas from not driving his car.

In a lot of ways, he’s just like the rest of us.

This broad but shallow care for the earth/energy/ begs the question: Instead of asking ourselves, “How can we influence consumers to make smarter energy choices?” instead of “How do we force consumers to make smarter energy choices?”

Most of the panelists agreed that people are concerned about green but don’t want to change radically. To be green has to be easy. Trae Vallasso of the venture capitalist firm Kleiner Perkins Caufield and Byers said that it shouldn’t be about changing behavior, but about finding better business opportunities. Money in the pocket - or money taken out of the pocket - will influence consumers’ behavior.

That’s why efficiency may be the best route to curbing energy use; not a silver bullet of course, but it is the cheapest, fastest, most efficient way to cut our energy use. It’s a major investment area for Kliener Perkins, Chevron is constantly looking for new ways to make operations more efficient, and Californians live the most energy efficiently of anyone in the nation. We know it works, it saves money, emissions and time, and it’s being done right now. As Paul Siegele of Chevron agreed: “The cheapest barrel of oil is the one you don’t use.”

Venture Capitalists are really excited about the energy technologies and are putting more and more money into three main areas: renewables, energy efficiency and transportation.

Trae Vassallo made a comment that struck me: Energy industry has been around a long time with little innovation.” There has been a lot of movement from the Goldman Sachs of the world and others, and investors are excited about that.

From a communications point of view, I think there’s also a lot of excitement about energy solutions because of the breadth of issues the topic touches: energy independence, global warming national security, clean air, healthy people, etc. People can wrap their minds around it, understand how it touches so many facets of our lives and the wealth of solutions.

Found my way to San Jose for the American Petroleum Institute/Newsweek dialog series on energy. Waiting in the lobby of the beautiful Sheraton Palo Alto for transportation to the event at Stanford. Haven’t met any other bloggers yet but I know they’re here somewhere. We’ll sniff each other out, I’m sure.

By the way, I rarely fly United Airlines but I gotta say those people are NICE. When I checked in, the lady offered to move me from a middle seat to an aisle or window and there was literally a group hug between a boarding agent and a group of older ladies. Love it.

Now I’m here at beautiful Stanford University and the Newsweek/API sponsored discussion: Energy’s Future is in Technology: Innovation in Energy Supply, Energy Efficiency and Alternative/Renewable Energy has just begun.

Moderator: David Jefferson, Senior Editor, Business and Technology, Newsweek

On the panel: Paul Siegele, Vice President, Strategic Planning, Chevron
Jackalyne Pfannenstiel, Chair, California Energy Commission
Trae Vassallo, Partner, Kleiner Perkins Caufield & Byers
Andrew Murr, Los Angeles Bureau Chief, Newsweek
David Victor, Professor and Senior Fellow at the Woods Institute for the
Environment, Stanford University

Topic: Englighten us on American’s emergent position on renewable energy. Promote energy literacy.

Small group of people, quite intimate. Video set up so I hope to get some video clips later…also a photo