$2 a gallon gas?

[TennTradition]

When alternative solutions are viable, they have a chance of ruining OPEC's little game. Until then, we have a job to do in maintaining a presence in the Middle East such that we influence fuel pricing.

Energy policy from the president is stupid. We need him dealing with nat'l security, which IMO, covers the international effects on our economy.

I would like to discuss this some with you because I see it differently - but I know you understand the business side of this better than I do. While there may be more important issues to spend time on up front, there is a role for the US government in this.

The private market will not do disruptive innovation in the energy sectors as is, IMO. The historical rate of R&D investment in the energy sector is about 3%...compared to 30% for biotech and IT - precisely because it is established and the cash cows are being milked for profits and stock prices. I think that it is fair to say this is what the shareholders want and they'll get it.

In 2001, Merrill Lynch has said that if a technology is greater than 2 years out, they will not advise investment - do you think this has changed? If not, what is the basis for increasing R&D investment to produce viable technologies if you are these companies when the time frame for most of these technologies is greater than 5 to 10 years. I think that establishing effective supply side measures is critical right now - particularly because I think that we will see cap and trade or carbon tax legislation of some form in the next two or so years. And, I think that the government will be needed in contributing to this technology push.

 

[BigPapaVol]

I would like to discuss this some with you because I see it differently - but I know you understand the business side of this better than I do. While there may be more important issues to spend time on up front, there is a role for the US government in this.

The private market will not do disruptive innovation in the energy sectors as is, IMO. The historical rate of R&D investment in the energy sector is about 3%...compared to 30% for biotech and IT - precisely because it is established and the cash cows are being milked for profits and stock prices. I think that it is fair to say this is what the shareholders want and they'll get it.

In 2001, Merrill Lynch has said that if a technology is greater than 2 years out, they will not advise investment - do you think this has changed? If not, what is the basis for increasing R&D investment to produce viable technologies if you are these companies when the time frame for most of these technologies is greater than 5 to 10 years. I think that establishing effective supply side measures is critical right now - particularly because I think that we will see cap and trade or carbon tax legislation of some form in the next two or so years. And, I think that the government will be needed in contributing to this technology push.

I think that as long as the gov't is driving the train, we're heading for nothing but empty talk and wasted money.

When the market needs a solution and it's financially viable, the market will provide it.

I absolutely hear what you're saying, but I'm just not a supporter of gov't driven innovation. The process is too political, too expensive and too slow.

I think private capital has started to head that direction today because people can see the payoff now. We just watched oil move to $4 a gallon and people like Boone Pickens pushing hard in the green agenda. While enormous capital came screaming from hedge funds and equity outfits, there is an enormous amount of equity capital now flowing toward sustainability and green platform investing. The solutions are going to come from this kind of capital because accountability comes with private capital. Gov't money tends to have no accountability attached to it and those taking tend to "always" need another round.

 

[MG1968]

I think that we will see cap and trade or carbon tax legislation of some form in the next two or so years.

cap and trade is a good way to destroy the US economy. Who in their right mind thinks that it's a good idea to force US companies to buy carbon credits from tin pot banana republics with little industrial infrastructure?

I know you didn't say that you were in favor of cap and trade, at least not in this post, so I'm not singling anybody out, but can somebody tell me why cap and trade is seen as a good idea?

I'm not in favor of a carbon tax either, because once the government gets used to it's new pound of flesh, it doesn't matter how efficient and carbon-free industry becomes, the government will find some other way to make up the lost revenue.

 

[TennTradition]

I think private capital has started to head that direction today because people can see the payoff now. We just watched oil move to $4 a gallon and people like Boone Pickens pushing hard in the green agenda. While enormous capital came screaming from hedge funds and equity outfits, there is an enormous amount of equity capital now flowing toward sustainability and green platform investing. The solutions are going to come from this kind of capital because accountability comes with private capital. Gov't money tends to have no accountability attached to it and those taking tend to "always" need another round.

This is where the wholly-owned government corporation (to invest the capital) idea interests me..though I don't fully see how Congress doesn't screw it up.

 

[BigPapaVol]

This is where the wholly-owned government corporation idea interests me..though I don't fully see how Congress doesn't screw it up.

I just don't think government can get it right. The accountability mechanism is broken and the government dole is too attractive to those living on it. The impetus to get it right just doesn't exist and I don't know how to address that problem.

 

[TennTradition]

cap and trade is a good way to destroy the US economy. Who in their right mind thinks that it's a good idea to force US companies to buy carbon credits from tin pot banana republics with little industrial infrastructure?

My position is that the economic implications of imposing this scheme without an effective supply-side innovation scheme in place first are very troubling. But, I do generally see emissions reductions as necessary in the future, so on this I'm sure we disagree.

But, the main thing I wanted to say is that I don't know if this is the right way to view the cap and trade (your quote above). In looking over most of the cap and trade legislation that is out there, the cap and trade almost exclusively involves domestic trading of permits.

In a few of the bills, there are provisions to allow for a committee to examine the effectiveness of eventually allowing for something that is the equivalent of the Clean Development Mechanism, where you pick the low-hanging fruit of developing countries where you can make emissions reductions more cheaply and then take credit for those in the form of credits. But, that kind of system isn't even part of the bill - the bills that mention it as far as I can tell do so only in the form of a question - would this be an effective mechanism for us to pursue. The cap and trade bounds are drawn around the US (with provisions to monitor electricity imports from Mexico/Canada).

Another interesting note is that while only cap and trade legislation has been proposed to date, there will be some talk of a carbon tax in this Congress. I'm not sure how I feel about one vs. the other (though I know you think both suck ).

 

[TennTradition]

I just don't think government can get it right. The accountability mechanism is broken and the government dole is too attractive to those living on it. The impetus to get it right just doesn't exist and I don't know how to address that problem.

There is a lot of truth there. The accountability is certainly different. DARPA has been a successful model for preventing folks from essentially taking annually sustained donations from DOD...but it has its own problems and wouldn't work as well for large-scale energy solutions in my opinion.

 

[volinbham]

Clearly there are cases of "market failure" where a completely capitialistic approach to long-term R&D (emphasis on the R) is likely to be underfunded. Our solution has been government programs DoE, DoD, NSF, NIH, etc. Having worked in Tech Transfer at a DoE facility, I've seen how inefficient the system is. Intellectual property rules changes in the 80's have helped but far too much "innovation" languishes on the shelf due to any number of barriers.

I'm more in line with TT on this one about the role of the government but clearly the system has a ton of waste in it. That said, it's working better than that of any other government.

 

[rjd970]

There is a lot of truth there. The accountability is certainly different. DARPA has been a successful model for preventing folks from essentially taking annually sustained donations from DOD...but it has its own problems and wouldn't work as well for large-scale energy solutions in my opinion.

That is interesting what you said about DARPA. I never considered it's structure in this paradigm.

Having worked multiple DARPA contracts, I can say that while it still may be flawed, it is a much better model to work in than the traditional government or DoD R&D contracts.

 

[TennTradition]

That is interesting what you said about DARPA. I never considered it's structure in this paradigm.

Having worked multiple DARPA contracts, I can say that while it still may be flawed, it is a much better model to work in than the traditional government or DoD R&D contracts.

There has actually been legislation passed to create an ARPA-E...but it has never been funded. There is talk that it will be funded this year, so we'll see. I should also say that DARPA has been wildly successful...so even if an ARPA-E isn't as successful, it could still fill some gaps in the energy innovation system.

 

[rjd970]

There has actually been legislation passed to create an ARPA-E...but it has never been funded. There is talk that it will be funded this year, so we'll see. I should also say that DARPA has been wildly successful...so even if an ARPA-E isn't as successful, it could still fill some gaps in the energy innovation system.

DARPA would provide a good model to try out in government funded commercial R&D. Many of the technologies developed on the defense side eventually make their way to the commercial sector, but if the government wants to really try it hand at this, I would just assume they do it with a dedicated commercial ARPA type organization. This is the only way I could really see it working.