Speeches & Floor Statements
Given at American Enterprise Institute
Posted on July 29, 2009
Today I want to challenge two popular misconceptions in the Waxman-Markey climate change and energy bill that is now before the Senate after passing the House of Representatives. The first is the idea that deliberately raising energy prices will somehow be good for job growth and the economy. The second is that, whatever the problems created by Waxman-Markey, they can mostly be resolved by building more windmills. Waxman-Markey started out as a bill to reduce carbon emissions in order to deal with climate change. It has ended up as a $100-billion-a-year energy tax nailed to a renewable energy mandate that will saddle consumers with expensive energy for years to come. Instead of a broad-based, national clean energy policy, Waxman-Markey has given us a narrow, expensive national windmill policy. I believe cheap energy means good jobs. My perspective comes, of course, comes from Tennessee: • Alcoa has shut down its smelter where my Dad worked. They are waiting for a cheaper electricity contract from the Tennessee Valley Authority. • Goodman, a company in Fayetteville that makes a large percentage of all the air conditioners in the United States, tells me that if their electricity prices go up too much then those jobs will go overseas. • Eastman Chemical employs 7,000 Tennesseans and uses coal as a feedstock. The company says if Waxman-Markey goes through they too might be headed overseas. • The Valero refinery in Memphis employs 600 people refining fuels, including jet fuel for Federal Express at its Memphis hub. Waxman-Markey would cost Valero $400 million or more per year. Today its profits are $40 million per year at that refinery. • We have two big supercomputers at the Oak Ridge National Laboratory in part because of our abundance of low-cost electricity. Just one of these machines consumes 7 megawatts. Nationwide, computers use 5% of our electricity and it’s still growing. • Our Governor has attracted two manufacturing plants to make polysilicon for solar cells – these are the “green jobs” everyone loves to talk about. Each of those plants uses 120 megawatts. If they’re going to make affordable solar cells, they can’t pay high electricity costs. • A third of Tennessee’s manufacturing jobs are in auto manufacturing. Auto parts suppliers watch their costs, including electricity costs, and if they go up too much they will be making auto parts in Mexico and Japan instead of Tennessee and Michigan. • Last December 10% of Nashvillians, even with TVA’s relatively low residential electric rates, said they couldn’t afford to pay their electric bills. So let’s step back for a moment and ask, “What kind of America are we trying to create with this climate-change and energy bill?” • We want an America in which we have enough clean, cheap, and reliable energy to create good jobs and run a prosperous industrial and high-tech society. In order to support the American economy that creates about 25 percent of the world's wealth, we need to produce about 25 percent of the world's energy. • We want an America in which we are not creating excessive carbon emissions and running the risk of encouraging global warming. • We want an America with cleaner air – where smog in Los Angeles and in the Great Smoky Mountains is a thing of the past – and where our children are less likely to suffer asthma attacks brought on by breathing pollutants. • We want an America in which we are not creating "energy sprawl" by occupying vast tracts of farmlands, deserts, and mountaintops with energy installations that ruin scenic landscapes. The Great American Outdoors is a revered part of the American character. We have spent a century preserving it. We do not want to destroy the environment in the name of saving the environment. • We want an America in which we create hundreds of thousands of "green jobs" but not at the expense of destroying millions of red, white, and blue jobs. It doesn't make any sense to employ people in the renewable energy sector if we are throwing them out of work in manufacturing and high tech. That's what will happen if these new technologies raise the price of electricity and send manufacturing and other energy-intensive industries overseas searching for cheap energy. We want new, clean, energy-efficient cars, but we want them built in Michigan, Ohio, and Tennessee, not Japan and Mexico. • We want an America where we are the unquestioned champion in cutting-edge scientific research and lead the world in creating the new technologies of the future. • And we want an America capable of producing enough of our own energy so that we can’t be held hostage by some other energy-producing country. None of these goals are met by Waxman-Markey. This bill provides a huge new tax on the economy. In addition, it requires 15% of our electricity to come from a narrowly defined group of renewable sources (defined as wind, solar, geothermal, and biomass.) While promising and intriguing, we can’t expect renewable energy to do anything more for the foreseeable future than supplement our current base load electrical production. It cannot replace it. What the Waxman-Markey Bill proves once again is that one of government's biggest mistakes is taking a good idea and expanding it until it doesn't work anymore. Republican Senators have a better idea: produce more American energy and use less. First and foremost we should build 100 new nuclear reactors over the next 20 years – just as we did from 1970 to 1990. That would double our level of nuclear generation to 40 percent of our electricity. Add 10% for sun and wind and other renewables, another 10% for hydroelectric, maybe 5% more for natural gas—and by 2030 we begin to have a low-cost clean energy policy that also puts us within sight of meeting the goals of the Kyoto Protocol on global warming. Step two is to electrify half our cars and trucks. This should reduce dependence on foreign oil by one-third, clean the air, and keep fuel prices low. According to estimates by Brookings Institution scholars, we could do this with the unused nighttime electricity we have today without building one new power plant. Step three is to explore offshore for natural gas (which is low-carbon) and oil (we should use less, but more of our own). The final step is to double funding for energy research and development and launch “mini-Manhattan projects” like the one we had in World War II to meet seven energy challenges: improving batteries for plug-in vehicles, making solar power cost competitive, making carbon capture a reality, safely recycling used nuclear fuel, perfecting advanced biofuels, designing green buildings and providing energy from nuclear fusion. Basically our policy should be to conserve and use our nuclear, gas and oil resources until we figure out how to make renewable and alternative energies more reliable and cost competitive. Instead of following this simple, fourfold low-cost clean energy strategy, the Obama administration wants to spend tens of billions covering an area the size of West Virginia with 50-story wind turbines while it squirms uncomfortably at every mention of nuclear power. According to the San Francisco Chronicle last week, ? “The Department of Energy is starting a new partnership with the nation's six largest wind turbine manufacturers, in an effort to . . provide 20% of the nation's energy from wind by 2030, a goal the DOE says is within reach.” The President in his inaugural address spoke eloquently of powering the country with the wind, the sun, and the earth. In June the Wall Street Journal asked Boone Pickens, Amory Lovins, Al Gore, and President Obama how to reduce dependence on foreign oil and contribute less to climate change. These four came up with 24 suggestions from placing veterans in green jobs to generating 20 to 30% of electricity by wind—but made not one mention of nuclear power. Over the next ten years, the wind industry will receive direct federal taxpayer subsidies of about $28 billion, according to the Congressional Joint Committee on Taxation. ? Most of this cost is due to the renewable production tax credit that is worth about 3 cents per kilowatt-hour to wind developers and costs taxpayers $26 billion. Fully 75 percent of the renewable tax credit goes to wind – solar, geothermal, biomass, and hydropower combined make up the remaining 25 percent. ? There will be $1 billion for construction subsidies through Clean Renewable Energy Bonds (CREBS). ? There will be an Investment Tax Credit (ITC) for residential and small industrial wind turbines. ? There will be accelerated depreciation of small wind turbines. ? Plus, there is $11 billion provided by the stimulus for building a “smart grid” and new transmission lines. The North American Electric Reliability Corporation tells us the entire U.S. grid needs upgrading, but the transmission projects announced so far will all go to bringing wind and solar electricity from remote places to population centers. And all this doesn’t even mention the Waxman-Markey Renewable Energy Mandates, which will have the practical effect of forcing utilities in many states to buy government-subsidized wind energy they don’t necessarily need from faraway states with better wind resources. Let me give you an example. Between 2000 and 2004, the TVA constructed a 30-megawatt wind farm at Buffalo Mountain at a cost of $60 million. It is the only wind farm in the Southeast. Now you’ll read in the papers that having a 30-megawatt wind farm means generating 30 megawatts of electricity, but this is only what they call its “nameplate capacity.” That’s not real output. In practice, Buffalo Mountain has only generated electricity 19 percent of the time, since the wind doesn’t blow very much in the Southeast. That means TVA will pay $60 million over 20 years to generate 6 megawatts of electricity. Multiply this out and you’ll see it means spending $10 billion to generate 1,000 megawatts, which makes Tennessee windmills more expensive than the costliest nuclear reactor. TVA considers Buffalo Mountain to be a failed experiment. In fact, looking for wind power in the southeast is a little like looking for hydropower in the desert. Nevertheless, Waxman-Markey will now force TVA and every other utility in the country to get at least 12% of its electricity from renewable sources. And that’s a very narrow definition of “renewable.” Hydroelectric dams, for example, are probably the best source of renewable energy we have, but they don’t count because . . . . well, I’m not sure exactly why, but environmental groups have been opposing dams since the 1950s. Nuclear doesn’t count as renewable either, even though we’ve got plenty of uranium and reprocessing the fuel could stretch it out for hundreds and hundreds of years. Instead, the TVA is already requesting bids for 1250 MW of renewable power that it doesn’t really need and may not be able to use. Wind now produces 1.3 percent of our total electricity, and 4.5% of our clean electricity. Yet according to the Energy Information Administration, wind turbines are being subsidized at 30 times the rate of all other renewables and 19 times the rate of nuclear. So instead of a clean, broad-based energy policy or even a clean, renewable energy policy, what we have in practice is a national windmill policy. “But wait a minute,” they tell us. “All this isn’t really about producing clean, cheap energy. It’s about creating green jobs.” There are two problems with this argument. • First, there must be at least as many welders, mechanics, constructions workers, and engineers that would be employed in building 100 new nuclear power plants during the next 20 years as in all the so-called renewable energies together. • Second, while there may be hundreds of thousands of green jobs, there are tens of millions of red, white and blue jobs in America that will be quickly lost because of rising energy prices. Let’s look at what has happened in California. The Golden State has been imposing renewable energy mandates for years. It has not built a base load coal or nuclear plant in more than 20 years. Meanwhile, it has built renewables, renewables and renewables – with plenty of expensive natural gas to back them up. All of this contributed mightily to the California electricity shortage of 2000. Now the state has the highest electricity prices in the continental U.S., west of Washington DC. Manufacturers are leaving in droves. Even Google and Yahoo are building their server farms elsewhere. With all this job loss, the state had an 11.9 percent unemployment rate in July and, until recently, a $28 billion budget gap. Its bond rating, once the highest in the country, is now the lowest of the 50 states. I can’t believe that the high cost of electricity in California hasn’t contributed to this. Has all this tempered the state’s enthusiasm for expensive renewable energy? Apparently not. California lawmakers are developing legislation to increase the current 20% renewable standard to 33% by 2020. State energy agencies have concluded it could cost $114 billion or more to meet the 33% mandate, more than double what the original 20% requirement cost. That comes to more than $3,000 per Californian. Yet, according to the Wall Street Journal’s news page on July 3, 2009: “The state auditor warned this week that the electricity sector poses a "high risk" to the state economy. A staff report from the state energy commission also warns that California could find itself uncomfortably tight on power by 2011 if problems continue to pile up. “Utilities complain that the ambitious renewable-energy mandates, combined with tougher environmental regulations on conventional plants, are compromising their ability to deliver adequate power.”Conflicting state policies are a problem," said Stuart Hemphill, senior vice president of procurement at Southern California Edison.” Renewable energy is intriguing and useful, but today is four percent of our electricity and has many challenges. What many people forget is that wind and solar energy is only available on average about one-third of the time. And electricity can’t be stored in commercial quantities with current technology. You either use it or lose it. • When you see 1000 megawatts of wind and solar power reported in the newspaper, remember it’s really only about 300 megawatts, because these sources only produce electricity one-third of the time - compared to American nuclear plants producing electricity 90 percent of the time. • Denmark, with the world’s biggest percentage of wind power, claims to get 20 percent of its electricity from wind. Yet it still produces 47% of its power with coal and imports more than 25% of its consumed electricity from Sweden and Germany. Moreover, it’s not clear that their carbon emissions have decreased at all over the last ten years. Worse yet, because of wind variability Denmark must export almost half its wind power to Germany and then import nuclear and hydropower back from Germany, Sweden, and Norway. • Then there is what conservation groups are calling “energy sprawl” and which we are only beginning to come to grips with: o One nuclear plant generates 1,000 megawatts and occupies 1 square mile. o One big solar power plant with giant mirrors generating 1000 megawatts in the western desert will occupy thirty square miles. That’s more than five miles on a side. o To generate the same 1000 megawatts with wind, you would need 270 square miles of 50-story wind turbines. That’s an area more than four times the size of Washington, D.C. Or, that’s an unbroken line of turbines along our ridge tops from Johnson City, Tennessee to Harrisburg, Pennsylvania. If wind farms move offshore, you would need to line the entire 127 mile New Jersey coast with windmills two miles deep – just to replace one nuclear reactor that sits on a square mile. o We haven’t even talked about when these wind farms outlive their useful life cycle of 20 years or so. Who is responsible for their removal? We have already seen this problem in Hawaii and Altamonte Pass in California. The developers should be required to put up bonds to ensure these turbines are taken down in case the developer walks away. o To those of us in the southeast, where the wind blows less than 20 percent of the time, they say use biomass-- which means burning wood products in a sort of controlled bonfire. That’s a good idea as far as it might reduce forest fires and conserve resources. But we’d need a forest one-and-a-half times the size of the 550,000-acre Great Smoky Mountain National Park to feed a 1000-megawatt biomass plant on a sustained basis. And it would take hundreds of trucks each day to deliver the wood to the biomass plant. It is hard for me to see how this reduces carbon emissions. Already we are beginning to see the problems. Boone Pickens, who has said that wind turbines are too ugly to put on his own ranch, recently postponed what was to be America’s largest wind farm because of the difficulty of building transmission lines from West Texas to population centers. The Sacramento Municipal Utility District pulled out of another huge project to bring wind energy in from the Sierra Nevada for the same reason—the transmission lines were meeting too much opposition, particularly from environmentalists. We hope that renewable energy can be reliable and low cost enough to supplement, but when we talk about using wind energy as a substitute for base load energy, we haven’t thought about what it’s going to look like in practice. Now let’s take a look at a true source of base load electricity, nuclear power: • Nuclear power already produces 20% of our electricity and 70% of our carbon-free electricity. • It’s so profitable that there is enough to pay back construction loans and still have low rates. • For example, TVA’s Brown’s Ferry will be repaid in 3 years, not in 10 as had been expected. Nuclear power receives little in the way of federal subsidies: • All 100 plants built between 1970 and 1990 were built with private funds. • The Price-Anderson insurance program for nuclear plants, which is often cited as a subsidy, has never paid a penny of taxpayer money in insurance claims. Today all 104 nuclear plants are responsible for $100 million for accidents at ANOTHER reactor. That’s more than $10 billion in privately funded insurance that the government is not paying for. There are other myths surrounding nuclear power besides subsidies, and we need to dispel those: • Nuclear power plants are not bombs. The uranium in a power plant is very different from the uranium in a bomb. A nuclear power plant cannot blow up. • While a nuclear plant can melt down if it loses its cooling water, western reactors are designed with many safety systems to prevent a disaster. That’s why, in the case of Three Mile Island, nobody got hurt even though the coolant was entirely lost. • U.S. nuclear reactors aren’t built like Chernobyl was and the Chernobyl accident cannot happen at a U.S. reactor. Chernobyl was an unfortunate event and was caused by a variety of failures, most importantly the bad design of the reactor. • Nuclear opponents claim we don’t know what to do with the fuel. That’s not true. Scientists tell us that we can store used fuel safely onsite for 40-60 years, while we work out the best way to recycle the used fuel. We can’t wait any longer to start building our future with clean, reliable, and affordable energy. The time has come for action. We can revive America’s industrial and high-tech economy with the technology we already have at hand. The only requirement is that we open our minds to the possibilities and potential of nuclear power. As we do, our policy of cheap and clean energy based upon nuclear power, electric cars, off-shore exploration, and doubling energy R&D will help family budgets and create jobs. It will also prove to be the fastest way to increase American energy independence, clean the air, and reduce global warming.