Small step for electric cars, giant leap towards killing BP's Macondo well

Today's post is somewhat of a news roundup.

President Obama promoted electric vehicles at the opening of a battery factory in Michigan yesterday, while engineers finally stopped the oil gusher completely (albeit possibly not permanently) for the first time since it began nearly three months ago.

While Gulf wildlife is not out of the oil infested waters woods yet, this is a major step on the way to permanently stopping the uncontrolled flow of oil. Engineers will be monitoring the internal pressure of the well over the next 48 hours to determine how well the cap is working. If they see rising pressure, that could signal an oncoming breach in the cap equipment. If they see dropping pressure, that could signify that oil is leaking into the surrounding rock, in effect finding other ways to breach the ocean floor.

(FYI, you can monitor the leak from multiple underwater cameras here on BP's website)

Switching gears, an NYT article yesterday announced that GM will be offering 8-year or 100,000 mile warrantees on their Chevy Volt batteries. I question whether they will extend that offer to customers who choose to cycle their batteries more frequently through vehicle-to-grid programs that are sure to develop once these cars hit the road. The warrantee department should probably get out of their internal combustion engine mindset and set warrantees based on battery cycles, not miles, but as an advocate of V2G systems, I won't complain.

One interesting thing about the president's address at the battery factory yesterday was that he dropped the last protectionist line from his usual EV battery stump speech, which normally reads, "For years, we've heard about manufacturing jobs disappearing overseas. You are leading the way in showing how manufacturing jobs are coming right back here to the United States of America, instead of South Korea." Since the parent company of the battery plant, LG Chem, is from South Korea, some astute staffer cut out the last four words. In my opinion, he or she probably deserves a raise. (This was first noted in the WP article linked to above.)

Obama, the spill, and the medical marijuana model

The President addressed a pissed off nation last week about the BP oil disaster. His speech clarified what we already knew...that the government is impotent to stop the spill, and we are all at the mercy of a gaggle of incompotent BP engineers.

However, the real problem is that the government also has no way to stop the other gusher...America's oil use. The President talks up alternative technologies such as PHEVs and next gen biofuels, but these will not substantially cut oil use for at least a decade.

The only short term way to dramatically reduce American oil consumption is to jack up the price, but mentioning a gas tax in DC is now as politically savvy as chanting "drill baby drill", and the President's speech avoided the topic like the plague.

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With all of these issues swirling, I spent last week in Boulder Colorado, apparently the happiest place on earth. The first thing you notice in Boulder is the beautiful mountain vistas. The second is the funky smell emanating from the dozens of medical marijuanna dispensaries.

Boulder's liberal medical marijuanna laws mean that obtaining a doctor's perscription for pot requires $200 and a slight cough. The town is reaping the benefits of the many Colorado University students suffering from 'chronic pain' by taxing the hell out of the bud. And slowly, the city is relying more and more on the funds to keep budgets afloat...and legalized marijuana is becoming a reality in Colorado.

My proposition is this: liberal cities like Boulder make their crunchy citizens happy by dramatically increasing local gas taxes...by $3 or $4 / gallon... and offset the tax hike by lowering income taxes. The tax would be revenue neutral for citizens, but the income from travelers would fill city coffers.

Naturally, the city would pressure it's neighbors to follow suit, so people don't fill up next door. Eventually the effort would gain steam, and gas tax hikes would become tenable at the state and federal level.

The Boulder Chronic Model (BCM) is the best cure for America's chronic oil addiction.

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Update, 7/20/10: The NYT did a great story a few weeks back on the burgeoning Boulder marijuana business: http://www.nytimes.com/2010/06/27/business/27pot.html?pagewanted=all

Offshore Wind and Oil: BFFs in a new Federal Bureau

Here's a link to a betterworld.org post about offshore wind on the east coast. Governors from ten East Coast states pledged to work together on exploration and development of offshore wind resources. The post also mentions Department of the Interior's new "Bureau of Ocean Energy Management." I hadn't heard of it before, but apparently it is a third of the new trifecta of bureaus replacing the Minerals Management Service. Here is a very under-hyped (in my opinion, maybe I'm just out of the federal energy loop) Secretary Order citing the formation of the Bureaus of Ocean Energy Management and Safety and Environmental Enforcement, and the Office of Natural Resources Revenue (the link goes directly to a pdf on the right hand side of the page, three items down). This effectively splits up the party responsible for ensuring offshore drilling ventures are safe from the one that collects the paychecks from the drilling profits. It sounds similar to the split of the Atomic Energy Commission back in 1974, forming one body responsible for the licensing and safety of nuclear plants (the Nuclear Regulatory Commission) and another responsible for the research and promotion of nuclear energy, now part of DOE.

It will be interesting to see how one bureau handles the management of both wind energy (and possibly wave and tidal energy eventually) and drilling for oil. Hopefully they can recruit people with expertise in offshore renewable energy since this is somewhat of a mission-change for them. Tradeoff decision-making will also be an important skill set for the new group, as situations where offshore wind and offshore drilling compete for the same spot of ocean may arise.

An End to Fossil Fuel Subsidies?

Simon writes each week on international issues relating to energy policy.

Among the most recent grand ideas to emerge in the pre-Copenhagen scrum is this from the US administration. President Obama has thrown his backing behind a plan to ban all government subsidies of fossil fuels, everywhere in the world.

It is a plan with considerable merit. New forms of electricity generation are constantly called on to prove themselves economically - a difficult enough task without their fossil fuel competition receiving both implicit and explicit subsidies in many countries.

However, fossil fuel subsidies are used to achieve a variety of policy objectives, and their removal will leave governments having to work out how to replace them. In the developing world, especially oil-producing countries, though they distort consumption patterns, they can be a more effective way of transferring wealth to the population. After all, in nations bedeviled by corruption, the choice is often not between cheap fuel and other government services, but between cheap fuel and embezzlement. In non-producing LDCs, subsidized fuel is not a perk for the very poorest, but can facilitate simple entrepreneurial activity - being able to run a tractor to improve land's productivity or have a generator so a factory no longer depends on unreliable municipal electrical utilities.

In the developed world, meanwhile, programs such as the Low Income Home Energy Assistance Program (LIHEAP) in the US or Britain's Winter Fuel Allowance program, fuel subsidies are a standard form of redistribution to the poor or elderly. Abandoning these programs risks leaving vulnerable communities bearing the brunt of switching to more efficient energy production.

Meanwhile, the tax breaks, competition protection and generous regulatory environments that western governments offer for a variety of industries, including oil and gas exploration and drilling, electricity generation and utilities could all come under pressure from the new agreement.

I think the idea is a good one - removing government subsidies for big business and polluting fuels is a necessary step towards leveling the marketplace for energy production and nurturing the next generation of energy solutions. However, as with almost all the big ideas in energy these days, the political obstacles are going to be large, with influential industry and citizen groups both being affected. Having resolved the question of what to do, it'll be interesting to see how to make it happen.