Andy Karsner is responsible for meeting the Bush Administration's energy goals. He's hoping the private sector will help him get there
When Energy Dept. Secretary Samuel Bodman and Assistant Secretary Alexander "Andy" Karsner first talked about plans to invest government money in something called "cellulosic" ethanol, they were enthusiastic. Most ethanol is made from corn, but cellulosic technology uses less-valuable resources, such as switchgrass or garbage. But they thought the original proposal, for $160 million, was too modest. So on Feb. 28, Bodman and Karsner unveiled plans to invest up to $385 million in cellulosic, more than double the original ante. "Ultimately, success in producing inexpensive cellulosic ethanol could be a key to eliminating our nation's addiction to oil," said Bodman.
Such an announcement could hardly be imagined several years ago. From supporting drilling for oil in the Alaska National Wildlife Refuge to disputing the science on global warming, President George W. Bush and his Administration did little to gain the confidence of environmentalists and the alternative energy industry. And while the Administration's stance on key environmental issues remains little changed, the President and his appointees at the Energy Dept. have been increasingly vocal about the need to support alternative energy.
"It is in our vital interest to diversify America's energy supply," said Bush in this year's State of the Union address, "and the way forward is through technology." He set the ambitious goal of reducing 20% of the country's projected gasoline use—mainly by replacing it with new biofuels.
To carry out this mission, Bush last March tapped Karsner, a former chief executive who's well credentialed in the alternative energy sector. As Assistant Secretary for Energy Efficiency & Renewable Energy, it's his job to carry out Bush's plans for clean fuels—and, in the meantime, help rehabilitate Bush's image on environmental issues. Karsner, the former CEO of energy consulting firm Enercorp, says he's all in favor of environmental stewardship, but is steering his department and budget in a staunchly promarket direction.
Karsner's job is to implement the Advanced Energy Initiative, announced by President Bush in his State of the Union address. The proposal calls for both the mandated cut in gasoline use and a 22% increase in clean-energy research to make clean energies competitive with those from fossil fuels. Karsner says his approach is "the opposite of what the legacy has been." He believes that since the 1970s the government has focused only on research and development, and needs to now shift more resources to commercialization and deployment. "It's time for a mass diffusion of new energy and technology into the American economy," he said in a Feb. 21 speech to alternative energy industry leaders and investors in New York. "Free-enterprise capitalism is the most effective route to bring clean energy into the economy."
Often decrying the slow pace of government action, Karsner says he wants to bridge the gap between the public and private sector, so that those making energy policy better understand how the market works—and how it will ultimately make clean energy an important part of the economy. "The pace of policy lags both technology and the capital markets," he says. "We need your help, and we want to be catalytic to your efforts." Karsner's background in the private sector informs his business-friendly approach to his position. A native of Dallas, he's worked in a range of energy businesses involved in everything from natural gas and coal to wind. He's managed large-scale power projects in North America, Asia, the Middle East, and North Africa.
The Assistant Secretary spends much of his time traveling to the dozens of alternative energy conferences springing up across the country, hearing the concerns of alternative energy leaders and talking with investors. Karsner says that among alternative energy companies, "predictability is the No. 1 ask." In plain English, that means companies want to know that the government is committed to renewable energy over the long term. And whenever possible, he says, he likes to give the private sector what it needs.
Backing Cellulosic to Achieve Ethanol Goals
Still, there's no question that Karsner faces serious obstacles to achieving Bush's lofty goals. It's not only that many experts are skeptical that the goals are realistic. It's also because the clock is ticking. Karsner has less than two years left in his post and he's serving under a lame-duck president.
Here's why the experts are skeptical. While Bush's 10-year goal is to produce 35 billion gallons of ethanol and alternative fuels, there's just not enough corn in the country to do that. At a Congressional hearing on Mar. 1, Guy Caruso, head of the independent analytical arm of the Energy Dept. called the Energy Information Administration, said that fuel ethanol production will fall fully 66% short of Bush's stated goal.
Cellulosic is what Bush—and Karsner—hope will make up the difference. Cellulosic ethanol is made by breaking down the cellulose in plants or wood chips and generating the sugars needed to produce the alcohol-based, clean-burning fuel. Several companies are developing the process, but it's not yet commercially viable.
Looking for Concrete Proposals
Karsner is focused on action, not doubts. He's aggressively reaching out to industry leaders for their input and help. At an alternative energy conference in February, sponsored by the investment bank Piper Jaffray (PJC), he looked at home mingling with industry leaders and CEOs making presentations to attract investor money. Ten of them spoke at a roundtable discussion with Karsner in a cramped room after his speech. Cracking open a can of Red Bull, Karsner made brief remarks to the eager group and opened the floor to their questions. There were plenty: Gregory Yurek, CEO of American Superconductor (AMSC) wanted to know when the electric grid—the infrastructure connecting power sources to homes and businesses—would be expanded and upgraded to accommodate more alternative energies. Anton Milner, CEO of Q-Cells, a German solar energy company, says there needs to be national legislation to standardize electricity distribution, which is now controlled at state and local levels. "If the market is here, we will come," says Milner.
Karsner responds to each inquiry with a firm answer, though not always one that pleases his audience. "Tell me what we can knock down—let's look at the top 10 priorities," he says. "I have 23 months, and I'm concerned with deliverables." He says he recognizes his role but wants industry to come to him with specific proposals. "Letterhead is free," says Karsner. "Give me something to put on it."
There are certainly some inconsistencies in the strategy. Karsner and the Administration pledge their allegiance to the private sector and free-market capitalism, but their very involvement changes the dynamics of the energy market. By putting their money behind initiatives such as cellulosic ethanol, Karsner and other government officials are making a bet. They may be right. But they also could be wrong. David Hamilton, director of Global Warming Energy Programs for the environmental group Sierra Club argues that the Energy Dept. remains focused on "pet project" areas like ethanol, hydrogen, and clean coal, but he says there's less attention to wind power and solar energy, considered superior technologies by some scientists.
In addition, while Karsner and the Administration tout their support of free trade, they refuse to let in biofuels from other countries without substantial tariffs. Brazil, for example, produces ethanol from sugar that could be used to meet Bush's green goal. But the U.S. imposes heavy fees on imports that render the fuel uneconomical.
Cautious Optimism from Environmentalists
Nevertheless, many CEOs in the alternative energy community speak favorably of Karsner, citing his willingness to get their input, even if they have reservations about the Bush Administration or the government process as a whole. "The folks before Andy were far more insular to the government than responsive to the needs of the renewable energy industry," says Jigar Shah, CEO of solar energy company SunEdison. "He created a group that's far more responsive to the industry and their needs, and isn't afraid to ask, 'What do you need to develop the market?'"
Environmentalists certainly haven't given up on critiquing the Bush Administration. But the Energy Dept. and Karsner are gaining more acceptance in some circles. "Karsner gives people a sense of enthusiasm," says Hamilton, of the Sierra Club. "He comes from the business, so I think he believes in it and has better intentions than those who have been derailed by politics in the past. So we're willing to be surprised and impressed."
Whether Karsner can help Bush build a greener image and achieve his energy goals remains to be seen. What's clear is that Karsner will need plenty of Red Bull to get through the next 23 months.