Congratulations, and welcome to the President’s second-term Cabinet.
The headquarters building of the U.S. Department of Energy is named for James Forrestal, the former Navy and Defense Secretary who suffered from depression and fell from a window to his death at Bethesda Naval Hospital in 1949. The building is a lifeless, sterile place — a boxy relic of the 1970s. Its workers are often demoralized; among the cynical, DOE’s motto is: “Ashamed of our past, afraid for our future.”
As secretary, you may expect to focus on the nation’s energy needs. You will find that much of DOE’s work centers instead on nuclear weapons and their environmental legacy. You might hope for a bully pulpit to promote clean energy. In fact, few pay much attention to the Energy Department unless gasoline prices are skyrocketing or the agency has suffered one of its frequent black eyes. In the solar system of power in Washington, DOE’s orbit typically resembles Neptune’s.
But DOE’s times in the spotlight do come — usually when something has gone wrong, such as when billions are wasted on unfinished projects, embarrassing security breaches occur, or companies default on their loan guarantees.
Your predecessor, Nobel Laureate Steven Chu, is a brilliant scientist who nevertheless presided over the expenditure of billions of dollars in the pursuit of “green jobs” that never materialized. The department has spent more than $22 billion of American Recovery and Reinvestment Act funding as of early last year, largely on efforts to seed innovation in the clean energy economy that have instead yielded a bitter harvest: Solyndra, the now defunct maker of thin film solar generators, defaulted on a $535 million federal loan guarantee. Bankrupt battery maker A123, a recipient of $249 million in federal assistance, is being sold to a Chinese consortium. Even the low-tech Low Income Weatherization program, in its rush to spend stimulus funding, funded substandard work that endangered some homeowners.
Be mindful of this unpleasant history, but don’t let it distract you from the key question: What good can you now do?
For all its shortcomings, DOE is the steward of the National Laboratories, the network of 17 institutions that the agency funds to conduct research in science and technology. Structuring the labs for collaborative, fundamental problem solving with private sector partners could yield tremendous results.
President Obama might like to claim credit for the shale energy revolution that is moving America toward energy self-sufficiency; the president who really deserves our thanks is Gerald Ford. In 1976, the Morgantown Energy Research Center in West Virginia, which is now a part of the National Energy Technology Laboratory, launched the five-year Eastern Gas Shales Project. The Center worked with private companies and universities to find sources of “unconventional” natural gas. The initiative’s research and demonstration projects led to critical advances in directional drilling techniques, hydraulic fracturing, and micro-seismic mapping that a generation later have made the United States a natural gas superpower.
Avoid making federal investments in late-stage manufacturing decisions involving individual companies and products — the approach that gave us Solyndra.
You would also be wise to eschew conventional liberal doctrine about energy and make some overtures to conservatives. The left must understand that the administration’s focus on “green jobs” has not only failed, it has provoked a backlash that remains an obstacle for bipartisan progress on energy innovation. Embrace a reform agenda that recognizes mistakes and refocuses federal resources appropriately.
For their part, conservatives must do more than merely criticize the Obama administration. They must articulate not only what they oppose, but what they support. Conservatives’ first instinct on energy and innovation policy is to “let markets decide.” That is a sound general proposition, but it only takes us so far. There is clearly a role for government in promoting innovation, as we have learned from successes including nuclear power, natural gas power plants and shale gas extraction. You must help conservatives understand this.
Doing so would be easier if you would avoid making federal investments in late-stage manufacturing decisions involving individual companies and products — the approach that gave us Solyndra. Instead, emphasize robust support of basic and pre-commercial research and development.
You should also pursue a pragmatic agenda focusing on policy areas where conservatives and liberals might agree, even though their motivations for doing so may differ. For example:
First, promote the use of carbon dioxide captured from electric power plants and industrial processes to extract oil from underproducing wells, a process known as enhanced oil recovery, colloquially called EOR. This would increase domestic oil production and keep our abundant coal resource in play, which is sought by the right, while advancing carbon capture technologies and cutting greenhouse gas emissions, which is sought by the left.
Second, accelerate the development of new nuclear technology, perhaps small modular units or new alternatives to light water designs, seeking support from the left to reduce greenhouse gas emissions, and from the right to revitalize nuclear power. Companies involved in these efforts include Babcock and Wilcox, Fluor, General Atomics and Westinghouse, as well as a host of startups with innovative designs.
Third, work to reform energy subsidies, such as the renewable energy production tax credits, and financing mechanisms, such as the troubled loan guarantee program. Common ground might be found in the notion that new energy technologies need an early break, but must stand on their own in a cost-conscious market within a reasonable time frame.
Fourth, conservatives and liberals should also be able to agree on sensible steps to reform and refocus the Nuclear Regulatory Commission to give it the ability to license innovative nuclear technologies. DOE could become far more focused and effective with systemic reforms that bridge the institutional divisions between the basic and applied research work, break down organizational stovepipes, insist on independent and honest analytics, and emphasize collaborative efforts with the private sector.
If you can convince the left to abandon the empty promises of “green jobs” and embrace a long-term mission of strengthening our fundamental innovation enterprise, you may in turn be able to persuade the right to move beyond the simplistic view that there is no role for government in innovation and energy markets. If you can help these two forces meet in the middle, with a little luck, you might change the orbit and trajectory of the Department of Energy.
Garman was Assistant Secretary and then Under Secretary of the Department of Energy under President George W. Bush. Thernstrom, who served as communications director for the White House Council on Environmental Quality from 2001-2003, is Executive Director of the Energy Innovation Reform Project.
Analysis and commentary on The Grid are the views of the author and don't necessarily reflect the views of Bloomberg News.
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