It’s been five years since U.S. Sen. Lamar Alexander called for a new Manhattan Project for energy independence, and during a Wednesday update, the senator said four “grand principles” should guide America’s energy policy.

The senator said his principles—which include research and development, free market forces, and cheaper, clean energy—would “end an obsession with taxpayer subsidies and strategies for expensive energy.” They would instead focus on “doubling research and allowing marketplace solutions to create an abundance of clean, cheap, reliable energy,” Alexander said during a Wednesday afternoon speech at the Tennessee Valley Corridor Summit in Oak Ridge.

A Tennessee Republican, Alexander said that Germany’s example of combining a cap-and-trade system to make carbon emissions more expensive with subsidies for wind and solar power had created “an energy policy mess that discourages job growth.” He said the United States “has a better energy policy than we’re given credit for because we rely on government-sponsored research, private property, access to capital, entrepreneurship and the advantages of a huge marketplace.”

Alexander said his proposed principles include:

1. cheaper, not more expensive, energy;
2. clean, not just renewable, energy;
3. research and development, not government mandates; and
4. the free market, not government picking “winners and losers.”

The senator presented his four grand principles five years after an address here in which he challenged the country to take on seven “grand challenges,” which he termed “mini-Manhattan projects,” that would tackle hurdles to energy independence in the same way the Manhattan Project sought to develop nuclear weapons before the Germans in World War II.

He said that five years ago some quarreled with his goal of “independence,” but that “this was and is a good goal in the sense that the United States cannot be held hostage by any other country because of our need for energy.”

“Today, I want to suggest four grand principles to help us chart a competitive energy future for the next five years,” Alexander said. “Even as other parts of the world grow rapidly, the United States still uses about 20 percent of the world’s energy, and the Energy Information Administration estimates U.S. energy demand will increase more than 10 percent by 2040. Perhaps by focusing on these four grand principles, we can capitalize on the progress we’ve made and put ourselves firmly on the path toward cheap, clean, reliable energy.”

Alexander delivered his speech at the two-day Tennessee Valley Corridor Summit at the Y-12 National Security Complex’s New Hope Center. The senator discussed progress made on his seven grand challenges by Oak Ridge, ARPA-E and others, and described ongoing challenges in American energy policy. Alexander is the ranking member, or lead Republican, on the Senate Appropriations Subcommittee on Energy and Water Development, and a member of the Senate Energy and Natural Resources Committee.

With “charting a competitive energy future” in mind, he laid out his four principles, with topics ranging from the perils of cap-and-trade legislation to the merits of America’s natural gas boom as a model for the future that was ignited by government-supported research and development.

 

Alexander’s complete speech follows:

Five years ago, I stood at Oak Ridge National Laboratory with a story from the past and challenges for the future.

The story is by now a familiar one: In 1942, President Franklin D. Roosevelt asked Sen. Kenneth McKellar, the Tennessean who chaired the Appropriations Committee, to hide $2 billion for a secret project to win World War II. Sen. McKellar replied, “Mr. President, I have just one question: Where in Tennessee do you want me to hide it?”

That place turned out to be Oak Ridge, which is how Tennessee became one of the major sites where scientists worked to build the atomic bomb before the Germans. The challenges I suggested five years ago were focused on a new Manhattan Project for U.S. energy independence or, more accurately, a series of mini-Manhattan Projects.

Today, I want to suggest four grand principles to help us chart a competitive energy future for the next five years, and end an obsession with taxpayer subsidies and strategies for expensive energy and instead focus on doubling research and allowing marketplace solutions to create an abundance of clean, cheap, reliable energy.

These four grand principles are:

1. Cheaper, not more expensive, energy
2. Clean, not just renewable, energy
3. Research and development, not government mandates
4. Free market, not government picking “winners and losers”

The seven grand challenges I announced five years ago were grounded in challenges from the U.S. National Academy of Engineering. My challenges included: make plug-in electric vehicles more commonplace; find a way to capture and use carbon; help solar become cost-competitive with other energy; safely manage nuclear waste; encourage cellulosic biofuels to become cost-competitive with gasoline; make new buildings green buildings; and create energy from fusion.

My goal in laying out these seven grand challenges was energy independence. At the time, some took issue with this grand goal underlying these grand challenges. But it was then, and it is now, a good goal, in the sense that the United States cannot be held hostage by any other country because of our need for energy.

Since I spoke five years ago, the U.S. Department of Energy has established Energy Innovation Hubs that are producing fuels from sunlight and advancing nuclear reactor and battery technologies. That paired with the work of the new energy research agency, ARPA-E, and others has moved us forward on my seven grand challenges in a number of ways:

1. Electric Vehicles—Sales of electric vehicles in the U.S. are approaching 100,000, according to the Electric Drive Transportation Association, and ARPA-E has helped a company called Envia double the energy density of its lithium-ion batteries.
2. Carbon Capture—We are developing commercial uses for carbon dioxide, like liquid fuels produced from microbes.
3. Solar Power – Though our goal is around $1 per watt by 2020, the cost of photovoltaic solar has fallen from $8 per watt to $4 per watt in the past five years, according to a 2012 U.S. Solar Market Insight Review. Installation of residential solar power has risen 500 percent.
4. Nuclear Waste – We have drafted comprehensive nuclear waste legislation and for the first time in 30 years, we are building new large nuclear reactors in the U.S. Also, small modular reactors are moving forward.
5. Advanced Biofuels – Three new Bioenergy Research Centers are developing next-generation bioenergy crops for industrial-scale production.
6. Green Buildings – Building technology research and development, or R&D, has meant 20 new commercial products in energy efficiency.
7. Fusion – We’ve already demonstrated human-engineered fusion on a small scale, and now we are trying to scale it up for commercial energy production.

The U.S. has made gains, but we still face challenges to a competitive energy future.

Even as other parts of the world grow rapidly, the United States still uses about 20 percent of the world’s energy, and the Energy Information Administration estimates U.S. energy demand will increase more than 10 percent by 2040. This growth alone is similar to Australia’s total energy production in 2010.

Second, although we have record oil and gas production at home, we need to be as independent as possible from those who might want to use our demand for oil to hold us hostage. Former Secretary of State Condoleezza Rice said she had “never seen anything warp diplomacy like high oil prices.”

And affording a tank of gasoline remains a struggle for many families: regular unleaded gasoline is consistently more than $3 per gallon on average in Tennessee.

Another challenge is failing to keep up in energy research and development that has given us the abundant, reliable, cheap energy we enjoy today—from unconventional gas to nuclear power. The amount we spend on energy research and development—nearly $9 billion in nondefense energy R&D in fiscal year 2011—is lower as a percentage of gross domestic product than major competitors France, Japan, Korea, and China.

While the United States has made more gains in reducing the use of carbon than any other industrial country, the National Academies of the U.S. and 12 other countries have warned that human activity has contributed significantly to climate change and global warming.

Thinking about the progress we’ve made on my grand challenges from five years ago, and taking into account the challenges we still have, let me suggest four grand principles that could guide our energy future.

Principle 1: Cheaper, not more expensive, energy

Five years ago, all the talk was about a cap-and-trade program for the United States, and deliberately raising the price of energy as a way of achieving clean energy independence. Last year I was in Germany, a country that adopted exactly that policy.

In addition, Germany is closing its nuclear power plants and becoming more dependent upon natural gas, but buying both forms of energy from other countries rather than producing it on its own. The Germans are subsidizing wind and solar, but are building new coal plants in order to have enough reliable electricity. What I found in Germany, in short, was an energy policy mess that discourages job growth.

The end result is that Germany has the second-highest household electricity prices in the European Union. When I asked an economic minister what he would say to a manufacturer concerned about energy costs in Germany, he said, “I would suggest he go somewhere else.”

The United States, on the other hand, has pursued a different track, the most conspicuous example of which is finding gas and oil by unconventional means. This has created for our country a remarkable phenomenon: a large amount of cheap, clean energy.

This cheaper energy has been the result of a peculiar combination of factors that, in my opinion, amount to a better national energy policy than most people give us credit for having. The first element is the entrepreneurial spirit of America and the large amount of private property ownership set in a huge private market. Another is access to capital, and a third and indispensable element is government-sponsored research.

Take our nation’s natural gas boom as an example. In the past, it was uneconomical to develop so-called unconventional gas. Government-sponsored research enabled it and demonstrated how it could be done, and a temporary federal tax credit that expired for new shale projects at the end of 1992 encouraged new sources of private capital.

Now, natural gas will be a big part of where we get our clean energy—which leads me to my next principle:

Principle 2: Clean, not just renewable, energy

Too often, we define our energy goals in terms of renewable energy, when we should mean clean energy.

There are a number of states that have a renewable energy mandate defined to include only or mainly wind and solar power. The U.S. Congress is regularly asked to pass a narrowly defined renewable energy mandate for the same purpose.

It is true these energy sources emit no air pollution, and these mandates say that a certain amount of electricity generated within a state must come from these specific sources.

But focusing on this narrow definition for clean energy misses the point, and at a high cost to our electric bills. Such narrow definitions also discount hydropower and nuclear power, our country’s cheapest and most-available sources of air-pollution-free electricity. In the Tennessee Valley Authority region, for example, more than 95 percent of our pollution-free electricity comes from TVA’s dams and three nuclear plants.

Second, mandating renewable energy runs the risk of creating too much reliance on sources that generate power only intermittently.

There certainly is a place for these renewable technologies, and solar power especially seems to me to have great promise. But renewable energy consumes great amounts of space. It would take a row of windmills all the way from Georgia to Maine on the Appalachian Trail to generate the same amount of electricity we get out of four nuclear power plants.

Fortunately, we have plenty of rooftops on which to put solar panels. And when they become cheap enough and aesthetically pleasing enough, they will probably become an increasingly important supplement to our country’s huge appetite for electricity—especially because the sun shines during the peak use hours. And battery technology will help make all forms of renewable energy more useful.

That brings me to my next principle:

Principle 3: Research and development, not government mandates

It’s hard to think of an important technological advance that has not involved at least some government-sponsored research, especially in the area of energy. The most recent example is the development of unconventional gas that was enabled by 3D mapping at Sandia National Lab in New Mexico and the Department of Energy’s large-scale demonstration project.

There is an argument that by imposing government mandates, just as by imposing higher prices, government could force some innovation that could move us toward clean energy independence.

But I think the surer path would be to double the $9 billion we spend annually on non-defense energy research and development—and trust the marketplace to produce better results.

In 2005, the “Rising Above the Gathering Storm” report—written by a commission led by former Lockheed Martin Chief Executive Officer Norman Augustine—recommended doubling energy research and development. And in 2007, Congress responded, passing the America COMPETES Act with overwhelming bipartisan support.

One small agency that is the result of America COMPETES is ARPA-E, and it’s already showing signs of the wisdom of this approach. ARPA-E has helped improve battery technology and worked to produce liquid fuel from microbes, among other accomplishments.

Seeing how our free enterprise system can capitalize on this brings me to my fourth principle:

Principle 4: Free market, not government picking “winners and losers”

We are more likely to have abundant supplies of cheap, clean, reliable energy in the United States if we trust the marketplace.

The most appropriate role for government is in research. I believe a second role is limited jumpstarting of new technologies.

For example: Unconventional gas involved government research and a limited tax credit. The full tax credit for electric cars was capped at 200,000 vehicles per manufacturer. To encourage innovation in nuclear energy, the government provided research and licensing support for small modular reactors for five years. Even for nuclear power plants there is a production tax credit, but it’s limited to 6,000 megawatts.

On the other hand, President Reagan used to say “the nearest thing to eternal life we’ll ever see on this Earth is a government program” and that’s too often the case with energy subsidies. The most glaring example is the more than 20-year-old subsidy for wind power, a technology that has matured.

It was supposed to help jumpstart wind, but we’ve already lost $16 billion in federal revenue from 2009 through the end of 2012 alone, and Congress just added a one-year extension costing $12 billion. The wind industry’s idea of a phase-out would cost tens of billions more. People talk about big oil, but the big, unnecessary subsidy is Big Wind, and a much better place to spend our money would be energy research.

I’ve been fascinated with the progress we’ve made on the seven grand challenges I suggested five years ago. Perhaps by focusing on these four grand principles, we can capitalize on this progress toward cheap, clean, reliable energy.

Oak Ridge’s evolution since its Manhattan Project days provides a good model. About 70 years ago, the astonishing collection of physicists that produced the two atomic bombs also enabled nuclear power, nuclear medicine and other technological advances.

What can we expect five years from now? To get a glimpse of the future, we might look at things that fit within the guiding principles I’ve suggested today.

Small modular reactors and virtual reactors that scientists at Oak Ridge are developing will revolutionize the safety and effectiveness of our nuclear technology. Game-changing manufacturing is also on the horizon with 3-D printing. And ARPA-E and other groups are increasing the reliability of our electricity supply.

This country of ours is a remarkable place, and with the potential I’ve described—and the principles I’ve suggested—a competitive energy future is well within our grasp.

Sen. Lamar Alexander is the ranking member, or lead Republican, on the Senate Appropriations Subcommittee on Energy and Water Development, and a member of the Senate Energy and Natural Resources Committee.