Why Can’t We Grow New Energy?

November 27, 2007

I watched a TED Talk by Juan Enriquez titled Why Can’t We Grow New Energy? The general premise behind the talk is that new biological processes will make the extraction of energy from hydrocarbons much more efficient. He compared the efficiency gains to the Green Revolution that allowed food to be grown at cheaper and cheaper prices.

OK, I’m following but I’m confused because I’m expecting to hear how this technology will impact the carbon cycle and fix global warming (I guess I’m conditioned). Instead I hear about how efficiency gains in energy extraction/production will solve our future energy needs. Sounds great, I’m all for technical progress but doesn’t that just lower the price of energy and not really change the carbon footprint problem?

So as I’m busy scratching my head the talk ends with the following.

One of the things that we have to do is stabilize oil prices. This is what oil prices look like [shows oil price graph]. This is a very bad system because what happens is that your hurdle rates are set very low. People come up with these smart ideas about solar panels or for wind or something else and then, guess what, oil prices go through the floor and that companies go out of business and then you can bring the oil prices back up.

So if I have one closing and modest suggestion. Lets set stable oil prices in Europe and the United States. How do you do that? Well lets put a tax on oil that is non revenue tax that basically says for the next twenty years the price of oil will be whatever you want, 35 bucks or 40 bucks or whatever you want. If the OPEC prices falls below that we tax it, if it goes above that price that tax goes away. What does that do for entrepreneurs what does that do for companies? It tells people if you can produce energy for less than 35 bucks a barrel or less than 40 bucks a barrel or less than 50 bucks a barrel, lets debate it, then you will have a business. But lets not put people through a cycle where it doesn’t pay to research cause your company will go out of business as OPEC drives alternatives and prevents bioenergy from happening.

This is a “modest” suggestion? Fix a bottom price on oil to encourage entrepreneurs to do more energy oriented research.

Juan Enriquez sounds like a really bright guy and Wikipedia says that he “is recognized as one of the world’s leading authorities on the economic and political impacts of life sciences.”

So why such a disconnect with free market principles? Is it academia in general or perhaps seeing the world through the lens of research grant funded innovation that makes suggestions like this seem modest and reasonable? Am I out to lunch with my misguided faith in free market economics when this is clearly a case for government command and control? I’m confused…. really confused.