Whatever Happened to the Energy Crisis? (And Other Embarrassing Questions)

by Lorna Salzman

If you are 25 years of age or less, chances are you weren't born in time to understand what happened in 1972. That was the year that an Arab oil embargo gave the oil companies the chance they had been waiting for: to raise gasoline prices fourfold. All across the U.S., supplies became scarce and spotty, and drivers began carrying spare gas tanks in their trunks if they drove long distances. Some cities instituted a system of selling gasoline on odd-numbered or even-numbered days depending upon the last number of the license plate. Talk of gasoline rationing was in the air.

That was the same year that the Blueprint for Survival and the Limits to Growth were published giving people the first clue that the profligate growth obsessed society was both environmentally destructive and unsustainable. A flurry of energy studies, articles, lectures and symposia on The Energy Crisis blew across the country and Europe. Energy became the No. 1 topic on everyone's lips; energy policy studies were all the rage in universities and think tanks.

Of course other countries had long paid a lot more for gasoline than the U.S., two to four times more in some places, but since their cars were smaller and more fuel-efficient, and because public transportation was inexpensive and convenient, this was not a huge hardship but rather a more accurate reflection of the value of gasoline as well as its social and environmental costs.

Americans on the other hand, were initially shocked out of their stupor but soon recovered and prepared to make sacrifices to protect their automotive way of life. Even government seemed ready to face the crisis with sensible and environmentally sound solutions, perhaps embarrassed by the fact that gasoline, a nonrenewable, highly polluting and high-grade fuel, costs less than milk, a pure and renewable food source and necessity of life.

Where are we today, nearly two decades later? Well, gasoline prices are higher, but still much lower than they were in 1972 and 1973, and still cheaper than milk. The automotive sector (vehicle fuel and roads) consumes about 50 percent of our fossil fuel energy. The energy policies talked about in Washington and in state capitols are things of the past. Big cars of six and eight cylinders are on the rise again. Construction unions, utilities and related service industries, as well as land developers and road builders and airlines, still control energy and transportation policy. Air travel is favored and subsidized while public transportation ins undermined and downgraded.

Amtrak subsidies are continually reduced, with total elimination perhaps the final goal of the Bush administration; bus and train service to "unprofitable" routes in out-of-the-way places has been sharply curtailed, damaging the cultures and economies of small towns and farming areas. Increases in gasoline taxes are looked on as anathema. Recreational vehicles for water and off-the-road use, and for transporting migrant retirees, proliferate like gypsy moths.

In big cities, and New York in particular, large office buildings and institutions burn their lights all night. Renewable energy technologies are at a standstill because of institutional, legal and political barriers but not least because of the termination of low-cost loan programs and the refusal of governments to make the regulatory process a level playing field for all energy sources (not to say the continued subsidy of fossil and nuclear fuels).

Implementation of better efficiency standards in appliances and in buildings remains voluntry and thus uncommon. Reform of building construction, materials and maintenance codes–insulation, lighting, heating, cooling–is suppressed by self-interested unions. All in all, the U.S. has not moved forward as a totality in pursuing sound energy policies since 1972, although certain industries for their own purposes have increased their energy efficiency in order to reduce their costs. Alas, government and commercial sectors are still living in a pre-1972 dream world of unlimited supply.

A look at New York City illustrates this perfectly. Once upon a time it actually had an energy office (for whatever it was worth) but it left no legacy. A recent New York Times article on the hiring of a William Squadron as director of NYC Telecommunications noted as an afterthought that he would also be in charge of energy for the city. But the office building lights still burn all night. The car traffic continues unabated into midtown Manhattan. Repeated urging by environmentalists to limit, discourage or tax these cars is studiously ignored. Sub-metering of electricity in multiple dwellings continues to be stymied by landlords as well as by those tenants who use inordinate amounts of electricity and are therefore subsidized by those who conserve or use less.

Perhaps the most egregious failing in NYC energy policy–one that best illustrates the ongoing hegemony of Consolidated Edison–is in the area of co-generation, which is simply the simultaneous generation of heat and electricity. In the "topping" cycle, fuel (oil, natural gas or coal) is burned to generate electricity from turbines, and the waste heat, converted to steam, is piped to nearby buildings for heat (that's why NYC streets have steam rising from holes; it's not the Fires of Hell as Jean Cocteau once declared). From the other direction, the "bottoming cycle", fuel is burned first for an industrial process and the recaptured heat converted to steam to turn turbines and generate electricity for onsite use or re-sale.

Co-generation still consumes fossil fuel but increases its efficiency of use by a factor of two to three. In Western Europe, co-generation provides about 25 percent of the total energy. In the U.S., it supplied 30 percent of industrial electricity in the 1920s, but is only about 8 percent today. The reason for the drop was that early central power station construction had economies of scale (which are no longer operative) and so the price of utility-generated electricity fell, undercutting the demand for co-generation facilities. Co-generation facilities are also of sophisticated design and need skilled personnel which tends to raise operation costs.

But the real reasons–the political and institutional reasons–blocking wider adoption of co-generation as an energy-saving measure–lie in the relationship of such new energy options to existing utilities. Co-generated electricity has to be delivered over existing utility systems; it needs a place to sell its surplus power, and still needs backup power which the utility has to provide. Utilities may also charge industry more to provide their electricity than they were willing to pay to the co-generator for its electricity.

The main reason that Con Edison has fought tooth and nail, and rarely successfully, to suppress co-generation is to protect its customer base and profits. Utilities have fixed capital, operation and maintenance costs over and above fuel costs, which are spread out over the total number of customers on their grid. If apartment complexes, schools, hospitals and government buildings began building onsite dual heat/electricity facilities like those at Starrett City and elsewhere, Con Edison would lose thousands of customers to the co-generators. The co-generator's customers would of course end up with much lower utility bills (which they would deserve inasmuch as they would be doing something socially desirable: using fossil fuels more efficiently). Con Ed, however, having fewer customers but presumably fixed costs, would have to spread those costs out over fewer customers, so goes the story, and electric rates would rise.

What Con Ed doesn't tell you, however, is that the rates would rise only because New York State guarantees it a fixed rate of return, which is presently about 11.5 percent, down a bit from some years ago. This is, you surely have noticed, not exactly the "free market" that corporations so proudly refer to but its antithesis: utility investors are guaranteed a risk free dividend and return on investment because Con Ed gets similar guarantees. Nice work if you can get it; this "free market".

Why should utilities get this guarantee? Why should they be investor owned rather than owned municipally, by its users? Why should the rate be guaranteed and sacred regardless of what the utility does? Above all, why should Con Edison and the Public Service Commission be allowed to contravene the public interest? The public interest is clearly served not by suppressing energy efficient power generation technologies but by the most efficient use of fuel, by less wasteful use by consumers, by reduced energy consumption, and above all, by rewarding, not penalizing, more efficient and less wasteful uses.

The system that guarantees Con Edison investors their return, regardless of the environmental and social cost to noninvestors, and which in so doing discourages co-generation and discourages reduced electric consumption (like shutting off lights in office buildings at night), is clearly a socially and environmentally irresponsible system.

It actually punishes those who would act responsibly by finding ways to use less fuel or use it more efficiently. It does this by explicitly rewarding Con Ed and its investors for not implementing programs to curtail consumption or use fuel more efficiently, and does not penalize the utility for either wastefulness or unnecessary power generation.

In brief, the structure of investor owned utilities is a prime example of the incompatibility of corporate capitalism with the environment and the needs of society. There are temporary fixes out of this bind such as rewarding utilities for avoiding the need for new electric capacity through conservation programs, but this still presupposes that energy supplies are appropriately a "free market" item and a commodity.

What we badly need is a re-conceptualization of things like energy, food and land, which are part of the global commons in their impact. The impact of energy use is, as the public has recently learned, global, the imminent global warming arises not because each dweller on the earth is equally responsible. It arises because of the overuse and squandering of hydrocarbon fuels by the industrialized nations, primarily the U.S. And within the U.S., it is the automotive fuel sector, followed by stationary power plants which is the chief culprit. So the notion that the "free market" and the rewarding of Con Edison for suppressing co-generation are compatible with solutions to global warming is pure nonsense.

This does not mean that there are no technological problems; it does mean, however, that they cannot be resolved in a vacuum. The regulatory and economic aspects of energy use are undoubtedly the chief obstacles to solving both the energy crisis and crises like global warming and acid rain. How and whether our elected officials tackle this will demonstrate whether our elected officials tackle this will demonstrate whether they have heard even a small part of the Earth Day message.

Source: Downtown, #205, August 1, 1990.

© 2002 Lorna Salzman. All rights reserved. Material may be quoted with permission.