Peter Grossman is a professor emeritus of economics at Butler University and the author of the 2013 book, U.S. Energy Policy and the Pursuit of Failure. In this episode, Grossman recounts five decades of bad policymaking in the U.S. including his list of the worse efforts (synfuels, price controls, and corn ethanol) how members of Congress are motivated by the “do something dilemma,” and why California is the “poster child for failure in energy policy.”
Robert Bryce 0:04
Everyone, welcome to the power hungry Podcast. I’m Robert Bryce. On this podcast we talk about energy, power, innovation and politics. And I’m pleased to welcome my friend Peter Grossman. He is the author of US energy policy and the pursuit of failure. Peter, welcome to the power hungry podcast.
Peter Grossman 0:19
Well, thank you, Robert. I’m delighted to be here to be discussing this with
Robert Bryce 0:24
you. Now, I didn’t warn you, Peter. But guests on the podcast introduce themselves. So you have a long CV. If you don’t mind, imagine you’ve arrived somewhere and you don’t know anyone. And you have, say, 4560 seconds to introduce yourself. Please go.
Peter Grossman 0:38
Okay. Yes, I’m Peter Grossman. I’m the Clarence Ephraim son, Professor of Economics emeritus at Butler University in Indianapolis. I have a PhD in economics, and that got probably disqualified this quarter disqualifies me in the eyes of some people. But I’ve been, I started out as a, as a journalist, excuse me, started out as a journalist, and was writing mainly magazine articles when I decided to go back to school and get a doctorate. But I continue to write things that the actual people as opposed to economists can read. And so I’ve written about, I don’t know, maybe 150, or more op eds over the last 20 years. And the book was meant to be a general, for general readers, the but it’s, it’s got things like graphs in it. And I had a friend who we urge that she read the book, and she, she wrote an email back saying she started it, but there are graphs or charts as well. Yeah. I don’t know that she ever finished it.
Robert Bryce 2:09
Well, here’s the book. It’s meant
Peter Grossman 2:12
to be a textbook. Right?
Robert Bryce 2:15
So just one quick thing. I’m getting a little feedback, a little noise on the is there something hitting your your computer there something there were just some scratching noise or something? But
Peter Grossman 2:24
I’ve been my hand. Okay. So this is the book, it’s
Robert Bryce 2:27
a US energy policy in the pursuit of failure. It came out in 2013. So this is not a new book. But we’ve known each other for a while you’ve you’ve published other books as well, right? Yeah. You have two other income, the darkness you published in the 70s. After the blackouts?
Peter Grossman 2:42
Well, actually 8181. Okay. That was a book that was meant for for kids, ages 10 to 14. And it was about the blackouts, which I was sort of in the midst of back in in 1978, I guess it is right. And there was looting. And there was all sorts of craziness going on in the streets below my window, and my apartment in New York at the time. And so I decided that I wanted to write something. So I saved a whole mass of articles about it. And sure enough, I was asked to write a book for children’s book. And the proposed book was not possible for me to read that right, the one that they suggested that I write. So I suggested, well, how about one about the blackouts? Right, and they thought that was great. Just so in came the darkness.
Robert Bryce 3:45
So the reason I wanted to have you on Peter, you’ve obviously been writing about the energy business for a very long time now. And even though this this book, US energy policy, and the pursuit of failure came out nine years ago came out in 2013. I wanted to talk to you because it sure seems relevant now. And in terms of where the US is in terms of energy policy. But let’s back up and I want to talk about what your history which really starts in the Carter administration after the first oil during the oil shocks. But what led you to write this book and now it’s now more than 10 years ago when you were writing it, but what was the thing that spurred you then to look at this?
Peter Grossman 4:28
Well, at the time, I was a professor of economics, and I was also a column, a regular columnist for the Indianapolis Star. And so I started writing about things that I knew about with respect to economics and had to have some economic elements to it. And so I started writing about energy again, and also did a couple of scholarly things on energy and did a number of articles about energy and and I decided, as I looked closely at it, that in fact, the books that I had written back in the textbook that I co authored back in the 80s, was not really, right, there was something that was missing. And so I decided I wanted to write a book that was focused on energy policy, that book in that textbook in the 80s, Introduction to energy was already entering its third edition. And so I contacted the editor at Cambridge, because as also a Cambridge book, and wrote a prospectus as to what I would be writing about in a book about energy policy. And they went, they agreed to it. And so I started writing it. And then I had to deal with the Congressional Record and the various sources in the admitted libraries of past presidents. And I, you know, I’m just grateful that I came out of it without a neurological disorder, because reading that stuff is really well, it was crazy. And also, often funny, I mean, except for the fact that it was costing the country billions of dollars, that they kept making these foolish kinds of mistakes, and learn nothing. From the past. They weren’t went around the that is the policymakers, people in Congress, in the bureaucracy, President, and so on, they kept making the same kind of mistakes. So I said, Well, I really need to look at this closely. And I did starting in I believe, Oh, nine or Oh, eight when I had a sabbatical. And then I started writing it and and there it is, in your hand.
Robert Bryce 7:06
Well, and it’s the most thorough book that I know of that documents, this now five decades of congressional moves and executive orders and so on that are looking at energy policy. But would you make the point that the there was a long string of failures going from oil shale, right, we’re winning today, we’re talking about shale oil, oil shale, corn ethanol fusion, you cite in the very beginning, a bill in 1980, you quote you cite Jim Wright had Congressman from from Fort Worth, where he says that they passed the magnetic fusion energy engineering act of 1980. And Wright declared May, this may well rank alongside the great discoveries of history, the discovery of fire, and the discovery of electric power. Now, that’s 42 years ago. But what you make the point I think the key that you talk about here is that the push has always been that policymakers have to do something right. They can’t just leave this alone. And is that the net of it? Is that the I’m not gonna say the root of all evil. But the root of all this bad policy is this motivation? Well, we have to do something.
Peter Grossman 8:16
I think that there’s a lot to that. One of the things that happens when there’s an energy crisis, because most of the policies that have been enacted over the past 40, odd years, 50 years, I guess, now that most of the the major changes came about during or in the aftermath of the energy crisis, or so called energy crisis, because a couple of them, although they were called energy crisis don’t seem to add up to anything that most people would think of as a crisis. Although anytime people were being meeting and gas lines, you could call it something an energy crisis, and most of the country would go along with you, because they were very unhappy about the kind of the present situation, right. But one of the things about energy policy is that, as you will know, for sure, and probably most of your listeners know, energy can be very complex and and for any kind of issue, it’s a real big kind of issue where you have technological issues that are hard to understand, unless you’re, you spend a lot of time trying to learn them, social issues, other kinds of philosophic issues moral questions even as, in fact, I would just say, look at your books and you see just how difficult energy policy can be how many areas it encompasses. People in Congress really don’t understand it an order presidents is pretty clear from what they say. And the the upshot is that they wound up giving, making, making big leaps, when things are disastrous, and they feel that they have to do something, I call it the DO SOMETHING dilemma. The they have to act on, in fact, it’s a to me a three step process. One is that they have to engage right away, they have to say, Oh, this is awful, we can’t have the we can have the the price of oil being or the price of gasoline and being $5 at the pump. Well, we know that won’t happen. But immediately, they have to engage, they will make resolutions and Congress will make speeches. And if the crisis goes away, which it often does, in the moment, carry crisis goes away, then they just forget about it, and they move on to something else. If it persists, then people begin to start introducing various kinds of legislation, or the president begins to contemplate executive orders. And the bureaucracy says we need to do this, and so on. And the after that will play itself out if in fact, the crisis situation ends naturally after a few months, right. But if it persists as it didn’t 79 as it did in Oh, 708 that then they you start getting really radical proposals and in fact, often the results, you’ll get radical kinds of policies being enacted. I mean, in 7980, we wound up with the sitophilus Corporation, which was supposed to replace all I, if I remember correctly, 2 million barrels a day of imported oil by turning coal into an oil substitute. And oh, seven, it was ethanol. That was going to be the panacea of the of the year. And it was going to be made from switchgrass and other kinds of things that by it would be viable by 2012. I believe if I remember George Bush’s.
Robert Bryce 12:51
That’s right. Yeah. That the ethanol that was going to be that was going to cure this the important oil issue. And that that was, and this was the national security hawks, I wrote, you know, I have a whole book that I published in 2008 about this, but the gusher of lies and dangerous delusions of energy independence, but right but it was like it was the national security hawks, James Woolsey, they had these other, you know, functionaries who signed this set America Free proposition, but it was all based around biofuels. So there’s just this incredible push for biofuels that still now is lingering today. But But anyway, so you’re saying that this this do something dilemma that that’s the motivator? So that handicap this for me, then if you don’t mind? Because I want to read some of these things about hydrogen because you talk about hydrogen in the book as well. What’s been the biggest flop? I mean, great for me here given you, you write about ethanol, he talks about biofuels, hydrogen, syn fuels, fuel cells, we there’s a whole bunch of examples in the book. But is it possible to highgrade them here to say this, this program failed the most or the most spectacularly?
Peter Grossman 13:59
Well, I think that probably the most spectacular failure was in fuels. But the probably the worst bill and was ethanol, because we’re still living with it. And it is been a drain on everything for the past 15 years, and it has such a large constituency that I don’t see it ever being repealed like they did with us in fuels Corporation,
Robert Bryce 14:30
and that constituency is the the Iowa primary for President right. And Iowa as a swing state, but it’s also the farm lobby and you know, there but I haven’t like I understand the arguments around ethanol as a oxygenate right and fuel but you can you can also synthesize that from natural gas. This is there’s other ways to produce oxygenates but this idea that we’re burning food to make motor fuel. I still hate that and I haven’t written Anything about ethanol for a while, I probably should. But so you say you’re so okay. So I’ve asked you to high grade them and rank them. So you say ethanol, then cellulosic ethanol, I guess whether we use corn or cellulosic goods. It’s a tie. But okay. So what would rank second third? Can you can you handicap them then?
Peter Grossman 15:18
Oh, gee, I’ve never thought of this before. But
Robert Bryce 15:22
I bring you on the podcast here at Grossmont.
Peter Grossman 15:27
All right, I’ll give it a shot. Let’s see, possibly the the next worst policy was the giving the pricing of natural gas to the Federal Power Commission, there was back in 1954. Okay. And within 17 years, there was a belief that it engendered a belief that, and a belief that lasted for another 15 years that we were running out of natural gas. The and it was actually banned. For electric power generation. Yeah, the 1878 power something
Robert Bryce 16:28
power planet industrial fuel use act that was sponsored by Robert Byrd right, that this was the Yeah. Well, that’s good. So So just want to recount so you said fuels would be first, then ethanol second, and then federal price controls on natural gas that but that that even goes back to the 70, almost 70 years to the 1980s.
Peter Grossman 16:48
Yeah, is almost 70 years. In fact, in some way, it goes back to the 30s. Because there was this dispute over natural gas pricing. And natural gas pricing also produced some of the unintentionally funniest debates in in Congress, which were the various senators were arguing over whether the price of natural gas should be set at $1.50 per 1000 cubic feet. No, someone said it should be no greater than 130. And they’re having this argument about what the price of natural gas should be. In fact, if you didn’t control it, you’ll find out what it is, what the actual demand is, and what the price would be set at by the marketplace.
Robert Bryce 17:41
But it’s interesting, you bring up the gas part of it, because that’s a I wrote about that, and the push to deregulate it. And under the Reagan administration, which was successful, and I think was important in it and much needed, but that the interstate price controls during the late 70s. Texas was a Washington gas, there were no shortage of gas, but there was a shortage of gas that could move across across state lines be traded in the interstate market. And because there were there were limitations on that, or price controls on that. You had states that were massively short of gas and other states that were washing gas, but it was because of excessive government meddling in the marketplace. Is that a fair assessment?
Peter Grossman 18:19
Yeah, and and the result was that the places that were short of gas were in somewhat desperate straits during the 70s. Because that there’d be a very, there were a couple of very harsh winters, right. And people had because people were cut off from natural gas, or we had had it rationed. I can remember exactly what yeah,
Robert Bryce 18:42
I’m still getting a little rustling noise. Peter, is that on your desk? They’re just
Peter Grossman 18:46
nine. Yeah, I’m my I’ll keep my hands off my desk.
Robert Bryce 18:49
No problem. So let me let me so that’s great. I’m glad to get your your your list of the worst policies that were that had been enacted.
Peter Grossman 19:01
For the next one, it would have been oil price controls, I suppose, because that certainly was up there among the worst of the worst.
Robert Bryce 19:11
And that was in the Nixon administration, which led to really, people talked about OPEC and the OPEC oil embargo being the cause of the shortages No, the prod the problem was that there were federal price controls on on the price of gasoline and the refiners couldn’t make money with the price controls right.
Peter Grossman 19:28
And also by the way, the solution to that I put should put solution and scare quotes. solution to that was allocation controls.
Unknown Speaker 19:42
Which rationing, I was stupid.
Peter Grossman 19:45
A response as one can make it. Okay, we’re not getting enough oil or enough gasoline around. Well, let’s just decide where it goes. And what are we use to decide we’ll use what they use last year? Well, that really was about as bad an idea as we can get. And they got rid of the initial allocation controls, but substituted something that was almost as bad. And the result was that we had a second energy crisis in the late 70s, where the were gas lines, once again, were the story around the country.
Robert Bryce 20:34
Right? Well, so let’s go, I’m gonna come back to this idea of the markets and federal price controls and somebody because that’s something that Biden administration has even floated in the, in recent days talking about, oh, we’re gonna control implement price controls, but you didn’t mention hydrogen. So I’ll just recap. Since in syn fuels, ethanol or biofuels, what was the third one was natural gas price controls, and then oil price controls would be the top four. But I was intrigued to buy what you wrote in the book about hydrogen. And you pointed out that was in let me just find it here. right quick? Because I wanted to read it. The Oh, yes. That the final bill, you’re talking about one of the the bills that was passed during the George W. Bush administration, final bill included funds for Bush’s hydrogen project, but nothing about Anwar. And you just point out that, that Bush announced out of the somewhat out of the blue $1.2 billion initiative to create a car powered by hydrogen fuel cells. This idea was entirely quixotic. Given that there were enormous technical problems to overcome to make such a vehicle commercial, commercially viable, and experts argued that commercialization would take decades. So I went back and did some research in advance of our discussion. And I found the 1979 report from the National Academy of Sciences, quote, cost considerations presently inhibit the use of hydrogen as a fuel is by no means certain that a widespread market for hydrogen as a fuel will materialize until it is forced by hydrocarbon limitations. Another report 2004 by the National Academies, their major hurdles in the path to achieving the vision of the hydrogen economy, blah, blah, blah. And yet today, we see these academics as particularly from Columbia University’s Oh, hydrogen and will always push for hydrogen. That would be in my view, one of the other ones, it’s like, well, how what is it made? So here’s the question, why is hydrogen so attractive? What is it about this energy carrier that just keeps coming back over and over again, for now? What 42 years
Peter Grossman 22:42
doesn’t create pollution? That’s, I think the main the main argument for it, but what you’re we’re referring to is something that’s really been ubiquitous with respect to energy policy is that and that is that the people who are proposing this in Congress are presidents really don’t have any idea of what the feasibility is with technology. And they often ignore reports that say, it’s not really feasible. Carter had to ignore five different Report reports from inside his own government saying that this infills idea was not going to be viable. Bush obviously was not poring over the reports about hydrogen
Robert Bryce 23:34
from the National Academy.
Peter Grossman 23:37
I am in in so that it seems that feasibility and results, there’s also no you know, what happens if, okay, you make something that allows for hydrogen cars to be come viable. As Not that that’s likely to happen anytime soon. But let’s say you couldn’t do use you solve the technological problems, you deal with economic problems. And you deal with you come up to the point of saying, Okay, now, what do we get? Okay, we got hydrogen cars, hydrogen powered cars, right? How, how much is this benefit? In what way? Is this benefiting? How do we measure whether or not it’s a really good thing? There’s no metric that in any of us, and that’s true right now of the Biden administration’s energy proposals. What is the metric there? It’s going to tell us that if in fact, they were to do the all the stuff that was in that bill that won’t build back better about climate? What would right what were the metrics going to be? How are we going to tell whether that we’ve spent money wisely? There’s nothing in there that really I mean, think that it is entirely possible we could spend trillions of dollars, that would have no effect whatsoever, no discernible effect on the climate, and would essentially, forestall a lot of a lot of I’m sorry, my dog is barking in the background. So I don’t know if you’re picking it up. But anyway, so there’s no way of determining whether you’ve got a good program or not. And they don’t care about it. And when to do something, dilemma, framing framework, what differences in make what how, what the results are, because the results are going to be at least probably not out until at least through the next election cycle. So
Robert Bryce 25:54
so to do something.
Peter Grossman 25:58
We’ve done something, you know that there was a quote of in 79, I have a think I’ve put it somewhere here, in which Representative Peter Pizer during a debate about the energy policy, Carter’s Energy Policy Program up proposals. He said, a friend wrote him a letter saying, you know, if the Congress was only dealing was only doing something, even if it was long term, it would make a lot of a lot easier waiting in these gas lines. Joe, in other words, as long as Congress, I mean, this really encapsulated what the what Congress what the policy makers in the government, then and now really see as the important thing about energy policy. It’s not the results. It’s it’s that people constituents see that they’re doing something
Robert Bryce 27:00
that’s interesting. Anything
Peter Grossman 27:02
that in in July, or June, I can’t remember which one of 79, one of Carter’s aides went up on Capitol Hill, and found that the members of Congress were terrified to go back for July 4 festivities, because they were afraid of their constituents. And the aid of Jakarta wrote a memo saying that in Congress, they want us to be they want some, some action taken, even if it’s wrong.
Robert Bryce 27:43
What is what is that line about? There’s always an easy solution that’s obvious, something else and wrong or something like that. Right. But But that’s, that’s a good anecdote. Yeah. I
Peter Grossman 27:55
mean, it’s, it’s, as I said, we’re writing the book or I burst out laughing every now and then. But then I reflect on the fact that they were actually doing something wrong in the process of saying things that were very, very silly, to me at least,
Robert Bryce 28:15
right. But they had to have that impression of doing something that that was going to whether right, wrong or indifferent. One of the things that is as I was going back over your book, Peter, I pulled out my book. Now, this is my advertisement for my book from 2010. But it ties in with what we’re talking about here. Because this idea of doing something that do we do something is it also allows Congress then to pass the money around? Right. And that’s the other part of this. And so I just didn’t want it in the appendix in. In my book I included this headed is America’s convoluted energy regulatory structure. And I’ve noted that since 1971, the Christian Science Monitor estimate, there were 48 federal agencies and 14 congressional committees that had some some hand in federal energy policy. And then in 2009, the US Chamber said that there were 24 federal agencies and 25 congressional committees, playing roles in shaping energy policy. So Export Import Bank, you know, commerce, defense, AG, Health and Human Services, Homeland Security, Justice, state interior Treasury transportation, that the doing something you say, well, we’re doing something but it’s also a chance for a little bocce show around the spread the money around different can favorite constituencies help? How big a role what is that in all of this? You mentioned the corn ethanol scam. How big a role has this is this issue is the ability to spread the money around that that drives this failed energy policy?
Peter Grossman 29:47
Well, that’s a good question because obviously, one of the things that happens one reason we get passage of various bills is or executive orders is too To reward various groups who are helpful, and and you certainly can see that in, in a lot of cases, ethanol being the obvious one. I remember Charles Grassley, from Iowa, of all places here. Once we gave a speech and said some people say, ethanol is bad, I’m here to say it’s good, good, good. And, you know, okay, it’s good, good, good. And for him, he should have finished the sentence for me if it passes, and I get reelected,
Robert Bryce 30:43
right? Because I’m from Iowa, and my constituents are a lot of farmers and they have a lot of money and Archer Daniels Midland and the rest of the industrial complex gives me a lot of money to make sure ethanol stays in place. It’s interesting. Grassley was also the father of the production tax credit for the wind energy business, which now has been extended 13 times and solar and wind crowd are trying to get that.
Peter Grossman 31:07
As you know, there’s a lot of wind, energy and in wind projects in Iowa, are at least there were or and there. There are fewer that are being built now, because of your, as you pointed out, on numerous occasions, the resistance of people to large utility scale, solar and wind
Robert Bryce 31:34
projects. Yeah. Well, you’re in Indianapolis, I mean, Butler, you’ve been in Butler for a long time. And you see the similar kind of rejections in Indiana, Indiana, Ohio, Wisconsin. Those states have been among really in the front lines, as well as Iowa in this backlash and just published a piece of real clear energy about a 344 rejections over the past decade or so of wind and the solar stuff is getting is getting much more opposition now. So what do you think about the Biden administration? You know, we talked about this and, you know, I, I’ve written about it some and not flattering terms, but I’ll, I’ll stop and ask the question. So if you look, now, you’ve, you’re the dean of historians on American energy policy, and you’ve got a view back now to the Carter administration. I don’t know how many presidents we’ve got had then since since then, or even Reagan. How does the Biden administration compare in terms of its rhetoric around energy policy relative to other administrations?
Peter Grossman 32:39
Oh, that’s a good question. In many ways, I think this is the worst. Yeah, we I mean, at least in terms of the rhetoric, because they attempt is to gin up a crisis, in which essentially, the crisis is if we don’t do something, we’re all gonna die. Because it’s an existential crisis, right. It’s, it’s something that we live or die if we don’t change the energy system in the United States. I mean, usually, we can say, all right, we change the some aspect of energy in the United States and reward some people, and it’s bad for other people and so on. But with the kind of green New Deal, Jr, that the Biden administration has been pushing the there’s, it’s so grandiose and so implausible. That, you know, I think Carter would have been blushing if he had tried to present these things. And Carter thought that his energy policy would cure the malaise of the American spirit, as well as 50 or 60. Other things, I mean, every every energy proposal has somewhere between hundreds of 1000s and millions of jobs. Every 100, your proposal has all sorts of benefits for trade and for the economy and so on, most of which is is just pulled out of nowhere. But the Biden administration is really the epitome of of not asking about the technical feasibility, the economic cost, and the likely results of anything that they’ve proposed. And while the somebody wrote in on the hill, alongside your excellent article, by the way, that the green New Deal is dead. That was I think, The title of the piece right and build back better where it was going to be incorporating a fair amount of that is probably dead. But in the meantime, you have a new bill that was introduced by Bernie Sanders in the Senate with a number of prominent co sponsors, which is called the energy security and Independence Act of 19. Of 20 2219. Solar generate, what century I’m from that they, this bill is really a different version of, of the green New Deal. And but the interesting thing is the focus of it is on building manufacturing capability in the US for wind and solar. In other words, we won’t buy windmills from China anymore, we won’t buy solar panels from China anymore. And $100 billion to start with, would be the amount Oh, and there’s other stuff in there about environmental justice and so on the is very amorphous, right, but let’s just look at the the basic plan says, we’re going to have this big, big big manufacturing capability for producing 10s of 1000s of windmills and millions of solar panels. There’s nothing in there about opening mining. So that then raw materials that are essential to creating those manufactured goods, right, would have to be imported from China or Congo or wherever. And so we’re really still in the same place, except that we spend 100 million a billion dollars to build some factories. That whose rationale seems pretty slender, if not completely wrong.
Robert Bryce 37:10
So we so where does that come from? Peter? I mean, because it’s this. We talked about do something dilemma, but is it a willing blindness? Is it is it purposeful? Is it just wishful wishful thinking? I mean, we’ve talked about this before offline. And there’s different discussions around where did from where does this kind of magical thinking come? Or is it? Is it purposeful ignorance, or is it is it just true ignorance?
Peter Grossman 37:37
Well, I think I’ll give Bernie the benefit of the doubt. And also, Marky, and Ralph will have signed on to this, that they really believe the world is imperiled. And if we don’t do something drastic, the climate crisis will overtake us and will destroy us. So they see a crisis, they see the worst crisis and so does Biden. I mean, he’s used existential crisis a lot. Right? Now, if you have these kinds of crises, well, if you can convince people that there’s a crisis and the end, then it’s dire, and something must be done immediately, of great, great costume and expanse, that that you really believe that this stuff is important. And we need to pass a bill like this. Or, as I said, before, we’re we’re all going to die. And none of that makes much sense to anyone looking at the data. Anyone who tries to calculate how much it would cost and how many windmills you would need, and so on to replace. What is it 3000 plus power plants that are fossil fuel power plants that exist in the US right now? I believe you’ve done some work with us. And I know there’s some other people have, in which they’ve tried to calculate the cost of, of actually installing building installing and maintaining this incredibly vast array of windmills and solar panels that would actually replace all of the fossil fuel electric plants in the United States. Right, that the cost is like $300 trillion. If and it probably would still cost more than that, and would take far more than what we get. We’re, we’re talking about 12 years or something that used to be 2030. Now, I think it’s 2035. Right? 150
Robert Bryce 39:55
those estimates, right, those estimates vary, I mean dramatically. Right, and one that I just cite routinely is one from wood McKenzie. And I think it was from three years ago or so now, but they estimated to go to all renewable, just electricity would be four and a half trillion. Now, that’s a far smaller number than what you but you know, in certain respect, in my view, some of these cost estimates really don’t matter, because you’re still ignoring the first principles, which is where are you going to put it right? Where if you’re going to attempt this kind of renewable push, where in the United States, are you going to put all of those wind turbines and solar panels at a time when you see some just such backlash, but But you know, I’m, I’m biased on this? Because this is obviously what?
Peter Grossman 40:38
It also talks to this feasibility question. Right. And he really, actually set up all these wind farms and 1000s. It’s really 1000s of, of windmills. And where, yes, where are you going to put them? Where are you going to put all the road access roads where you’re going to put the power towers? high voltage lines? Yeah, 1000s of miles of high voltage lines. None of this is really being considered certainly not in, in Bernie’s bill, and I don’t think he I don’t think he understands that even I mean, there have been times when he’s said things about economics where it was clear, he didn’t understand what the issues were.
Robert Bryce 41:27
Sure. You said that when thought that popped in my head, and I’m looking at the, you know, the forward strip for natural gas prices in Europe, and one of the guests on the podcast I’ve had is art Berman, who’s a energy analyst based in Houston. And one thing he said popped in, it just popped in my head, as you were talking about that. He said, energy is the economy. Oil is the economy. And it sure looks like that in Europe. Now. I mean, you’re in a car, you’re trained as an economist, you’ve obviously, you know, not frontline seat front row seat for what’s going on in Europe. But there’s that how do you view what’s going on in Europe? And is there any hope in the near term for the what what’s happening there? Their natural gas prices are over $50 per MMBtu. Now, that’s 10x what it is in the United States? What do you what do you see in the as you look at Europe?
Peter Grossman 42:15
Well, you know, one of the things about energies, people talk about energy security, and the fact that we need to be sure that we’re going to have energy supplies. But what often it comes along with the question about paying or importing or paying some country or group of countries for for their energy supplies for their resources, right. But they, in terms of energy security, the one thing that really stands out as being a, an insecure and problematic thing is to be importing all your key your most of your key energy resources from one place. Right. And with natural gas, that’s been true for a lot of Europe, that they get it primarily from Russia. And that’s a condition which will be problematic or can be problematic. One of the things you know, but back in the 70s. People were defining what it meant to be energy independent. And we know a lot of that was nonsense, right? But one of the people who was defining his version of what energy independence meant was William Simon, who was treasury secretary under Ford. And he said that, well, energy independence would mean if we had many suppliers, we were to invent had too much coming to us from OPEC, especially from the Arab OPEC countries, right? So if we got rid of not got rid of them completely, but had alternatives, that that would mean we would be energy independent, in some sense. Now, of course, that’s one of one of about 50 different definitions of what energy independence is, but it does suggest energy security, at least in the the sort of most basic way of having energy resources when you need them. That that, essentially Europe violated that basic maximum. And they’re paying for it right now in both paying in terms of money and in terms of really being an A very dicey situation for production for survival, even as we know that extreme weather events, for example, may become an issue for Germany for various other parts of Europe, if they rely on Russia to provide them with energy, with natural resources with natural gas in particular. Sure.
Robert Bryce 45:35
As you’re saying that one of the things that pops into my head about it into my head too is the that famous Churchill line that energy security lies and variety and variety alone, right that that was, he was talking about oil supplies for the British Navy and what 1908 or something like that. But yeah, but I mean, Europe just hitched their entire wagon their entire energy fortunes to Russia. Now they are in, I mean, a world of hurt. But just a quick station break. My guest is Peter Grossman. He’s a longtime friend of mine, and been a great advisor and kind of a consultant to me on different things I’ve been running. He’s the author of US energy policy and the pursuit of failure, which now has been out nine years. But this book is very much relevant today, because of what’s going on you in one of your last chapters, or maybe it is your last chapter that it’s called modesty. And you argue for modesty in policymakers, you cracked me up. But you you do call for some policymakers, when they come to energy, that they should be more modest. And I can I could probably find that quote, but what do you mean by they need modesty? And you also want a second question. You also say we should reform or abolish the Department of Energy? What? Why?
Peter Grossman 46:55
Okay, well, let’s take the first question. For sure. Honesty means that you don’t think that you have the magic bullet for solving not just all energy problems, but for solving employment, and the environment. Happiness, that even that the grandiosity and in energy proposals is really a point to me of very poorly thought out ideas. How can you actually imagine that by putting out more windmills, you’re actually solving problems like, I mean, right now, we don’t really have serious unemployment problems. But supposedly, we’re going to create 6 million new jobs if we start putting up more windmills, and build the manufacturing capability that Bernie’s bill talks about. So that’s what I mean, when I talked about modesty, let’s say, what can we actually accomplish through energy policy? And what what is energy? But let’s start with that one. What do we mean by energy policy? Is it mean that we’re solving the malaise in the country? Does it mean that we’re actually solving any employment problems? Does it mean that we’re going to make the the climate change problems go away? I mean, the idea that even the name I mean, California called its 2006. Bill, the Global Warming Solutions Act of and it’s just so ridiculous. It’s so beyond anything that the whole United States can do much less California. Right. And so, the I think grandiosity is really a problem and energy policy has been going on since since Nixon proposed project independence back in 7473 74. Right he was going to make America completely self sufficient self sufficient and energy we won’t depend on anybody else, etc. And as long as we treat it, like the Apollo program, we need an Apollo program for for energy. We need a recently we need it a war operation work speed for alternative energy. No, we can’t get that kind of because energy She has a different problem from putting a man on the moon. And in fact, it was I think it was Mark Mills suggested No, it’s not putting a man on the moon. It’s like creating a city on the moon and moving a million people there. Right thing like that.
Robert Bryce 50:18
I’ll interrupt here because you you have a section called Apollo in the book. And I highlighted it here. And you talk about this idea of you say energy problems have to often been viewed through the prism of Apollo, seeing in the creation of new energy technologies, the image of men walking on the moon and the determined effort that got them there. By the way, if you haven’t watched chasing the moon, Robert stones film, it’s just fantastic. And so I think six hours three part series that was came out in 2019, but I just watched his incredible, but here I’m reading I’m reading from your book again here. The trouble with this image of talking about Apollo here is that it is the wrong one. The difficulty of creating a commercially viable solar energy technology bears no relationship whatsoever to the problem of putting a man on the moon. However spectacular the ladder, it only misleads when applied to energy policy. It conflates a demonstration, with commercialization, an engineering feat with a marketing one, a thrilling idea with everyday mundane market exchange. I call this the Apollo fat fallacy. It’s great. There’s a great line about just how you put that together. I like the way you wrote it. But I hear that the same thing oh, well, we just need an Apollo if willing, we replied ourselves more more. You know, we only we really focused on this we’d solve it. All of which ignores the problems of scale cost, you know, material availability, all these other things that we’ve been discussing. Right? Oh, those neodymium iron boron magnets. Oh, well, nevermind. China controls 92% of the market. We’ll make our own market here. How are you going to do that?
Peter Grossman 51:49
Yeah, I the Apollo fallacy is is something that I started actually, I had a scholarly piece on that. And it was eight I think, or rule seven. I was just really sick and tired of people making that claim that all we need, I think it would be it was a Thomas Friedman in the in the New York Times wrote an editorial in which he said, If only George Bush would come and out before America and say we’re going to become energy independent by 2016. Only he would do that. And I thought to myself, everybody said that. Nixon’s
Robert Bryce 52:40
going back two years before, right?
Peter Grossman 52:43
And where did it get us? I mean, it’s just Oh, yes. Okay. Gung Ho, we put a man on the moon. Okay, that was really great. But it doesn’t tell us anything about the difficulty and the issues involved in in creating a well now come creating completely new electric grid and a replacement for internal combustion engines.
Robert Bryce 53:11
Right? in transportation. Yeah, yeah.
Peter Grossman 53:15
Those issues are not ones that can be solved by a big engineering push. It’s those a lot of the issues relating to energy, and to, especially to alternative energy, which are often talking about, I have problems of physics and those problems are intractable, they’re not going to be solved because we throw more money at it.
Robert Bryce 53:46
So let me ask about one question here, Peter and my guest against Peter Grossman. He’s the author of US energy policy and the pursuit of failure. We’ve talked about you know, markets and you you advocate for more markets and allowing markets to to have a more say in how and where we, you know, put our energy and power systems. But is the electricity business fundamentally different? I mean, this is something we’ve talked about different different times. And I’ve written about that. There’s the electricity is not like the natural gas market that deregulate so I’ll ask the question, Has deregulation of electricity benefited the consumer because it or and or is it just a different kind of energy service are a different form of energy that we have to treat differently than we treat the oil market, the natural gas market, cold market, etc?
Peter Grossman 54:38
Well, I think that’s an important question. I have written in the past that electricity markets should be de controlled and allowed to be a marketization except perhaps for the grid itself. But obviously, all of the attacks EMPs that are to make changes in in electricity markets have been more or less failures, and sometimes really bad failures like in in California, of course, California is the poster child for failure in energy policy. But even Texas, which was supposed to be the poster child for how energy markets could work, they didn’t do so well. A winter or so ago, no proof from firsthand hasn’t benefited the consumer? Well, to the extent that California has is not a market system, you can see that the that there were a lot of other factors that have led California to be one of the most expensive electrical electricity states in the US. Right. And so I don’t know, I probably would be qualifying any kind of state statement about electric power, deregulation, real deregulation, I mean, California’s deregulation bill in 96, was this. No, it was, it was a mess. Well, one of the things that was in the bill, this is something that only legislators in California probably but maybe only legislators, period would think of, and that is to say that the bill, electricity prices must be coming down. And the consumers price prices for consumers must be coming down, and they can’t go up. And then we had a natural gas problem. So what did that mean in California? Disaster, right, and bankrupt utilities and everything. You know, a lot of people wanted to blame it on Enron, which certainly didn’t come out of it with showering with glory. But basically, the law was there to be exploited by clever people at Enron. It all started with very bad law now. It was no in no sense. And a number of people said this at the time. In no sense. Was it a deregulation bill? It was just a reregulation bill. And so we’re finding that changing around you know, changing around things is like rearranging the deck chairs on the Titanic. And California is. Well, I’m, I’m much more can I bash? I was actually invited to once to go to California, and to talk to members of the legislature about energy, realistic energy policy. But there was a I arrived a, you know, I was given a place to speak, and there were only a few people there. And someone said, Well, unfortunately, I just about 10 minutes ago, we got a notification that a major bill was had to be was coming up for a vote so all the legislators left, right. And so I talked to a few people who were there who were part of the energy industry mostly and went home. And I mentioned to someone that I was going to talk about energy policy of course this was after my book and come out as going to California and he said with with great passion, that’s the place where you really need to go they really need to hear what you have to say. Well, they didn’t
Robert Bryce 59:31
was it was just a couple of last questions and Peter. So what do you what are you reading now? What? I know you’ve retired from Butler I have a long career there. But what any books on your got a lot of books behind you there any what’s on your bookshelf? What are bookstand nightstand today?
Peter Grossman 59:50
Jake? I started reading a history of Ferdinand Magellan on Have circumnavigation of the globe? Um, back in 16th century? What else was I’ve been reading?
Robert Bryce 1:00:13
You recall the title on that one? No. Okay. So last question then Peter, what it’s the question I always ask my guests. And it’s one that I like, obviously, or I wouldn’t be persisting this way. So you’ve written a book that is, frankly, pretty sobering. And now nine years out after it’s published, it seems as relevant now as it was back then or maybe more relevant, given all the different energy issues that are we’re facing now. What gives you hope? What makes you optimistic?
Peter Grossman 1:00:48
You know, that that’s, that’s a tough one. Because one of the things that writing my book did was emphasize the negative. And the fact that energy policy was such a mess, someone once asked me at a talk that I gave, which president’s energy policies Did you like? And I took a long time to think about that one, then I said, George Washington is good to his horse. But optimism? Well, there is some reasons for optimism a bit. You, of course, have led the and been one of the leaders of, of people’s calling for a nuclear power, rebirth. And I think that that’s extremely important. That, to me, anyone who claims to be to care about climate change, and his anti nuclear is, is living in a completely confident, self contradictory kind of position. And so the fact that it’s getting something like that is getting somewhere, I hope, that, that that’s, that is a reason for optimism. That, as people get a more realistic view, I think also people are getting more realistic view of, of what climate change is going to mean. It’s not going to mean the end of humanity or the end of civilization in the next eight years, or even the next 80 years. But it’s something a problem we’re probably going to need to deal with. And one way to deal with it, of course, is to get rid of carbon dioxide producing engines. And one of the ways to do that, of course, is with nuclear power. So as people gain a little bit of realism in this, I have some hope that for the future that people will start looking at energy policy modestly and not believe that they that it’s a silver bullet to change the world.
Robert Bryce 1:03:25
Well, I think that’s a good place to stop then. And I’m hopeful I’m hopeful as well, and I hope hopeful for nuclear. I’m trying to be as pragmatic and realistic as I can, but it progress is made slowly. So yeah. Well, Peter, thanks for, as always for talking with me, and thanks for coming on the power hungry podcast. Again. My guest is Peter Grossman. He’s a professor emeritus of economics at Butler University. And his book that’s my favorite. He’s written several but it’s us energy policy and the pursuit of failure which is available at all fine booksellers. Peter, thanks for again for being on the podcast.
Peter Grossman 1:04:00
Well, thank you for having me. It was my pleasure.
Robert Bryce 1:04:04
And thanks all of you in podcast land. Tune in for the next excuse me next episode of the power hungry podcast. Until then, see you
Transcribed by https://otter.ai