Mixed signals on energy policy

This winter, a handful of people in Minnesota won't have to worry about oil or gas prices. Jamie Juenemann is one of them. He lives in the country north of Two Harbors, and he's installed his own energy plant.

Behind the house, there's a pole 84 feet high. At the top, a modern windmill turns to catch the wind. Sometimes Juenemann just stands and watches it.

"When we have those cold, bitter, raw days and the wind's howling out there, at least there's some solace, some consolation that we're producing a lot of energy as a result," Juenemann says with a chuckle. "So it makes the weather more tolerable, anyway."

The Juenemanns also have a solar hot water heater mounted on the roof. And last fall they installed a geothermal heat pump, which brings underground heat into the house.

"This was the final phase in our goal to become carbon-neutral," Juenemann says, "essentially producing as much energy as we're consuming."

INVESTMENT FOR THE FUTURE

Juenemann says he chose to install this equipment because he's concerned about climate change. The less fuel he burns, the less he's contributing to global warming.

Of course these systems aren't cheap. The Juenemanns took out a second mortgage to pay for them. It was a big decision, but Juenemann says they're doing what they can to make sure their young daughters will inherit a liveable world.

"It's all about choices," he says. "We have the choice to either purchase a Chevy Suburban, or we can use that same outlay, that same expense, and put in some renewable energy systems."

Eventually these systems will pay for themselves. In about eight years, Juenemann will be getting free hot water from the solar heater. In 10 years, he'll have free heat from the earth. In 15 years, free electricity from the wind turbine. Already, he's selling excess electricity to his local power co-op.

This fall, Juenemann is adding some solar panels to produce more electricity. He's taking advantage of several new government programs that help pay for renewable energy systems. The programs are covering almost three-quarters of the cost.

A MIXED MESSAGE FROM THE GOVERNMENT

Those programs are part of last year's federal energy bill. Many states have set up similar programs. Those subsidies have spurred a big jump in demand. In fact, right now, there's a shortage of solar electric panels.

Advocates say that surge in demand will prompt expanded production, as well as more research on better ways to make the panels, which should bring the prices down.

The growth in the industry has been sort of dependent on those financial incentives, which are at the mercy of politics.

The trouble is, the federal tax credit ends next year. That short window makes it hard for businesses to plan and grow.

Mike LeBeau owns Conservation Technologies, a Duluth company that installs energy-saving equipment. He says small companies like his, and even large-scale wind projects, have moved in fits and starts because of the uncertainty of government help.

"The growth in the industry has been sort of dependent on those financial incentives, which are at the mercy of politics," LeBeau says.

And politicians have been sending a mixed message about energy.

Last year's legislation offered a smorgasbord of subsidies for nearly every energy source. But it didn't send a clear message favoring one over another.

FOSSIL FUELS OR ALTERNATIVES?

That's OK with John Felmy, chief economist at the American Petroleum Institute. He says the country depends on traditional sources.

"If you look at how much we get of our energy supply from oil, it's roughly 40 percent. If you look at what we get from alternatives, it's less than 1 percent," Felmy says. "So you have to say, 'Where can you get the biggest impact from encouraging additional supplies?' And those numbers of 40 percent clearly dwarf what you have from the alternatives."

He says to help consumers, and to keep the economy strong, the government should make it easier to drill oil wells, import natural gas, and transmit electricity.

Others would rather try to damp down the demand. J. Drake Hamilton is a scientist with Fresh Energy, a Minnesota nonprofit pushing for a quicker transition to clean energy sources.

Hamilton points to a Minnesota program that offers rebates to people buying Energy Star appliances, and helps businesses find ways to save energy.

"We saved so much energy that there were two big power plants we never needed to build," Hamilton says.

In the next five to 20 years, conservation could cut Minnesota's energy needs by 10 to 30 percent.

Conservation also offers an environmental benefit -- it doesn't contribute to global warming.

There's another perspective. Some people say if consumers paid for the true costs of burning coal and oil and gas, the prices would be a lot higher. Prices would include costs like damage to the environment, health effects, and possibly even part of the Pentagon budget.

Economists call these external costs, and they argue over how to set a price on them.

Environmentalists say we should start charging an extra tax on fossil fuels, because they contribute so heavily to global warming. At the same time, we could reduce the income tax, which would make the shift revenue-neutral.

The higher tax on fossil fuels would mean higher prices, which would make renewables more competitive.

MORE RESEARCH IS THE KEY

The American Petroleum Institute's John Felmy says we don't know enough to fairly internalize the environmental costs of fossil fuels. But he says the government should support research on new technologies.

"Climate change is a long-term problem; it'll take long time to solve it, and so technological development will be key," Felmy says.

But the U.S. may have given up its role as inventor to the world. Germany, Spain, and Japan already have healthy industries centered on renewable energy.

J. Drake Hamilton, from Fresh Energy, says the world is bound to shift to new forms of energy sooner or later -- it's just a matter of when.

"We used to burn a lot of wood in this country. We used to burn whale oil around the world. We've made lots of energy transitions over time," she says. "Now is the time to make the energy transition away from fossil fuels."

There's nothing new about government subsidies for activities we think are good, or taxes on things we think are bad. But so far, when it comes to energy, Congress hasn't been able to agree on which is which.

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