A buddy of mine built his Taekwondo studio several miles from the nearest city sewer system. However, city policy required him to connect to the sewer rather than to use a much less costly septic system. The additional cost imposed by the city to run several miles of pipe that would be large enough to handle the sewage of the population that would eventually make its way out toward his studio made building at that location cost prohibitive given their regulations.
This example demonstrates two things; one the cost of regulation sometimes means the loss of otherwise viable businesses. Second, the way America goes about infrastructure development can impact how we view the competitiveness of businesses. In the taekwondo example, this man belongs to an association of over 1,300 studios and has the most profitable of all the studios in the country, yet the irresponsibly misplaced infrastructure policy of the city made it appear otherwise.
When I left the energy industry back in the ’90s, the cost of electricity made from wind was about 160 percent of the cost of that made from natural gas. Therefore, based on economic proformas, no business would logically invest in wind power. But what made wind energy more expensive? For one, the cost of placing electric lines out to wind projects to connect them to the grid made them less economical. Certainly, if there were much larger wind farms using the same electric grid, the cost of connecting would have been much less and the viability of wind much greater.
Another issue with looking at alternative energy purely from an MBA’s spread sheet is that it does not care about the nation state, only the industrial state (our burgeoning multinational corporations). When two thirds of the cost of an oil fired power plant’s electrical energy is sent to Saudi Arabia, the transfer of wealth from America to the Saudis is not reflected in the calculations. The above the line profit benefit may be greater to the company with oil fired power, but that may not translate to the economic benefit to our nation state, America. Without understanding that the two motives are different, the United States will continue to be dictated to by nonaligned motives of our MNCs to the detriment of our future viability as a nation state.
Additionally, by not looking at the potential lifecycle cost of oil as it relates to the exponentially growing demand for oil and the parabolic reduction in supply of this dwindling resource, we are potentially creating a nationally damaging bias toward hydrocarbonically created electricity. Hydrocarbon fuels are facing an exponentially increasing price that is not reflected in current utility business models that base decisions on relatively short time frames. At some point, the exponentially growing price of hydrocarbons will make the less steeply growing price of a more highly capitalized alternative energy plant competitive even from an MBA perspective.
This potential presents several issues. First, if America is caught off guard by quickly rising foreign fuel prices having failed to invest in alternative energy technology and having failed to build the capacity to react quickly with new sources of energy, the cost to America of much higher energy prices over a long ramp up time will be much greater than the additional cost of investing now to create a technological base for alternative energy.
However, the way we go about investing in alternative energy is just as important as the fact that we should be investing now. A recent post discussed that China was building a wind energy farm in Texas. How is America building technological expertise when we export technology development to China? How is America reinvesting maximum dollars back into American resources by investing in China’s wind energy company? This is one simple example of how a national strategy of alternative energy development can have a horribly ironic and ineffective implementation when the overall goals of our national strategy are not carried out through all aspects of development.
If we are to achieve a sustainable America into the 21st century, America must vigorously pursue an energy policy designed to enhance our nation’s core skill in producing alternative energy. It must think in terms of the nation state and not our highly political and well lobbied industrial states. It must pursue scale of grandeur that creates economies of scale instead of continuing to compare projects on a flawed vision of limited size. America will soon face a future of capacity limited by our failure to plan for diminished hydrocarbons and our short sided vision, resulting strategies, and flawed implementation driven by highly manipulative industrial states that our courts have given citizenship status could be our down fall if we do not recognize it in time to react.