national energy governance in the united states

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National energy governance in the United States

Benjamin K. Sovacool*

This article explores the institutional architecture in place to govern energy in theUS and its underlying principles. More specifically, it identifies the key institutionsinvolved with energy decision-making, with an emphasis on the national level and key legislative acts of the past four decades. The second section explores six historic guid-ing principles connected with national energy production and use, and the third sec-tion identifies how each of these conditions is eroding. The fourth section highlightsthe general implications of this shift for energy governance, namely that energy decision-making is now complex, inconsistent, vertically and horizontally fragmented

and politicized.

1. Introduction

The US is the world’s largest energy consumer. With less than 5 per cent of the global

population, it accounted for 27 per cent of primary energy use and consumed about

one-fourth of the world’s electricity in 2008. The country is home to 17,342 conventional

power plants totalling 1,087,791 gigawatts (GW) of generating capacity, approximately

527,000 miles of high-voltage transmission lines, 21,688 power substations, 1,298 coal

mines and 125 nuclear waste storage facilities—making it the largest electric utility systemon the planet. It is also home to 410 underground natural gas storage fields and

1.4 million miles of natural gas pipelines, as well as a transportation system including

4 million miles of roads and highways, 251 million registered passenger vehicles, 149 oil

refineries and 117,000 gasoline stations.1

A labyrinthine and complicated governance structure has arisen to govern such mas-

sive energy infrastructure, a system briefly explored in the first part of the section. The

country has legislated a number of influential energy policies, four of the most recent of

which are explored in the second part of the section: the Public Utility Regulatory Policies

Act of 1978 (PURPA), the Energy Policy Act of 1992, the Energy Policy Act of 2005 and

the Energy Security and Independence Act of 2007.

* Assistant Professor, Lee Kuan Yew School of Public Policy, National University of Singapore.1 US Energy Information Administration, ‘Existing Capacity by Energy Source’ (21 January 2009) 5http://www.eia.doe.gov/

cneaf/electricity/epa/epat2p2.html4; US Bureau of Transportation Statistics, ‘Data and statistics’ (February 2008) http://www .bts.gov/programmes/freight_transportation/html/data_and_statistics.html.

Journal of World Energy Law and Business , 2011, Vol. 4, No. 2 97

The Authors 2011. Published by Oxford University Press on behalf of the AIPN. All rights reserved.

doi:10.1093/jwelb/jwr005



The primary energy governors

The interstate nature of energy production and trade, the US Constitution and a number

of assumptions built into environmental law have largely made governing energy a fed-

eral, rather than state or local, affair in the US. Part of the explanation is that local actors

such as communities, municipalities and states face constitutional challenges to deal

with energy problems on their own. The Commerce Clause of the Constitution preventsthe states from interfering with interstate commerce—ie, interstate transmission and

distribution of electricity and interstate pipelines for oil, natural gas and gasoline—and

attempts to forge interstate cooperation face challenges based upon the Compacts Clause

(states cannot band together to regulate areas within federal jurisdiction) and the

Supremacy Clause (states cannot exact laws contravening federal statues).

For example, in the electricity sector, the creation of a federal role began in 1927, after

the Supreme Court ruled in Rhode Island Public Utilities Commission v Attleboro Steam

and Electric Co. that state regulatory agencies were constitutionally prohibited from

setting the prices of electricity sold across state lines. This facilitated the passage of the

Public Utility Act of 1935 and the Federal Power Act of 1935. These laws, as amended,

endow the federal government with jurisdiction over the prices, terms and conditions of

wholesale power sales involving privately owned power companies and the transmission

of electricity. The federal government approves rates for public power sold and trans-

ported by five federal power marketing administrations and Tennessee Valley Authority,

and oversees and licenses non-federal hydroelectric projects on navigable waters.

The federal government also plays a hefty role in offering initiatives to expand

national demand side management programmes, endorsing financial and technical as-

sistance to state energy offices, funding basic and applied research on energy technologies,

setting standards for energy efficiency labelling and providing loans to electriccooperatives.

For these reasons, electricity and energy are often treated as national issues, and

jurisdiction over energy is spread across multiple agencies. A recent Government

Accountability Office report charged with ‘identifying major federal energy efforts’ and

determining ‘the extent to which resources associated with federal energy-related efforts

have changed’ found more than 150 energy programme activities and 11 tax preferences.2

The GAO grouped these incentives into eight major energy activity areas: energy supply,

energy’s impact on environment and health, low income energy consumer assistance,

basic energy science research, energy delivery infrastructure, energy conservation, en-

ergy assurance and physical security and energy market competition and education. AsTable 1 shows, these programmes were managed primarily by 14 federal agencies, includ-

ing the Department of Energy, Department of Agriculture and Department of Health and

Human Services.

2 US Government Accountability Office, ‘National Energy Policy: Inventory of Major Federal Energy Programmes and Status of Policy Recommendations’ United States GAO Report to Congress (June 2005) (GAO-05-379).

98 Journal of World Energy Law and Business , 2011, Vol. 4, No. 2



Table 1. The agencies governing energy at the national level in the US

Name Mission Annual Budget

Authority

(millions

of dollars)

Total

Budget

Authority

(%)

Department of Energy Manages nuclear weapons, cleans up

environmental pollutants from nuclear

testing and conducts research on basic

science and energy

2,628 65

US Agency for International

Development

Provides humanitarian and economic assist-

ance overseas

692 17

Federal Energy Regulatory

Commission

Regulates, monitors and investigates electri-

city sales, natural gas and pipelines,

hydropower and dams, oil matters and

LNG terminals

192 5

Nuclear Regulatory

Commission

Oversees nuclear power generation and other

civilian uses of nuclear materials

104 3

Environmental ProtectionAgency

Conducts environmental science research,education and assessment aimed at pro-

tecting human health and the natural

environment

102 3

Department of

Transportation

Oversees federal highway, air, railroad and

maritime and other transportation sectors

98 2

Department of the Interior Charged with protecting and providing

access to government owned land

57 1

Department of Commerce Aims to foster, serve and promote economic

development, trade and technological

advancement

48 1

National Science Foundation Promotes science and engineering through

research programmes and educationprojects

31 51

Department of Homeland

Security

Charged with strengthening borders, provid-

ing intelligence analysis for infrastructure

protection, countering weapons of mass

destruction and responding and recover-

ing from terrorist attacks

24 51

Department of Agriculture Manages the nation’s food, agriculture and

aquaculture production

20 51

U.S. Trade and Development

Agency

Promotes economic growth in developing

and middle income countries through

American exports of products and services

15 51

Army Corps of Engineers Responsible for investigating, developing andmaintaining the nation’s water and related

environmental resources

10 51

Department of State Charged with using diplomacy to improve

bilateral and multilateral relations and

promoting democracy

2 51

Source : US Government Accountability Office (2005).

Benjamin K. Sovacool National energy governance in the United States 99



While somewhat crude, one can map out the relative influence of these organizations

by their amount of budget expenditure, listed in Table 1 and also presented in Figure 1,

which depicts each agency’s spending on energy’s impact on environment and

health, energy delivery infrastructure, energy conservation, physical security and

market competition and education. Some of these agencies also collect about $10 billion

in royalties per year (instead of just spending money), and their annual collections are

listed in Table 2.

As these figures and tables show, the US Department of Energy (DOE) is the nation’s

primary energy governor, responsible for 65 per cent of all energy-related expenditures

and second in terms of collected royalties. The DOE was created, in part, to answer basicquestions concerning energy research and development. Established in 1977 to manage

the nation’s nuclear weapons complex, clean up the ‘environmental legacy’ from the pro-

duction and testing of nuclear weapons and conduct research on energy and basic science,

the DOE is a behemoth organization dedicated to an overwhelmingly complicated task:

provide the framework for a comprehensive and balanced national energy program. To

meet its mission, the DOE employs a workforce of 14,500 people and more than 100,000

contractors and operates 50 major installations in 35 states. The DOE also directs a

Energy and health

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Educaon

Physical security

Energy conservaon

Energy delivery infrastructure

Energy and health

Figure 1. Annual budget authority for top 14 federal energy agencies. Source : US GovernmentAccountability Office (2005). DOE ¼ Department of Energy; USAID ¼ US Agency forInternational Development; FERC¼ Federal Energy Regulatory Commission; NRC¼ NuclearRegulatory Commission; EPA¼ Environmental Protection Agency; DOT¼ Department of Transportation; DOI ¼ Department of the Interior; DOC ¼ Department of Commerce;NSF ¼ Nati o nal S ci ence Fo un d ati on ; D HS ¼ D epar tment o f Ho melan d S ecu r ity ;USDA ¼ Department of Agriculture; USTDA ¼ US Trade and Development Agency;ACE ¼ Army Corps of Engineers; DOS ¼ Department of State.




complex network of 24 national laboratories located in 14 states with an additional staff

of 60,000 and a budget of $7.6 billion.3

As mentioned above, state and local governments are active in governing energy,

but they exert much less influence than federal actors. Still, it is local public utility

commissions that often set retail electricity prices (where wholesale electricity is sold to

residential, commercial and industrial customers), typically subject to approval by the

Table 2. Annual federal energy-related collections

Agency Programme Energy-relatedcollections(Millionsof Dollars)

Department of the Interior Minerals management service—mineralleasing receipts/outer continental shelf (royalties, rents and bonuses)

$5,93

Department of the Interior Minerals management service—mineralleasing receipts/onshore (royalties, rentsand bonuses)

2,066

Department of the Interior Minerals management service—royalty andoffshore minerals management (offsettingcollections)

90

Department of the Interior Bureau of land management—service charges,

deposits and forfeitures

8

Department of the Interior Minerals management service—Indian trustresponsibility (offsetting collections)

7

Department of the Interior Office of surface mining—regulation andtechnology

1

Department of Energy Civilian radioactive waste 1,039Department of Energy Uranium enrichment decontamination and

decommissioning fund189

Nuclear Regulatory Commission

Nuclear energy-related collections 474

Federal Energy Regulatory Commission

Competitive markets, energy infrastructure,market oversight

192

Department of Transportation

Pipeline and hazardous materials safety administration—natural gas pipeline safety

57

Department of Commerce National Institute of Science andTechnology—energy use and conservationprogrammes

2

Total $10,059

3 US National Science Foundation, Federal Funds for Research and Development: Fiscal Year 2003–2005 (Washington, DC: NSF,2005); US Department of Energy, ‘Protecting National, Energy and Economic Security with Advanced Science and Technology and Ensuring Environmental Cleanup: The Department of Energy Strategic Plan’ (August 2003).




state legislature or a governing body (such as the State Corporation Commission in

Virginia, for example). Indeed, one study identified more than 200 specific programmes

related to energy under development or implemented by the states.4 These programmes

ranged from taxes on gasoline and energy research projects to appliance standards and

alternative fuel mandates for the transportation sector to industrial process regulations

and farm conservation programmes. The states relied on a variety of voluntary andmandatory approaches, including standards, permits, technical assistance, procurement,

information and education.

Some forms of regulation, such as electricity, are meant to be governed at different

scales simultaneously through the form of ‘interactive’ or ‘dual’ federalism. For example,

the Federal Energy Regulatory Commission is responsible for regulating interstate trans-

mission of electricity, natural gas and oil as well as approving and reviewing LNG ter-

minals, natural gas pipelines and hydroelectric projects. Local and state governments

(usually through state public utility commissions) are responsible for setting retail elec-

tricity and natural gas rates, approving construction of in-state power plants, regulating

mergers and acquisitions of in-state energy companies and ensuring the reliability of theelectricity distribution network. Under this federalist approach, each level of government

has their respective role and authority is shared.

Key policies

National energy governors in the US have implemented a copious amount of statutes and

regulations in the past century. In the US, the government’s role in energy began in the

early 1800s and its involvement in electricity began almost immediately after Thomas

Edison commercialized the first electric power station in the late 1880s, subsidizing coal

exploration and mining. The role of government, state and federal, in the early nineteenth

century was to encourage private enterprise and growth, not regulate or constrain it.

The century thus witnessed massive federal subsidies and free land to promote economic

development and modernization through railways, coal mines, hydroelectric projects, oil

and gas wells and giveaways of valuable minerals to prospectors.5 During the Progressive

Era at the turn of the century, bursts of regulation began, primarily against holding

companies, as a response to World War I and to address the growth of interstate

energy markets. The federal government became formally involved in national energy

markets in the 1920s for hydroelectricity, electricity in general in 1935, natural gas in

1938, with the primary role of regulating prices, prohibiting discrimination among cus-

tomers and imposing conditions to ensure market competition. Looking only at the

period 1908–2008, Table 3 presents most major national energy-related laws.

While Table 3 does reveal a number of shifts in American energy policy—the regula-

tion of holding companies and energy firms in the 1920s, signalling that energy should

not be solely in the domain of private enterprise; massive hydroelectric projects

4 Thomas D Peterson, ‘The Evolution of State Climate Policy in the United States: Lessons Learned and New Directions’ (2004)14 Widener LJ 81, 91–93.

5 John Gulliver and DN Zillman, ‘Contemporary United States energy regulation’ in Barry Barton, Lila Barrera-Hernandez andAlastair Lucas (eds), Regulating Energy and Natural Resources (Oxford University Press, Oxford 2006) 113–136.




Table 3. National energy-related legislation in the US, 1908–2008

Date Regulation Description

1917 Food and Fuel Control Act(40 Stat 276)

Also known as the ‘Lever Act’, it established federalcontrol over the production, pricing, sale, transpor-

tation and distribution of coal and created the USFuel Administration to manage and monitor energy prices during World War I.

1920 Mineral Leasing Act (PL66-146)

Established the modern policies of issuing permits andleases for the development of mineral resources onpublic lands.

1920 Federal Water Power Act(12 USC 16)

Provided the Federal Power Commission exclusive au-thority to license non-federal hydroelectric powerplants on navigable waterways and federal lands(later extended into the Federal Power Act of 1935)

1922 Cummins Act (PL 66-152) Amended the Transportation Act of 1920 to give the

Interstate Commerce Commission the ability to em-bargo coal operators and set coal prices in responseto coal miner strikes and rising prices

1933 Tennessee Valley Authority Act (PL 73-17)

Created the Tennessee Valley Authority as an autono-mous federal corporate agency responsible for elec-trifying and promoting the development of theTennessee River Basin

1934 Fish and WildlifeCoordination Act (16USC. 661-667e)

Required federal agencies licensing water resource de-velopment projects to consult and consider recom-mendations of the Fish and Wildlife Service

1935 Federal Power Act(PL 49-333)

Granted authority to the Federal Power Commissionto regulate interstate transmission of electricity andinterstate energy commerce at the wholesale level

1935 Public Utility HoldingCompany Act (PL 74-333)

Limited the geographic size of electric utility holdingcompanies, the types of business that they couldconduct, the number of holding companies thatcould manage a utility and their capital structure.

1938 Natural Gas Act (PL 75-688) Granted authority to the Federal Power Commissionto regulate the interstate sale of natural gas

1944 Synthetic Liquid Fuels Act(30 USC ss 321–325)

Aimed for the production of 1,000,000 barrels a day of synthetic oil made from oil shale, liquefaction of coal and liquefied petroleum gas

1946 Atomic Energy Act

(PL 79-585)

Set up the civilian Atomic Energy Commission with

authority over nuclear power research and develop-ment. Further amended in 1954.

1955 Trade Agreement ExtensionAct (PL 69-86)

Granted authority to the president to establish oilimport quotas and authorized the Office of DefenseMobilization to advise whenever imports impairednational security

(continued)




Table 3. Continued


1957 Price-Anderson Act(PL 85-256)

Established a joint federal/private insurance pro-gramme to limit the liability of the nuclear industry for accidents

1963 Clean Air Act (PL 88-206) Set up programmes for the prevention and abatementof air pollution

1968 Wild and Scenic Rivers Act(PL 90-542)

Prohibited construction of any project under theFederal Power Act from affecting wild and scenicrivers

1969 Federal Coal Mine Healthand Safety Act (PL91-173)

Provided federal authority to promulgate and enforcehealth and safety regulations in coal mines

1969 Tax Reform Act (PL 91-172) Provided reductions in oil and natural gas tax preferences

1970 National Environmental

Policy Act (PL 91-190)

Established the Council on Environmental Quality and

introduced the requirement for environmentalimpact statements

1970 Clean Air Act Amendments(PL 91-604)

Amended the Clean Air Act of 1963 by establishingambient air quality and emissions standards. Furtheramended in 1977 and 1990

1972 Federal Water PollutionControl Act Amendments(PL 92-500)

Set national goal to eliminate discharge of pollutantsinto navigable waters by 1985, functionally replacesearlier water quality acts

1973 Trans-Alaska PipelineAuthority Act (PL 93-153)

Facilitated Alaska pipeline construction by barringcourt challenges and relaxing limitations on pipelinerights-of-way

1973 Emergency PetroleumAllocation Act (PL93-159)

Authorized the president to establish a comprehensiveallocation programme for oil and oil products

1973 Endangered Species Act (PL93-205)

Limited building of dams and hydroelectric plants thatdisrupt the natural environment

1974 Energy Reorganization Act(PL 93-438)

Created the Energy Research and DevelopmentAuthority to assume non-regulatory functions of theAEC and set up the Nuclear Regulatory Commission

1974 Solar Energy Research,Development andDemonstration Act

(Pl 93-319)

Established a national programme for R&D to ensureuse of solar energy and created the Solar Energy Information Bank and the Solar Energy Research

Institute (later to become the National RenewableEnergy Laboratory)

1974 Federal Nonnuclear Energy R&D Act (PL 93-577)

Established a national programme for R&D innon-nuclear forms of energy and predicted the needto spend $20 billion over the next decade

1974 Energy Supply & EnvironmentalCoordination Act(PL 93-319)

Allowed the federal government to prohibit electricutilities from burning natural gas or petroleumproducts for electricity generation

(continued)




Table 3. Continued


1974 Federal Energy Administration Act(PL 93-275)

Established the Federal Energy Agency within the ex-ecutive branch to advise the President on Congresson energy policy issues

1975 Energy Policy andConservation Act(PL 94-163)

Established standby authority for an energy emergency,created a strategic petroleum reserve, mandated fueleconomy standards for automobiles and refined oilprice controls

1975 Tax Reduction Act(PL 94-12)

Repealed 22 per cent depletion allowance for major oilcompanies

1976 Electric Hybrid and VehicleResearch, Development,and Demonstration Act(PL 94-413)

Invested $5 million in 1976 and up to $36.8 million in1981 (real terms) to promote research and develop-ment on hybrid electric vehicles

1976 Resource Conservation and

Recovery Act (PL 94-580)

Provided ‘cradle-to-grave’ control of hazardous waste

by imposing management requirements on electricgenerators

1976 Energy Conservation andProduction Act (PL94-385)

Mandates that the FEA must promote accelerated de-ployment of solar energy

1976 Tax Reform Act (PL 94-455) Enabled wind energy systems to receive 10 per centbusiness investment tax credit

1977 Surface Mining Control andReclamation Act(PL 95-87)

Set environmental standards for the surface mining of coal

1977 Department of Energy

Organization Act(PL 95-91)

Established the US Department of Energy from a

dozen departments and independent agencies

1977 Clean Water Act(PL 95-217)

Set federal water standards for utilities, replacingformer state-by-state approach


Required states to limit sulphur dioxide and nitrousoxide sources in areas not meeting established goals

1978 Public Utility Regulatory Policies Act (PL 95-617)

Encouraged conservation of energy supplied by electricutilities and mandated that rate structures reflectactual marginal cost of providing service

1978 Energy Tax Act (PL 98-618) Allowed tax credits for installing solar, geothermal andenergy-saving equipment imposed on inefficient

automobiles1978 National Energy

Conservation Policy Act(PL 95-619)

Required utilities to promote energy conservation,mandated efficiency standards and authorized con-servation grants

1978 Powerplant and IndustrialFuel Use Act (PL 95-620)

Prohibited new utility plants from burning oil or nat-ural gas and existing plants from using those fuelsafter 1990

(continued)




Table 3. Continued


1978 National Gas Policy Act(PL 95-621)

Established prices for various classes of natural gas, seta schedule for decontrol of some gas prices by 1985and gave the president allocation authority in an

emergency 1978 Small Business Energy Loan

Act (PL 95-315)Created solar energy and energy conservation loan

programme within the Small BusinessAdministration

1980 Crude Oil Windfall ProfitTax Act (PL 96-223)

Provided for an excise tax on decontrolled domesticcrude oil

1980 Wind Energy Systems Act(Pl 96-345)

Established aggressive 8-year wind RD&D programmeand set goals of 8,000 MW of total capacity by 1988,later slashed by the Reagan Administration

1980 Renewable Energy ResourcesAct (PL 96-294)

Established additional incentives for renewable energy resources to improve and coordinate dissemination

of information and to promote local energy self-sufficiency

1980 Energy Security Act(Pl 96-294)

Created the Synthetic Fuels Corporation to provideloans, purchase agreements and joint ventures tostimulate production of synthetic fuels, as well asthe development of biomass and alcohol-based fuels,solar energy, geothermal and energy conservation.

1980 ComprehensiveEnvironmental Response,Compensation, andLiability Act (PL 96-510)

Required electric utilities to report any release of haz-ardous substances into the air, surface water,groundwater, or soil.

1981 Economic Recovery Tax Act(PL 97-34)

Permitted accelerated depreciation of capital for re-newable energy equipment and offered a 25 per centtax credit for spending on research and development

1982 Tax Equity and FiscalResponsibility Act(Pl 97-248)

Ended further acceleration in the depreciation formulacreated by the 1981 Economic Recovery Tax Act

1982 Nuclear Waste Policy Act(PL 97-425)

Specified that the federal government has the responsi-bility to provide for the disposal of high-level radio-active waste

1984 Renewable Energy Industry Development Act (PL

98-370)

Authorized $10 million to be spent by the Departmentof Commerce to promote American renewable

energy technologies abroad1986 Tax Reform Act (PL 99-514) Repealed federal investment credit for renewable

energy technologies1986 Electric Consumers

Protection Act (PL99-495)

Increased importance of environmental considerationsfor licensing hydroelectric projects, eliminatedfederal preferences for hydroelectricity set underPURPA

(continued)




undertaken in the 1930s and 1940s as an essential component of modernization through

the electrification of rural areas; the introduction of nuclear power in the 1950s and

1960s; and the emergence of the ‘portfolio’ approach in the 1980s and 1990s—it dem-

onstrates that a rash of energy bills were passed during1968–1987. During this period, 41

energy-related bills were implemented, accounting for roughly 65 per cent of all energy

Table 3. Continued


1989 Renewable Energy andEnergy Efficiency Technology

Competitiveness Act(Pl 101-218)

Authorized DOE to pursue aggressive national pro-gramme for RD&D on renewables, but leaves specif-ic cost goals unresolved

1990 Solar, Wind, Waste, andGeothermal PowerProduction IncentivesAct (Pl 101-575)

Eliminated QF size limits established under PURPA


Mandated the winter use of oxygenated fuels in 39major carbon monoxide nonattainment areas andrequired year-round use of oxygenates in 9 severeozone nonattainment areas. Also established theAcid Rain Programme to reduce sulphur dioxide

and nitrous oxide emissions by electricity producers.1990 Omnibus Budget

Reconciliation Act(PL 97-424)

Decreased the gasohol tax exemption from 6 to 5.4cents per gallon, set expiration for ethanol tax cred-its at 6 cents per gallon in 2002.

1992 Energy Policy Act(PL 102-486)

Sought to employ market forces to spur energy pro-duction and energy efficiency, gave a 10 per centbusiness tax credit for purchases of solar and geo-thermal equipment and offered a 10-year productiontax credit of 1.5 cents per kWh for wind projectsand biomass plants installed before mid-1999

1995 Federal Reports Elimination

Act (PL 104-66)

Eliminated requirements to do studies and investiga-

tions to promote wind technologies1999 Tax Relief Extension Act

(PL 106-170)Extended and modified the production tax credits

from the Energy Policy Act of 19922005 Energy Policy Act

(PL 109-58)Provided tax incentives and loan guarantees for energy

efficiency, bio-fuels, renewable energy, coal andclean coal, natural gas, oil and nuclear technologies

2007 Energy Independence andSecurity Act (PL 110-140)

Set higher fuel economy standards for cars and lighttrucks, required production of 36 billion gallons of renewable fuels by 2022, created new efficiency guidelines for household appliances and governmentbuildings and set goal of phasing out incandescent

light bulbs by 2017




legislation in the US (see Figure 2). Four of the most important acts, each explored briefly

below, were PURPA, the Energy Policy Act of 1992, the Energy Policy Act of 2005 and the

Energy Security and Independence Act of 2007.

As a result of the OPEC oil embargo of 1973, President Jimmy Carter made energy

policy his first major initiative. Among a set of five laws proposed by Carter and passed by

Congress (albeit in greatly diluted form), PURPA of 1978 had far-reaching consequences

for small-scale energy systems. PURPA spurred creation of radical technologies, began the

process of deregulation and challenged the control held by power company managers.PURPA offered incentives for the use of decentralized power plants (such as wind farms

and solar panels) and promoted research on environmentally preferable technologies that

used water, wind or solar power to produce electricity. More successful than anyone

originally anticipated, PURPA established the first production tax credits for renewable

energy systems.6

The Energy Policy Act of 1992 promoted energy efficiency and conservation, set regu-

lations on natural gas imports, required that federal agencies use alternative transporta-

tion fuels, initiated research on clean coal and attempted to create a permanent geologic

storage facility for nuclear waste at Yucca Mountain. The Act was especially far reaching

in impacting electric power deregulation, where it pushed the ‘restructuring’ of elec-

tricity markets. This restructuring created incentives for the privatization of electricity

supply; the vertical separation and unbundling of generation, transmission and distribu-

tion networks; the introduction of transmission access; the facilitation of electricity

trading agreements; the unbundling of tariffs and bills; and the establishment of

Figure 2. Frequency of US energy legislation 1907–2007 (by decade).

6 Alice L Buck, A History of the Atomic Energy Commission (US Department of Energy, Washington, DC 1983, DOE/ES-0003/1).




market oversight and monitoring.7 Basically, the act allowed a new type of electricity

suppliers, called Exempt Wholesale Generators (EWGs), to generate electricity in one

location and sell it anywhere else in the country using someone else’s transmission

system; the only restriction was that an EWG could must deal exclusively with the whole-

sale wheeling of power.8 The Act thus ushered in era of restructuring and privatization led

by the states, with no less than 24 states and the District of Columbia enacting some formof restructuring or regulatory orders aimed at promoting market competition in the late

1990s and early 2000s.9

The Energy Policy Act of 2005 set provisions for an even broader set of technologies,

including significant support for nuclear energy. While the Act was very wide ranging and

amassed more than 1,700 pages, notable parts included federal mandates that biofuels be

mixed with gasoline, funding for clean coal and advanced coal combustion technologies,

the extension of production tax credits and other subsidies for renewable sources of

electricity and transportation fuel, granting of extra leases for oil and gas exploration

and production, exemptions for oil and gas producers from the Safe Drinking Water Act

and requirements that all electric utilities offer net metering when requested by cus-tomers. The hodgepodge of technologies supported by the act even provoked The

Economist to call it ‘the no lobbyist left behind bill’. Support for nuclear was most sub-

stantial, with $2 billion in federal support for construction overruns; a production tax

credit worth 1.8 cents/kWh; loan guarantees of up to 80 per cent of project cost; $3 billion

in new research; updated favourable tax treatment of decommissioning; and the exten-

sion of limited liability for nuclear accidents under the Price Anderson Act. The Act also

legislated tax credits worth $4.3 billion for nuclear energy, $2.8 billion for fossil fuels, $2.7

billion for renewable electricity, $1.6 billion for clean coal, $1.3 billion for energy effi-

ciency and $1.3 billion for biofuels.

The Energy Security and Independence Act passed two years later in 2007 was not as

wide ranging and sweeping, but it did include stricter standards for fuel economy for

automobiles, additional support for biofuels and more commitment to energy efficiency

and buildings and demand side management. Notable, here, was renewed support

for biofuels with a requirement that production grow from 4.7 billion gallons in 2007

to 36 billion gallons by 2022 and that 21 billion of these gallons be derived from

non-corn-based sources. The Act also revised federal labelling and appliance standards

for compact fluorescent light bulbs (effectively aimed at disincentivizing the use of in-

candescent light bulbs) and mandated that all federal buildings become carbon neutral

by 2030.In essence, the national energy policy regime has changed greatly in the past four

decades. The classic model of energy supply in the early 1970s, that federal and state

7 Fereidoon P Sioshansi, ‘Competitive Electricity Markets: Questions Remain about Design, Implementation, Performance’(2008) 21 Electricity Journal 74–87.

8 Michael K Heiman and Barry D Solomon, ‘Power to the People: Electric Utility Restructuring and the Commitment toRenewable ENERGY’ (2004) 94 Ann Assoc Am Geogr 94–115.

9 Paul L Joscow, ‘Markets for Power in the United States: An Interim Assessment’ (2006) 27 Energy J 1–36.




governments should play a heavy hand in regulating electricity through monopolies, was

challenged by PURPA and eroded their control. More changes occurred in the 1990s

when restructuring began and introduced competitive retail markets for electricity and

the government started supporting non-petroleum forms of transportation fuel, and

again this past decade as the portfolio approach—supporting a broad base of different

technologies and options—took hold. As the next two sections explore, significantchanges in the guiding principles of energy governance explain most of these shifts

and energy has become an even more complex and contested area of governance.

2. Six historic guiding principles

Up until about the 1970s, a set of six consistent guiding principles tended to found

decisions made about energy in the US. These principles were (1) the notion that

energy is a public necessity deserving of government support and subsidies; (2) commit-

ment to creating abundant supplies of energy at low cost; (3) adherence to large-scalecentralized technologies of energy supply; (4) building supply to meet anticipated in-

creases in demand; (5) an optimism that technological advancement would overcome

scarcity of resources; and (6) faith in expertise and trust in authorities to make decisions

about energy.

Energy as a public necessity

One basic principle was that energy was a public necessity and as such energy providers

were either subsidized generously or given monopoly status and granted certain rights.

Public electricity companies, for example, historically had a ‘duty to serve’ all customers

within their jurisdiction within the limitations of available technology. Under this mon-opoly model, a public electric utility was responsible to render ‘safe and adequate service’

to all customers within their domain and obligated to meet all foreseeable increases in

demand. These utilities were required to serve all customers within each service class on

equal terms, with no undue discrimination and had to charge ‘just and reasonable’ prices

for services. In return for their monopoly status, utilities were granted certain rights. They

had the right to reasonable compensation, including a profit on capital investment to

serve the public. Through its franchise and certificate of public convenience and necessity,

utilities were also usually protected from competition from other enterprises offering

the same service in the same territory. In many states, public utilities could exercise the

right of eminent domain to condemn and take private property for public use wherenecessary to provide adequate service, subject to the requirement of just compensation

for the owner.

Affordability and abundance

Intertwined with the idea that energy was a public necessity was the notion that it should

be therefore abundant and cheap. In his study of the entire history of energy policy-

making in the US, Melosi observed how the only overarching theme was a commitment




to ensuring the abundance of cheap, reliable energy.10 Over the course of the country’s

development, historically plentiful sources of natural resources (including fossil fuels)

enabled the transition from labour-intensive jobs to capital-intensive ones and provided

sources of vast commercial wealth. Americans, Melosi concluded, have become ‘endowed

with an abundance of domestic sources of energy and having access to foreign sources’

and continue to expect supplies to be simultaneously ‘never-ending and cheap’. Similarly,in his history on energy use and government policy, Clark noted that abundance and

price therefore affect the way Americans use energy, how businesses develop and market

it and how government establishes policies about it.11 The long-standing and self-evident

vision of the American emerge policy has been to achieve the lowest possible unit price of

electricity through the fullest exploitation of resources and maximum consumption.

Cheap and plentiful energy, following this paradigm, has attracted a stronger constitu-

ency than social welfare, protection of the environment or conservation and energy

efficiency.12

CentralizationA number of social, political and technical factors also converged to support large-scale

centralized supply of energy, especially electricity. During World War I, utilities inter-

connected systems in order to avoid local power shortages and to assist in the develop-

ment of high voltage transmission, and during the Great Depression, cheap electricity was

one prescription for economic revival. Developing sources of energy supply in increments

as large as possible was believed to create economies of scale, lowering production costs

that could then be passed onto consumers. Prototypical examples of large-scale, centra-

lized energy projects in the US include the Hoover Dam, Tennessee Valley Authority’s

network of 29 hydroelectric dams and the Shippingport Nuclear Reactor. Such central-

ization and the building of massive energy systems seemed to work exceptionally well upuntil the 1970s. Providing an almost textbook example of economies of scale in action,

the capacity of large power plants doubled every 6.5 years from 1930 to 1970 while, at the

same time, electricity prices in nominal terms dropped from almost $1 to less than

7 cents/kWh (see Figure 3). The success of the conventional system became associated

with a number of related assumptions. Planners believed that energy systems should con-

sist of relatively few but large units of supply and distribution and that those units should

be composed of large, monolithic apparatuses rather than small, redundant models.13

Meeting increases in demand

Energy policymakers sought to forecast economic and energy demand in the future andthen build sources of supply to meet those projections. One underlying assumption was

that the marketplace could best determine supply and demand and that the efficacy of

10 Martin V Melosi, Coping with Abundance: Energy and Environment in Industrial America (Knopf, New York 1985).11 John G Clark, The Political Economy of World Energy: A Twentieth Century Perspective (University of North Carolina Press,

London 1990).12 David S Freeman, ‘Is there an Energy Crisis? An Overview’ (1973) 410 Ann Am Acad Polit SS 1–10.13 Richard F Hirsh, Technology and Transformation in the American Electric Utility Industry (Cambridge University Press,

Cambridge 1989).




free market, not government regulators, should decide how much energy should be

consumed. Another underlying assumption was individualism, that individuals were

best suited to determine their own energy needs and that these individual needs could

be efficiently provided by competitive exchange in the marketplace. A third underlying

assumption was that qualitative differences in energy did not matter and that variations in

type, quality, unit scale and geographic source were not as important as meeting consumerdemand for energy at any scale. John Hoffmeister, president of Shell Oil Company, re-

cently encapsulated this view nicely when he stated that ‘my job constantly look for more

fossil fuels, more fossil fuels, and more fossil fuels to try to meet demand’.

Technological optimism

For most of the country’s history, Americans have tended to place their own personal

needs above that of the environment and have accepted a promethean view of technology.

Nearly 200 years of cheap fuels, industrial growth, abundant natural resources and an

environment that could seemingly absorb pollution endlessly convinced many policy-

makers (and ordinary citizens) that they were, in fact, entitled to dominate Nature. Theseclassical ideas created a worldview that correlated energy consumption with economic

growth and convinced many Americans that they are somehow entitled to consume as

much energy as possible and promoted the notion that technology can overcome all

resource constraints. Historically, such a worldview can be connected to New England

Puritan ideals. The original pilgrims found their natural surroundings strange and threat-

ening, and their writings often referred to nature as something to be subjugated or

conquered. To assist Americans in this domination, regulators placed their faith in

0

100

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P r i c e p e r k W h ( 2 0 0 4 c e n t s )

Figure 3. Average residential price of electricity in the US, 1892–1970 (adjusted for inflation to$2004). Source : Hirsh 1989.




technology and their confidence in the idea that American ingenuity could solve all

problems.14 The enjoyment of material abundance was believed to be connected to the

invention of positive and progressive technologies constituting the essence of democratic

freedom for the ways they render the conveniences of modern life.15

Government controlA final guiding principle concerns the roles of technical experts, regulators and con-

sumers. Given the complexity of energy production and use, technical experts were

deemed to be best able to make decisions about energy, and regulators often deferred

to them to select appropriate technologies. While these experts and regulators retained an

active role in energy decision-making, the role of consumers was passive. Consumers

were best left to consume energy, not to produce it, and lack of public participation or

involvement in the energy sector enabled energy companies and bureaucrats to maintain

their control over a system that provided social utility (energy) at a low cost and also

stable profits and economic growth.

3. Six historic principles in conflict

The current energy governance environment in the US, however, sees each of the six

historic principles in conflict: (1) energy is no longer viewed solely as a public necessity

and instead is seen in at least four other dimensions; (2) the idea of low cost energy must

now compete with efforts to price externalities and account for full social costs; (3)

defensible and differing views exist concerning the benefits of small-scale and decentra-

lized technologies in contrast to large centralized ones; (4) demand for energy is no longer

taken as a given and instead is often ‘influenced’ through energy efficiency and

demand-side management campaigns; (5) faith in technology and optimism has beeneroded or at least challenged by alternative views from ecology and the natural sciences;

and (6) community actors and ‘laypersons’ have begun to demand more participatory

and inclusive forms of energy decision-making.

Energy as heterogeneous

Energy is no longer solely viewed primarily as a public necessity. Instead, numerous

studies have identified at least five diverging (and often contradicting) viewpoints held

by regulators, analysts and end users.

In their work after the energy crises of the 1970s, Stern and Aronson identified a

scientific view of physicists and engineers framing energy as a property of heat, motionand electrical potential, measurable in joules and BTUs.16 According to this view, energy

14 Benjamin K Sovacool, ‘Exploring and Contextualizing Public Opposition to Renewable Electricity in the United States’ (2009)1 Sustainability 702–721; Zachary A Smith, The Environmental Policy Paradox (5th edn) (Prentice Hall, Upper Saddle River, NJ2009).

15 Langdon Winner, ‘Energy Regimes and the Ideology of Efficiency’ in George H Daniels and Mark H Rose (eds), Energy and Transport: Historical Perspectives on Policy Issues (Sage Publication, London 1982) 261–277.

16 Paul C Stern and Elliot Aronson, Energy Use: The Human Dimension (Freeman & Company, New York 1984).




can neither be produced nor consumed, quantity is always conserved, quality is always

declining and correct policy is a matter of understanding thermodynamics and physics.

Bent and colleagues add that from a thermodynamic perspective, human beings are

merely complex organisms for processing energy, meaning there is no more fundamental

issue than the energy that fuels our existence.17

The economic view sees energy as a commodity, or a collection of commodities such aselectricity, coal, oil and natural gas, traded on the market. This view emphasizes the value

of choice for consumers and producers and assumes the marketplace allocates choices

efficiently. According to this view, when prices rise, fuel substitutes will be found and

inequities arise only through irrational behaviour. Correct policy is a matter of analyzing

transactions between buyers and sellers and minimizing the external costs of these trans-

actions. The economic view of energy has become perhaps the most dominant one re-

cently, with a preference for competition and efficient markets promoted in the energy

sector even if they result in unjust and unreasonable prices.18

The ecological view rejects framing energy as scientific or economic, and instead

classifies energy resources as renewable or non-renewable, clean or polluting and inex-haustible or depletable to emphasize their environmental context. This view prioritizes

the values of sustainability, frugality and future choice. Correct policy is a matter of

recognizing that energy resources are finite and interdependent and that present use

engenders significant costs to future generations.

The social welfare view sees energy services as a social necessity. This view suggests that

people have a fundamental right to energy for home heating, cooling, lighting, cooking,

transportation and essential purposes. The central value here is one of equity, and correct

policy becomes a matter of distributing energy services to all social classes.

The energy security view focuses on the geographical location of energy resources,

political stability of producing and consuming countries and availability of fuel substi-

tutes. This view sees energy supply as a key component of national security, and correct

policy becomes a matter of maintaining economic vitality and military strength.

In parallel, Stern and Aronson identified at least five different types of energy users.

The investor regards energy as a cost that is carefully considered in making purchases

such as equipment and capital and views energy technologies as durable ways to recover

costs over their useful life. The consumer thinks of their homes and automobiles as

consumer goods that provide pleasures and necessities. The conformer sees energy tech-

nologies as a way to belong to a particular social group or attain status. The crusader sees

energy use as an ethical issue and conserves energy as an expression of self-reliance andenvironmental stewardship. The problem avoider treats energy as no more than a po-

tential source of annoyance or inconvenience, doing nothing about it until technologies

break down and services cease.

17 Robert Bent, Lloyd Orr and Randall Baker, Energy: Science, Policy and the Pursuit of Sustainability (Island Press, Washington2002).

18 Gulliver and Zillman (n 5 above).




Constraints on production

Support for low-cost and abundant supplies of energy is now being challenged by

calls to price at least some of the negative social and environmental costs associated

with energy production, even if it involves raising the price of energy. Many costs

produced in the current energy system are not captured in prices and are therefore not

borne by consumers; they are instead ‘externalized’ or passed onto society at large orfuture generations. In the electricity industry, the generation costs from a coal power

plant may appear low, but they do not include coal mine dust that kills thousands of

workers per year, black lung disease that has imposed at least $35 billion in health care

costs, coal emissions that cause acid deposition, smog and global warming that also

contribute to asthma, respiratory and cardiovascular disease and premature mortality.

These external costs would easily double the price of coal if they were incorporated into

its price. Automobiles, oil and gasoline appear cheap because their prices fail to cover the

1.2 million deaths per year and 25–50 million injuries caused by accidents (making them

the third largest contributor to death and injury in the world) as well as the variety of

unhealthy pollutants and particles such technologies spew into the air, contributing toacid rain, ozone depletion and climate change.

To account for these damages, a slew of economists and even some policymakers have

called on the government to raise the price of energy as a matter of fair accounting and

ensuring that consumers receive accurate price signals connected with their energy con-

sumption. This ‘incorporation of externalities’ can take many forms and dozens of pro-

posals have been backed by various groups in the past decade, although each has been

polemic. Sometimes fierce internal debates have occurred over how such externalities

ought to be priced, who should bear those prices, as well as which mechanisms ought to

be used. Should efforts focus on climate change mitigation or adaptation? Should they

focus on damage costs or avoided costs? Is a carbon tax or the trading of carbon credits

optimal, or should policymakers rely on renewable portfolio standards (RPS) or feed-in

tariffs? Each policy has created its own constituency, and advocates often bicker between

each other as well as with those arguing in favour of no government policy or interven-

tion at all.

Decentralization

The trend towards ever-larger centralized sources of energy supply faced significant con-

straints in the late 1960s and early 1970s. In the electric power sector, thermal efficiencies

for plants reached a plateau in the 1960s and the scale of power plant equipment peakedat 1,300 MW and then started to shrink as larger facilities faced technical challenges

concerning information processing, metallurgy and plant design, creating what one

author called ‘technological stasis’.19

In his widely synthetic work, physicist Amory Lovins attacked many of the asserted

benefits to centralization and large-scale production as belonging to a ‘hard path’ that

19 Hirsh (n 13 above).




suffered from a number of significant problems.20 Lovins argued that large energy sys-

tems cannot be mass produced. Their centralization requires costly distribution systems.

They are inefficient, often wasting excess thermal energy. They take much longer to build

and are therefore exposed to escalated interest costs, mistimed demand forecasts and

wage pressure by unions. In contrast, Lovins proposed a ‘soft’ path promoting energy

technologies that were (1) diverse, providing energy in smaller quantities from decen-tralized sources; (2) renewable, operating on non-depleteable fuels; (3) simple or rela-

tively easy to understand; (4) modular or matched in scale to energy needs; and (5)

qualitative or matched in energy quality to end-use needs.

Shaping demand and influencing behaviour

Massive public and private campaigns to save energy during the crises of the 1970s

created a constituency for energy efficiency and demand-side management, backed also

by strong lobbies and groups such as the American Council for an Energy-Efficient

Economy (ACEEE) and the Alliance to Save Energy. These groups have argued that

energy efficiency—substituting fuels, upgrading or retrofitting technology and changingconsumer behaviour—represent the quickest, cheapest and most feasible and environ-

mentally friendly approach to address energy demand. Responding to the high prices

induced during the 1970s, individuals purchased more fuel-efficient automobiles, insu-

lated and weatherproofed their homes and they adjusted thermostats to reduce energy

consumption. Businesses retrofitted their buildings with more efficient heating and cool-

ing equipment and installed energy-management and control systems, accounting for a

decline of 25 per cent of energy use per square foot of commercial building space.

Factories adopted more efficient manufacturing processes and employed more efficient

motors for conveyors, pumps, fans and compressors.

Some electric utilities discovered that they could save electricity cheaper than the costof operating existing plants, meaning efficiency can improve cash flow by displacing

operating costs, appeasing investors and saving consumers money at the same time. All

in all, these efforts ‘saved’ more energy than any single source of energy supply on the

market today, and they did so costing much less than the value of that energy.21

Technological pessimism

Forced to confront burning rivers and environmental pollution in the 1960s, the nuclear

accident at Three Mile Island, the Bhopal industrial accident in India, and Chernobyl,

some regulators and citizens have developed scepticism regarding new technology, and

numerous scientists have warned that ecosystems are at their assimilative capacity atabsorbing pollution. Undergirding such pessimism are advances from ecology and biol-

ogy, including the ideas that humans are dependent on nonhuman forms of Nature; that

pollution of air, water and land is clearly detrimental to human life; that limits should be

20 Amory Lovins, ‘Energy Strategy—the Road not taken?’ 55 Foreign Aff 65–96; Amory Lovins, Soft Energy Paths: Towards a Durable Peace (Harper Collins, New York 1979); Amory Lovins,. ‘A Target Critics can’t Seem to get in their Sights’ in HughNash (ed) The Energy Controversy: Soft Path Questions and Answers (Friends of the Earth, San Francisco 1979).

21 Benjamin K Sovacool, The Dirty Energy Dilemma: What’s Blocking Clean Power in the United States (Praeger, Westport, CT2008).




set on the exploitation and use of natural resources; and that humans have a duty to

preserve the biosphere for future generations.22

The most serious issue on the political agenda is undoubtedly climate change, and

there may be good reason for pessimism. There is mounting evidence that the climate

change consequences of ‘business as usual’ could be nothing short of catastrophic for the

planet. A consensus of studies from the Intergovernmental Panel on Climate Change,United Nations and other top climatologists such as Lackner and Sachs, Rosenzweig

et al . and Josberger et al . have declared that continued emissions of greenhouse

gases will likely cause severe alterations to the distribution, availability and precipitation

of water and drinking water shortages for millions of people; destruction of ecosystems,

species and habitats, especially the bleaching of coral reefs and widespread deaths of

all types of migratory species; a significant loss of agricultural and fishery productivity,

along with a shift in the growing seasons for crops and increased drought in areas

with marginal soils that have low buffering potential; increased damage from floods

and severe storms, especially among coastal areas; and deaths arising from changes in dis-

ease vectors, particularly among diseases regulated by temperature and precipitation.23

The cumulative impacts of these changes could surpass $13 trillion, or 20 per cent of

global economic activity, if the more severe scenarios unfold.

Community control

Rather than remaining in the hands of technical experts and bureaucrats, momentum has

partially shifted to broaden participation outwards to include communities and local

actors as well as international ones. First, correlating with David Orr’s ‘energetics’

view, many citizens and nongovernmental groups are calling for more participatory

and democratic modes of energy policymaking that give individuals and communitiesmore autonomy over modes of energy production and use. For example, Sovacool sur-

veyed various studies looking at the acceptance of different energy systems and found that

participation and ownership—technologies and systems that had equitable forms of

permitting and project siting, and efforts to invite or include stakeholders to invest in

a given project—played a strong role in creating community support behind energy

projects.24 This switches the public role from a passive one of consuming to a more

active one of ‘energy democracy’ where consumers produce some of their own energy or

at least make more informed decisions about energy policy. Such participation has been

defended for being necessary to broaden public interest and increase knowledge, promote

equity in how benefits and costs are distributed and improve accountability.25

22 Sovacool (n 14 above).23 IPCC, ‘‘Summary for Policymakers’ Climate Change : 2007 (Government Printing Office, Washington, DC 2007); UnitedNations Development Programme, Energy After Rio: Prospects and Challenges (United Nations, Geneva 1997); Klaus S Lackner,and Jeffrey D. Sachs, ‘A Robust Strategy for Sustainable Energy’ (2004) 2 Brookings Pap Eco Ac : 215–248; Cynthia Rosenzweiget al., ‘Attributing Physical and Biological Impacts to Anthropogenic Climate Change’ (2008) 453 Nature 353–357; EdwardJosberger et al., ‘Fifty Year Record of Glacier Change’ US Geological Survey Fact Sheet 2009–3046 (6 July 2009).24 Sovacool (n 14 above).25 David W Orr, ‘US Energy Policy and the Political Economy of Participation’ (1979) 41 J Polit 1027–1056.




4. Current governance challenges

These changes to fundamental principles concerning what energy means and how it is

governed have resulted in a number of potential problems related to complexity, incon-

sistency, vertical fragmentation and horizontal fragmentation.

ComplexityTo handle the country’s vast energy infrastructure and to ensure that local and state

governments are represented along with the national government, regulations are very

complex. For example, just one sector, electricity, is regulated by 53 federal, state and city

public service commissions and more than 44,000 different state and local codes. About

240 investor-owned utilities (such as Exelon, Dominion, Southern Company and

American Electric Power) operated three-quarters of the country’s total electrical capacity

in 2008, but in addition to these, more than 3,187 other private utilities provided power

along with 900 cooperatives, 2,012 public utilities, 400 power marketers, 2,168 non-utility

generating entities and 9 federal utilities (such as the Tennessee Valley Authority and

Bonneville Power Administration) played their respective roles.26

Inconsistency

Perhaps because of this complexity, inconsistencies have occurred in how energy prob-

lems are addressed. Consider the example of renewable energy promotion. National

policy for renewable energy has been inconsistent, with federal research on renewable

energy systems focusing on centralized, large-scale and utility owned technologies yet

legislation advancing decentralized, small-scale and independently owned technologies.

Legislation including the 1935 Public Utility Holding Company Act (PL 74–333), 1980

Wind Energy Systems Act (PL 96–345), 1984 Renewable Energy Industry Development

Act (PL 98–370) and provisions of the Energy Policy Act of 1992 (PL 102–486) were

allowed to expire or never fully implemented. The result has been inconsistent govern-

ment mandates and very slow adoption of renewable resources. One study found that

renewable energy policy in the US was the most inconsistent out of a sample of 17

countries.27 The study noted that for 16 other countries, the average number of signifi-

cant changes made to renewable energy policies for the period 1997 to 2005 was less than

0.6, but the US changed its policies 6 times (See Figure 4).

We see the same inconsistency with changes to energy research sponsored by the

federal government. Such research has seen variations in year-to-year funding as great

as 116 per cent for coal, 84 per cent for petroleum, 64 per cent for natural gas and similar

jumps and drops in funding patterns for all major DOE research areas and technologies.

Figure 5 presents these numbers from 1978 to 2008. Gulliver and Zillman explain the

inconsistency in government research through the lens of regulatory capture, namely, that

much of the national government has been captured by various energy interests that have

26 Sovacool (n 21 above).27 Reinhard Haas et al., ‘Promoting Electricity from Renewable Energy Sources—Lessons Learned from the EU, United States and

Japan’ in Fereidoon P Sioshansi (ed) Competitive Electricity Markets: Design, Implementation and Performance (Elsevier,Amsterdam 2008.) 91–140.




evolved into cartels that protect these interests over those of consumers and the country

at large.28 These cartels are successful at getting subsidies and research funds in some

years, but not in others.

Vertical fragmentation

Despite moderately clear roles about state and federal jurisdiction over energy, a degree of

vertical fragmentation exists where local, state and federal actors at times duplicate and

Figure 4. Consistency of renewable energy policies for 17 countries, 1997–2005. Source : Haaset al., 2008.

28 Gulliver and Zillman (n 5 above).




contradict each other’s actions. In some situations, such vertical fragmentation has led tolawsuits and litigation between states as well as between the states and the federal gov-

ernment. For instance, the 1992 Supreme Court decision New Energy Co. of Indiana v

Limbach ruled that a local income tax credit to promote in-state ethanol producers was

unconstitutional and that same year in Wyoming v Oklahoma the Court held that an

Oklahoma regulation requiring the state’s utilities to utilize a certain percentage of

in-state coal violated the Commerce Clause. In 1995, a federal court decided in

Alliance for Clean Coal v Miller that an Illinois preference for the use of in-state coal

to satisfy Clean Air Act amendments similarly violated the Dormant Commerce Clause,

and in 1996, the court ruled that states could not restrict the treatment and disposal of

hazardous waste from neighbouring states.In other situations, the states have attempted to ‘fill the gap’ in areas where they deem

the federal government has not acted quickly enough. Prominent examples include RPS,

renewable fuel standards, greenhouse gas reduction targets, net metering and the trading

of carbon credits. The problem with such action is that it greatly complicates local mar-

kets for energy and can lead to a cacophony of different voices and views. Consider one

type of state policy, RPS, which mandates that states provide a certain percentage of

electricity from renewable resources by a certain date (ie, California mandates that all

y g

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

1978198019821984198619881990199219941996199820002002200420062008 R D & D

F u n d i n g Y e a r - t o - y e a r V a r i a t i o n [ % ]

Coal R&D Petroleum GasTransportation Industry Buildings

-140%

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e a r - t o - y e a r V a r i a t i o n [ % ]

Solar Biomass WindGeothermal Hydropower

Figure 5. Year-to-Year funding variation for 6 research areas and 5 technology areas at the USDepartment of Energy, 1978–2008. Source : Narayanamurti et al., 2009.




major utilities must generate 30 per cent of their electricity from renewable resources by

2020). Contrary to enabling a well-lubricated national energy market, at times incon-

sistencies between states over what counts as renewable energy, when it has to come

online, how large it has to be, where it must be delivered and how it may be traded to clog

the renewable energy market like coffee grounds in a sink. Implementing agencies and

stakeholders must grapple with inconsistent state goals, and investors must interpretcompeting and often arbitrary statutes. If America’s interstate highway system were

structured like its renewable energy market, drivers would be forced to change engines,

tyre pressure and fuel mixture every time they crossed state lines.

Another example of vertical fragmentation is state targets for reducing greenhouse gas

emissions and trading carbon credits. Like RPS programmes, state climate change policies

lack consistency and harmony. The multitude of state greenhouse gas policies is more

costly than a single, federal standard because it creates complexity for investors.

State-by-state standards significantly increase the cost for those attempting to conduct

business in multi-state regions. Statewide implementation programmes also require sep-

arate inventory, monitoring and implementation mechanisms to check progress againstgoals and provide feedback, adding to their cost. And state programmes provide incen-

tives for local and regional actors to duplicate their research-and-development efforts on

carbon-saving building technologies and energy systems, compromising efficiency.

Horizontal fragmentation

Even when one focuses only on the national government, a significant degree of hori-

zontal fragmentation exists. Within the more-than-a-dozen federal agencies charged with

varying responsibilities for energy governance, many programmes are stove-piped and

fragmented. Channels of coordination between external organizations (such as the USDA

and DOT) and within the DOE remain confusing and complicated. The national labora-tories are sponsor-driven rather than mission-driven and research programmes poorly

funded compared to other federal activities.29 Contrary to a historical role as an incubator

of energy technologies and a supporter of scientific research, the DOE and its national

laboratories have been criticized for losing their sense of mission and ineffective man-

agement. DOE labs are said to be the most lacking in flexibility and cost effectiveness,

resulting from an overly centralized, hierarchical and micromanaged resource allocation

system. Such criticism is usually based on three grounds: that the DOE’s diverse mission

creates an uncoordinated approach to energy problems; loss of mission is further com-

pounded by a dysfunctional organizational structure; and as a result, DOE research re-

mains hindered by a weak culture of accountability.

Politicization and manipulation

The now emergent varying views of what energy means in the US have made it a

contested and politicized site of conflict. One recent survey of 2,701 American residents

in the summer of 2008 found that familiarity with a particular type of energy and

29 Benjamin K Sovacool, ‘Resolving the Impasse in American Energy Policy: the Case for a Transformational R&D Strategy at theUS Department of Energy’ (2009) 13 Renew Sust Energ Rev 346–361.




proximity to a site or power plant were strong indicators of public acceptance and sup-

port. This means local communities differ greatly from national samples and that greater

concern about local environmental conditions has a strong correlation with preference

for renewable sources of energy and opposition to fossil fuels30 The study also found that

trust in authority, trust of the federal government or energy suppliers, was predictive of

respondents willing to tolerate nuclear and conventional sources of energy. The study revealed that almost half-Hispanic females and black females favoured increased reliance

on coal and objected to renewable energy for its harm to birds; these participants placed

greatest importance on lowering energy costs, they did not identify with environmental

activism, they believed that their environment would be better in 25 years than it is today

and they professed strong religious beliefs and trust in authority. Proponents of renew-

able energy, by contrast, saw huge environmental benefits with wind energy and other

renewables, were highly opposed to coal and nuclear sources and tended to be white,

highly educated, strong environmental supporters.31 As if the presence of different views

were not enough, there have been notable efforts to manipulate public opinion to make

energy even more politicized and contentious, summarized by Sovacool, Radmacher,Sheppard, Fahrenthold, Lyons, Mouawad and Muller.32

These examples underscore that consensus on energy issues may no longer be possible

in the US. The former Committee on Nuclear and Alternative Energy Systems, a panel set

up by the National Academies in the 1970s to look at the energy crisis, vividly demon-

strates the difficulties faced by any group trying to arrive at consensus on energy issues. ‘It

simply can’t be done’, its Chair, Harvey Brooks, concluded, ‘at least not within any group

that honestly represents the spectrum of defensible views in today’s academic, intellectual

and industrial community’.33

5. Conclusion

If there is one central lesson from this article, energy governance in the US is currently

complex, inconsistent, fragmented, politicized and dynamic. The historic principles that

guided the formative years of energy supply and use in the US—a public duty to serve,

emphasis on low prices, adherence to large sophisticated technologies, responding to

projected demand, faith in technology and trust in expertise and technocrats—are now

30 Michael Greenberg, ‘Energy Sources, public Policy and Public Preferences: Analysis of US National and Site-specific Data’(2009) 37 Energ Policy 3242–3249.

31 Ibid.32 Sovacool (n 21 above); Dan Radmacher, ‘Effort to Clean Coal’s Image won’t Work’ Roanoke Times (21 December 2008) 7; Kate

Sheppard, ‘Majority of Energy Citizens’ Rallies Organized by Oil-Industry Lobbyists’ Grist (21 August 2009); David AFahrenthold, ‘Coal Group Reveals 6 More Forged Lobbying Letters’ Washington Post (5 August 2009); Daniel Lyons, ‘AnSOS for Science: Clean Energy should Trump Politics’ Newsweek (12 October 2009) 26; Jad Mouawad, ‘Industries Allied to CapCarbon Differ on the Details’ New York Times (2 June 2008); Frank Muller, ‘Energy Taxes, the Climate Change Convention andEconomic Competitiveness’ in Olav Hohmeyer, Richard L Ottinger and Klaus Rennings (eds) Social Costs and Sustainability:Valuation and Implementation in the Energy and Transport Sector (Springer, New York 1997) 465–487.

33 Harvey Brooks, ‘Energy: a Summary of the CONAES report’ (1980) 36 B Atom Sci 23




in flux. No overarching theme or principle currently guides policy, and the country

instead appears wedded to a portfolio approach that pushes a variety of technologies

and systems, even those that tradeoff with each other, to appease as many diverse stake-

holders and lobbyists as possible. Here, the portfolio approach makes perfect sense in-

sofar as it accommodates different interests.

The problem, however, is that the world’s largest energy producer and consumer isrunning at full steam but without a rudder. Currently, energy governance in the US

represents more a bundle of technologies randomly juxtaposed together than any coher-

ent energy vision. The situation illustrates quite nicely the non-technical dimensions of

energy systems—that underlying social and political values can change over time and

exert great influence on the course a country takes towards energy—offers a nice depart-

ure from commentaries exclusively about technology that so often dominate the discus-

sion. But while looking at governance may give us a more nuanced view of current state

of affairs, it still does little to help resolve the inconsistencies and complexities that

become painstakingly apparent.


national energy governance in the united states

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