Inside Obama's green plan for energy and the economy
Times staff writer Edward Silver posts this detailed look at Sen. Barack Obama's proposals on energy -- and which companies could benefit most from the candidate's blueprint if he wins the White House.
For Barack Obama, climate change is change we can believe in.
Speakers at the Democrats’ convention this week, by and large, have taken as dim a view of fossil fuels as the Iraq war. If you were quaffing your brew at each mention of "alternative energy" from the podium, you’d have a lot of recycling to do by now. The green theme climaxes tonight, with environmental hero Al Gore setting the stage for the candidate’s address.
Since he launched his campaign, Obama has offered remarkably detailed proposals and demonstrated fluency in the language of energy and carbon. He promises a broad agenda aimed at growing sustainable industries quickly. That means jobs, profits and a balm for the planet, but it’s a riddle when, or if, that growth would offset the financial costs of change.
If he takes the helm, Obama’s blueprint may be welcomed by an admiring Congress. Then comes the hard part: implementing it.
Like rival John McCain, Obama proposes a market in permits to emit greenhouse gases, commonly termed "cap and trade." His approach is stricter, however, and his final goal -- an 80% reduction from 1990 levels by 2050 -- more ambitious. Even though emissions limits are defined by the government, cap and trade is widely seen as a fair, market-driven way to, in Obama’s words, make "dirty energy expensive."
Coal generates half the country’s electricity, but with carbon costs imposed, new plants won't be built. Under Obama, investors may shun coal producers that only sell domestically while favoring those that feed booming demand overseas, such as Peabody Energy Corp. Meanwhile, firms that crack the engineering challenge of burying coal emissions underground would get more than a few contracts.
Assuming that a Congress renews key tax incentives, utilities would hurry to add renewables to their mix, playing into the hands of wind energy specialists such as Vestas and solar companies like Energy Conversion Devices Inc., Sunpower Corp. and private BrightSource Energy.
Obama is not a friend of nuclear power but urges the industry to solve its chronic waste storage and other problems. With coal in the doghouse, though, the pressure to go nuclear would build. That’s where natural gas comes in. In his energy factsheet, Obama makes special mention of the cleaner-burning fossil fuel, the No. 2 source of U.S. electricity. He promotes drilling in the Barnett shale in Texas, among other places. After all, the Illinois senator doesn’t see renewables contributing more than 10% of our power supply by 2012, and even that may be a reach.
Ironically, Pickens and Chesapeake Chairman Aubrey McClendon donated generously to Swift Boat Veterans for Truth, the conservative group that tried to shred Democrat John Kerry's military credentials in 2004. Energy crises, apparently, make strange bedfellows.
Cap and trade auctions would channel $30 billion to $50 billion into public coffers annually, Obama estimates. He’d invest some of that in clean-energy research, efficient-use programs and subsidies for Americans' rising energy bills. He’d spread the largesse by funding a Clean Technologies Venture Fund and earmarking $150 billion over a decade to underwrite the green transition in the private sector.
Obama says his "overarching goal" is ending U.S. reliance on Middle East and Venezuelan crude. Not much controversy there. Yet he’s not enamored of U.S. oil companies either. He backs a windfall profits tax, and his aide Jason Grumet has spoken critically about the wave of mergers that gave us modern Big Oil.
Obama has several strategies to loosen oil’s vise. He has backed corn ethanol but now emphasizes cellulosic fuels made from materials no one eats, such as wood chips and switchgrass. A speculative solution, certainly, but indications of support could give a boost to big DuPont & Co., little Bluefire Ethanol Fuels Inc. and Verenium Corp., as well as private firms such as Mascoma Corp. and Range Fuels.
He backs raising auto mileage standards 4% a year and would push to make all new vehicles flex-fuel-capable. Advanced battery technology is a priority in Obama’s plan, to make plug-in hybrids kings of the road. Potential beneficiaries: General Motors Corp., if its much-anticipated Volt makes it to market, and brainy battery makers like A123 Systems, which is competing for the Volt contract and plans an IPO this year.
To keep the technology and jobs in Detroit, the candidate would extend tax credits and loan guarantees to U.S. automakers for retooling. And to sweeten the deal for consumers -- think of the premium you have to cough up to purchase a Prius -- Obama favors a $7,000 tax credit per plug-in vehicle.
Conservation may be the most effective way to loosen the hold of fossil fuels, and Obama knows it. One plank in his energy platform is a drive to weatherize homes. Another piece is more complex: using regulation to flip the logic of profitability for utilities. Instead of more consumption equating to bigger bottom lines, he wants to reward power sellers for husbanding their resources.
To that end, Obama has become a booster of the "smart grid," an electricity network that manages use while it brings renewables on line. With the right technology, for example, a utility could shift demand away from peak times and bring energy produced by customers into the pool. Rooftop solar owners, that means you.
Such an agenda might draw companies such as EnerNOC Inc. and Itron Inc. into the limelight. The former enables customers to get paid for conserving, and the latter automates meter reading. Up-and-coming architects of the smart grid include Gridpoint Inc., Silver Spring Networks and Trilliant Inc.
Think of Obama’s mutifaceted program as a manual for turning around a supertanker. It can’t be done hastily and changing course will make waves. But he’s betting that most Americans believe he’s pointing the ship in the right direction.
Top photo: Barack Obama. Frank Polich / Getty Images. Bottom photo: Workers on the Orion Altair natural gas rig in Edna, Texas. Eddie Seal / Bloomberg News