In Search of Energy Security

Will New Sources and Technologies Reduce Our Vulnerability to Major Disruptions?

By James T. Bartis, Mark A. Bernstein, Tom LaTourrette, and Debra Knopman

Jim Bartis and Mark Bernstein are RAND senior policy analysts who specialize in research on energy and the environment. Tom LaTourrette is a RAND physical scientist specializing in science and technology policy. Debra Knopman is vice president and director of RAND Infrastructure, Safety, and Environment.

Among the critical weaknesses in America’s infrastructure laid bare by the spate of Gulf Coast hurricanes of 2005 are the fragility of U.S. offshore domestic oil and gas production facilities and coastal refineries and their vulnerability to disruption. One deceptively simple solution would be to spread the critical energy infrastructure more evenly around the country, preferably to less disaster-prone regions. However, there is much more to the story of U.S. energy insecurity than merely the geographic concentration of infrastructure.

The reality is that neither new energy sources nor new energy technologies can reduce our vulnerabilities in the next 10 to 20 years.

We define energy insecurity as a susceptibility to prolonged supply disruptions and price spikes. Part of our susceptibility does stem from the heavy concentration of refined energy products (such as gas, aviation, and maritime fuels) at very few spots in the supply chain (such as New Orleans and Long Beach) that are vulnerable to natural disasters or to a major terrorist event. But the degree of energy insecurity now facing the United States will require a response far more sophisticated than just spreading the problem around. The reality is that neither new energy sources nor new energy technologies can reduce our vulnerabilities in the next 10 to 20 years.

In the short term, the strategies that can be deployed the most productively are conservation, improved efficiency, and other demand-side measures. There are physical and economic limits, however, to how far these measures can take us toward a more secure future. Simultaneously, we need to explore new supplies of fossil-fuel resources, push technological advances in production and utilization of these resources, and perhaps reconsider the role that nuclear power could play if its waste and proliferation issues can be satisfactorily resolved. Over the next several decades, we need to pursue a mixture of demand-side and supply-side measures to keep up with the energy requirements of U.S. and world population growth and to reduce the risks inherent in our current, limited energy portfolio.

The best near-term option for increasing our energy security is increasing our energy efficiency.

There is much that the public and private sectors can do to lay the groundwork for improving our energy security in the next 25 to 50 years. Oil shale is a potentially significant new source of fossil fuel, and this particular source of energy faces the common technological hurdles associated with moving from first-of-a-kind plants to major commercial scale-up. There are economic, environmental, and social hurdles as well. As in many cases of oil and gas exploration, the economic constraints alone could considerably curtail production and distribution. We offer guidelines to help manage these kinds of challenges. We also envision research on energy alternatives, including hydrogen development, as a long-term investment to expand our options.

Diversifying America’s energy portfolio would help the nation not just to reduce its energy vulnerability but also to do a better job of protecting the environment. Several emerging energy investment options could serve both energy and environmental needs. Each option merits further study, but the key point is that no single option alone will suffice. Only a larger, balanced package of investments can reduce our energy insecurity in the long run.

AP/JULIA MALAKIE   Claudia Delgado, 16, helps assemble an insulated concrete form wall during an Energy Star Technical School Outreach workshop in Worcester, Mass., on Feb. 3, 2005, as Mark Dillon, 17, looks on. Both are students at Upper Cape Cod Regional Technical School. The workshop taught technical high school students about energy-efficient building techniques.

Short-Term Option: Efficiency

Part of the challenge in diversifying our energy portfolio lies in balancing short-term, medium-term, and long-term options, all of which are needed. The best near-term option for increasing our energy security is increasing our energy efficiency. No matter what sources of energy supply we tap or how we tap them, improved efficiency can help us manage energy demand.

As a mandate for greater energy efficiency, the 2001 National Energy Policy released by the Bush administration called for continued reductions in energy intensity, which is typically defined as energy consumption per dollar of gross economic output. To help identify the most promising ways to reduce energy intensity nationwide, we compared the changes in energy intensity within each of the 48 contiguous states between 1977 and 1999.

We found that state-sponsored energy efficiency programs cost-effectively curbed growth in energy use, alleviated pressure on energy systems, and reduced price volatility. The five states with the greatest overall reductions in energy intensity (after accounting for various economic and natural conditions across the states) were Washington, Oregon, Kansas, Arizona, and North Carolina.

If it were possible for each state to reduce its energy intensity to the same degree as these five states, then the nation’s energy use per dollar of economic output could fall by 2020 at a rate twice as fast as that forecast by the federal Energy Information Administration. This finding suggests that there may be ways for the U.S. Department of Energy to help states share valuable information with one another about effective state-level actions to reduce energy intensity.