Do We Need an Alternative Energy 'Manhattan Project'?

The following is the second half of an interview that was published August 6th.

Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome back to the second half of my interview with Ed Mitby, senior research analyst at Van Eck. We’re talking about alternative energy.

Ed, [high energy] prices have clearly been a driver behind this push toward alternative energy, but policy is also very important. I think policy is at the top of the heap. Some would say the United States really doesn’t have an alternative energy policy. The president still talks in terms of oil: drilling on the outer continental shelf, up in ANWR, maybe oil shale, this sort of stuff. But what policies do we have in place, if any, right now to help foster the growth and usage of alternative energy in this country?

Ed Mitby, senior research analyst, Van Eck (Mitby): The current policy for energy in this country is basically nonexistent across the board. It’s not good. It’s basically led to a dependence on oil that is a finite resource and is running out - whether it runs out in 20 years or 30 years or 50 years - it’s definitely running out. There needs to be a long-term fundamental policy hopefully that the government can institute at some point to help private industry come about and develop these technologies.

Norman: You said you were at a conference recently in Washington, D.C., where you heard a lot of bigwigs and policy wonks and people from the Defense Department speak on this very subject. It was at a critical stage; tell us about that.

Mitby: Basically the oil energy problem has become not just an environmental issue, it’s become a national security issue. The U.S. is dependent on Third World countries that are not exactly favorable toward the U.S. They are subject to random weather patterns, they are subject to dictatorships. The oil-producing countries, several of them, are not…

Norman:We’ve seen it, like Russia, Venezuela, places like that, where even if our producers find oil, they nationalize it, they take it away.

Mitby: Right. And you’ve also got an issue where U.S. foreign policy is being undermined at this point by its inability to convince other nations not to do business with nations that produce oil. China, for example, needs oil, and they will do business with Iran, they will do business with Darfur [in the Sudan]. It’s becoming a major foreign policy issue.

Norman: So let me ask you this: Do we need a Manhattan Project? You remember when John F. Kennedy said we’re going to put a man on the moon by the end of this decade, and it was partnership between government that funded a lot of the primary research and development and private industry. Do we need something like that? And if we do, the way I see it, every time you talk about some public planning, it’s perceived as socialism.

Mitby: What we need in this country is a levelized playing field for the people that are trying to develop these technologies. There’s been a huge venture capital boost into developing these technologies in the last few years, and they are progressing. But it would be a huge boon to the entire world actually if they would have some help between the tax incentive or visibility into what the tax structure is going to be [long term]. A big purchaser of any kind of energy product would be a utility, and they need to look at the future six or seven years out. It’s very hard for them to plan at this point when they don’t know what the funding or tax policies are going to be.

Norman: Now do you feel that those policies will fall into place perhaps after the election?

Mitby: Both candidates propose their own agendas on the subject. It remains to be seen. It seems much more favorable than anything that’s happened in the past, and that has nothing to do with which administration it was or that type of thing. But this type of politicking has been going since the ’70s really. So maybe it comes to such a critical juncture at this point that there will be enough incentives to look at this from not just an environmental standpoint but also a national security standpoint.

Norman: All right. Two questions I want to ask you quickly. First of all, how do we stack up against some other countries; who’s in the lead when it comes to this? And secondly, what companies - if I’m thinking like an investor - what companies here in the United States are the ones best poised to take advantage of this trend?

Mitby: Well, the European countries I think have done a really good job of fostering these emerging industries with pretty lenient subsidy structures; Germany and Spain for example - they’ve really gotten the solar industry going there. Wind has done very well in Europe; some countries over there get about 20 percent of their electricity from wind at this point. The Department of Energy has done a study where they would like to see the U.S. have potentially 25 percent of its energy coming from wind by about 2030.

Norman: All right; well, let’s hope so, definitely. Folks, you’ve got to stay tuned to this Web site. We’re going to have a lot more of our interview series right here on HardAssetsInvestor.com. Thanks for watching. I’ll be back next time. Take care; bye bye.

Comments

[akapital:]

Hey Ed Mitby I am quite impressed on your comments of "a level playing field." You are in my opinion aboslutely correct. The level of tax breaks and other advantages that oil has received over the years is unsurpassed by any other industry. And not simply tax breaks but access to special privileges (e.g. White House energy forums, etc.) Now there is not necessarily anything wrong with this if other energy solutions are also being given this access and advantages but of course this is not the case. Thus, the reason alternative energies were behind in research and development has alot to do with this factor. And when people today still say that solar or wind isn't viable without gov't subsidies they are partly right but the same could be said for oil. Oil would not be a viable energy solution without all the tax advantages and geo-political policy engendared on its behalf.

Although of course solar and wind become viable and desirable when the cost of oil inceases to a level of parity with the cost of alt energy.

What's the point here? Whatever our energy solution it will indeed require gov't subsidy or cooperation of some kind. Why not open up Dept of Energy to all free market energy companies and not only level the playing field but assist in diversifying our energy solutions.

2008 Aug 13 05:13 PM

[David @ the...:]

For any interested, I'll send a copy of King Hubbert's original paper which he presented to the American Petroleum Institute in March, 1956 - cited as the origins of peak oil theory. I know this crowd understands the theory, but it's inspiring to read the original -from a man who will go down as true visionary. Just send me an email at:

www.hybrid-car-show.co...

2008 Aug 13 08:27 PM

[petersterling:]

America could easily be energy independent in ten years by aggressively developing its own oil and gas resources. But that would require a majority of congressmen to be capable of conscious thought!

See; www.strategicnine.com/...

2008 Aug 13 09:11 PM

[creativforce:]

America could easily be energy independent in ten years by aggressively prosecuting oil companies that are squashing existing technology. They say we can't drive electric cars because the technology is too expensive, because the battery doesn't exist, because blah blah blah blah. I can build a goddam electric car in my back yard for under $8000, but I can't buy the Cobasys NIMH battery that powered the EV1 in California because Chevron bought it and won't sell itt to anyone. They won't even fulfill their contract with Daimler who is currently sueing them. But they don't care about lawsuits, they make more money each day that the battery is not available than they'll ever lose in a lawsuit.

2008 Aug 14 10:34 AM

[sabbadoo32:]

MIltby deftly manouvers around the question of which party would give us the best chance at a "Manhattan Project". Both will have to. McCain's plan would be slower, slaved to the pace of the oil companies and Detroit. GM may be ready to start rolling out electric cars (this time), but they'd have to stand in line for the oil companies to make an orderly transition to other sources.

Obama wouldn't make things an alternative fuel nirvana, either. I believe he's a bit more pragmatic than the media and "the spin" would allow you to think. I think he'd start to link oil company subsidies to R&D into new fuels. We know he'd adopt some form of cap an trade, hopefully something better than the Euros have.

Most of all I think an Obama administration would set a tone of entreprenurial development.

2008 Aug 14 11:19 AM

[nakedjaybird:]

Let it be known, that with the stated complications of and between regulations, politics, free-markets (which are not), breaks, tax breaks, etc., the push for alternatives will not happen without a MANHATTAN PROJECT EMPHASIS because of all the above complications, and many more.

A MANATTAN PROJECT push will decimate all the resistance, which is necessary to make it happen, and do so in less than 10 years.

It's the only way to beat the 2030 targets which are no more likely to happen than what has happened in the past 45 years since the 1973 embargo.

A Manhatten project push says "THE BUCK STOPS HERE".

GET ON THE TRAIN OR GET ROLLED OVER.

2008 Aug 14 12:20 PM

[nakedjaybird:]

It's absolutely disgusting to hear how our OIL energy policy is lacking, OIL energy is a national defense issue, etc., etc., and that **&^%$%^& has not the guts or whatever to say clearly that we really need to get off of an oil diet.

2008 Aug 14 12:33 PM

[nakedjaybird:]

And that is why we need a Truman to say "drop the bomb" or a Kenndy to say "we're going to the moon in a decade". AND THEN MAKE IT HAPPEN.

STOP TRYING TO POLITIC IT, LEGISLATE IT, TAX-BREAK IT, FAIR PLAY IT, ETC., JUST DO IT!!!!!!!!!!

Repair any damage after the fact (if there really is any)..

We run this country on a basis of "ask for permission" of a lot of no-never-mind-dummies-... whereas in this case (and maybe some others) regarding alternaive energy sources to eliminate hydrocarbon use and become energy independent, we should JUST DO IT, and "ask for forgiveness" after the fact, should we even need to.

2008 Aug 14 12:43 PM

[bruno12:]

We absolutely need a Manhattan type project to solve the energy crisis. I would use NASA as a better example of cooperation between government and private enterprise to solve an urgent crisis (the Russian lead in space). There should be a NASA type campus somewhere. Since Houston is the energy capital of this country it could be there. But perhaps it should be in a more neutral, academic place. MIT comes to mind. They have an energy project already.
The 128 corridor is already a research center. There is no way Congress is going to lead the way to solve the energy crisis no matter which party is control If they were in charge of the space program step by step we would still not be on the moon. They just need to fund a NASA type program and let the scientists and industry go to work.

2008 Aug 14 01:22 PM

[Paul Killinger:]

Sabbadoo,

Obama the entrepreneur?

Well, the communist Chinese have embraced capitalism.

So, now you're forecasting entrepreneurial Socialism?

Anything's possible, I guess.

2008 Aug 14 01:43 PM

[nakedjaybird:]

No, we don't need a NASA type campus ---- we need a Patton; a Truman;

We have plenty of campus's(?). WE NEED A LEADER!!!!!

Come on Boone, Warren, Bill, and Al(?) - well, I'd go with the first two first - for sure; for quite a while (and I'd ask Bill to give back Warren's money to Warren - Bill bothers me - but not as much as Al - Al is a misguided missle that every now and then hits the right target; Bill exhausted himself on his best and only 20 years ago - proof: MSFT progress! It's been a pre-kindergarden since).

2008 Aug 14 01:47 PM

[Alex Filonov:]

If you say something, doesn't mean it happens. When Truman said Drop the bomb', he had it. Price didn't matter. When Kennedy said 'Let's go to the Moon', technology was available, price was decent for the goal (not the Moon but the propaganda value). Even Manhattan project was built on the base of know science and technology. There is no technological base for altenergy right now which makes it at close to competitive with oil for transportation. Governments around the world spent hundreds of billions since 1970s (much more than on Manhattan project and Moon races combines, adjusted for inflation) and still nothing. Best hope we have now is fuel cells working on gasoline. But they've been three years in the future for the last ten years. When somebody invents cold thermonuclear device compact and powerful enough to fit in the car, and cheap enough to mass produce, that's it. Everything else is just talk. And huge waste of taxpayers money.

2008 Aug 14 02:09 PM

[nakedjaybird:]

Muddling - Truman said the buck stops here, often; which we have become inable and unable to do.

Prior to Harry our LEADERSHIP implemented the Manhattan Project - which believed in the blue glow and WANTED TO USE IT.

SO. we designed, built and operated a working nuclear reactor within 18 months - from nothing - including drawings; using 1940's technology, in the Hanford desert. Then we made the materials, tested and built the bombs Harry ok'd, and we delivered - MUCH ADO ABOUT SOMETHING - including flying blind, so to speak.

Regarding alternative energies, their conversion devices and new and used technologies: the methods to get us off oil, gas, and coal; we ALREADY know more, have more, can do more, etc., etc., for this than we ever had for the Manhattan Project, the bombs (the delivery systems), AND ALSO for going to the moon - period!!!!!!!!!!!!!

2008 Aug 14 02:50 PM

[nakedjaybird:]

What I hear from all you oil, gas, and coal guys against alternative energies/uses and becoming independent of natural hydrocarbons is really nothing more than the kind of stuff that could have been or was presented against building the INTERSTATE HIWAY SYSTEMS.

If it had not been for lot's of SELFISH folks wanting that to happen for their own selfish reasons it would not have happened.

We certainly had all that was required for the hiways; just as we have for alternate energies.

AND OUR NEED FOR ALTERNATIVES IS MORE SERIOUS THAN THE INTERSTATE HIWAYS.

Just a lot of selfish noise winning for the moment.

Again, it takes LEADERSHIP riding the horse in the direction it should be going.

2008 Aug 14 03:02 PM

[nakedjaybird:]

Did the railroads or airlines whine about the proposed interstate hiway plan??

Did small towns??

Did small town businesses??? (this is not the fast food or big box store battles, yet).

Did the farmers and landowners (that had their lands divided, or homes destroyed)????

How about the developers??

How about the asphalt and cememt industries??

Steel??

Engineering/Constructi... Cat? Deere?

Where were all the lobbiests lined up?

How open were all the politicians pockets??

So, let's do ALTERNATIVE ENERGY!!

The resistance is no different except in form or location.

2008 Aug 14 03:13 PM

[Alex Filonov:]

The difference is, there is no scientific and technological base to make altenergy competitive. If electric car is not competitive when oil is $100 for a barrel, it's not competitive at all. If solar energy costs 40+ cents for kWh and science and technology don't allow it to be much cheaper, it's no good. Wind energy isn't good for base load, because it's weather dependent and not good for peak load for the same reason. Chemical battery will always lose to liquid fuel because of low energy density and long recharge times. And, again, altenergy already consumed much more money than Manhattan project and Moon race combined, inflation adjusted. Where are results?

2008 Aug 14 05:35 PM

[longtermstocks:]

If the US does not do it - another country will. We need to get on with it!

2008 Aug 14 06:09 PM

[nakedjaybird:]

Muddling - the result we got was the NEA and what it's produced; oh, yes, and we got welfare: just nothing comparable.

2008 Aug 14 10:55 PM