Is Apollo Program for US Energy a Recipe for Waste?
INDIANAPOLIS - When was the last time you had to choose between a trip to Paris and a trip to the moon?
And when did you last have to decide whether to buy an atomic bomb or a bomb with conventional explosives and a similar yield?
Silly questions, right?
But these are the kinds of questions we'll be asking about the alternative energy technologies the Obama administration wants us to use. They illustrate why the overused analogies to the Apollo moon landing and Manhattan atom bomb project don't apply. Those programs were entirely different in purpose from ones related to our search for energy alternatives. And if we are to have a sensible energy policy, it's important for the American people to understand how they are different.
Not that any politician will tell you. Nearly every president since Richard Nixon has invoked the Apollo program to win support for some energy panacea program. President Obama went into Apollo-mode on the campaign trail to explain why he was going to spend $150 billion to jump-start renewable energy.
At first glance, the analogy seems to make sense. If government could do something so stupendous as put a man on the moon, surely it could produce a device to make us energy independent. Right?
Well, no. The Apollo Program was an engineering feat. Replacing conventional energy technologies with something new will be a commercial feat. Government is good at the former (although the New Orleans levees may give us pause); it's terrible at the latter.
Let's try those questions again:
When you last bought a car, did you have a choice between a hybrid car and a comparably fuel-efficient one with a conventional engine? If you did, you probably went with the conventional car. Why? Probably because cost, reliability, style, and other factors weighed more heavily than being "green." Even a government tax break on the hybrid may not have persuaded you to buy one.
Or what about the last hot water heater you bought: Did you choose gas? Electric? Solar?
In the 1970s, President Carter prodded Congress to pass tax breaks for solar hot water heaters. These breaks were designed to expire after a few years because solar would soon be, by the government's reckoning, so obviously superior, cost effective, and popular that few would resist. His administration wanted 2.5 million solar heaters installed nationwide by 1987, and some proponents expected that by 2025 solar would be providing most of America's hot water.
Instead, by the late 1980s, more solar systems were being removed from homes than installed. Consumers found them expensive and vendors unreliable. By 2000, solar was providing a minuscule portion of home hot water heating.
New technologies such as electric cars will face similar market issues. The Chevy Volt, due in 2011, may feature a $7,500 tax credit. But if it has a $40,000 price tag and if gas is $2 a gallon, how many will buy one?
Most consumers will at the very least wait to see how well such cars perform over time. The fact that the technology exists and the government is behind it means very little when a consumer has to decide how to spend thousands of dollars. That's why governments have historically failed to "pick winners" in the technology market.
The analogies to Apollo and Manhattan miss the point. Their aim was to prove that we could do something. We can already do all of the energy technologies the Obama administration is touting. But that doesn't mean they'll become commonplace consumer purchases, even with massive federal support.
There really isn't a good example of government ever providing a commercially viable alternative energy technology.
Markets have done a much better job. Take the hybrid car. In the 1990s the US government and the Big Three automakers launched the Partnership for a New Generation of Vehicles (PNGV), which was supposed to produce a superefficient family car. The PNGV spent more than $1 billion of taxpayer money, but the resulting prototypes weren't commercially viable and the project was shuttered in 2001. Meanwhile, Honda and Toyota, which had been excluded from the PNGV, launched the Insight and the Prius, respectively. Recently, Toyota celebrated the millionth Prius sold.
Does that mean the best energy policy is no policy? Not entirely. Government-sponsored research is useful and tax policy can certainly influence consumers. But alternative energy programs that mandate man-on-the-moon timetables for not-yet-commercially viable technologies are a waste of money. They haven't gotten us very far, and new programs, however alluring, are unlikely to be any better.
• Peter Z. Grossman is the Clarence Efroymson professor of economics at Butler University in Indianapolis.
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