When people flip a light switch in their homes, it’s unlikely they think about what goes into to generating the power and the politics behind it. Electricity is one of those things that rarely comes to mind unless something goes wrong with it. This summer has been the hottest within living memory, and while some claim that the jury’s still out, the science pretty conclusively points to the fact that it’s due to global warming. Which, as we all know, is fueled by carbon emissions into the atmosphere. The carbon comes from human activities regarding electric and motive power, making these topics the subject of concern by the government.
This coming November 6th, a proposal will be on the ballot in Michigan that would mandate 25% of the power generation in the state of Michigan would come from green, renewable or other, more carbon neutral sources. So, what to make of it? Well, Consumers Energy and DTE, the two main utilities, don’t think much of it. They claim that it would add about $12 billion to the utilities bills of customers, and there’s probably some truth to that. Any new technology that comes along will always be more expensive than whatever it’s replacing. Currently, most of the power in the state is generated by coal, which is cheap, plentiful and full of the carbon that environmentalists are trying to wean us off of.
So should the government step in to tell a business how to run its affairs? In some respects, this does seem like an onerous burden, and somewhat presumptuous that government would know how to conduct the affairs of an industry better than itself. But, if you look at broader historical trends, this is not without precedent. The auto industry strenuously resisted government safety regulations promoting the seat belt. Industrial enterprises screamed ‘Socialism!’ with the imposition of the minimum wage in the 1930s. And the financial industry claimed that it would no longer be able to make a profit after stricter accounting regulations were put in place following the Arthur Anderson/Enron implosion ten years ago. None of the apocalyptic outcomes industry feared actually came to fruition, and in all cases, these regulations just became the new normal. Incidentally, all of these measures achieved the goals towards which they aimed.
It’s natural that the energy industry would resist changes. Change is uncertain and expensive. Plus, let’s face it, there’s the human element that people just don’t like being told what to do by whom they perceive as being outside meddlers. But if you look at the overall policy of governments picking winners and forging an industrial and energy policy, it’s worked wonders for east Asian governments over the past sixty years.
I personally am in favor of the initiative. I don’t think that it’ll pass in Michigan right now, I think the state is probably a shade too conservative for it for the time being. However, I can tell you that, as Tom Friedman says, the better we get at green and renewable technology now, implementing it and making it work for ourselves, the more of it we’re going to be able to sell to foreign buyers in the coming century. And if I were Consumers Energy or DTE, I would view this market far more covetously than their ill-fated foreign acquisition binges they conducted twenty years ago. These technologies, unlike a coal burning power plant in Argentina, have the potential to make far more money than any physical plant they’ve ever purchased. The reason is, there’s going to be a huge premium on green energy, far in excess of what’s traditionally generated by traditional means.
Whether or not it will happen, well, that remains to be seen.