Ken Silverstein EnergyBiz Insider Editor-in-Chief

The most effective way to combat those high prices is through new technologies that will bring cleaner burning fuels to the fore. President Bush and environmental organizations agree to this point, although they can't agree on which power plant technologies deserve the most funding. In his speech to the nation as well as his 2007 budget request, the president set out to diversify the country's energy portfolio by accelerating research in clean coal technologies, renewable energy forms and nuclear energy.

The administration's blueprint is not free of controversy. Opponents of the White House's energy policy say that the preponderance of funding goes toward the promotion of fossil fuels and nuclear energy development. Some Democrats and green organizations argue that the country is too dependent on coal and natural gas, which are not only finite but also responsible for many pollutants. At the same time, they say that nuclear energy is not-yet-proven safe and that there is nowhere to store spent fuel.

Since 2001, the Bush administration says that it has spent nearly $10 billion to develop cleaner energy alternatives and that its commitment to such projects continues. Through his so called Advanced Energy Initiative, the president will propose an increase in such spending of 22 percent, although environmental groups say that the level of funding is still less than what the Clinton White House offered.

"The President missed an opportunity to put his money where his mouth is with his budget for fiscal 2007," says the National Resources Defense Council (NRDC.) "Though he bragged about increasing 'clean-energy research,' his budget takes money away from promising technologies to make it happen."

The administration supports clean coal research and FutureGen, a $1 billion coal project that would emit zero emissions and capture carbon emissions. President Bush has committed a total of $2 billion over 10 years toward research that would advance clean coal projects. His 2007 budget would provide $281 million for this, which would complete this initiative four years ahead of schedule. This is okay with environmental groups, as long as carbon dioxide thought to cause global warming is safely stored underground. And coal groups say it is possible.

"There is increasing bipartisan momentum to increase our energy security through America's unmatched coal reserves," says Mike Mudd, CEO of FutureGen Alliance. "Coal helps to power the U.S. economy and those of other fast growing nations."

Coal now provides about 51 percent of the country's energy needs. By 2030, it is expected to supply 60 percent.

AEP is spending $1.2 billion over the next three years to install scrubbers that will reduce its sulfur dioxide releases. It is also expected to build a coal gasification plant that washes the impurities from coal before it leaves the smokestack. Cinergy is working with General Electric and Bechtel Corp. to design and construct such a plant in Indiana. It will take about four years to build the 600 megawatt generation facility. Altogether, the U.S. government will provide $1.3 billion in tax incentives for all coal gasification projects.

Fuel Diversity

There's nothing more contentious in the administration's energy policy than its support of nuclear energy. Unlike coal and natural gas, there is almost an infinite supply of uranium. Nuclear's biggest selling point: It emits no pollutants, which in a carbon constrained world makes it invaluable. But, the NRDC say that expanding nuclear power is expensive and has serious safety and security concerns that drain resources from clean energy solutions such as wind, solar, and energy efficiency.

Nevertheless, the 2005 Energy Act has strong nuclear components. It's supported with a tax credit of 1.8 cents per kilowatt hour generated for the first eight years of operation. It provides more than $1 billion for nuclear research and developers have broad liability protection. The significance: Wall Street might decide to finance new projects and the first new nuclear facilities in a couple decades will go on line by 2014.

Renewable energy is the least controversial part of the budget package. Today, excluding hydro sources, it comprises less than two percent of the generation mix. But wind and solar technologies are advancing and the costs to build those kinds of plants are coming down.

Congress extended the tax credit given to wind until the end of 2007. In fact, the 1.8 cents per kilowatt hour generated credit has been broadened to include other alternative energy forms such as solar. The states have taken the lead on renewable portfolio standards, with 15-20 of them requiring renewable energy options. All told, about 600 utilities around the country now offer such options to their customers.

The Bush administration has proposed an increase in wind energy funding from $39 million in 2006 to $44 million in 2007. Likewise, it is proposing a new $148 million Solar America Initiative, which is an increase from $65 million in 2006. The idea is that solar photovoltaic cells can be used to deliver energy services to rural areas as well as be introduced directly into building materials.

If the citizenry says it wants clean air and clean water, then it has to realize that the government must give incentives to developers to take certain risks. And that means backing in part the development of green energy -- at least until it becomes competitive in its own right. Toward that end, the administration's initiative "also conspicuously omits sensible standards to reduce global warming pollution, which is an integral part of any responsible energy plan," says NRDC.

People still want reliable energy at low cost. A proactive government must therefore work to diversify the national energy resources while protecting the environment and while ushering in new technologies. Clearly, the administration and some green groups disagree on what technologies ought to receive the most attention. But the resulting discussion has focused the nation on what its energy priorities ought to be.

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