Obama's Challenges

Obama's Challenges

February 01, 2010

Ken Silverstein
EnergyBiz Insider
Editor-in-Chief

As President Obama rounds the corner and heads into the second year of his administration, he is discovering what nearly all of his predecessors have -- that voters become disenchanted during the midterm and tend to elect more of the opposition.

With that comes the challenge of how to enact what he and his supporters have determined to be the country's greatest priorities. To that end, Obama has not forsaken the issues to which he got elected. Instead, he has chosen to extend a hand to Republicans and Independents and offer them a chance to influence the course of history.

In his State of the Union Speech, the president continues to endorse the creation of a clean energy economy built on carbon constraints and the expansion of a modern infrastructure that involves new generation and the intelligent utility. But he is also becoming increasingly vocal in his support for new nuclear power plants as well as the development of clean coal technologies and more offshore oil and gas drilling.

"I know there have been questions about whether we can afford such changes in a tough economy; and I know that there are those who disagree with the overwhelming scientific evidence on climate change," the president intoned. "But even if you doubt the evidence, providing incentives for energy efficiency and clean energy are the right thing to do for our future -- because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation."

While the president's more accommodating tone is the result of the loss of his super-majority in the upper chamber that allowed him to avoid filibusters, it is also an extension of what he had said on the campaign trial. Recognizing that the president was first elected as a U.S. senator from Illinois, Obama had been inherently in tune with the coal and nuclear industries there. His earlier trepidation, however, was that his friends on the left were generally not in synch with these causes.

While running for office he became a latent supporter of more oil and gas drilling rights in the Gulf of Mexico -- a change-of-heart that occurred at the time of ever-soaring prices and added pressures to find new, domestic energy resources.

By putting nuclear, advanced coal and extra drilling rights atop the agenda, the president has now made his energy bill more appealing to fence-sitting Democrats and moderate Republicans. But with each action comes an equal and opposite one. And now he must worry whether the liberal wing of his party will stay with him.

"We continue to believe that passing cap and trade legislation this year will be a very steep uphill battle; however we'll be watching closely as alternative 'hybrid' approaches for pricing carbon are discussed," says Whitney Stanco, energy policy analyst for Concept Capital's Washington Research Group.

Practical Path

Beyond the political realities, the president also faces the practical ones. Today's energy mix is no secret: The preponderance comes from coal, nuclear and natural gas. The renewables sector, hydro power included, accounts for around 8 percent. Diversification is a must, given that energy producers will be spread thin as developing nations demand ever-increasing fuels to run their economies.

What then? The president's supporters are heartened by his firm stance to usher in the New Energy Economy whereby more of the nation's resources are going to research and to build more wind and solar plants. But this movement has gotten ensnared not just in Washington politics but also in mainstream economics. And while the president says that climate change is a national priority, the odds of passing a bill this year are now reduced.

That would give the advantage to natural gas, at least as a bridge until the country can cost-effectively produce and use more sustainable fuels. It's particularly true given that the older coal plants are nearing retirement and as the demand for energy will eventually resume. This, then, would require easing the drilling restrictions in areas now forbidden.

"Obama's corporate colors have been showing for some time but now they are on full display," says Linda Gunter, with Beyond Nuclear a national environmental advocacy group. "How he can see oil, coal and nuclear as compatible with climate change is breathtaking."

The president's task of holding together a coalition that can pass a comprehensive energy bill is noticeably difficult. More than likely, he will have to pare down his aspirations and focus on those elements that have broad backing.

As such, the funding and tax breaks provided to green energy will continue. But more concessions will be made to the fossil fuel industries, giving increasing leeway to coal producers that invest in best-available technologies and to gas shale developers who have access to rich deposits around the country.

While recession has chipped away at energy demand, it is still expected to rise at 1.5 percent a year. The ultimate objective is to meet that challenge with the cleanest possible fuel sources. Getting there is a national goal but it will require compromise.

"We can and we must forge a practical path that will address the country's immediate economic needs while laying the foundation for a clean, cost-effective, low-carbon energy future," says Eileen Claussen, president of the Pew Center on Global Climate Change.

That process presents opportunity: to jumpstart the American economy by advancing modern energy technologies. That's the foundation of the president's message and one that has not waned during this midterm transition.