Whipping potential electric-power shortages of the 1990s
THE spate of recent nuclear power plant cancellations has resulted in renewed concern over the adequacy of future United States electric power supply. With the demise of each plant - four were canceled in January alone - the question is: Will there be enough power plants in the 1990s and beyond to keep the lights on and the wheels of industry spinning?
The issue is not insignificant. In the past, economic growth has been linked with electricity growth and some analysts go so far as to perceive a causal link between the two. The worst fear of utility executives is that in the coming years there will be renewed high growth in power consumption, wiping out existing reserve margins and leading to brownouts and industrial layoffs.
There are a growing number of studies demonstrating that shortages can be readily and economically avoided. However, the shortfalls might occur anyway for reasons that can only be classified as ideological: the unwavering determination of the Reagan administration to play no role in the energy problem beyond the leasing of public lands and promoting nuclear energy.
The guiding premise of White House policy is that energy markets, left to themselves, will function efficiently in the national interest. This assumption is now treated as an unassailable axiom rather than a hypothesis to be tested against actual market behavior. Such rigidity is unfortunate, since ample evidence shows that major segments of the energy market operate poorly.
An outstanding example of ''market imperfections,'' as economists delicately call them, is the failure of very efficient appliances to capture a large share of the appliance market. There is no dispute that highly efficient appliances are becoming available and that their widespread use would save large amounts of energy. Consi-der two examples: Refrigerator-freezers are now available that use one-third less electricity than the typical model being sold, and new central air conditioners are being marketed that use only half the electricity that more popular models use. In comparison with their less-efficient rivals, these efficient appliances are attractive economic investments, yielding (tax-free) rates of return - through fuel savings - of 10 to 60 percent a year.
The cumulative effect of employing efficient appliances is startling. If only efficient models now available on the market were to be installed over the next two decades, total home energy use (gas, electricity, and oil) would be 33 percent less than what would be expected under current trends. The cumulative fuel savings would be about equal to the 25-year output of Alaska's North Slope, about 16 billion barrels of oil. The electricity savings alone would equal the total output of all nuclear power plants now in operation or under construction.
Such enormous savings for the nation are unlikely to be realized because of several serious market flaws. Many appliances are purchased by ''third parties, '' home builders and landlords who do not pay the fuel bills and who try to keep their own costs to a minimum. In almost all new homes the builders select the heating, cooling, and water-heating appliances, and they do not consider efficiency in their purchases.
Even when consumers do the buying, efficiency may not be considered. Appliances are often bought quickly when an appliance has failed and little attention is given to efficiency. The federally required energy performance labels displayed on major appliances help with this problem, but labels do not tell consumers which are the most efficient and cost-effective models, nor do labels explain how reduced operating costs compare with higher purchase price.
In 1975 Congress legislated efficiency targets and standards for appliances. The statute was later amended to direct the Department of Energy to issue standards if significant energy savings would result and if the standards were technically feasible and economically justified. Near the end of the Carter administration, DOE concluded that these conditions were met, and standards were proposed. Under President Reagan, DOE quickly changed its position and decided that only a ''no standard'' standard was warranted, a determination which could nullify the standards programs already in effect in several states.
The burdens of adopting appliance standards would be small and the benefits would be far-reaching. The fuel savings achieved through efficiency would cost far less than new energy supplies and new power plants. The results of such prudence would include lower oil imports and trade deficits, more disposable income for consumers, positive employment effects, and reduced strain on the financial markets that must underwrite capital-intensive power plants. In short, efficiency standards represent an irresistible opportunity to achieve a number of important economic and political objectives by improving the operation of the market.
If we have learned anything, it is that rigid dogmas rarely succeed in the workaday world. Pure market theory, uncritically applied, will often work at cross purposes to national goals. We will have to do better in the next 10 years if we hope to leave permanently behind the ''crisis'' of the last 10 years.
