We Need Smart Energy Policy
Global electricity, industry, transportation systems, buildings, and land use are where energy policy is ultimately manifest. Because every economic sector is touched by energy, it becomes all the more crucial that we get energy policy right. If done correctly, energy policy can reduce pollution and carbon emissions, cut consumer costs, and minimize dependence on foreign energy supplies. Done wrong, energy policies can increase pollution, lock in dirty technologies, and waste money.
Energy development is the most capital-intensive industry in existence. Investments in a single project can cost billions of dollars. In addition to these high capital costs, energy infrastructure is built to last for decades, and the effects of decisions made today will be felt for generations to come. For these reasons, it is crucial that we get policy right.
Designing Smart Energy Policy
Every jurisdiction ought to tailor its energy policy toward its unique economic, social, geographic, and cultural situation. However, a handful of best practices for policy design can help:
- Set goals and empower market forces to drive the best solutions
- Reward performance, not investment, and be wary of unintended consequences
- Require continuous, and predictable, performance improvements
- Set a long-term trajectory
- Encourage investments in cleaner and more efficient infrastructure when it is first designed and built, rather than building less-efficient infrastructure that requires subsequent retrofits or replacements
- Ensure sound incentives for innovation and mechanisms to accelerate uptake of new technologies
When these policy design principles are followed, they produce dramatic results, ushering in both new technology and new business models.
Energy Policy Solutions
Getting energy policy right is tricky. Policies can interact with one another, producing unanticipated consequences. Energy commodity prices can be volatile and unpredictable, adding to the challenge of designing effective policy. It’s much easier to design policy poorly than well, and bad policy can cost taxpayers money, result in higher levels of pollution, and increase reliance on foreign energy supplies. But smart energy policy can deliver a huge prize: safe, reliable, affordable, and clean energy.
Objective, quantitative analysis can help us land on smart packages of policies that can work in concert to deliver our climate and energy goals.
Energy Innovation’s Energy Policy Solutions project is designed to enable users to do just this kind of analysis.
Energy Policy Simulator
At the heart of this assessment is our quantitative computer model, the Energy Policy Simulator. The simulator allows the user to control more than 50 different policies (such as a carbon tax, fuel economy standards for vehicles, reducing methane leakage from industry, and accelerated R&D advancement of various technologies) that affect energy use and emissions in various sectors of the economy. The Energy Policy Simulator operates at the national scale and includes every major sector of the economy: transportation, electricity supply, buildings, industry (including agriculture), and land use. It calculates at annual intervals between 2013 and 2030, and provides numerous outputs, including:
- Emissions of 12 different pollutants (CO2, NOx, SOx, PM2.5, and eight others), as well as CO2e
- Direct cash flow (costs or savings) impacts on consumers, industry (as a whole), government, and several specific industries
- Monetized social benefits due to avoided mortality from particulates and avoided climate damages
- The composition and output of the electricity sector (e.g. capacity and generation from coal, natural gas, wind, solar, etc.)
- Energy use by fuel type from various energy-using technologies (specific types of vehicles, building components, etc.)
The simulator offers unlimited policy combinations: users can adjust policy levers to any setting, allowing them to create their own policy scenarios. It is fully open-source, allowing anyone to download the model and view or modify its data sources and structure. The input data are free, carefully-cited, and publicly available. Additionally, the Energy Policy Simulator runs in real-time, enabling users to observe the impacts of their policy settings instantaneously.
You can try out the simulator in your web browser or download the full model at http://energypolicy.solutions.
As part of Energy Policy Solutions, we analyzed a variety of policy packages and scenarios to gain insight into the best ways to meet America’s decarbonization goals most cost-effectively.
**Check out our Energy Policy Solutions Insights page to learn more about our findings**