Reducing Carbon Emissions: The Government's Role


Peter Hamilton, MBA ’07, director of Sustainable Energy at NRG Energy, believes government policy initiatives can play an important role in alleviating the global energy crisis.

Peter Hamilton is no stranger to the issues the energy industry is facing globally. For more than a decade, he has worked for a variety of academic, non-profit, and government entities focused on the development and commercialization of clean energy and water technology. Now the director of Sustainable Energy at NRG Energy, Hamilton offered his insights into the global energy crisis at a lecture offered by Johnson’s Center for Sustainable Global Enterprise on Sept. 5.

One of the issues plaguing the industry, Hamilton contends, is that energy production is constrained by the laws of physics and thermodynamics — only so much energy that can be generated from a given source — as well as by a lack of significant breakthroughs in the field since the invention of the steam engine, not counting what Hamilton calls “just a few minor incremental improvements.” Because energy production is limited by the technology used to produce it, the energy industry cannot move forward until the technology does.

The industry’s massive size also presents a challenge, and the fact that our civilization is so dependent on energy further complicates the issue. “The energy industry is actually a series of industries,” Hamilton said. “It’s massive. Trillions of dollars per year are spent on oil, gas, and electricity, but it’s the foundation for our civilization.”

Hamilton recounted the energy industry’s complex economic history. Following OPEC’s oil embargo, prices skyrocketed and remained volatile until the 1990s, when they stabilized at about 35 to 40 dollars per barrel. But today, increased global demand is causing oil prices to broach 100 dollars per barrel, creating an economic and environmental situation unlike any in the past.

While climate scientists believe that if climate change is to be avoided, carbon emission levels have to be reduced to 80 percent of 1990 levels by 2050, “the cold hard truth is that we’re not anywhere close to meeting that objective,” said Hamilton. “In fact, we’re moving in the opposite direction.” Why? Because the use of energy in emerging economies is “just exploding,” he explained. In fact, a 50 percent increase in energy use is expected by 2035.

While there’s no silver bullet, Hamilton believes that the global energy crisis could be mitigated through a combination of policy initiatives, including government subsidies. In California, for example, Arthur Rosenfeld, former commissioner of the California Energy Commission (CEC), changed the energy equation by incentivizing people to make their homes more energy efficient and establishing standards for lightbulbs, refrigerators, and other appliances. “Rosenfeld and the CEC put money into a big bucket and used it to encourage people,” Hamilton said. Because of increases in energy efficiency, although the cost of electricity continues to go up, the cost per unit of service stays the same or comes down. “This ultimately flatlines energy use,” he said.

Approaches such as net-metering are also promising, particularly when it comes to solar energy, noted Hamilton. Many people are not home when the sun shines, so they may not think it’s economically viable for them to put solar panels on their roofs. But net-metering allows users to credit their meters for every kilowatt hour. “This rolls that meter backwards and ensure that when you do start using power, you use the credit,” Hamilton explains.

Because of government policies, tax credits, and subsidies like these, solar power is “booming,” Hamilton said. “Solar’s not cheaper [to produce] than natural gas,” he explained. “It’s just that governments have implemented policies that provide revenue paths to solar developers.” Consequently, “solar is cost-competitive with new natural gas plants, now. ... This is really exciting, because we never thought this would happen. There are still a lot of caveats,” Hamilton concluded, “but we’re headed in the right direction.

—     Maria Minsker, ‘13