Solving the Energy Crisis

All the recessions of the last 30 years have been caused by high energy prices, and they’re to blame for the current crisis, too.

If your servers are in Silicon Valley, you know what I mean. You’ve just spent a ton of money on generators and fuel and installation, backups for the next time the lights go out. The giant sucking sound you hear is money leaving your pocket to buy electricity, natural gas, and gasoline.

And it’s only going to get worse. I predict this cold winter will be followed by warmer weather, even hot weather. (I believe you will call this time “summer.”) Electricity demand will spike again.

What the technology business needs, more than ever, are permanent solutions. No one has offered any. Tax cuts for the rich won’t guarantee the money goes where it’s needed. Government spending is a short-term fix. The next time the Middle East blows up (maybe as you’re reading this), supplies will tighten, prices will spike, and the problem will get worse.

What angers me more than anything is that the solution is so simple, and — relative to the problem — it’s cheap. Here it is.

For any investment in renewable energy, the profits are tax-free for 10 years. This includes investments in efficiency. If you put lower-power chips into your server farm, the savings in electricity go right to the bottom line. If you insulate and cut your need for air conditioning, the savings go right into your pocket. The same is true for investments in solar power or wind power — it’s tax-free money.

But wait, there’s more. We need to guarantee that profit. If everyone plows into the energy business at once, prices will plummet and no one will make anything.

So we need a floor price for energy, a rising floor. If energy is sold for less than $25 per barrel (or its equivalent in gas or electricity), the difference goes to the treasury and pays for the tax breaks. Next year, the floor price is $26, then $27, and so on. The tax isn’t paid, however, if the energy comes from renewable sources. If you can sell solar power at the equivalent of $15 per barrel, in other words, you get both a huge profit and a tax break.

Most of the big money from these tax breaks, most of the profits on this energy policy, will go straight to Texas. (OK, a lot will go to California.) Also, we’re “picking winners,” and the new president doesn’t like that. Well, Mr. Dubya, would you rather pick losers? Because that’s what you’re doing right now — we’re all losing.

I know it sounds silly to ask Internet businesses to become involved in energy policy. But energy has ended this boom, and unless the problem is solved, it will end the next boom. We have the technology to prevent inventory recessions, to adjust capital flows, and to keep productivity rising forever. What we don’t have is a ready supply of renewable energy to power the Internet economy. It’s past time we demanded one.

Now I’m going to get off my soapbox — my wife needs to burn it for heat.