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February 9, 2014
David Warsh, Proprietor


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Towards Stunde Null

Things happen first in California, the saying goes.  The West Coast news last week was bad. There is the drought, though of course that is becoming old news; and then there was the previously undisclosed attack on a San Jose power substation last April that may have been a dress-rehearsal for a terrorist attack on the US electricity grid.

The story appeared on the front page of The Wall Street Journal. The New York Times followed up the next day. The details were chilling.  Starting at 12:58 a.m. last April 16, an unknown number of well-prepared raiders carried out an attack on a Pacific Gas and Electric Co. transmission substation in rural Santa Clara County, at the southern end of San Francisco Bay.  One set of nearby fiber-optic cables in a vault were cut at that moment, and nine minutes later another set not far away, apparently to disrupt communications in the area and delay alarms.

At 1:31 a.m., snipers began firing at oil-cooled transformers forty yards behind an alarmed and monitored chain-link fence (whose cameras all faced in).  More than 100 rounds were fired from military assault-style rifles over the next 20 minutes; 17 of 23 enormous transformers were knocked out, after their oil-cooling systems were drained. At 1:45 a.m,, the PG&E control center ninety miles north received an equipment-failure alarm. Flashlight signals, caught on tape, apparently commenced and ended the attack; the shooters melted away into the night.

Police arrived on the scene at 1:51  a.m., one minute after the second signal.  Unable to enter the fence, they found nothing out of the ordinary. At 3:15, a PG&E employee arrived to discover the damage. The utility, meanwhile, was able to route power around the substation to maintain the stability of its system. Except for pleas to big users in Silicon Valley to conserve power for a time, the incident went unreported except brief local accounts of “vandalism” at the station and fleeting mentions last December in Congressional hearings and an article in Foreign Policy magazine.

Why did the story suddenly surface last week?  However WSJ reporter Rebecca Smith may have tumbled on to the story in the first place, she made the motivation of its confirmation crystal clear. Jon Wellinghoff, who had been chairman of the Federal Energy Regulatory Commission for five years, acknowledged that the incident had taken place and said he had grown increasingly concerned in recent months that a larger attack might be in the works.  He had given high-level briefings on the incident to Federal regulators, Congress and the White House, he told Smith. Now, she wrote, “He said he was going public about the incident out of concern that national security is at risk and critical electric grid sites aren’t adequately protected.”  A longtime proponent of renewable energy sources during his years as a Nevada utility regulator, Wellinghoff was named to head FERC by George W. Bush, in 2006; he stepped down last November.

I mention this because, after listening to Harvard economist Lawrence Summers expound his secular stagnation hypothesis on Tom Ashbrook’s On Point radio show last week – Summers mentioned New York’s Kennedy Airport as emblematic of public works projects crying out for long-term government funding at current low rates of interest – it seemed like a good time to bring up Reed Hundt’s little e-book book, Zero Hour: Time to Build the Clean Power Platform,

Hundt, a high school classmate of Al Gore, was chairman of the Federal Communications Commission from 1993 to 1997, under Bill Clinton, where he oversaw the introduction of large spectrum auctions and the implementation of the Telecommunications Act of 1996.  His account of those years, You Say You Want a Revolution: A Story of Information Age Politics, is an intimate account of a series of policy battles in the years when wireless technologies and the Internet were beginning to transforming the communications world.

Hundt left government before the dot.com boom.  Gore’s defeat in the hanging-chad election assured that he would not return in 2001.  A Yale-trained lawyer, Hundt spent the next eight years serving as an advisor to McKinsey & Co. and the Blackstone Group,  sitting on various boards (including Intel Corp.), and boning up on energy alternatives.  Gradually he assembled Coalition for Green Capital, and in 2008 he was back, arguing to the Obama campaign that what the country needed was an extensive initiative to retool its energy economy – something like the Tennessee Valley Authority of the New Deal, only bigger.

The time was not ripe. In September 2008, an incipient banking panic became full blown after the failure of Lehman Brothers.  For five weeks the financial world tottered on the brink of chaos. Candidate Obama hired former Treasury Secretary Summers as his chief economic advisor, and though the panic had subsided by October a recession of great severity had commenced.  From September until December, as Hundt tells it in Zero Hour, the incoming administration weighed whether  it should seize the opportunity to put a grand energy strategy in place.  The president himself wanted to announce something “more moon shot,” or at least a project on the scale of the Hoover Dam.

But when, on December 16, 2008, his economic team recommended an $800 bllion stimulus, “it also decided that the spending would not be organized around changing any major part of the American economy or society,”  Hundt writes, even though “change had famously been the central theme of Obama’s long, amazing campaign.” Instead, the stimulus – “timely, targeted and temporary” – would be ratified by Congress and little discussed by the president, or so it was expected.  “The plan did not work,” writes Hundt; the stimulus became a divisive issue.   So did the health insurance measure on which the administration embarked next.

Would matters have been different if, early in his administration, Obama had sought to pivot away from coal and oil in favor solar, wind, and of the bonanza of natural gas from fracking then just coming into plain view? He would have had to explain the nature of the financial crisis very differently. Much would have been different if it had been better understood. The omnibus nature of the stimulus package was such that the energy portions were too quickly implemented to do much good and, in the case of Solyndra, did much harm, after Chinese dumping drove the solar-panel manufacturer into bankruptcy. We’ll never know.

But Hundt’s plan remains on the shelf, perhaps to become relevant some other day. It consists of the three-pronged legislative program designed to replace carbon-intensive electricity generation by subsidizing cheaper alternatives:  cap-and trade permits designed to ease out heavy polluters, a government-sponsored “green” infrastructure bank designed to ease in more efficient producers and loer the cost of energy to consumers, and a national version of the renewable portfolio standards (RPS) with which many states now to require utilities to purchase slowly increasing amounts of clean energy. Among other things, the energy platform Hundt’s plan is designed to create would be less centralized (and less vulnerable to disruption) than the hierarchic monopoly networks which have evolved over the past 140 years.

Most interesting is Hundt’s analysis of just how close to passage  some of the measures came under the sponsorship of Representatives Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) during the Congress of 2009-11, when the Democrats controlled both the House and Senate. Only a veteran of the Telecommunications Act of 1996 would see the Realpolitik of the measure quite this way. Then the British Petroleum oil spill in the Gulf of Mexico abruptly changed the subject, and the Tea Party election of 2010 put such measures far out of reach – at least until concern about carbon emissions again becomes widespread.

Hundt called his book Zero Hour because German audiences, even after six decades, know the phrase well – Stunde Null was May 8, 1945, the day after Germany’s total surrender in the European theater of World War II.  Zero hour is a day of decision, he says, a point at which a country must reconsider the structure, conduct and performance of its culture – and decide to rebuild it along different lines. Growing awareness may be enough to effect such fundamental change, he thinks.

It seems to me that traumatic surprise is probably required – in the US case, Sputnik and 9/11 are instances that come to mind; in China, perhaps the earthquake that levelled the industrial city of Tangshan in 1976, killing more than half a million people six weeks before Mao Zedong died. Smog and lengthy droughts and terrorist attacks notwithstanding, nothing of the sort has happened yet in either nation with respect to energy policy and climate change. But if the scientists are right, there certainly will occur zero hour some day, and probably within the lifespan of a generation or two. There’s every reason to be prepared.

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2 Comments

  1. Craig Williams wrote:

    You may say I’m a dreamer but I thought we could create a Clean Energy Reverse Mortgage for people with a fair amount of home equity and good credit. Unlike the Subprime strategy which ended up in foreclosure and financial crisis. Good credit only !!!! Also could the tapper on Quantitative Easing shift to Climate Change Easing with Zero interest loans transitioning from the banks to clean energy investment or clean energy investments at zero interest through the banks.

    Thursday, February 20, 2014 at 4:16 am | Permalink

  2. karl eschelbach wrote:

    Good article but to say that Gore and Hundt attended the same “high school” is factually true but elides over the fact that they both attended a private prep school in Washington, D.C. that generally limited the enrollment of minorities and the less affluent. Boef Bourguignon with a vintage Vin Rouge Bourgogne was typically served at lunch to ensure that the young elites could easily blend into the world of the 1% when they became of age.

    Friday, February 21, 2014 at 5:21 am | Permalink

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