Carter laid out the long-term energy challenge for the United States and the world community. The United States, he made clear, was now, fatefully, tied into a world market.
“I gave the energy message on television and think it came out all right,” Carter wrote in his diary. But the speech was not well received. Its brittle tone and pessimism, its emphasis on sacrifice and moral failing, and its expectation of permanent scarcity—all these left a very mixed legacy. Many decades later a senior energy adviser walking through the Old Executive Office Building, next to the White House, observed, “These halls are still haunted by Jimmy Carter’s sweater.”7
Carter put James Schlesinger, formerly director of central intelligence and secretary of defense under Nixon and Ford, in charge of a 90-day crash program to develop a national energy plan. Schlesinger, a master of the complexities of bureaucracy, combined 50 government agencies concerned with energy into a single new organization, the Department of Energy.
Support for solar continued to build, and the Carter administration moved with it. As Schlesinger summarized it, “Solar has captured the public imagination.” It was in these years that the Carter administration and Congress laid down the baseboards for today’s renewables industry. They did so with tax incentives, grants, regulations, a solar bank, and R&D funding. The administration also established a new national research laboratory devoted to solar energy—the Solar Energy Research Institute—in Golden, Colorado, in the foothills of the Rockies. To head it, Energy Secretary Schlesinger chose, of all people, Denis Hayes, who had been criticizing the Carter administration for not moving fast enough on solar. But Schlesinger had a reasonable theory: if a nuclear proponent headed the nuclear program, and a coal proponent the coal program, then why not a renewables advocate to head the renewables program?8
“PURPA MACHINES”
One other policy would prove of critical importance. It is one that has already been cited: Section 210 of the Public Utility Regulatory Policies Act of 1978, otherwise known as PURPA. This may have been obscure at the time, but it turned out to be one of the main foundations on which the renewable industry was born.
Electric utilities were required to contract to buy the power output from what were called qualifying facilities, or QFs. These facilities were mostly meant to be cogeneration projects or small renewable facilities, such as a small dam or wind turbines. The rate that the utilities would pay the owner of the QF was set on a state-by-state basis by the slightly arcane notion of “avoided cost.” That is, the utility would guarantee to buy the electric output at what was calculated to be the cost of theoretical oil supplies at some point in the future, plus the high costs of building theoretical new power plants—again against some point in the future. The costs that were avoided were often set at the peak of the market and sometimes, especially in the case of a place like California, on very generous terms. A guaranteed market with guaranteed high prices certainly provides the incentives to get people moving and help jump-start an industry. It worked here. In time, however, many of these facilities became known as “PURPA machines,” as they would never have been economic had it not been for what turned out to be those excessively high estimates of the avoided costs.
In addition to creating a market, these PURPA machines had another consequence. By requiring utilities to purchase power from these units, which were not owned by the utilities, the government was taking the first step to erode the natural monopoly that had characterized the power business for more than seventy years. This would give a further boost to renewable energy.
There was in those years much debate over solar policy and the nature of incentives. Some argued that systems had been overdesigned and were too expensive and too complex. “We’ve built a Cadillac when people want a Volkswagen,” complained one critic, George Tenet, the promotion manager of the Solar Energy Industries Association (and many years later the head of the CIA). Yet the momentum continued to build. By 1980 over a thousand companies belonged to the Solar Energy Industries Association. Some of them were start-ups but some were large companies, ranging from Grumman, Boeing, and Alcoa to General Motors and Exxon.9
GOOD-BYE SUNSHINE
That shining moment did not last. As quickly as it had emerged, the solar energy industry seemed to fold. The Iranian Revolution led to chaos in the oil market, rapid increases in prices, new gas lines, and