Study challenges Reagan 'supply side' energy policy

Conservation, or increased energy efficiency, appears to be the quickest and least expensive way to reduce US dependence on foreign oil. But substantial government support will be required to capitalize fully on this substantial energy opportunity.

This is the major thrust of an analysis done for the US Department of Energy under the Carter administration.

This conclusion also has been reached by other studies. However, the release of this report has been held up for several months by the Reagan White House and has yet to be released. This has led to charges that the administration is suppressing the report because many of its recommendations run counter to Mr. Reagan's energy policy.

Despite steadily growing support by energy analysts in recent years for conservation and solar energy, the Reagan administration's energy policy discounts them both. Deregulation of energy prices, synthetic fuels development , and increased support of nuclear energy appear to be the President's approach to energy.

A draft of the 750-page study, which was conducted by the Solar Energy Research Institute (SERI) and obtained by the Monitor, may prove to be one of the most in-depth and persuasive technical arguments in favor of conservation and solar energy yet prepared. It finds tremendous savings possible with existing technologies that are currently cost-effective. Buildings

"The energy which can be saved in buildings in the United States represents the largest and least expensive source of energy which can be supplied during the next two decades," the study finds.

Currently, buildings account for about one-third of total US energy demand. The SERI analysts believe this can be reduced by 30 percent over the next 20 years "given a sensible set of program initiatives." Solar and renewable resources such as wood could reduce this by an additional 20 percent as well.

The average building in Sweden uses 35 percent of the energy consumed by the average US building, despite the more severe climate. However, recent price increases have caused a major change in American's attitudes toward energy. In 1978 and 1979, as many as one-fifth of all US households undertook major energy conservation improvements. Also, energy integrity of houses has become a major concern of home buyers.

Changes already under way will lead to significant energy savings, but "it will take more than a laissez-faire approach to overcome the influence of decades of cheap energy by the end of this century," the study warns.

It advocates gradually redirecting the direct fuel payments portion of the Windfall Profits Tax to weatherization of low-income housing, working through utilities to build up an energy conservation industry, federally mandating increased efficiency standards that exist for automobiles, and setting up an applied research program to determine the best technical approach to retrofit existing buildings to make them more energy efficient. Transportation

Transportation, still the No. 1 use for petroleum, remains the heart of America's energy problem.

Yet, with little change in US driving habits and only utilizing proved technologies, "the total demand for energy in transportation can be 15 to 35 percent less than the US used in 1977, while transportation services provided for each person (both personal and freight) is increased by about 50 percent," the report estimates.

To realize these savings, public policy must concentrate on improving the efficiency of autos and trucks, slowing the shift of freight traffic from rail to truck, and improving aircraft performance.

Extending automobile fuel economy standards to higher fleet miles per gallon, or replacing it with a gas guzzler tax, restructuring the national financing system so trucks pay their fair share of highway construction and maintenance costs, deregulating both rail and truck freight systems, giving nonbusiness van-poolers tax breaks, and enforcing the 55 mile-per-hour speed limit are some of proposals required to realize this reduction.

"With some ingenuity it seems possible to increase vehicle efficiency at a rate which will prevent the cost of driving or freight hauling from increasing significantly over the next two decades even if the price oil doubles," the study maintains. If these increased efficiencies can be realized, then it also appears possible to meet 35-to-45 percent of the remaining demand with alcohol fuel derived from coal, wood, or agricultural byproducts. Industry

It should be possible for US industry to meet its production goals during the next two decades with a decreased demand for conventional industrial fuels, SERI analysts believe. They point out that energy use per unit output in the US declined by 8 percent between 1973 and 1978, and an additional 13 percent decline is expected by the end of the century.

This is not entirely due to energy conservation, however. Basic materials industries (steel, paper, and cement), which are extremely energy intensive, are not growing as rapidly as electronics and other industries where energy is a smaller fraction of the total cost.

The industries that use the most energy tend to be in poor financial shape. They cannot compete with the energy companies for capital. As a result, they will have difficulty replacing energy-inefficient plants with new, more efficient ones.

"Among other things, this means that US industrial facilities will continue to be older and less efficient than European and Japanese plants for the rest of the century" unless the federal government changes its basic policies, the study concludes.

It recommends that the federal government levy an industrial energy tax, which would be offset by corporate income tax relief. It also suggests eliminating current government subsidies for conventional energy sources (an estimated $3 billion per year in tax advantages for the electric utilities, for example) and a revised role for the Synthetics Fuels Corporation that would provide a "scrap and build" program for energy intensive industries. Such a program would subsidize efforts to replace old factories with modern ones.

Cogeneration, onsite generation of electricity and heat, also could save substantial amounts of fuel. However, the most efficient forms of cogeneration utilizing gas turbines and internal combustion and diesel engines, are discouraged by current federal statutes. These statutes should be altered, the study finds.

Cogeneration savings in six industries could displace about 100 gigawatts of electricity -- about one-quarter of the nation's total US electricity consumption in 1979.