In light of the troubles in the middle east and highlighted by the BP oil spill, we are reminded that somehow we need to reduce our dependence on oil. Not just foreign oil, but oil at all. If we can make alternative energy as cheap as oil, then we can eliminate the disproportionate power the middle east has. This is a proposal (I'm sure it isn't entirely new) for reducing our dependence on oil.
I have a very simple proposal that harnesses the free market and like welfare reform I think it is something only the democratic party would be capable of pulling off.
The alternative energy industry historically has had extreme difficulty finding consistent funding because the price of oil cycles to ridiculously low levels every decade. When this happens any burgeoning alternative energy companies get completely wiped out. Witness T. Boone Pickens backing off his wind farm proposal. The first problem is that the price of oil is often too low.
To try to fix this, a lot of people would like to see the government fund alternative energy regardless of the price of oil and make various laws to drive conservation. The second problem is that this solution then relies on "experts" to forecast and predict which technology will have the breakthroughs and to determine which methods will be the chosen methods by which to conserve energy. The reality is it isn't possible to forecast which technology will have all of the right factors necessary to make it the one that primarily supplants oil. Other actions like raising fuel efficiency standards target one particular segment of the oil market but then don't touch others (like shipping or electricity generation). It makes it seem like the politicians are doing something, yet the impact does not cover the entire market for oil. According to my research, transportation accounts for about 2/3 of oil use and gasoline (primarily passenger cars) accounts for about 2/3 of transportation oil - so about 44% of oil usage is from passenger cars. As politicians make various laws to drive behavior one way or the other, they are meddling in complex systems in which central planning simply cannot respond to. Ultimately as fuel efficiency goes up, people just drive more and the same total amount of oil is consumed.
The simplest but maybe not the most politically expedient solution is to begin raising taxes on oil then use that money to fund alternative energy X-prizes. This has the dual effect of harnessing the free market to find all kinds of solutions (not just energy efficiency) to reduce oil usage and to harness the free market to invest in alternative energy technology and distribution.
I think Obama could pull off a yearly increase in oil taxes coupled with a speech similar to the famous ask not what your country can do for you but what you can do for your country. All Americans could feel like they are contributing. Some Republicans (the non-crazy ones) will be happy that we are effectively destroying the middle east by figuring out how to destroy their financial base. The Dems would be happy that we are reducing the harmful impact of oil usage on the environment. We would all be contributing by paying for increased oil prices. Eventually oil will be $120 a barrel again, we can either pay it to ourselves now in taxes or to the middle eastern terrorists as we buy their oil.
The second part involves using that money to fund alternative energy research and deployment. But not in the traditional way. The problem with the traditional way which usually involves research grants for particular technologies is that it means some "expert" is trying to predict the future of who is going to have the capability to invent the technology and even which technology is going to be the one and then give out grants based on those. A better model is the X-prize model (inspired by the Orteig prize for flying around the world) where the government could create huge prizes - in the billions of dollars for the people who hit various technology and distribution milestones. Historically private industry will back prizes like this with about 10X of whatever the prize is. This means that the government 1) only pays for success 2) gets huge leverage from industry for every dollar spent.
The prizes should not reward a particular technology, but have targets for energy creation per $ (watts/$) and distribution (total watts/btu's or # of people served). This way all technologies compete evenly for the prizes.
Finally, the prizes can also reward cities or states for creating policies that reduce per capita oil consumption. This allows us to use a competitive model where we can quickly determine which government policies really are effective vs. the federal government mandating the policy of the day.