An energy strategy: private enterprise nurtured by government

The era of massive government energy programs is over. And maybe it's just as well. The badly botched synthetic fuel project of the late 1970s, which lost billions, is often held up as evidence that too much federal involvement in large-scale energy projects is a bad idea. Besides, the money for such ventures is scarce.

What's needed, most analysts say, is federal leadership that nurtures, rather than replaces, the forces of the marketplace.

Since 1981, the government has slashed funding for a wide range of renewable-energy and conservation programs. Indeed, even spending for the development of traditional energy sources, such as coal and oil, has slumped. Impact on the environment

``When you combine a crash effort with prevailing political forces, you end up with large-scale programs that support today's industries,'' says Christopher Flavin, a senior analyst at Worldwatch Institute, an international environmental think tank.

A crucial issue for those seeking alternatives to nuclear power is the environmental impact of new energy sources. Many critics of the synthetic-fuel program, for instance, argued that the plan would simply replace one carbon-based fuel with another.

Mr. Flavin says the real problem facing the United States is not finding an alternative to nuclear power, which currently supplies about 14 percent of the nation's electricity, but rather finding a substitute for imported oil, used primarily for transportation. Putting incentives in place

``You don't decide in advance that it will be ethanol from corn or synthetic fuels from coal,'' Flavin says. ``Rather, you put incentives in place so that those technologies that are both economically viable and environmentally beneficial end up being favored.''

The problem is that many promising alternative energy sources will take years, even decades, to commercialize. Businesses that focus on short-term profits are hesitant to invest in such projects. And so the government is left in the uncomfortable position of trying to find ways to encourage development of beneficial technologies - without excessively intervening in the marketplace.

During the 1970s, generous federal subsidies spawned a variety of alternative-energy businesses. Some of these have survived and pros-pered, but many of them disappeared along with federal leadership and support. `Government can't sit back'

``Government can't sit back and expect the private sector to take care of things,'' says Scott Fenn, energy director at the Investor Responsibility Research Center here in Washington. The center, funded largely by institutional investors, recently did a study of private investment in renewable-energy companies. The study found that some of the companies are beginning to attract substantial support from investors.

But there is still a great deal the government could do, Mr. Fenn says, particularly in supporting long-range research and development.

For example, the government could allow a group of companies to band together to do research - as was done in the semiconductor industry. Such a consortium would normally not be permitted under American antitrust law. `Nuclear still has a major role'

Scott Campbell, director of the office of policy at the Department of Energy, says the administration is examining various ways to concentrate resources on the most promising technologies, including alliances between businesses and universities.

``But I don't think in terms of finding alternatives to nuclear power,'' says Mr. Campbell, ``because I still think nuclear has a major role to play.''

The department now spends about $1.1 billion a year on researching nuclear power, compared with about $1.4 billion in 1981. Meanwhile, spending on conservation and renewables has fallen dramatically - dropping from a total of $1.5 billion in 1981 to about $521 million today. Improved technologies underestimated

Campbell says the department's near-term challenge is to bridge the gap between today's low oil prices and the ``window of vulnerability'' coming in the early 1990s. The department recently published a major study on energy security that predicted hefty increases in oil prices within a decade, with Organization of Petroleum Exporting Countries suppliers once again dominating the market.

Taking a longer view, Campbell says the department is considering the development of enhanced oil-recovery technologies that might help enlarge US domestic oil supplies.

Meanwhile, some analysts say that those who campaign against nuclear power and fossil fuels underemphasize the potential for improvements in those technologies which would make them cleaner and safer.