When talking with Governor Pataki, it isn’t necessary to clarify which position you are talking about when you ask him if he’ll “run.”

The looming presidential election of November 2011 has begun to exert a kind of gravitational pull on everything the former New York governor does with his days, which since leaving elected office a little more than four years ago includes working at the New York office of law firm Chadbourne & Parke LLP, running a consulting firm Pataki-Cahill and lending his support to the deficit and debt-reduction effort No American Debt.

Pataki can only confirm that he might run, but he absolutely plans to be active during the election and the debates it prompts among legislators and the American public. He’s hopeful the election will end up including serious and meaningful debate on the US energy sector and the policies that shape it, focusing on the cost of imported oil and the next generation technologies of the power industry.

He sat down with Breaking Energy this week at Chadbourne’s office to discuss his approach to energy policy, with the looming election overshadowing the conversation.

It can be challenging to find a prominent Republican figure who also has a reputation for being a “green” advocate, but Pataki’s leadership in creating the much-maligned but largely still intact Regional Greenhouse Gas Initiative (RGGI) earned him environmental credentials at the same time that he has defended business interests.

“Oil has been one of the economic and geopolitical weak links in our country for decades now.”

Minding Government’s Own Business

Defending US business is different from “choosing winners and losers” via company-specific incentives or handouts and short-lived stimulus programs, Pataki said, emphasizing that technology and customer preference has a strong history of outpacing policy and rendering government incentive programs irrelevant.

He waded into the natural gas debate to prove his point, citing a major liquified natural gas import terminal proposed during his governorship for the Long Island Sound that would be completely abandoned now if it had proceeded then, as the invention of hydraulic fracturing technology caused natural gas prices to fall sharply and quickly.

“[The terminal project developers] are very lucky because of what has happened with the domestic sources of much lower cost natural gas it would have been an unused multi-billion dollar dinosaur,” he said. “Which is another example of why government shouldn’t be making these types of investments, because the technology [and] the market can change so quickly that something that makes enormous economic sense one day could be priced out of the market by shale gas a year later.”

Mandating Outcomes Not Technology

But tax policy and government incentives are at the heart of the large-scale and complex energy business, and particularly for renewable fuels project developers,
government financing can be a major component of any new project. Pataki believes the problem with government incentive programs today is that they mandate technologies rather than outcomes, a striking difference from programs like the cap-and-trade model underpinning the RGGI program.

“We need to have a longer-term horizon,” Pataki said. “People are not going to spend years developing a breakthrough technology and they’re not going to invest in a massive project that could take years to get permitted and years more to get constructed based on a one or a two year incentive program”

Ultimately it is not going to be government incentives that drive the marketplace adoption of new kinds of energy, and living without government incentives should be the goal, Pataki warns.

Choosing Demand Response

Pataki also walks an unusual middle ground on the controversial industry issue of demand response and smart meter installations, which are broadly supported by those concerned about saving electricity but often raise privacy concerns.

There is no need for government mandates to install smart meters and prompt electricity demand response programs, Pataki says; the improvement is sufficiently self-evident and the economics beneficial enough to the user that customers will take install smart meters on their own.

Demand response saves money, reduces the need for energy and means new and innovative products for consumers, Pataki emphasized.

The bigger controversy from an electricity public policy perspective is over large-scale transsmission projects that require federal intervention.

“Permitting high-voltage interstate transmission is a nightmare because of the fractured jurisdictions and if we’re going to access the solar power of the Southwest and the wind power of the plains and bring them to the consumer marketplaces” the US federal government needs to be able to permit transmission the same way it deals with natural gas pipelines, Pataki said.

“I know the private sector is prepared to invest in those high-voltage interstate transmission facilities – but that’s something where the permitting is the impediment and the federal government, just by paralleling what it does in natural gas with electricity could have an enormous impact in allowing the private sector to develop these domestic renewable resources,” he said.

The Elephant In The Room

After a deep dive into energy markets, through, it isn’t too long before the former politician starts sounding like a presidential candidate once again.

“I am certainly critical of the Obama Administration’s picking winners and losers and doing short-term fake stimulus plans that ultimately may look good in a headline and may get somebody a job for a month but ultimately doesn’t provide the economic growth opportunity for people in this country,” Pataki said as he headed into his next meeting. “But I also think it is important to advance alternatives so that it is not simply criticizing what’s been done wrong but offering alternatives.”

If Pataki has his way, we’ll be hearing a lot more about those alternatives in the coming months.