Transitioning Energy: Decades, not Years

Before I delve into this post, I feel it necessary to show my hand. I love my standard of living, a standard of living that is completely reliant on cheap energy. Lots of cheap energy. I drive to class, I leave the TV on, I crank up the heat. I would never consider driving a Prius. I have stock in ICO(Coal), SD(Natural Gas), and TLP(Pipeline, Storage, and Logistics Partnership). I think T. Boone Pickens is a genius. Do I have a natural propensity to over consume? Yes. Why? Because energy is cheap,  its readily available, and the true economic cost is not apparent. Disclosure out of the way, I, as well as most rational people, realize that our current primary energy sources are unsustainable at current levels of consumption.  I found an article written for the Economist to be of interest, as well as another article the Economist referenced in their article. Also of interest was the Kennedy speech from last night, although he has succumbed to what Vaclav Smil, author of the second article, calls Moore’s Curse (I’ll explain later) as well as the Al Gore “do at any cost” mentality. My interest in these pieces is derived from my curiosity into how energy transition will actually occur and why it will occur that way.

The Economist piece focuses on the rise of cheap coal and other fossil fuels and begins to chronicle the transition from traditional sources, such as wood, to coal, natural gas, and nuclear. That transition took 50-60 years, mostly because the technology was not fully developed, it wasn’t economical enough yet, and the investment in infrastructure was significant. The second piece, referenced in the Economist, is a more in-depth look at the changes in the energy industry over time, although the focus of the piece is clearly aimed at calling out Al Gore types on the infeasibility of their goals. What Smil is trying to point out is not that we should continue to rely on these legacy sources, but that transition takes a lot of time. Smil also introduces the idea of Moore’s Curse, which is his extrapolation of Moore’s Law. Moore’s Law originally referred to the processing power of micro chips doubling every 18 months. Smil sees the curse as the idea that energy systems will perform in a similar fashion, increasing in efficiency and decreasing in cost, at a rapid rate–this idea simply isn’t true as the energy industry does not mirror the computer industry. Thus the curse has led those like Gore and Kennedy to believe that transition is possible at an accelerated rate.

Both authors also focused on the true cost of energy production and the fact that all production costs are not accounted for. Coal, oil, and gas, are dirty industries, everyone knows this, it’s not a secret. What I mean by the true economic cost, and what Kennedy talked about last night, was the cost on health and the environment. The kind of hidden economic costs that don’t develop for years and are not accounted for in the cost of fuel extraction and energy production. The costs are real, but I have a feeling that many Americans mirror my consumption patterns and like cheap energy way too much to consider massive tax levies.

Another point of contention highlighted by the authors as a barrier to a quicker transition is the massive cost of new infrastructure development. We have pipelines, transmission lines, power plants, etc–all of the physical infrastructure to upgrade or replace. These assets have an aggregate value in the trillions and a replacement value in the trillions. It is simply not possible to upgrade our infrastructure that quickly. We’ve spent well over 100 years developing our current one. A massive change to wind and solar is not going to happen overnight, it will take decades, just as previous transitions have. How this transition will occur is the interesting part. Think of the energy market as a very, very informal organization. There are three groups that operate within this organization: Producers, Consumers, and Government. What I’m curious about is how they will interact with each other as this transition occurs. Who will make the infrastructure upgrades? What new laws will be enacted and will the force the hand of the producers? Will there be push back from wasteful consumers like me?

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3 Responses

  1. This is one of my favorite posts I have read so far. I does a great job of laying down the general framework of the problems facing us concerning energy dependence. You bring up the fact that their are three group within the energy information spectrum: Producers, Consumers, and Government. I find it fascinating to think how the interaction between these three groups is essential in bringing about any change. But it must first start with Government and Consumers. Consumers determine demand for energy, but its the responsibility of our government in order to educate the consumer on good energy habits and to create programs focused on creating green energy. My question is how to producers fit into this equation? What responsibility should we as a society place on these organizations in order to create a world free of pollution?

  2. I think the role depends on who the producer is. Producers are for the most part self interested and are in the business of making money, so the role of an ICO, BTU, or Patriot (all coal companies) is going to be different than a GE, or other company that produces wind turbines and solar panels. Other producers have been spreading their bets around, BP, Exxon-Mobil, have been spending billions breaking into new energy markets—they want to be ahead of the curve if legislation or consumer action forces them to change their business model. So I think the role of the producer really is to try and respond to the changing energy environment. They may try influence government and consumers through lobbying and pr campaigns —which up to this point have been pretty successful – we have a huge dependence on oil, nat gas, and coal – one could look to the deregulation campaigns of the 1970s and 1980s as a partial cause of this. I guess at the end of the day, and to respond to your second question, we as a society can place pressure on producers by buying green products, consuming less, and lobbying government. Producers do see these trends and will respond to them. But again, this will be nothing instant and the costs are very prohibitive. We may want to consider taking a tiered approach. Try to upgrade existing facilities to make them a little cleaner as we transition over the long term to renewable sources.

  3. Hey all – check out these links on energy. The first is an article about a bill pushing for Nuclear energy (this is the intermediate stage that I talked about). The second is a link to a speech I recently saw down in Washington DC at the 2010 CPAC conference. It’s a great speech and definitely worth watching….definitely understands the future of energy.

    http://www.guardian.co.uk/environment/2010/feb/16/barack-obama-nuclear-reactors

    http://www.ustream.tv/recorded/4843394

    Disclaimer: this was a conservatives conference so the speech is right leaning.

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