A Realistic Energy Strategy By Tsvi Bisk
This wonderful article by Tsvi Bisk originally appeared in “The Futurist” World Future Society magazine March-April 2009. This is reprinted with permission by Tsvi Bisk. Bisk is contributing editor for strategic thinking.
Deployable solutions to the energy crisis are in hand. The obstacle is our inability to differentiate between ideological and strategic thinking. Intelligent policy making requires that effective strategies prevail over ideological wishful thinking. “What can we do?” and “When can we do it?” must be our standards — not visions of a perfect world. Policy criteria are concerned with time (when something can be done) and do-ability (what can be done). Time refers to short term, intermediate term, long term, and deep long term. In other words, how we get from here to there and what the intermediate steps would be. Do-ability relates to practicality — a policy that reflects how real people actually live. Anything else is irrational. Thus, a rational energy strategy must:
1. Presume the middle class will not change its lifestyle. Policy proposals based on fundamental changes of lifestyle will fail and close minds to environmental arguments. People are willing to change on the margins — replace present gas guzzlers with hybrids or electric cars, replace incandescent bulbs with fluorescent or LEDs, pay attention to the energy consumption of appliances, vacation closer to home, work closer to home (or from home), etc. They are not willing to give up hot water, air conditioning, or the flexibility of private transportation.
2. Mobilize multi-partisan political support. Policies that irritate large segments of public opinion are not politically doable in postmodern democracies — a fact annoying to experts, but still a fact.
3. Conform to the laws of economics. Taxing big energy corporations might be emotionally satisfying but will solve nothing, and, as with President Jimmy Carter’s tax regime in the 1970s, probably will exacerbate the problem. It is the equivalent of kicking your dog because you are angry it is raining outside.
4. Be equitable. A strategy cannot depend on long-term direct or indirect subsidies, nor have a privileged status before the law.
5. Include indirect costs and yields. Internalizing the $50 billion a year the United States spent in policing the Persian Gulf between the two
Iraqi wars, as well as other costs of oil dependence, means that the real price of imported oil to the American economy would be about $10 a gallon at the pump. If the economic benefits of producing energy within the United States (jobs created, business activity generated, and tax revenues derived) are added in, tax breaks for alternative energy technologies become an investment that would produce a greater return for the economy and not only for the environment.
6. Be beneficial to the environment. More energy with less environmental damage is the only policy that can mobilize the broad-based support mentioned in criterion two.
7. Be a combination of increased production (primarily from unconventional sources) and decreased consumption.
Impractical Solutions • Building nuclear plants. How
new nuclear plants are supposed to solve the problem of high liquid fuel prices is beyond comprehension. Polls showing 60% of Americans in favor of nuclear power are irrelevant — try building a plant in their area. Inevitable local opposition will turn any new nuclear plant into a 10- to 20-year project even if approved by national authorities.
Nuclear is not equitable. In the United States, the nuclear industry has been so legally advantaged in terms of liability that one wonders how it has withstood a real constitutional challenge. France’s protection of nuclear power is even more extreme. Nuclear plants also have the environmental problem of nuclear waste. Previously claimed economic advantages are now doubtful. Costs per kilowatt of nuclear power are twice to four times what estimates were only several years ago.
• Hydrogen, ethanol, and palm oil. Hydrogen is essentially a carrier of energy; it takes almost as much energy to produce it as it carries. It is a “killer application” straw man. Its advocates would be well advised to turn their efforts to more immediate, doable, and efficient energy alternatives. The documentary Who Killed the Electric Car? highlights this.
Corn ethanol is similar to hydrogen in that it also takes almost as much energy to produce as it carries. Sugarcane ethanol, on the other hand, produces nine units of energy for every energy unit invested, but it has several problems. Brazil, the world’s largest producer, consumes all the ethanol it produces and will likely continue to do so as its economy expands. Other potential developing-world producers will be small and likely use any product they generate domestically. The expansion of sugarcane growth is beginning to impact on rain forests, so its environmental benefits are becoming ever more doubtful.
Palm oil is an environmental catastrophe — its growth is destroying wide swaths of rain forest. Sugarcane ethanol and palm oil might be redeemed by genetic engineering that enables their growth in desert areas with high-salinity water. This would be a worthwhile research initiative, but not a doable solution in a reasonable amount of time.
• Drilling. Even Texas oil man T. Boone Pickens says drilling cannot solve the problem. According to the U.S. Department of Energy, if permission for drilling in the Alaska National Wildlife Refuge were given tomorrow, the first barrel of oil would be produced by 2018; production would peak in 2027 at 780,000 barrels a day (mean estimate) and then decline.
According to the Energy Information Administration, the United States was consuming 19.8 million barrels of oil a day in April 2008, down from the 20.6 million a day the previous April. That is a savings of 811,000 barrels a day. In other words, in one year, the United States had a net gain equal to the total production of ANWR in 2028. Yet, the price of oil doubled during the same period.
Peak Oil or Peak Availability The debate about “peak oil” is bo-
gus unless one assumes “peak technology.” Given advancing technologies in deep-ocean drilling and extraction from oil sands and oil shale, known and recoverable oil reserves will probably sustain themselves in coming years. But recover-
able reserves and actual availability of oil are two different things. Developing these reserves entails enormous capital outlays and long lead times. Brazil’s recent deep ocean discovery, with an estimated 9 billion barrels of reserves (similar to ANWR in size), is a case in point. It will cost about $150 billion to develop and, like ANWR, will take more than a decade before the first barrel of oil is extracted. Both the Brazilian field and ANWR will be worth this tremendous investment only if the price of oil is high. In other words, drilling is not the solution to high fuel prices; it is contingent on continued high prices. See how many major oil companies will stand in line for licenses to drill in ANWR if oil hovers around $50– $60 a barrel. My guess is not many, unless they feel their lobbyists can maneuver indirect governmental subsidies. Energy maven Chris Nelder argues that the real systemic problem is “peak exports” or “peak availability” of oil. [See his article on page 6.] By the time ANWR and new offshore resources in the United States, Brazil, and elsewhere get fully on line, their combined production will not equal the ongoing decline in exports from oil-producing countries, due to increased domestic consumption. All 14 major oil exporters are moving up the value chain by developing petrochemical industries that use a growing percentage of their domestic oil production. Their citizens are also buying automobiles at a dizzying rate. All, except Norway, have had double-digit yearly increases in domestic oil consumption since 2005. In 2020, Russia might still be pumping 10 million barrels a day, but most likely will be consuming 5 million barrels rather than the 3 million it consumes today; in 2028 it might still be pumping 10 million barrels a day but consuming 7 million barrels. We must remember that the United States was the world’s largest oil exporter in the 1930s but became a net importer soon after World War II. Exports from Africa will remain static as Nigeria’s exports decline. Booming Brazil will consume all the energy it produces. The domestic en-ergy consumption of the rest of Latin America will burgeon. Venezuela’s production has declined significantly under Chavez; more-competent governance will likely lead to increased production but also increased domestic consumption. The same is true of Iran. If the Islamic regime stays in power, production will continue to stagnate. A progressive regime change will likely lead to increased production but also improved development and increased domestic consumption.
Mexico’s constitution forbids foreign investments in the oil sector. Its major fields are rapidly declining. Domestic consumption is increasing. By 2020, Mexico’s exports to the United States could decline to a trickle. It might even be on the verge of becoming a net oil importer, like Indonesia this past year. It is already down to a little more than a million barrels a day, as production from its biggest field has dropped 34% in 2008. Projections for Canadian oil sands cannot make up this difference.
Persian Gulf countries are now investing huge sums in economic diversification, which, along with population growth and increased standard of living, is pressuring exports downward.
What Can Be Done? • Conservation and accumulation
of greenhouse-emission credits. Hybrids, plug-in hybrids, and electric cars should be advantaged for licensing and other taxes. All non emergency vehicles purchased by governments (federal, state, and local in the United States) should be hybrids, plug-in hybrids, or electric by 2010. Purchasers, whether private or governmental, would earn greenhouse-emission credits they could sell to the coal-liquefaction program (see below), thus providing an additional economic incentive advantaging these technologies. It is reasonable to assume that this policy would result in a decline in the consumption of liquid fuels for transportation of 150,000 to 200,000 barrels a day every year from inception. By 2020, the United States could be consuming less than 18 million barrels of liquid fuel daily. Incandescent bulbs should be banned by 2010. Replacing a single incandescent bulb with a compact fluorescent light (CFL) will keep half a ton of carbon dioxide out of the atmosphere over the life of the bulb. It is estimated that, if everyone in the United States used energy-efficient lighting, 50 average-size coal-powered plants could close. Similar savings could be achieved in the European Union, Japan, and South Korea. Homes, businesses, and governmental offices could sell the greenhouse-emission credits thus earned to a coal-liquefaction program.
Alternative-energy companies could sell their products and services to homes and businesses as “loss leaders” or “at cost” in order to accumulate greenhouse-emission credits that they could also sell to a coal- liquefaction program, making the price of alternative-energy technologies more attractive. Consequent increased volume of sales would generate economies of scale and further lower the cost of dispersed solar and wind power.
• Liquefaction of coal. The technologies for coal liquefaction have been available since before World War II and can produce a barrel of oil for about $30. Opposition derives from the fact that these technologies release more carbon dioxide in the conversion process than the extraction and refinement of liquid fuel from petroleum.
To assuage environmentalist opposition, liquefaction installations would be permitted to become operational on condition that they produce a half a ton of CO
for every ton of greenhouse gases eliminated by other methods of producing energy. Trading half a ton of CO2 for a ton of CO2, the environment would get a two-for-one benefit. Trading half a ton of CO2 for a ton of methane, the environment would get a 20-for-one benefit. This would give the coal industry an economic incentive to get behind some of the green alternatives described below.
The United States has the largest recoverable reserves of coal in the world — equal to the entire world’s proven oil reserves. An energy-and environment program that includes coal would generate local jobs and augment local tax bases, garnering support among the working and middle classes. If we do not help coal become a friend of the environment, we are in trouble. It is the fastest growing fuel source in the world and the most ubiquitous, found on every continent and in almost every country. Millions of people depend on it for their livelihood. Banning coal is, for the time being, simply not doable. A rational environmental and energy strategy will have to make room for it. Coal-liquefaction installations could be manufactured serially, much as Liberty ships were manufactured in World War II or F-16 fighter planes are manufactured today, using the underutilized manufacturing and human resources of America’s industrial heartland in the upper Midwest. Operating licenses would be contingent on the coal companies purchasing greenhouse emission credits to offset liquefaction emissions. Within five years, the United States could be producing 1 million to 2 million barrels of liquefied coal daily; within 10 years, this could increase to 4 million barrels a day. The upper amount would be limited only by the availability of greenhouse-emission credits and new (cleaner) liquefaction technologies. The Coal-to-Liquid Fuel Promotion Act introduced in Congress in 2007 provides a partial legislative basis for this strategy — especially as it has as a major aim of making the U.S. armed forces energy-independent (by implication recognizing the national security aspects of energy crises). Other countries with large coal deposits could follow America’s lead. The aggregate impact on the world energy supply within a short period could be enormous.
• Capped wells. There are approximately 200,000 capped wells in the United States. With current technology, each well could produce five to 10 barrels of oil a day. Within one or two years, these wells could produce more oil per day than ANWR would after 20 years. What is needed are sufficient government guarantees in the form of long-term contracts and low-interest loans as an incentive for small oil producers to bring these wells back into production. Given historical precedent, we can reasonably expect that new technologies that increase production rates and well life-span would quickly follow.
This policy would be environmentally beneficial in several ways. It would avert the use of bunker fuel for the tankers transporting imported oil. Bunker is the most polluting transportation fuel in use today. The combined world merchant fleet spews as much noxious gas into the atmosphere as does the entire United States. Lower tanker traffic would also lessen the risk of tanker accidents and oil spills and eliminate the ballast detritus that oil tankers flush into the oceans before entering port. Bringing these wells back into production would neutralize the fact that capped wells are poorly supervised and often leak into groundwater.
Lastly, reactivating capped wells would generate local jobs and augment the local tax base. Tens of thousands of them are owned by thousands of small oilmen who have been begging the government to look at this option for a short-term bridging solution to the energy crisis.
• The T. Boone Pickens plan. This oilman turned wind-power guru has an interesting concept: Replace the 22% of domestically produced natural gas used for electrical generation with wind power. Turn the natural gas into liquefied natural gas to be used for transportation. The amount of natural gas obtained would be the equivalent of 38% of America’s current oil imports — more than 4 million barrels. Pickens claims that this could be achieved within 10 years and would cut hundreds of billions of dollars off of America’s trade deficit.
The obvious caveat to his proposal is that gas-fired plants less than 30 or 40 years old will not be decommissioned even if wind power is available. If he modified his plan to decommission aging gas and coal-fired plants over the next 10 years, with the coal thus saved becoming available for liquefaction, this concept could probably realize a replacement of several million barrels of oil a day
also. Another modification might be to convert the gas into methanol rather than liquefied natural gas. This would advantage the concept of flex-fuel engines and freedom of choice in transportation fuels.
Wind replacing natural gas and liquefied natural gas or methanol replacing gasoline are both environmental pluses. Again, the sale of greenhouse-emission credits to the coal industry would be an additional incentive. If hybrids and plug-in hybrids were modified to use liquefied natural gas or methanol in their flex fuel internal-combustion components, there would be a tremendous multiplier effect in terms of reduced oil consumption and environmental benefit.
The above three steps could add between 5 million and 10 million barrels of domestic liquid fuel production by 2020. The conservative estimate of 5 million barrels would be a combination of 1.5 million to 2 million barrels for each of the above solutions. But let’s say that enough greenhouse-emission credits were accumulated to enable coal liquefaction to the tune of 4 million barrels and that T. Boone Pickens’s optimal vision of 4 million barrels is also realized. Let us further imagine that a new technology for extracting oil from capped wells comes on line, greatly increasing productivity.
Global Resource Corp. of New Jersey claims that its microwave technology can extract 100 barrels a day from abandoned wells. It is currently in negotiations with one of the largest oil service companies in the world to bring 10,000 of these wells back into production over the next seven years. It is also in advanced negotiations with Pennsylvania officials to bring the state’s 4,000 ancient wells back into production. Simple math shows that these two deals alone would add another 1.4 million barrels a day of production within a decade. One must assume that the initial success of these two projects would result in other deals, as well as the development of competitive technologies. Thus, the optimistic prediction of 10 million barrels a day in aggregate becomes not so farfetched.
But assuming the minimum and further assuming conventional domestic oil production declining to 5 million barrels a day, while consumption has declined to 18 million barrels a day, the United States would be importing 8 million barrels a day, compared with 12 million today. If the optimal 10 million barrels is achieved, the United States would be importing only 3 million barrels a day, mostly from Canada. If consumption declines to 17 million barrels a day as a result of other savings in home heating and industrial use, NAFTA will have become a net fuel exporter.
Likely Developments within the Next Decade
• Ethanol and bio fuel from algae, sewage, manure, trash, and garbage. There are dozens of companies around the world funded by tens of millions of dollars of venture capital working intensively on alternative fuels. The biomass is enormous, and breakthroughs could generate millions of barrels of additional liquid fuel by 2020. Algae alone could generate 2.5 million barrels on a surface area the size of Connecticut (the equal of several corn-growing counties in Iowa). Algae are the ultimate sequester of CO which is its primary feedstock for growth. Algae-growing installations could be constructed vertically (to gain maximum surface area while optimizing land use) adjacent to fossil fuel power plants and other CO
emitting installations. One must wonder why the coal industry hasn’t become a champion of this energy strategy. Landfills around the world create as much greenhouse gas in the form of methane as all the vehicles in the world. They leak toxic poisons into groundwater and pollute the soil as well as coastal areas. Economically, they are a stupid example of land use. Very few if any sewage-processing installations are hermetic and 100% efficient; they also pollute the groundwater and commercial fisheries. In essence, waste-to-fuel would be a recycling of hydrocarbons — civilization eating its own waste (the ultimate renewable) in order to endure.
Ethanol and bio-diesel from algae could become commercially viable within the next several years and provide us with another powerful weapon in the energy war. The challenge for algae advocates is to radically reduce the cost of the extraction and refining of bio-diesel and ethanol from the raw algae. At present it is much too high and not economically competitive.
E10 (gas with a 10% ethanol additive) can be used without retrofitting infrastructure or automobiles. The equivalent of 9.1 million barrels of oil is consumed every day in the United States as gasoline. If it were possible to mandate the universal use of E10 today, it would replace the equivalent of 911,000 barrels of oil a day (more than ANWR in 2028).
An “Energy Peace Corps” of engineering and science students could help lower-income groups to convert cars past warranty into flex-fuel engines capable of burning gasoline with 85% ethanol. With modestly priced conversion kits, we could convert 50 million cars, about one-fifth of the American fleet, saving at a minimum an additional 1.5 million barrels a day.
Plug-in hybrids with flex-fuel engines using E85 could be getting 500 miles to the gallon of gasoline. The sale of greenhouse-emission credits to the coal industry would also enhance the economic benefits of these fuels. The creation of such a huge market would further drive investment and innovation, increasing production and lowering costs.
• Electric cars. Various technological and conceptual developments are beginning to interact with increasing consumer receptiveness to the electric car. Greatly improved batteries, quicker recharging mechanisms, and innovative infrastructure concepts are converging.
One intriguing model is Project Better Place, the brainchild of Israeli high-tech innovator Shai Agassi. It has formed a three-pronged alliance with the State of Israel, Nissan- Renault, and international venture capital.
The concept is an idea based on the mobile-phone model: You pay a monthly service fee for the battery and the electrical charge. They envision 150 battery-changing stations around Israel, where a driver could exchange a drained battery for a fully charged one in less time than it takes to fill up a tank of gas. Agassi’s inspiration came from NASCAR and Formula One racing pit-stop techniques. The battery-changing stations will be supplemented with tens of thousands of plug-in points in parking areas around the country. The beauty of his concept is that it makes intermittent renewables such as solar and wind competitive without subsidies. In Israel, battery stations will be recharged by solar power; in Denmark, the second country to sign on, by wind. The idea is particularly attractive to geographic or geopolitical islands. Japan and Hawaii have signed on to the project. But so also have Australia and California. Mercedes-Benz, Subaru, and a major Chinese car company are also in negotiations to join Nissan-Renault as the automotive partners. Analysts at Deutsche Bank are enthusiastic about Agassi’s business model of selling electric-car services like mobile-phone service. They see it as a disruptive concept that could eventually transform the auto industry and neutralize petrodollar power. Of course, Agassi’s model might be trumped by other developments, such as batteries with a 200-mile range that are capable of being fully charged in less than an hour. This in effect would give an electric car infinite range when taking into consideration how real human beings actually drive. Who does not have rest and refreshment stops over a 200mile trip? During a 10- to 15-minute pit stop, or a 30- to 40-minute food stop, drivers could top off their batteries at convenient recharging parking areas. Interstate-highway and state-turnpike rest stops could be required to set up recharging installations. Municipalities could require shopping malls to do the same. Fast food chains would compete for customers by dedicating parts of their parking lots to recharging installations. In short, both by mandate and by competition such installations would quickly become ubiquitous. The environmental benefits of electric cars are self-evident. Various studies show that driving on electricity, even from coal-fired grids, would reduce greenhouse-gas emissions. Using renewables, the environmental benefits would be multiplied.
The Deep Future The focus of this article has been
on the United States, but energy, especially oil, is fungible. The European Union, Japan, and the rest of the Organization for Economic Cooperation and Development (OECD) could do much to relieve the global pressure on energy supplies. Mandating and advantaging hybrids and electric cars, as well as compact fluorescent bulbs and LEDs, would be an obvious first step.
Countries could focus their foreign-aid efforts on making the developing world energy self-sufficient. On the principle of one-half ton of greenhouse-gas emissions for every ton saved, they could build coal- liquefaction plants in many developing countries. When waste-to-fuel technologies become commercialized, they could be put into operation in every developing country. Not only would this have economic benefit, since developing countries suffer the most from energy volatility, but it would also create jobs and promote public health, since smoldering landfills and running sewage are one of the greatest threats to public health in these countries.
In short, if the free world resolves that humankind be liberated from its addiction to oil by 2020, and by doing so greatly lessen greenhouse emissions, it will be done.
The above is essentially a bridging strategy designed to get human civilization to 2050 safely. The liquefied natural gas/methanol, coal, and capped-well gambits, being finite, will also run out of steam within 30 to 40 years from inception.
The future beyond 2050 will depend on continued progress in algae growth and waste-to-fuel technologies. Human civilization must start planning to become a closed system by 2100 — i.e., 100% recycling of all human waste and zero externalization into the commons. Sewage and waste-disposal systems would become the major source of fuel, and the environment would gradually cleanse itself back into a relatively pristine state. Algae growth would top off any fuel shortfalls.
But energy productivity must become the dominant theme in policy strategies. New lighting technologies, smart materials, and super-light composites (along with 100% recycling of organic waste into energy) will enable humanity to maintain a rich consumerist civilization at declining cost to both the economy and the environment. The theoretical underpinnings for such a vision already exist in the Cradle to Cradle philosophy of Bill McDonough and Michael Braungart. They are already commercializing their theory through the for-profit design firm they cofounded, McDonough Braungart Design Chemistry LLC.
By the end of the century, lighting technologies will have transcended CFLs and even LEDs. Buildings will be built from smart materials that heat when it is cold and cool when it is hot, as well as turn sunlight into electricity. They will also have minidepolymerization units that turn domestic sewage and garbage into fuel. Buildings will have become completely independent, self-sustaining energy units.
Airplanes, motor vehicles, and trains will be built from super-light composites (the proper use of hydrocarbons) that at present are prohibitively expensive but which industrial engineers will eventually learn how to produce cheaply. Imagine the fuel savings if a jumbo jet weighed only 50 tons rather than 400 tons. The same principle applies to cars, trucks, trains, elevators, ships, construction machinery, and port installations — in short, anything that consumes energy in order to move. And if the fuel is an algae or waste derivative (infinitely renewable), you will, in effect, have solved the problem.
The possibilities of space might also have become a reality by 2100. All mineral extraction could come from the asteroid belt or the Moon, and we would enable our precious planet to heal its scars. Space elevators would lift up toxic waste to be disposed of in that great incinerator in the sky called the Sun and bring down raw materials and finished products. Energy for the solar economy would be provided by space solar energy generators capable of operating 24/7. Our home, this Earth, will have become a bedroom community.
Final Note: The Optical Illusion of Plummeting Oil Prices
With the price of oil dropping over $100 a barrel within a six-month span, the shortsighted temptation will be to dismiss the above. But since futurists think about the future, consider the following. The International Energy Agency has just published a report that the world’s 450 biggest oil fields are depleting at a rate of 9.1% a year! This means that, barring major new oil discoveries, world production could fall 38% to 52 million barrels a day by 2013. Even if oil consumption held at the present 85 million barrels a day, there is no way that new oil discoveries could make up for a 38% drop in production from existing fields. All the oil in the Arctic National Wildlife Refuge would supply the world for only six months (using the most optimistic estimate of reserves). The world would need four to five new Saudi Arabias by 2030 just to stay at 85 million barrels a day. Alaska, deep-ocean drilling, new offshore drilling, drilling in national parks — i.e., raping the land for every last drop of oil — could not even begin to offset these declines. Add in the fact that, with our present energy paradigm, consumption is predicted to grow to 130 million barrels a day over the next 30 years or so, and we must conclude that this energy paradigm is unsustainable. “Enjoy” present oil prices while you can. As the world’s economy recovers, we will be approaching $150 a barrel for oil in the next four to five years. ?
About the Author Tsvi Bisk is the director of the Center for Strategic Futurist Thinking and the author of The Optimistic Jew: A Positive Vision for the Jewish People in the 21st Century (Maxanna Press, 2007).