2009 Energy Conference - Plenary Session

There are two sources that many of us who write about Energy go to, with regularity, to see how, statistically, the world is doing on Energy consumption. The EIA is the most consistent and has become an integral part of the knowledge base that I have used, first at TOD, and now here. Thus my attendance at the EIA Energy Conference in Washington, today and tomorrow. The meeting had seats for some 1200 folk and significantly more than half the chairs were filled, with a fair number, so I was told, of those being from the investment side of the house. It has been an interesting meeting so far, the talks with ultimately be posted by EIA, and should be worth watching. Though I have to say, hearing the speaker from Pemex, the Mexican oil company blithely talk about their sustaining levels of production, in the face of the collapse of Canterell, does give an idea as to where some of the world’s unfounded optimism comes from.

There is no doubt that the Administration has changed, from the presence of “the hockey stick” curve in Dr Chu’s Keynote Address through all three of the Plenary Papers, we, as an audience, were left in no doubt that Climate Change and the problems of carbon, are now a major part of the new agenda. If you want a longer version of Dr. Chu’s remarks, they followed quite closely a talk he gave on the Helios Project a couple of years ago, although in somewhat abbreviated form. He did, however, include a comment on Econbrowser’s note that recessions follow oil price peaks and seemed to agree with the basic thesis that James Hamilton presented. He expressed again his concern that with changing climate the water in the Sierra snows is reducing, and that this does not bode well for that State. Usually a two year decline in water is sufficient to lead to water rationing and he is concerned that these will be worse. (Ed. Note – historically Scott Stine has shown that droughts there in the past have lasted decades).


He pointed to a number of nations that have shown that the standard of living is not proportional to energy consumption and talked a little on the Human Development Index. But in talking about energy he noted that California had stabilized on energy use per person, at a time where the rest of the country had continued to increase demand, and stressed the benefits that can come from increased energy efficiency in use. We need to call ET back home. (Sorry! His joke about an old science fiction movie) Except that now ET is Energy Technology and if we can bring this green technology back, it is something that can’t be outsourced. The likely biggest impact of ET will be on Construction, though to get the maximum gains houses will have to have sensors integrated, in the same way that cars have microprocessors now.

We need four things to make progress, an investment in R&D; some standards of performance; the development of new technology; and the will to go forward. The investment is available through, among other things, the Stimulus Package, with $8.2 billion, for example, going into weatherization, and $11 billion for the smart grid (though he did not mention D.C. this time around). He anticipates that the R&D tax credit will become permanent, and that wind cost will go down several fold in the next 20 years, as increasing percentages of the energy generated are extracted.

In terms of standards and efficiency he noted that refrigerators had dropped to a third the price, yet use less than 25% of the energy they demanded in the 1970’s.

Again he bragged on the scientists in the National Labs (who it increasingly seems likely will get most of the R&D money) noting that they have 88 Nobel Laureates in their midst and have the potential to be the future Bell Labs of the Nation. And in that regard he detailed a little of the work he was doing at Berkeley in using different chemicals from wood lice etc to turn cellulosic material into ethanol. To indicate that success should be anticipated, he quoted the example of Norman Borlaug, who after being told that the world did not have enough food to provide for 6 billion people created the Green Revolution to ensure that it did.

He was followed by Professor Nordhaus a Yale Economist, who again underlined the key issue - that is the Carbon question. His perception is that the world energy supply can be considered as taps filling a bathtub and that you, as a person consuming oil from one of the drains leading from the bath, did not need to know which spigot was supplying what oil from where. (Which only works – with oil as a fungible product – until there is not enough to go around, but Professor Nordhaus did not get into that aspect of the argument). He showed that oil prices between the nations are closely linked and said that it was a fallacy to anticipate the need for America to have energy independence. We should not need to care who causes what oil to be put into the tub only that it is there and available (either directly or indirectly). We should however be prepared to pay the appropriate price (technological, social and that due to microeconomics).

He felt that our effort should be to ensure a stable, long term price for oil that was reasonably low, bt sustainable. It is more critical to get the carbon policy right, since the current energy policy is incoherent, and then to work on oil prices. By encouraging all countries to supply as much oil as they can (without subsidies) prices will be lowered, and the world economy will prosper.

The final speaker of the Plenary Session was John Rowe of Excelon who again reiterated that this was the time for decisive climate change legislation, citing the Waxman-Markey bill. He would prefer a clean carbon tax, but recognizes the advantage that a cap and trade mandate can bring. He cited the Excelon 2020 program. As a utility that takes money from customers every day he is aware how critically they evaluate changing conditions. He also recognizes that we can only get to 35% renewables in the energy mix, if we retire some of the legacy power generation plants. There will still be a cost every $10 a CO2 ton will raise costs $0.01/kWh and so the cost benefits of different techniques must be evaluated. As natural gas prices have changed, so it becomes more difficult to write policy for the different fuel alternatives. He recommends that the whole issue of carbon credit costs be turned over to the market. Then the costs can be assessed and integrated into business plans, He mentioned in this day and age there is no substitution for having had an education that included physics and economics (Ed. Note I recorded that he did not include geology in the list). At present distributed energy often means natural gas (NG) but in the future this could be solar.