Tuesday, November 27, 2007

How not to make an energy policy.

First a caveat: When it comes to electricity generation, I'm an agnostic. In other words, I try to evaluate energy sources on their own merits, from cradle to grave, and I try my best to keep ideology out of the analysis.

So, when we're talking about our energy future, I believe it is essential to look at the big picture, to evaluate each fuel source, its pros, cons, and its potential for the future given all the geopolitical, economic and environmental challenges we face, and to develop a comprehensive plan that maximizes energy potential, minimizes risk, and makes room for new technological developments. There are two things we absolutely must not do: 1) turn reactionary decisions based on short-term situations into long-term policy, and 2) base our energy future on wishful thinking. And, speaking of coal and CO2 sequestration....

Reactionary decision-making
In the early 1970s, this country had about 12% of its generating capacity in natural gas-fired power stations. Then the OPEC embargoes hit and we legislated against using natural gas in power stations (the Fuel Use Act of 1979). The gas share of electric generating capability dropped to around 7%. Then, after the Fuel Use Act was repealed in 1986, we went on a gas-fired power construction binge in the late 1990s. Today, we have more gas-fired generating capacity than we have coal-fired! However, because the price of gas is so high, those plants only account for about 12% of actual kilowatts generated. Hmmm...1970- 12%. 2007- 12%.

Also in the 1970s, we were on a path to replace a significant amount of coal capacity with nuclear. Then Three Mile Island occurred. All the planned nukes were cancelled, and we were back to relying on coal. Not only that, the economics of the Clean Air Act of 1990 encouraged utilities to switch to Western coal because even though it has less energy per unit weight (a lower quality fuel than most eastern coal sources), it is low in sulfur and less expensive, even when transportation costs were factored in. Power plants representing tens of thousands of megawatts switched to Western coal because this was cheaper, in the short term (based on regulated utility economics), than adding sulfur dioxide scrubbers or some other alternative.

So, now we not only use much more coal, we use lower quality coal with poorer efficiency that emits more CO2. And, the result of all these jumps and starts is that, despite some interesting cycles in the trend lines, our energy source mix today looks remarkably like it did forty years ago.

Wishful thinking
The truth is that once you factor in the cost of reducing, or perhaps the better words are "managing" or "containing," CO2, coal ceases to be the low-cost option for electricity production. With the coal and sequestration song and dance, however, it looks like we're going to repeat history-- the power industry is rallying around CO2 sequestration as the savior of coal and believes we're going to solve our environmental and energy issues in one fell swoop by considering just one part of the overall problem. It's not just that there are huge technological challenges or significant efficiency and economic penalties imposed by separating CO2, compressing it, transporting it, and injecting deep into the bowels of the earth.

No, as serious as those issues are, that's not what makes me, a chemical engineer, nervous. Here's what makes me nervous: for the first time, instead of taking out large quantities of stuff from the earth, we will be deliberately putting in large quantities of stuff--stuff we don't want. And we're putting it in deep, injecting it into the subsurface of the earth where the sun don't shine, so to speak. (This process is very different from landfilling, which is a surface operation.) Plus, we are substituting a solid material (coal) for a gaseous material (CO2). Fundamentally, technologically, geologically, and ecologically, this is no apples to apples switch. These huge volumes of vaporous material will have to be monitored and contained for, well, forever. Kind of like spent fuel rods from nuclear plants.

Yes, sequestration makes coal similar to nuclear power. There is a residual waste stream that has to be managed beyond the timeline of quarterly reports and into forever. That's not a timeline that corporate America does well. And, we're talking about a huge volume of CO2 as opposed to nuclear waste which is, relatively speaking, small and easy to monitor and can be put where we can see it. Set aside for the moment the profound legal issues surrounding sequestration. Are today's sequestration sites tomorrow's sets for the 21st century Poltergeist movie?

Short-term decisions have long-term consequences
We have to recognize that the energy mix of the 1970s does not serve us well in the 21st century. But, it is also true that coal isn't going away anytime soon, and it behooves us to find more intelligent ways to use it (more about this some other time). Unfortunately, the electricity industry does not make revolutionary changes, and I might argue that, at least in my lifetime, it has hardly made any evolutionary changes. Because of its institutional structure, the best move King Coal can usually muster is to tread water and hope it all blows over one more time.

Why is this? One reason is that environmental regulation proceeds on a piecemeal basis, rather than a holistic one. We legislated against natural gas after the OPEC embargoes. Then we pinned all our hopes on natural gas and built capacity like crazy people. Then all the nukes were cancelled based on one accident, during which, by all accounts, the safety systems actually behaved the way they were supposed to, avoiding a truly calamitous event. Now, sequestration is the answer. We keep regulating, legislating, and reacting to one-time events or one type of pollutant with short-term measures, instead of truly evaluating the problem holistically, and ultimately, paying for a solution for the long haul. Sequestration will not be the single savior for the coal industry, let alone the planet. We must look beyond single saviors, and, instead, look to formulate a realistic policy that is not overly reliant on any one fuel, any one technology, or any one supplier. The question is can we look beyond the simplistic solutions, muster the political will, and formulate--and implement--a coherent energy policy to keep our nation's economic engine running and our lights on.

The foundations of our vision of a coherent energy policy, articulated in the book Lights Out, are as follows:

1. Conceptual
- Shift emphasis and money into the right side of the value chain and away from the left side--in other words don't focus as much on reducing consumption, but on managing consumption
- update the grid
- give consumers the tools to see/feel/understand/act on their consumption habits
2. Technological
- use nuclear to meet demand and manage CO2
- limit coal to "intelligent" coal
- fund massive development program for storage
- continue to commercialize "renewables"
- limit LNG to strategic imports for distributed power networks
- enhance effectiveness of microgrids and drive that process from a market/consumer perspective
3. Regulatory/political
- the backbone of the nation's electricity infrastructure should be "backstopped" by the federal government
- unleash the power of technology and competitive consumer choices (the power of the market) on the retail side
4. Financial
- financial engineering should NEVER displace systems engineering
5. Global
- secure all of the supply lines affecting our domestic electricity infrastructure
6. Social
- make electricity visible, understandable, and part of our everyday discourse.

And then, there's the Personal -- see Think: Less!

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