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April 4, 2008
Hard Truths
I attended a fascinating briefing on Energy Future 2050 on Monday night at the Council on Foreign Relations in New York. Shell CEO Jeroen van der Veer led the discussion (Disclosure – Shell is an Edelman client).
Key points:
There are three hard truths about energy:
a) energy demand in world will double by 2050 due to 50% population growth and rise in incomes so many more people can afford to drive
b) supply of energy cannot meet that demand based on conventional oil and gas alone—will need renewables, nuclear etc—partly because the Easy to Get Oil is shrinking as percentage of total
c) huge issue of CO2—likely to see rise in acceptable standard to 450-550 parts per million
There are two possible scenarios:
First is every man for himself (actually every government for itself). There will be a surge in demand for coal, which fills the supply gap but causes greenhouse gas emissions to rise. We will see second generation bio-fuels which don’t compete with food sources and more centralized solar/wind power generation.
Second is global rules of the game. A coalition of business, NGOs and government will make change together, as in California. Incentives are introduced for broader use of wind/solar; carbon capture and storage comes to scale. CO2 emissions are priced so business can have certainty. Forty percent of cars will be powered by electricity and the other 60% will have much higher miles per gallon.
On specific forms of alternative energy:
1) Second generation bio-fuels can be used for transport. They are based on nonfood parts of plants such as stems, first generation bio-fuels have driven up the price of foodstuffs
2) Hydrogen fuel cells can power cars but there is perceived safety risk
3) Heavy oil and shale—huge reserves but big CO2 problems in production
On hydrocarbons:
1) Need carbon tax to raise price of gasoline. Note that European cars are 40% more fuel efficient than American cars because gasoline costs twice as much
2) Coal and nuclear are the “balancing fuels”, not oil and gas. This means we can create supply quickly but there are side effects with each of these options
3) Nuclear will decline as percentage of total energy production, because so many plants built 20 years ago will be decommissioned. The uranium mining and disposal system for waste must be rebuilt, while new construction of plants must accelerate
4) Need cap and trade system in the US to cut emissions; also congestion pricing in cities
5) Need efficiency standards on buildings, cars and appliances to make sure we are progressing on learning curve to use less energy
Trade-offs need to be made explicit for all parties; there will be no free lunch and the status quo is not acceptable given climate change and fast-rising price of energy. There is a critical role for public relations in this evolving market place. As a New York City resident, I have been pleasantly surprised by the turn in public opinion on congestion pricing, so that 70% of city residents are now in favor of the $8 tariff for driving in the central business district. This was achieved through intensive media relations and a stark ad campaign. There were also forums for consumer input, including town hall meetings or via the web on Campaign for New York’s website. Behavior change will not come with price incentives alone; there must be an understanding of the benefits to all of us.
I look forward to your comments.
Posted by Edelman at April 4, 2008 9:54 AM
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Comments
It will be interesting to see if the trade-offs reach the point that requires a reduction of the status-quo in terms of consumption. For example, will the average American accept driving less miles or use less power/heat in their homes? Or will the reality be that innovation will always produce greater efficiency allowing consumption to rise, or at least remain stable?
Posted by: Steve Shannon at April 10, 2008 12:38 PM
I would recommend re-reading Amory Lovins since the first tool is conservation, higher energy efficiency. There is also a need to disconnect "progress" with more energy consumed/wasted. I think it would be a mistake to mechanically imagine that the growing consumption in developing nations will be modeled after the wasteful US way. We have reached our ecological limits as far as the 'traditional energy sources" (coal, oil) are concerned. I bet the changes will not come from today's main players as they are too settled in their old ways: one of the "best" example of that has been the refusal of GM and Ford to continue producing electrical cars after the Californian regulation were lifted (because of their lobbying). They did shot themselves (and still are). It is pathetic to read the ads by GM still claiming they did not kill their electric car (although they now feel obliged to address the issue). About Ford, look at the Th!nk car, ie Ford's electric car that was sold to Norwegian investors and is now on its way back to the US.
And on and on...On the other hand the French EDF just took a participation in Nanosolar. Everything solar is part of the solution but there are many other ecological challenges ahead like the lack of potable water (look at the drought in Spain for instance)...
Posted by: Philippe Boucher at April 26, 2008 2:09 PM
Of course the energy "crisis" and the global warming reality remain on the front of the news. One month later I find interesting the move by the Rockefeller family to present motions at the forthcoming Exxon's general assembly to pressure the management to change course about "alternative energies".
Also interesting this article about General Motors trying to pretend it is now Green Motors but without much success... I am quite appalled by all those ads where they hawk their new "green SUV" while when you read the very fine print it says they are not really available now. I wonder who their ad agency is and who they think they can lure that way? Will they ever learn?
Here is the link to the article about wagoner's presentation:
http://www.enn.com/top_stories/commentary/35800
Posted by: Philippe Boucher at May 5, 2008 11:59 AM