Changing Gears: How Do You De-Carbonize Energy Production?

Think of how much money is invested in fossil-fueled vehicles. Think of the oil-drilling rigs, the refineries, the massive fleets of ships and the miles of pipes and other delivery infrastructure. Just in the United States there are almost 170 thousand filling stations providing retail gasoline and occasionally diesel fuel to America’s thirsty vehicles.

According to the Energy Information Administration, “The U.S. transportation sector consumes about 220 billion gallons of liquid hydrocarbon fuel per year. Energy use in the transportation sector is primarily for passenger travel and freight movements. Passenger vehicles consist of light-duty vehicles (automobiles, motorcycles, and light trucks) and high-duty vehicles (buses, airplanes, boats, and trains). The freight modes of transport include truck, air, rail, pipeline, and marine (domestic barge and cargo). Energy is also used for military operations and off-highway vehicles used for construction and farming.

“Approximately 250 million personal vehicles are registered in the USA, which amounts to about 25% of all personal vehicles in the world. About 60% of the personal vehicles in the U.S. are cars, the other 40% are SUVs, pick-up trucks and motorcycles.

“U.S. Transportation fuel consumption accounts for over 70 percent of total U.S. oil consumption, and more than 65 percent of that amount is for personal vehicles. American drivers consume about nine million barrels of gasoline per day for personal transportation—378 million gallons every day—about 45 percent of total U.S. oil consumption.” Remember the 1973 gasoline shortage? Oh, most of you weren’t born yet. So look at the picture above, and ask yourself if you would like some current experience with this issue again?

Like a toasty house in the cold? In the US, 6.9 million homes (mostly in the northeast) use heating oil and 69 million use natural gas to get through a tough winter. We could go crazy thinking about the amount of coal-fired electrical plants around, but according to the World Coal Association. 41% of the world’s electricity in generated this way. 45% for the U.S. and a staggering 79% for China. In the US, natural gas and coal cover 70% of our electrical generation capacity.

What does all this mean? We have so much invested in fossil fuel infrastructure – incumbent companies and governments with trillions and trillions of dollars at stake – that the mere thought of transitioning to a system that would render just about all of this obsolete is powerful enough to deter the most relevant players in any sector of the global economy from pushing too hard for change. What makes this even more difficult is that will all of this infrastructure and plenty of coal and natural gas reserves (and new oil fields being discovered all the time), the risk-reward for committing to new energy sources collapsed in a world of relatively cheap existing fossil fuel.

The prestigious Massachusetts Institute of Technology recently issued a report (Unlocking Energy Innovation) that accepts these challenges and notes that big change by big companies and huge governments – the path that most of us assume will implement the transition – is so fraught with conflicts of interest that we probably should stop looking at such centralized solutions to manage our energy future. The December 27^th FastCompany.comreviews this massive text and highlights the underlying message: “It lays out a 40-year framework for decarbonizing the U.S. energy system, arguing that a ‘fundamental transformation’ is needed to avoid the worst (‘unmanageable’) impacts of climate change. ‘We face a very big innovation challenge over the next few decades, bigger than most people recognize. And the system as a whole isn’t close to being up to the task,’ [MIT Professor and co-lead author Richard] Lester says.

“The authors say energy innovation has lagged other sectors because companies and financial institutions have been ‘risk-averse,’ and often had a ‘strong interest in preserving the status quo.’ But it also says energy is different: It takes a long time to bring technology to commercialization because the system is complex and contingent. Before you can introduce lots of wind turbines, for example, you first need a better grid, more accurate forecasting, more energy storage, and so on.

“The book advises against a ‘moonshot mentality’ in favor of long-term collaboration between public and private research laboratories, small and large firms, financial intermediaries, schools and universities, and local, state, and federal agencies. ‘There is an enormous innovation agenda that does not depend on a ‘moonshot’ mentality,’ it says...

“More broadly, the report recommends looking beyond Washington, arguing that the parties are unlikely to come to agreement on a comprehensive way forward. Instead, it says the ecosystem may be better served with state or regional level initiatives, which are easier to negotiate and more responsive to local needs… [The authors say] intensive government-orchestrated projects like the Manhattan or Apollo Projects won’t bring about useful innovations. Instead, they say policy-makers should focus on what is achievable in the near and longer terms. It sees three ‘waves’ of development, starting with a focus on energy efficiency (particularly cars and buildings). Between 2020 and 2050, the U.S. can bring down the costs and risks of ‘known low-carbon energy-supply and electricity-storage technologies.’ And then, after 2050, it can finally bring fundamentally new energy technologies to market.”

When local experiments succeed, they reduce the economic risks of scaling the solution to national or global levels. Further, different regions have differing resources, and hence their ability to access non-fossil fuel alternatives will require myriad choices. With local initiatives, appropriate diversity of choice will be amplified.

The authors see the cap-and-trade solution (where polluters pay cash for the right to emit effluents into the atmosphere) as flawed and envision a series of breakthrough technologies in the coming decades that will produce vastly better answer to decarbonizing the world. Innovation has to recognize that it will be competing head-to-head with inexpensive coal-fired incumbents, so high-cost answers just won’t solve the biggest issues. But their focus is on generating electricity, to power industry, homes and cars, just not through legacy fossil fuel systems.

I think the answer lies in a combination of local initiatives (with strong governmental funding) plus overall national governmental policies to move away from fossil fuels – there is no other way to manage this change, particularly in centrally-directed economies such as China – with appropriate research funding, infrastructural commitments at the macro and micro levels. We need it all. In the end, this is an efficiency-creating effort that will add and sustain job growth to a battered economy. Just supporting legacy fossil fuel systems as our central policy – which is clearly what our current commitments are – just doesn’t cut it for the long haul… or even for the foreseeable near term.

I’m Peter Dekom, and in an impaired economy, the ability to secure our future while creating near-term job growth seems to be a compelling priority.