Thursday, October 13, 2005

Alternative energy slow to take hold


By John W. Schoen
July 28, 2005

Weaning the world from petroleum will take decades

With oil and gasoline prices pushing to new highs and global demand projected to grow faster than production capacity, consumers are understandably puzzled by an ongoing energy enigma. Simply put: Why haven’t alternative energy sources — from renewables like solar and wind power to alternative fossil fuels like coal — kicked in to take up the slack? And how long before these non-oil energy sources begin to make a difference?

Thirty years after the “oil shocks” of the 1970s signaled the end of cheap, reliable supplies of oil, the global economy is still dependant on petroleum. And despite billions of dollars in research grants and government subsidies, no alternative energy source has yet been developed to replace it.

Now, with oil prices at $60 a barrel and supplies tighter than they were 30 years ago, analysts, scientists and businesses working to develop alternatives say it will be decades — at least —before the global economy’s reliance on oil can be broken.

“There’s just no silver bullet here," said Ryan Wiser, a scientist at Lawrence Berkeley National Laboratory who specializes in the economics of renewable energy. "There is no singular technology — renewables, nuclear, what have you — that’s going to replace fossil fuels in the near future. We’re going to be talking about weaning ourselves from fossil fuels for many, many decades to come. There’s no way around it.”

Renewable energy sources are hardly new. Photovoltaic solar power cells have provided electricity to locations not served by the grid — from remote homes to missions to Mars — since they were first invented in the 1950s. When nuclear power was introduced at about the same time, it was thought that one day it would be “too cheap to meter.” Wind and water have been used to power mills for centuries — long before the electrical grid was created. And "biomass" — in the form of wood or other combustibles — was the world's first energy source until the middle of the 19th Century, when the development of railroads, which made possible the production of millions of tons of coal, reduced the reliance on wood for fuel.

But from that day “Colonel” Edwin Drake drilled the first commercial oil well in 1857 in Titusville, Penn., petroleum began to edge out other contenders as the fuel of choice. In 1901, when speculators hit the first Texas gusher on Spindletop Hill near Beaumont, the multi-billion-dollar oil industry was born. With crude oil trading for less than $20 a barrel for most of the 20th century, refined products like gasoline and kerosene provided a cheap, safe, reliable, versatile and easily-transported energy source that alternatives simply couldn't compete with.

Now, with a surge in oil demand coming from huge developing economies like China and India —— on top of continued growth in demand from the developed world — the world’s oil producers are struggling to keep up. For the first time in its history, OPEC is producing at just about full capacity and can't keep enough oil flowing to curb the recent rise in prices.

Tight supplies are only part of the story. The recent rise in oil prices has also been fueled by the realization that there are not enough viable alternatives to replace oil as an energy source. That means consumers will pay whatever price they have to.

And it will be a long time before those alternatives become widely available and abundant enough to cool the demand for petroleum. Part of the problem is that the global economy is dependent — not just on oil — but on the sprawling production and distribution system that's been developed over the past century to deliver petroleum products to consumers.“Frankly, even if we had the technology right now to supplant the current energy system with something new and sustainable that was cheap and wonderful it would still take us several decades to do it because its such a big enterprise,” said Richard Smalley, a Nobel-prize winning physicist at Rice University in Houston. “But we don’t even remotely have that right now. And even if we get really intent about this we'd be lucky to get those breakthroughs with the next 10 to 20 years.”

“Frankly, even if we had the technology right now to supplant the current energy system with something new and sustainable that was cheap and wonderful it would still take us several decades to do it because its such a big enterprise,” said Richard Smalley, a Nobel-prize winning physicist at Rice University in Houston. “But we don’t even remotely have that right now. And even if we get really intent about this we'd be lucky to get those breakthroughs with the next 10 to 20 years.”

Making oil work harder

Most agree that a major part of the solution will require much greater emphasis on making the energy sources we already have work harder — replacing megawatts of electrical power, for example, with "negawatts" of conservation.

“Saving and substituting efficiency for all the oil we use is cheaper than buying it,” said Amory Lovins, CEO of the Rocky Mountain Institute and author of a detailed plan, Winning the Oil End Game for ending dependence on oil. “Every way we use energy of every form is ripe for greater efficiency.”

But even after oil prices doubled in the past two years, conservation has not achieved the political support needed to include it in U.S. energy policy. After five years and two failed attempts, Congress is set to enact a wide ranging energy bill that provides little backing for conservation. An amendment to mandate higher automobile mileage standards, for example, was voted down.

And with the output of most of the world's major oilfields in decline, conservation alone won't be enough to end the Oil Age.

Reliance on subsidies

To date, the progress of finding alternatives to replace oil has been frustratingly slow. When U.S. oil production peaked in the 1970s — and a newly-empowered OPEC drove home the point with twin embargoes — the race to develop alternative sources began in earnest. Along the way, alternative energy has advanced as technology and increased production have cut costs. But until recently, most alternative energy sources have not been economically competitive with oil-based alternatives. That has left many promising alternatives — from solar to wind to biofuels like ethanol and biodiesel — dependent on government subsidies to remain in the game. (Proponents of alternatives argue that oil production is already heavily subsidized.)

And even those working to develop alternative energy sources agree that government subsidies are not a long-term solution. Former General Motors CEO Robert Stempel is now chairman of Energy Conversion Devices, a small Michigan company developing flexible solar cell and high-efficiency batteries.

“We’re not so naïve to think those incentives are going to be there forever,” Stempel said. “So we’ve been focused on how do we get our costs down to where we can get a good profit without incentives.”

The switch to alternatives has also been slowed by the heavy capital investment required to increase production — sometimes with a payback of decades. Oil prices have surged before, only to crash to levels that destroy the economics of alternatives. Even today, the very real prospect of a sharp drop in oil prices — if not on the scale of the oil price crashes of the mid-80s and late 90s — has limited investments in alternatives that can compete economically with $60 oil.

Amid mounting global concern about climate change, renewable, pollution-free energy remains the long-term goal. But until those alternative sources can compete without subsidies, other fossil fuels are being tapped to meet the world’s growing energy demands. Coal — still in plentiful supply in the U.S. — is playing stronger role in part due to the development of technologies that can dramatically cut pollution. “Synthetic” oil — made from a tar-like substance called bitumen trapped underground in sand and shale — is also becoming economically attractive as oil prices continue to rise. But though vast expanses of these deposits have been discovered in Alberta Canada and in the Orinoco River Basin in Venezuela, the process of extracting and processing synthetic oil is much more difficult than drilling for liquid oil. Underwriting that process consumes billions of dollars of capital investment.

Alternative energy sources have failed to supplant oil for another very simple reason. About two-thirds of the oil consumed in the U.S. is used as a transportation fuel. So far, only biofuels — like ethanol made from corn — are available to displace petroleum as a vehicle fuel. But ethanol and biodiesel are only economical thanks to heavy subsidies. Some researchers say that these biomass fuels require more for fossil energy to make than they produce. In any case, even if ethanol production doubles to 7.5 billion gallons in 2012 — as called for the in the recent energy bill — that would represent only about 5 percent of the fuel consumed by U.S. motorists today.

Other renewable energy sources (like wind and solar) and non-oil fossil fuels (like natural gas or coal) and nuclear will also displace little oil because they are used almost exclusively to generate electricity. Less than 2 percent of the 20 million barrels a day of petroleum products consumed in the U.S. is used to supply power.

“There is very little petroleum that is used to power electricity generators in the in the U.S. today, very little indeed," said Wiser. "So the wind projects you see up there, the solar projects, the geothermal projects — they are offsetting natural gas generation, coal generation and maybe every now and then a little bit of oil. But they’re not directly displacing oil in any significant magnitude today.”

So until electric-drive transportation becomes commonplace, alternative energy sources that generate electricity can do little to help meet the growing demand for gasoline and jet fuel. Most alternative energy advocates point to the latest improvements in gas-electric hybrids as kind a of “bridge” technology that will introduce the electric drive trains to production passenger vehicles. These early generation hybrids may soon be replaced with “plug hybrids” — designed to hold a charge that will take you 30 miles or so between charges, enough to get most Americans to and from work or the local mall every day without burning a drop of gasoline.

"Bringing the electric drive and the batteries on board is a big first step that allows that transition to occur some time in the future," said Stempel.

But of the roughly 17 million cars and light trucks that are expected to be sold in the U.S. this year, the number of new hybrids available will be measured in the tens of thousands. And even if hybrids became wildly popular with new car buyers tomorrow, it would take years — perhaps decades — to replace the more than 200 million cars and light trucks that make up the passenger vehicle fleet in the U.S. Increasing production to meet that demand would require a major re-tooling by auto manufacturers and the hundreds of feeder companies that supply them.

Meanwhile hydrogen power, the Holy Grail of alternative energy, is decades away from replacing oil — if it ever does. The promise of a hydrogen-fueled global economy is compelling: Hydrogen is the cleanest energy source imaginable. Whether run through a fuel cell used to generate electricity or burned to propel the Space Shuttle into orbit, hydrogen’s only byproduct is water.

But as a fossil fuel substitute, hydrogen has some major drawbacks: To make it, you either have to strip it from a fossil fuel like natural gas with steam or generate electric power to strip it from water. That’s why many alternate energy experts say it’s better to think of hydrogen as a way of storing energy rather than as a new source of energy.

In the meantime, oil demand from developed countries is expected to grow even more rapidly than the developed world. The average American consumes about 25 barrels of oil a year. In China, it’s more like 1.3 barrels. Yet China is already the world’s second largest energy consumer. Energy demand there has doubled since 1980 and could triple between now and 2020, representing 25 percent of the increase in global demand.

But with world oil production capacity already stretched to the limit, global energy demand over the next decade will be very difficult to meet without shortages and even higher prices.


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