Saturday, December 6, 2008

Global Trends 2025: Timing is Everything

Chapter Four of Global Trends 2025 covers one of my favorite topics - resources. I'll begin the discussion by highlighting a section concerning alternative energy and the challenges that we face.

Timing is Everything

All current technologies are inadequate for replacing traditional energy architectures on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025 (see foldout). The present generation of biofuels is too expensive to grow, would further boost food prices, and their manufacture consumes essentially the same amount of energy they produce. Other ways of converting nonfood biomass resources to fuels and chemical products should be more promising, such as those based on high-growth algae or agricultural waste products, especially cellulosic biomass. Development of clean coal technologies and carbon capture and storage is gaining momentum and—if such technologies were cost-competitive by 2025—would enable coal to generate more electricity in a carbon-constrained regulatory environment. Long-lasting hydrogen fuel cells have potential, but they remain in their infancy and are at least a decade away from commercial production. Enormous infrastructure investment might be required to support a “hydrogen economy.” An Argonne National Laboratory study found that hydrogen, from well to tank, is likely to be at least twice as costly as gasoline.

Even with the favorable policy and funding environment that would be needed for biofuels, clean coal, or hydrogen, major technologies historically have had an “adoption lag.” A recent study found that in the energy sector, it takes an average of 25 years for a new production technology to become widely adopted. A major reason for this lag is the need for new infrastructure to handle major innovation. For energy in particular, massive and sustained infrastructure investments made for almost 150 years encompass production, transportation, refining, marketing, and retail activities. Adoption of natural gas, a fuel superior to oil in many respects, illustrates the difficulty of a transition to something new. Technologies to use natural gas have been widely available since at least the 1970s, yet natural gas still lags crude oil in the global market because the technical and investment requirements for producing and transporting it are greater than they are for oil-based fuels.

Simply meeting baseline energy demand over the next two decades is estimated to require more than $3 trillion of investment in traditional hydrocarbons by companies built up over more than a century and with market capitalizations in the hundreds of billions of dollars. Because a new form of energy is highly unlikely to use existing infrastructure without modifications, we expect any new form of energy to demand similarly massive investment.

Despite what are seen as long odds now, we cannot rule out the possibility of a transition by 2025 that would avoid the costs of an infrastructure overhaul. The greatest possibility for a relatively quick and inexpensive transition during that period comes from better renewable generation sources (photovoltaic and wind) and improvements in battery technology. With many of these technologies, the infrastructure cost hurdle for individual projects would be lower, enabling many small economic actors to develop their own energy transformation projects that directly serve their interests—e.g., stationary fuel cells powering homes and offices, recharging plug-in hybrid autos, and selling energy back to the grid. Also, energy conversion schemes—such as plans to generate hydrogen for automotive fuel cells from electricity in a homeowner’s garage—could avoid the need to develop complex hydrogen transportation infrastructure. Similarly, non-ethanol biofuels derived from genetically modified feed stocks may be able to leverage the considerable investment in liquid petroleum transport and distribution infrastructure.

- This highlights a need for increased research and development. Our current alternatives are not a realistic substitute to oil/coal/natural gas. America needs to lead in energy technology breakthroughs.

- We need to figure out which direction we are going in, and provide smart incentives to get there. I am a strong believer in the free market, but I think we have to have a plan with support from government and industry. Hopefully this can be rolled into (at least addressed) the Big 3's bailout/bankruptcy emergence.

- We should try to use technologies that use our current infrastructure as much as possible. More overlap means less adoption lag.

- Liquid fuels are going to continue to be key in the foreseeable future for large scale transport, agriculture and construction. We can leverage plug-in flex fuel hybrids for reducing light transport demand.

- The current global recession could have harmful effects on alternative energy development, or it could buy us desperately needed time. Perhaps a combination of both.

- Conservation efforts should be much easier with the current financial situation.

Other Global Trends Posts:
Global Trends 2025
Global Trends Update
Global Trends Update II
Globalization and the Crash of '08
Demographics of Discord
Timing is Everything
Winners and Losers in a Post-Petroleum World
Scarcity in the Midst of Plenty
Final Thoughts

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