LOWERING the cost of energy...

Today’s post: Wednesday, 7-30-2008

1. The cost of energy for the heat and electricity and light we use and for transport do depend somewhat on the cost of producing them and delivering them to us. But often of far more importance is the balance between supply and demand.

If supply stays the same or grows very little while demand soars, prices will go up. You cannot wish that away or pass laws against it that will keep it from happening.

2. Drilling for more oil will increase global warming -- which it looks like threatens to destroy our economy and ability to grow food. And, it will produce a very small percentage gain in the energy and oil available to us. In fact, it may well produce increases LESS than the increase in demand. So, it will do very little to reduce gasoline prices or reduce our cost to get where we need or want to go and to transport our food and do business.

It will make the global warming problem worse instead of better. And, it will NOT solve the problem of prices many people find too high.

3. Huge increases in renewable energy to generate electricity; huge increases in the use of electricity to power our cars, and huge increases in nonfood, cost effective biofuels will probably take quite a bit more time than 10 years.

BUT, they are doable. Even better, the advances in technology in each of these areas ALREADY in place or to be available commercially within five years makes these increases VERY doable & realistic.

T Boone Pickens has found that we can very likely get to 22 % of our electricity from wind power alone.

Ausra, the thermal electric power company, has found that we can generate 100 % of the electricity we now use by installing enough thermal electric power installations in just part of the Mohave Desert in Southeast California.

(Note that this does NOT include also installing such thermal electric power installations in Nevada, Arizona, New Mexico, West Texas, or Northern Mexico. Nor does it include installing thin film or advanced photovoltaic cells on roofs over parking lots, and on buildings throughout the United States.)

All three of these things are doable. The bad news is they will have no effect on energy prices if we fail to do them.

4. I don’t personally believe we can get all three of these things done plus convert to electric cars, plug in hybrids, and generate commercial quantities of nonfood, cost effective biofuels within 10 years.

BUT, if we make the kind of effort Al Gore suggests to make ALL these changes happen fully in as close to 10 years as we CAN achieve, the magnitude of the effect on supply WILL be enough to LOWER our costs for gasoline and transport AND meet greater demand as well.

Further, to me, it looks doable to do enough to begin to lower energy and gas prices FOR SURE within 10 years.

And, if we do not do this, there simply aren’t enough new places to drill for oil to have 5 % of this effect.

5. Since the economics of this depend on supply and demand, which is something business people tend to understand better than non-business people AND business people tend to be Republicans, you’d think that it would be the Republicans who would back the conversion to renewables MORE than drilling for more oil which cannot increase supply as much.

The polls show the reverse. It seems today’s Republicans either believe that more of what we have been doing will solve problem or that renewables cannot increase by more than one or two percent or both.

Unfortunately, the facts are the reverse of both of those beliefs.

Last week, on 7-22, the political news and polling company Rasmussen Reports said that “only 33% of American voters believe Al Gore's proposal to switch all of the nation's electricity production to wind, solar and other carbon-free sources in 10 years is realistic.”

(The 10 years is what we need to do, I think, rather than what we CAN do. 10 years IS probably too optimistic. But it DOES look doable in 20 if we start soon and work hard enough at achieving it.)

They also found that that 62% of Republicans -- and over half (52%) of unaffiliated voters -- believe that Gore's approach will drive the cost of energy even higher. Even among Democrats, 26% hold that view. “

And, they said that: “Overall, 44% think Gore's proposals would drive up the price of energy while just 26% believe they would have a more positive economic impact.”

As our readers likely know, the week before last, Al Gore challenged the United States to produce every kilowatt of electricity through wind, sun and other renewable energy sources within 10 years.


It was recently predicted that world energy demand will grow 50 percent over the next 20 years.

This means that even if we meet his challenge in 20 years instead of 10, we will need to produce about 129 percent of the electricity we produced in 2005 from renewable sources alone.

Since, in my estimation, the 5 percent or so we got from hydroelectric sources in 2005 is likely to go down, perhaps falling as much as in half due to drought conditions from global warming already in place, that means solar, wind, & geothermal will need to go from the 3.6 percent or so it did produce in 2005 to something like 131.5% of all the electricity we produced in 2005 to achieve his goal. This means a 100 fold increase in electricity from solar, perhaps 20 times as much from geothermal, & about three times as much from wind.

The good news is that each one of these increases may well be doable, particularly as new technologies ramp up & the costs come down per unit with the much increased production AND as the costs of the alternatives begin to double once or twice in that same time period.

6. One cautionary note is worth adding however. We look likely to try cap & trade methods to give businesses funding and incentives to make these changes.
The good news is that the achievable increases in renewables will eventually bring down energy prices by massively increasing supply.

However, using cap and trade systems very well might make the prices of energy go up MORE in the short run than other ways of doing things.

In fact, an MIT study found that gaming and speculating in a cap and trade system are almost certain to cause quite rapid and substantial increases in energy prices if we use cap & trade systems. Their simulations found that effect to be extremely strong.

7. In summary, massive increases in renewable energy, particularly to replace coal, oil, and natural gas burning as ways to generate electricity WILL LOWER energy prices. Drilling for more oil will have little effect on prices. But if we use cap and trade systems to boost renewables, it may look initially as if the reverse is happening.

8. Also, here are some thoughts from last week’s post that are worth repeating.
They are relevant to today’s post.

In particular, they predict $300 a barrel for oil and gasoline at $9 to 10 a gallon if we fail to massively increase renewables.

(T. Boone Pickens, Texas oilman and wind-power booster T. Boone Pickens, an oilman for over 20 years said that this is ..”one problem we can’t drill our way out of.” And, he warned that “….oil could cost $300 a barrel in 10 years as supplies drop, if the nation continues to "drift" on energy policy.”)

And, if these increases come to pass we will also need, as Al Gore & his group emphasizes, to sharply increase & improve our national electricity distribution grid to get the electricity from where it’s generated to where it is being used.

Gore said that:
“The nation's electric grid is still not sufficiently developed to move solar power from sunny states out West or wind power from windy states to power-hungry markets.”

The other piece of good news is that when oil goes over $300 a barrel, it will then be cost effective to use the coal we no longer burn for electricity production to make gasoline, diesel fuel, & jet fuel. Then by adding alcohols & biodiesel from nonfood biofuels to that plus producing new cars to be electrics & plug in hybrids and retrofitting existing vehicles to operate as plug-in hybrids, we can also totally stop using oil to run our cars, trucks, & buses.

(This will also give today’s coal producers and coal producing regions an economic role in the transition instead of simply bankrupting them by using no coal at all.

Oil companies have lots of money now & still have time to invest in owning some of the new energy producing companies plus it will take more than 20 years to wean the whole world away from using oil. So they have plenty of cushion now, IF they act in time.)

The bad news is that NOT doing this over the next 20 years guarantees gasoline will hit $20 a gallon, food prices will also triple, & fires, floods, and droughts will get even worse world wide.

We may even have our coastal cities begin to need to invest in dikes or relocate to higher ground. This will be caused by burning the coal, natural gas, & coal NOT converting to carbon free sources will add to the CO2 that is already in the process of causing these exact climate changes.

The other piece of bad news is that neither the man on the moon analogy that Gore used in his speech nor the Manhattan project analogy New York Times columnist Tom Friedman uses are as large in scope or scale as Gore’s challenge or the very real problem it aims to solve.

To get the job done will require massive action by almost everyone in the United States over the initial 5 or 10 years to adequately get this huge change into place.

The only historical precedent of comparable size is the effort the entire United States made to win World War II. Virtually everyone in the country was involved and made strong and focused efforts to get the job done and did so over a several year time period.

The other thing that will be necessary, according to Jim Owen, a spokesman for the Edison Electric Institute, which represents investor-owned utilities that produce 70 percent of the nation's electricity. He said this.

"We cannot do the job with renewables and energy efficiency alone," he said. "We have …. to include nuclear. And we frankly think that nuclear should be increased."

I agree with Al Gore that we can get to his goal of using renewables only. But it may well take longer than 20 years. And to begin to approach replacing all coal, oil, & natural gas for generating electricity in 20 years, let alone in 10 years, I suspect Jim Owen is correct. It will be necessary to produce the speed of this change we look to desperately need, to at least double our generation of nuclear power over the next 20 years.

John McCain looks to plan to carry on the other policies of the Bush administration that helped get us into this mess. So I plan to vote for his opponent. But I think his nuclear policy is a good idea. I hope Obama adopts it in addition to doing his best to make exactly the changes Gore suggests.

Can we make all these changes in 10 years?

I personally suspect it will take 20 years if we do an excellent job with all the national effort we can muster.

But that’s the WRONG question. Since it’s desperately needed and clearly the right thing to do, we need to ask instead:

1. Presuming making these changes IS doable within 10 years, what are some of the ways we might get it done?

(Gore pointed out that the United States gets more than enough solar energy to the job alone & the mid-Western United States gets enough wind to do it with wind alone. So it is doable in theory at least.)

2. How can we make as much progress right away as we can?

We’re 30 years too late in starting; & the results of that are beginning to hurt us economically. So we need a FAST start.

3. And, if we cannot get there in 10 years, how can we get it done in as close to 10 years as possible?

By the way, gasoline in the United States will very likely go to nine or ten dollars a gallon as this transition happens.

The key thing to remember is that this transition will cause the price of gasoline to go DOWN once that happens and to provide alternatives that cost LESS than gasoline to power cars and trucks.

If we don’t do as Gore suggests, twenty dollar a gallon gasoline plus rationing plus gas lines will result. And, world wide economic depression or collapse is possible.

(Drilling for more oil would mean $18 or $19 dollars a gallon instead of $20.)

If anything, I think Gore UNDERSTATED the problems that will occur if we fail to do as he suggests.

Former Rep. Bob Barr, Libertarian presidential candidate: "None of us can walk away from this issue without agreeing with him that we do have a very serious problem, and it's only going to get worse unless we do something about it. ... I hope to be a part of that, and I would like to see the free market take the lead, not the government."

Gore believes in the entrepreneurial businesses we have to rise to this challenge. And, I think he knows that many already are. But he understated how important it is to have government support and speed this process as a part of the solutions he recommends.

Businesses CAN help do the job. But they respond much more and dramatically faster to incentives for doing the right thing than they do from penalties for doing the wrong thing. So, to get the job done, I think we need to dramatically boost the incentive side more than Gore suggested.

One good effect of the recent run up in gasoline prices is that they begin to make it cost effective to put the changes Gore recommends in place.

Rep. Jay Inslee, D-Wash.: Gore “…. pointed out that the only way we have a chance to drive down oil prices is if we become free of the slavery of oil. If we can give Americans choices of electrical cars or ... biodiesel cars, then and only then do we have a chance of dealing with this cost issue. That is why $4-a-gallon gas is not an enemy of action, it's an ally of action."

The other thing that Gore said that I like is that if we do this in the United States and take the lead in it, it will have two very desirable effects.

It will at least partly restore the United States in the eyes of people in other countries to being thought of as a country that takes the lead in making good things happen.

And, as the methods we use and the positive economic effects of these changes happen and begin to be copied and emulated, we will also help solve these problems world wide.