2 Very Different Visions of Our Energy Future

As a youth, I remember participating in a German New Year's tradition called das Bleigiessen or "lead pouring." In this activity, you melt a small amount of lead in a tablespoon, drop it into a bowl of water, and divine your future based on the shape into which the lead solidifies.

The fact that I played with lead as a child may explain a lot. Nevertheless, I still enjoy a good forecast. Topping my recommended reading list this year is George Friedman's The Next 100 Years. (Space-based solar by 2080? Yeah, I guess I can see that happening.)

While looking slightly less far ahead, the energy industry is still taking a much longer view than most year-end prognosticators. We've recently seen some reports with highly divergent views on our possible energy future, and I thought I would share a few highlights.

Farewell, fossil fuels
In the November issue of Scientific American, two professors presented a plan to put the world on 100% renewables (i.e. wind, water, and solar) by 2030. This makes other recent studies on how to get the U.S. to 20% wind or 10%-20% solar within the same time frame look pretty unambitious. More to the point, those other plans make this one pretty hard to take seriously.

The authors call for 3.8 million 5-megawatt (MW) turbines, 1.7 billion rooftop photovoltaic systems, and 40,000 300MW photovoltaic power plants, among other installations. I guess it's conceivable that the world could build and install this much equipment, but I don't think we would get much sleep.

Take those 3.8 million turbines. That averages out to 190,000 per year over two decades, and over 500 per day. A-Power Energy Generation Systems (Nasdaq: APWR  ) is only geared to crank out 300 2.7-megawatt turbines per year at its new plant in Shenyang, China. Siemens (NYSE: SI  ) , which has an actual track record in this area, has delivered fewer than 8,000 wind turbines of all sizes since 1980.

There are obvious material and manpower constraints involved here. Environmental opposition to utility-scale PV plants in places like California also appears formidable, as First Solar (Nasdaq: FSLR  ) is discovering. But let's get right to the punch line, which is the price tag: $100 trillion in construction costs, not including transmission.

I appreciate the spirit of this plan, but with several of the world's leading economies already leveraged to the hilt (i.e. America, the UK, and Japan), such a level of spending seems deeply implausible. A World War II-style mobilization of the global economy to green our energy infrastructure is an appealing analogy, but developed nations didn't then face the staggering fiscal burden of supporting an aging population as they do now.

A multi-dimensional approach
It may surprise some readers that the theme of ExxonMobil's (NYSE: XOM  ) Outlook for Energy: A View to 2030 is not "Drill, baby, drill!" The company's vision, as spelled out in a report earlier this month, is far more nuanced than that.

An obvious point is that world energy demand is going to grow over the 2005-2030 period in question. Also unsurprising is that this demand will be driven by non-OECD countries, whose energy usage will rise by some 65%. But Exxon sees OECD energy demand actually dropping slightly over this period.

How can this be, with GDP growth in the OECD countries projected at 50%? Efficiency gains are the key. Exxon calls these "the greatest source of energy in the future." (Take that, SunPower (Nasdaq: SPWRA  ) ). I tend to agree on this point, and would love to bring an energy efficiency play into my portfolio. WaterFurnace Renewable Energy (Indiana-based but traded on the Toronto exchange) makes a killing on ground source heat pumps, and is one stock on my watch list.

Exxon is realistic about coal, which will not be dethroned as the top source of electric generation any time soon. But the company also sees nuclear and renewables like wind generating 40% of the world's electricity by 2030. Utilities like FPL Group (NYSE: FPL  ) will see to that. These generation sources benefit strongly from a $60 per ton carbon price, which Exxon has baked into its outlook. The company is unimpressed with the economics of both carbon capture and storage (CCS) and solar over this period, however.

As for natural gas, Exxon sees a very bright future, as underlined by its recent purchase of XTO Energy (NYSE: XTO  ) . Gas will be the fastest-growing hydrocarbon, with global demand rising 55%, or 1.8% per year (compared to oil at just 0.8%/year). Over half of U.S. natural gas demand will be met by shale and other "unconventional" sources by the end of the period.

In 2030, Exxon sees fossil fuels continuing to dominate the energy mix, at around 80%. If you accept that crucial premise, then you'll see why oil and gas continue to command my attention, and solar power, even with its explosive growth, remains a sideshow.

First Solar is a Rule Breakers pick. See what other stocks our advisors see taking the future by storm with a free 30-day trial.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of XTO and FPL Group. The Fool has a disclosure policy.


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  • Report this Comment On December 31, 2009, at 3:56 PM, predfern wrote:

    Low capacity factors are the bane of alternative energies. This is because they only work when the sun shines and the wind blows. A good website is truthaboutenergy.com. It takes a lot of money to build and maintain a power plant. If the power plant only produces a small amount of energy in a year, then that energy will be very expensive. The average cost of electricity from a nuclear power plant is 1.72 cents/kwh including waste handling. Electricity from wind costs 3 times as much. The best solar concentrator power plant produces electricity for 20 cents/kwh, ten times more than coal or nuclear! Photovoltaic solar panels produce electricity for 40 cents/khw. This is not going to change because of the low capacity factor. Technically, you could get around the capacity factor for solar but the solar power plant would have to occupy 25,000 acres. Land is not free. I would require a constant stream of water to pressure wash the mirrors (in the middle of the desert) and would require expensive maintenance. It is questionable whether there is enough aluminum in the world to make all of those mirrors. How well will the system stand up to sandstorms and temperature extremes?

    The long term solution in breeder reactors. Physicist Bernhard Cohen has shown that uranium extracted from seawater can give us plenty of energy for billions of years and the cost of energy will increase by less than 1%. More uranium is flowing into the ocean from rivers all the time.

    For transportation fuels, Nobel prize winning chemist George Olah has shown that we can harvest the atmosphere, turning CO2 into methanol (cars), dimethyl ether (diesel) and jet fuel (using well know catalysts). We don't have to do any of this for thousands of years until fossil fuels are used up. We can be energy independent by 2020 since we have over 200 years of oil in the oil shale out west. We are also the Saudi Arabia of coal (which can be turned into transportation fuels). The recent climategate scandal as well as recent peer reviewed scientific studies has shown that global warming is the biggest scientific fraud in history.

  • Report this Comment On January 02, 2010, at 11:14 AM, MoneyWorksforMe wrote:

    To address something that is not covered in the links below. Atmospheric science is not a perfect science by any stretch of the imagination. The limits of atmospheric science are best compared to that of economics. Much of the reason has to do with simply the shear size and complexity of our atmosphere and biosphere as with our economy. Both disciplines are extremely dynamic, in that conditions are constantly changing and the affects of myriad variables have affects on other variables and so on and so on. Another limiting factor is the butterfly effect and chaos theory. One hundred percent certainty will almost never be achieved in either of these disciplines--and that must be accepted for the aforementioned reasons. However, good hypotheses can still be derived from gathered data and various trends deduced. The trends, although not infallible, should NOT be taken with a grain of salt. The implications, as you can see clearly with the financial crisis, can be extremely dangerous and detrimental. During the financial crisis we waited for absolute certainty before enacting a plan for mitigation, or in this case, a shift toward more government intervention and financial reform--and the economy is still hemorrhaging as a result. Many prominent economists correctly predicted the global financial meltdown years in advance while others with equivalent resumes opposed their theories. The countervailing views resulted in inaction and ultimately virtual catastrophe. Nothing was done preemptively--the signs had to be plainly obvious before change was sought. This is why, with regard to Global Warming, precautionary action must be taken swiftly, and assiduously now. How, exactly, is part of an entirely different, but equally perplexing issue.

    Finally, as for the cynical position where it is said that these scientists are politically and monetarily motivated--I disagree. While there is serious difficulty in disproving this idea, I have significant trouble in believing that some of the world's most brilliant scientists are that driven for their own financial gain as to fabricate data to influence the masses and build momentum behind a hidden political agenda. The educations and resumes many of these individuals have make them readily employable in virtually any industry in very high paying professions. They could easily find positions at some of the most successful companies in the U.S. namely, Exxon Mobil, IBM, GE, Oracle, Cisco, Intel etc. etc. These individuals aren't "relying" on government grants to put food on the table and shirts on their backs. I don't believe either that the recent greed seen on Wall Street is a mentality that extends into the scientific community. You don't go into science and mathematics if money is your chief motive--it just doesn't make any sense.

    Carbon dioxide is a greenhouse gas because it absorbs infrared radiation causing C=O bonds in the molecule to stretch and bend.

    Each year fossil fuel combustion worldwide puts~6.2 billion metric tons of carbon into the atmosphere as CO2.

    About 45% is removed from the atmosphere via natural processes--photosynthesis, and the rest by dissolving into rainwater and oceans to form hydrogen carbonates and carbonates. The other 55% of the CO2 from fossil fuel combustion remains in the atmosphere, increasing the global CO2 concentration.

    1750 (preindustrial revolution) CO2 concentration in atm. was 277ppm.

    1880 CO2 = 291ppm a 5% increase.

    From 1958 to 2004, the atm. concentration of CO2 increased from 315 to 377ppm, a 20% increase.

    Expectations based on advanced computer models are that CO2 concentrations will continue to increase at 1.5ppm/year and are projected to reach 550ppm, between 2030 and 2050.

    According to the IPCC nearly 75% of CO2 emissions are from the burning of fossil fuels.

    As the CO2 level has increased, global temperatures have increased--a direct correlation.

    The IPCC estimates a 1--3.5C (2--6F) temperature increase by 2100.

    Warming by 1.5C would produce the warmest climate seen on earth in the past 6000 years.

    An increase of 4.5C would be unprecedented since the Mesozoic era (aka the time of the dinosaurs).

    Since the 1940's, avg summertime temperatures in Antarctica have increased 2.5C to above 0C--ice shelves have lost nearly 13% of their total area during 1998 alone.

    he global avg. temperature has risen .6 -.8C (1-1.5 F) over the past 150 yrs.

    All of this information was retrieved from my college chemistry textbook: "Chemistry The Molecular Science" Moore, Stanitski, Jurs pp. 473-478.

    In direct response to the CRU Hack: http://www.realclimate.org/index.php/archives/2009/11/the-cr...

    http://www.realclimate.org/index.php/archives/2009/11/the-cr...

    How do we know that recent CO2 increases are due to human activities? http://www.realclimate.org/index.php/archives/2004/12/how-do...

    As for this man's (Eric) credentials: http://www.realclimate.org/index.php/archives/2004/12/eric-s...

    Some background info on radiative forcing (used to deduce warming/cooling based upon more or less incoming/outgoing radiation): http://en.wikipedia.org/wiki/Radiative_forcing

    Note: TOA = Top of atmosphere.

    CO2 explained: http://www.realclimate.org/index.php/archives/2007/08/the-co...

    As for this man's (Gavin) credentials: http://www.realclimate.org/index.php/archives/2004/12/gavin-...

  • Report this Comment On January 02, 2010, at 11:14 AM, MoneyWorksforMe wrote:

    To address something that is not covered in the links below. Atmospheric science is not a perfect science by any stretch of the imagination. The limits of atmospheric science are best compared to that of economics. Much of the reason has to do with simply the shear size and complexity of our atmosphere and biosphere as with our economy. Both disciplines are extremely dynamic, in that conditions are constantly changing and the affects of myriad variables have affects on other variables and so on and so on. Another limiting factor is the butterfly effect and chaos theory. One hundred percent certainty will almost never be achieved in either of these disciplines--and that must be accepted for the aforementioned reasons. However, good hypotheses can still be derived from gathered data and various trends deduced. The trends, although not infallible, should NOT be taken with a grain of salt. The implications, as you can see clearly with the financial crisis, can be extremely dangerous and detrimental. During the financial crisis we waited for absolute certainty before enacting a plan for mitigation, or in this case, a shift toward more government intervention and financial reform--and the economy is still hemorrhaging as a result. Many prominent economists correctly predicted the global financial meltdown years in advance while others with equivalent resumes opposed their theories. The countervailing views resulted in inaction and ultimately virtual catastrophe. Nothing was done preemptively--the signs had to be plainly obvious before change was sought. This is why, with regard to Global Warming, precautionary action must be taken swiftly, and assiduously now. How, exactly, is part of an entirely different, but equally perplexing issue.

    Finally, as for the cynical position where it is said that these scientists are politically and monetarily motivated--I disagree. While there is serious difficulty in disproving this idea, I have significant trouble in believing that some of the world's most brilliant scientists are that driven for their own financial gain as to fabricate data to influence the masses and build momentum behind a hidden political agenda. The educations and resumes many of these individuals have make them readily employable in virtually any industry in very high paying professions. They could easily find positions at some of the most successful companies in the U.S. namely, Exxon Mobil, IBM, GE, Oracle, Cisco, Intel etc. etc. These individuals aren't "relying" on government grants to put food on the table and shirts on their backs. I don't believe either that the recent greed seen on Wall Street is a mentality that extends into the scientific community. You don't go into science and mathematics if money is your chief motive--it just doesn't make any sense.

    Carbon dioxide is a greenhouse gas because it absorbs infrared radiation causing C=O bonds in the molecule to stretch and bend.

    Each year fossil fuel combustion worldwide puts~6.2 billion metric tons of carbon into the atmosphere as CO2.

    About 45% is removed from the atmosphere via natural processes--photosynthesis, and the rest by dissolving into rainwater and oceans to form hydrogen carbonates and carbonates. The other 55% of the CO2 from fossil fuel combustion remains in the atmosphere, increasing the global CO2 concentration.

    1750 (preindustrial revolution) CO2 concentration in atm. was 277ppm.

    1880 CO2 = 291ppm a 5% increase.

    From 1958 to 2004, the atm. concentration of CO2 increased from 315 to 377ppm, a 20% increase.

    Expectations based on advanced computer models are that CO2 concentrations will continue to increase at 1.5ppm/year and are projected to reach 550ppm, between 2030 and 2050.

    According to the IPCC nearly 75% of CO2 emissions are from the burning of fossil fuels.

    As the CO2 level has increased, global temperatures have increased--a direct correlation.

    The IPCC estimates a 1--3.5C (2--6F) temperature increase by 2100.

    Warming by 1.5C would produce the warmest climate seen on earth in the past 6000 years.

    An increase of 4.5C would be unprecedented since the Mesozoic era (aka the time of the dinosaurs).

    Since the 1940's, avg summertime temperatures in Antarctica have increased 2.5C to above 0C--ice shelves have lost nearly 13% of their total area during 1998 alone.

    he global avg. temperature has risen .6 -.8C (1-1.5 F) over the past 150 yrs.

    All of this information was retrieved from my college chemistry textbook: "Chemistry The Molecular Science" Moore, Stanitski, Jurs pp. 473-478.

    In direct response to the CRU Hack: http://www.realclimate.org/index.php/archives/2009/11/the-cr...

    http://www.realclimate.org/index.php/archives/2009/11/the-cr...

    How do we know that recent CO2 increases are due to human activities? http://www.realclimate.org/index.php/archives/2004/12/how-do...

    As for this man's (Eric) credentials: http://www.realclimate.org/index.php/archives/2004/12/eric-s...

    Some background info on radiative forcing (used to deduce warming/cooling based upon more or less incoming/outgoing radiation): http://en.wikipedia.org/wiki/Radiative_forcing

    Note: TOA = Top of atmosphere.

    CO2 explained: http://www.realclimate.org/index.php/archives/2007/08/the-co...

    As for this man's (Gavin) credentials: http://www.realclimate.org/index.php/archives/2004/12/gavin-...

  • Report this Comment On January 06, 2010, at 11:50 AM, sailrick wrote:

    predfern has a few factual errors.

    "The average cost of electricity from a nuclear power plant is 1.72 cents/kwh including waste handling"

    Really? Power from new nuclear plants is projected to cost from 12-17 cents/kWh.

    Power from solar thermal is projected to cost from 4-8 cents/kWh when the industry reaches economy of scale, which would happen before even one nuclear plant is built. The cost of building new nuclear plants has skyrocketed recently.

    Florida Power and Light estimates that new nuclear plants would cost between $5,500 and $8,100 /kW to build. - compared with $1,400 per kW for wind energy.

    http://climateprogress.org/wp-content/uploads/2009/01/nuclea...

    Nuclear power is heavily subsidized. According to Earthtrack, Federal subsidies to new nuclear power plants are likely between 4 and 8 cents per kWh (levelized). Total

    http://www.eoearth.org/article/Ten_most_distortionary_energy...

    Water to wash solar panels?

    One of nuclear's biggest problems is water. It takes billions of gallons to cool a single reactor. We are already seeing potential problems with this. A reactor in Alabama had to be breifly shut down in 2008 during a drought in that region. How reliable will the sources of cooling water be in a changing climate?

    http://www.grinzo.com/energy/index.php/2008/01/24/nuclear-po...

    Every nuclear power plant will require about $500 million to dismantle it, when it has outlived it's useful life. This also adds to the nuclear waste disposal problem

    Nuclear power doesn't give us energy independence. We import 65% of our oil and 90% of our uranium. And now Russia is being lined up as a future source of 20% of our uranium.

    http://www.grist.org/article/foreign-energy-sources/

    The more nuclear reactors that are built all over the world, the more fissionable material there will be, which can be stolen by terrorists and used against us. Just look at the concern over Iran's nuclear program. How many times may this kind of scenario be played out if nuclear energy proliferates all over the world?

    There is no accountability with nuclear power. The Price-Anderson Act places most of the liability for nuclear accidents on the backs of taxpayers, not the nuclear power industry

    Harvesting uranium from seawater is impracticle. We would have to filter 40,000 cubic miles of water a year, just for the U.S..

    Thousands of years to use up fossil fuels? You must be dreaming. Recently, estimates for coal, which were at about 200 years were reduced to about 60 years.

    " but the solar power plant would have to occupy 25,000 acres"

    The land needed for enough solar thermal power in the southwest to supply the entire country is less than the land now used for coal mining and coal plants.

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