The American Patient: Energy 28 comments
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I would like to begin by stating that while the subject of energy economics has still not attained its ‘critical mass’ where book-length literature is concerned, there are an increasing number of short, non-technical papers that everyone should attempt to read and understand. Where my energy economics students are concerned, I mean read and understand perfectly, especially if they prefer a passing to a failing grade.
I can name three extremely valuable contributions. Their authors are Ronald R. Cooke (in ‘321 Energy’), John Lounsbury (in ‘Seeking Alpha’), and Peter Huber (in ’City Journal’). Eventually I also plan to force my students to examine a few chapters in my energy economics textbook (2007), but one has to be careful here, because as the actress Joan Collins once indicated, people who spend a large part of their time in a Facebook or Twitter mode are generally not strongly interested in academic offerings.
Ronald Cooke’s position is that the Waxman-Markey (‘Clean Energy’) Bill that was recently passed in the U.S. House of Representatives, and which is intended to resuscitate the U.S. energy economy, may instead contribute to an industrial demise of that country. I know precious little about that piece of legislation except for its promotion of the cap-and-trade approach to reducing CO2 emissions; but since Cooke – like myself – regards cap-and-trade as a malicious scam, I can only hope that I never come into contact with its half-baked supporters in an academic milieu.
John Lounsbury’s important article covers about the same ground as Mary J. Hutzler’s short paper in the latest IAEE Energy Forum. (2009). Lounsbury makes it clear though that the attempt to convince legislators and motor vehicle operators and owners that they should be enthusiastic about replacing gasoline with, for example, natural gas has to do with strategic issues (e.g. lobbying) that in game theory are associated with the manipulation of information. Screening and Signaling are the applicable technical terms, although lies and humbug sound better to me. For instance, the bus that carried me to the jazz and dancing at Stockholm’s ‘Skansen’ a few nights ago had a notice on its side which stated that its fuel was ethanol, just as the bus carrying me to Uppsala University often displays information designed to suggest that natural gas should be thought of as the fuel of the future for public transportation.
Unless I am mistaken, natural gas made its appearance as a desirable transportation resource because in this manipulation of information game, the superficially intelligent players possess a substantial advantage over the resolutely ignorant. In game theory this is called information asymmetry.
Both Lounsbury and Hutzler deal with investment and conversion costs, however my position has been – and remains – that in addition to these expenditures, the availability of natural gas is not very different from what it was several years ago, when people like the former Federal Reserve Chairman Alan Greenspan, as well as a number of corporate executives, suggested that gas-intensive U.S. industries and activities could expect some very bad news in the near future if large quantities of new gas reserves were not discovered – and produced – in North America. Some observers seem absolutely certain that an augmentation of reserves has come about (because of such things as shale gas), but as far as I am concerned it is too early to consider this issue settled.
Peter Huber’s brilliant short paper is the kind of document that I inform my students in advance that they will encounter in the final examination. Among other things he points out that China is adding 100 ‘gigawatts’ of coal-fired electric capacity a year – which is one third of the total coal burning capacity of the U.S. The bottom line here, according to Huber, is that the U.S. does not control the global supply of carbon, and I would like to make it clear that neither do, for example, Sweden and Denmark, despite their posturing and courting attention as environmental know-it-alls and icons in the corridors and restaurants of the European Union headquarters in Brussels.
Regardless of the circus that will convene in Copenhagen this December, when experts and fellow travellers from every corner of the globe assemble for the purpose of improving the world’s environmental health, as well as to drink a large amount of beer in Copenhagen’s celebrated Tivoli, it would be nice if our famous patient began thinking in terms of an economically and technologically optimal energy sector, instead of one whose only merit is its popularity with the anti-nuclear booster club. One of the things this suggests to me is that energy should be considered a ‘public good’, because it is just as important as parks, street lights, and stupid wars thousands of miles away. In line with the title of this paper, it is very likely that the new doctor in the White House and his assistants know this as well as my good self, but unfortunately they have got to sell it to the TV audience, who to an alarming extent are increasingly captivated by phenomena without the slightest relevance for their future welfare.
REFERENCES
Banks, Ferdinand E. (2007). The Political Economy of World Energy: An Introductory Textbook. (London and Singapore: World Scientific)
Cooke, Ronald R. (2009). ‘The clean energy act is not going anywhere’. 321 Energy (July).
Huber, Peter W. (2009). ‘Bound to burn’. City’ Journal (Spring).
Hutzler, Mary J. (2009). ‘The Pickens plan: is it the answer to our needs?’ IAEE Energy Forum. (.pdf)
Lounsbury, John (2009). ‘Natural gas: another great thing from a lobby near you.’ Seeking Alpha.
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This article has 28 comments:
Whilst we can all agree that nobody spends vast sums of money lobbying on behalf of the public good, it doesn't mean that everything a lobbyist says is wrong.
I don't favour hosings of government money on the special projects of lobbyists. However at least a portion of what is being asked by Pickens and co is no more than the removal of government erected barriers to natural gas conversion.
I too saw the ethanol signs on vehicles in Sweden and guffawed. How "sunny Sweden" can efficiently produce biofuels is a mystery to me.
ferd i like your writing style. some people do not grasp your zingers immediately.
> jack
online.wsj.com/article...
"ust three years ago, the conventional wisdom was that U.S. natural-gas production was facing permanent decline...
But new technologies and a drilling boom have helped production rise 11% in the past two years...
In contrast, 98% of the natural gas consumed in the U.S. is produced in North America."
Long FSYS
And I DONT believe that everything lobbyists say is wrong. There is no point in that, but I took a very thorough look at natural gas some years ago, and came to the conclusion that gas reserves were inadequate, given what I calculated to be the future demand for this resource. But let's face it, I could have been wrong. The only two resources I am really sure about just now is nuclear and oil.
This is a shame because there is possibly no more important subject. To me, one benefit of the global downturn is that it may give us the breathing space we so badly need to make progress on energy. Without that progress we will probably not be able to achieve the economic growth necessary to support our debts and spending commitments and avoid a substantial decrease in our standard of living.
The progress required can only come from technological innovation. There is no combination of existing fuels and technology (that I am aware of) that gives us an acceptable answer. The answer has to come from new technologies. So we need to think about how they are incentivised and supported etc. That doesn't seem to be a priority within your definition of Energy Economics. That seems to be a big omission.
I don't have the faith in Mr Pickens' judgement that some people do, but this idea that gas is a 'bridge fuel' until renewables becomes more plentiful sounds good to me. Of course, if my energy wish came true for the US, there would be an increase in nuclear - not a very big increase perhaps, but enough to indicate that the present government means business: it's not easy to be a democrat and rejoice over what is happening in the US energy picture..
I was expelled from engineering school in Chicago because I failed everything except history and english TWICE. I was also expelled from infantry leadership school, even though I was first in the class.
I was fired from my engineering job in Los Angeles also, and...and..
I have published 12 books and more than 200 articles. I have also held at least 12 visiting professorships, and in addition was an academic foot soldier in Dakar (Senegal) and Lisbon (Portugal)
Now get this: NOBODY HAS A CHANCE AGAINST ME IN A SEMINAR ROOM OR IN A CONFERENCE! As for teaching, I am a brilliant teacher. I worked as a mathematical statistician for a consulting company in Chicago, and as a junior engineer at Great Lakes designing terminal installations on destroyer escorts. I spent 2 years in Japan in an infantry regiment, and 15 months in Germany in an artillery brigade.
Do you get the rhythm? Do you feel it in your bones? About those books of mine referred to on :::::: they are the leading textbooks in the world on energy economics, and today I agreed to do another textbook. The ranting that you referred to will pay a major role in that book. By the way, you should read Professor Richard Gordon's review of my first textbook in The Energy Journal. He thought it was ______ awful, just terrible. Of course, he thought out of the other side of his face when I told him that he should never show up at an energy conference at which I put in an appearance.
By the way, if you still have any complaints about my career, I agree with you. I should have written 20 books instead of 12, and I should have worked in biochemistry. So you see, I'm not satisfied worth a _____.
Thanks for the opportunity you gave me to discuss a topic that I discuss with myself at least a couple of times a week. .
Since you're in the mood to respond; come on then tough guy, defend yourself against my accusation that you're missing the most important part of energy economics. What thought have you given to technology and innovation?
P.S. In answer to your questions: yes, I get the rhythm and yes, I feel it in my bones.
Electric cars have an advantage of being diversified -- the electricity can come from a portfolio of sources, e.g., nuclear, oil, natural gas, coal, solar, and so on. In addition, the electric motor is the most efficient type of motor available. Internal combustion engines waste 86% of energy as heat and friction. Electric motors only waste 30% on friction losses.
The other advantage of electric cars is we already have a widespread distribution network for electricity. Converting gasoline stations to NG stations would require an expensive and costly retrofitting.
Here's a nice story for you. I was visiting professor of oil and gas economics at the Asian Institute of Technology last year, and in my first lecture I put a couple of equations of the Boston Public variety on the board, and asked for comments. For some reason, instead of a sensible reply, I ended up being informed by one of the students - an engineering graduate - of my intellectual shortcomings. Now how did he find out about those - did you tell him? Anyway, he was supported in his evaluation by a gentleman sitting next to him.
He and his friend received the same story that you got above, only delivered in a very special tone of voice. As Humphrey Bogart would have said, he took it and he liked it. As for my thoughts on technology and innovation, I know enough about those topics to know that the United States could begin to solve the energy problems that you are so concerned with next week if they stopped _____ around, like the morons in my class and the one you cited who told that wonderful Amazon audience not to waste their valuable time reading my stinking, rotten, no good, dumber than stupid, completely worthless and silly book.
Incidentally, do you have Dr Phil's address?
R U Nuts? Look at the theory of public goods again and see if you are making anything but noise.
OK Mr tough AND smart guy. Check out what Elliott wrote. He seems to have the kind of ideas that could help you (though you obviously don't need any help in the areas that require toughness and smartness). I agree with Elliott that battery technology could be one of the key components of the solution, but would it need an
"Apollo-moonshot type program"? I don't think it needs to be remotely that challenging or complex and would have a far better payback. But, what it shares with the Apollo program is the reality that it needs focus and commitment and ......... government support. This is not the kind of stuff that you can gamble on Detroit getting right.
What we need to do is to frame these kind of projects and get them on the agenda. To do that we need a smart (and tough) energy economist. If only we had one of those.
On Aug 05 03:04 PM Elliott wrote:
> Electricity should be on top of the list for commuter vehicles.
> The U.S. should be working with private industry in an Apollo-moonshot
> type program to improve battery technology to improve range.
>
> Electric cars have an advantage of being diversified -- the electricity
> can come from a portfolio of sources, e.g., nuclear, oil, natural
> gas, coal, solar, and so on. In addition, the electric motor is the
> most efficient type of motor available. Internal combustion engines
> waste 86% of energy as heat and friction. Electric motors only waste
> 30% on friction losses.
>
> The other advantage of electric cars is we already have a widespread
> distribution network for electricity. Converting gasoline stations
> to NG stations would require an expensive and costly retrofitting.
I am an engineer and constructor. I am very excited about all these changes happening these days. It means more work for us "slaves". Thanks for pushing all these alternative energy. The more the merrier. Even better still, more mistakes so that we can do the projects over and over again.
Are you available for speaking engagements or cage fights?
As for questioning the amount of natural gas reserves in the US, I might be wrong here. I studied this issue very carefully once and came to the conclusion that there was not enough domestic gas to meet a large share of domestic demand in the not too distant future. Maybe there is better technology and equipment now, but whether the additional demand represented by turning NG into a prime motor fuel can be accomodated is quite another matter. And koolsoot, while nobody wants to believe more than I do that the right kind of hydrogen technology will be available some day, some very smart people are saying that this is a fantasy. Better wait before you tell the decision makers to put all their eggs in this basket.
And incidentally, when I say energy as a public good I'm thinking about the concept - about what a public good is and why they seem to be necessary in just about every society. Of course, when the young ladies and gentlemen on Wall Street reach the crazy conclusion that that it does not pay to finance nuclear energy, then Uncle Sam has got to do what has to be done.
Sweden gets most of its ethanol supplies, especially for its bus fleet (imported under a special arrangement with the EU that allows it to charge a much lower import tariff than otherwise), from BRAZIL. It produces a bit of ethanol domestically from wheat, and also as a byproduct of cellulose production, but the bulk is imported.
The main importer of that ethanol, SEKAB, last year created a private sustainability standard for ethanol called the "Verified Sustainable Ethanol Initiative." It claims that all of the ethanol thus certified attains a 85% improvement in life-cycle greenhouse gas emissions compared with gasoline. Unfortunately, actual audits suggest that the producers aren't quite attaining that level yet.
And, by the way, I thought that most of Tivoli Gardens (except for the concert halls) closes for the winter. Unless they open it up especially for the occassion, I doubt very much that Climate delegates are going to hang around there this December drinking large amounts of beer.
On Aug 05 01:50 PM Ferdinand E. Banks wrote:
> Your comment deserves some attention Chap 08, and I hope that you
> are tuned in.
>
> I was expelled from engineering school in Chicago because I failed
> everything except history and english TWICE. I was also expelled
> from infantry leadership school, even though I was first in the class.
>
> I was fired from my engineering job in Los Angeles also, and...and..
>
>
> I have published 12 books and more than 200 articles. I have also
> held at least 12 visiting professorships, and in addition was an
> academic foot soldier in Dakar (Senegal) and Lisbon (Portugal)<br/>Now
> get this: NOBODY HAS A CHANCE AGAINST ME IN A SEMINAR ROOM OR IN
> A CONFERENCE! As for teaching, I am a brilliant teacher. I worked
> as a mathematical statistician for a consulting company in Chicago,
> and as a junior engineer at Great Lakes designing terminal installations
> on destroyer escorts. I spent 2 years in Japan in an infantry regiment,
> and 15 months in Germany in an artillery brigade.
>
> Do you get the rhythm? Do you feel it in your bones? About those
> books of mine referred to on :::::: they are the leading textbooks
> in the world on energy economics, and today I agreed to do another
> textbook. The ranting that you referred to will pay a major role
> in that book. By the way, you should read Professor Richard Gordon's
> review of my first textbook in The Energy Journal. He thought it
> was ______ awful, just terrible. Of course, he thought out of the
> other side of his face when I told him that he should never show
> up at an energy conference at which I put in an appearance.
>
> By the way, if you still have any complaints about my career, I agree
> with you. I should have written 20 books instead of 12, and I should
> have worked in biochemistry. So you see, I'm not satisfied worth
> a _____.
>
> Thanks for the opportunity you gave me to discuss a topic that I
> discuss with myself at least a couple of times a week. .
Ferdinand, I see why you were fired and thrown out!! Not only are you arrogant, but wrong.
If you want to know the future energy sources, you just need to follow the money. The low cost, suitable fuels will win.
Oil will be too costly very soon, hitting $4-5/gal in 1-3 y, as soon as the worlds economy recovers and up until it causes the next recession.
This will be the final straw starting the move away from oil.
So what will take it's place in the US? First will be conservation/eff just as in 73 and 2008. Though this will be much deeper moving to much higher mileage cars, EV's and plug in hybrids.
Semi's, trucks will move to NG hybrids because they use a lot and have the room for it so save much more. Cars don't have room, time to refuel and safety, not being able to use tunnels, will keep NG from them.
Batteries are not a problem, orders for them are. They are at least 8 viable batteries now ready for EV's from various Lithiums, sodiums, Zinc-alum/air, NiMH, Ni-cad and even lead. I and many others drive lead battery EV's every day. We just had to build our own.
My costs are so low because I build light, aero, composite EV's it's under $.01 mile for fuel, in the Lovin's Hypercar style. I just use medium tech composites and forklift tech.
Homes, buildings use much of the rest of the energy. They too by eff,conservation can cut their use by 50% and many can cost effectively produce their own energy by RE and cogen either cutting outside energy needs or even producing excess.
A tax on coal, oil to pay their real costs instead of socializing it in our income taxes, pollution, oil wars, balance of payments costs, depletion, etc will make them too costly compared to wind, solar, river/tidal, NG, biomass and our biggest, cheapest energy source, conservation/.eff.
Basic facts are fossil fuels are going up in price and RE is dropping fast. Now home wind is down to $2k/kw and CSP solar once in mass production will be $3k/kw plus 9kw of heat as a bonus. These will for under $10k, make enough energy for the home, EV/plug in hybrid for it's life!! This will put a floor on energy costs in about 10yrs it will take to deploy them enough to energy cost slightly above ours now in today's $.
So while it will be rough for those 10 yrs on the other side will be people in control of their own energy, not big business. Why is business got too greedy and killed their golden goose.
All this is doable with today's tech and high oil, coal, nuke costs will make it happen. It will happen much faster if repubs get with the plan but they rather see America suffer than Obama's plan, Cap and tax/etc, not congress' Cap and Trade', work.
But it doesn't matter as it will happen whether anyone wants it to or not because it's the only one we can afford. The CO2, GW, GHG's are reduced is a side benefit.
if we go fast like Obama, the smart people wants, then Iran,. Russia, oil dictators and terrorists won't profit and we won't be deeply in debt to them which I think is the patriotic way. Vs the republican way will keave us broke, at war and deeply in debt. To me that's treasonous supporting our enemies..
I'm reading these comments again because I plan to give a brilliant talk soon. As it happens I favor electricity also, and despite my arrogance I know that many of the commentors above and elsewhere know more than I do about this matter - a lot more The comment of Chap 08(?) about electricity was especially valuable..