Mind Over Matter: Oil / Coal Dependence vs. Alternative Energy

by: Gregor Macdonald

Energy analyst and author Richard Heinberg published a sobering piece on energy transition and climate change last week, and he hits upon a theme that I’ve been addressing in my recent work on coal. Titled, Trying to Save the World, Heinberg writes about the energy deficit one would be choosing to enter, as part of carbon reduction:

Reducing carbon emissions essentially means using less coal, oil, and gas (since carbon capture and sequestration is arguably unrealistic on any substantial scale, other than by reforestation and regenerative agricultural practices). Since “clean” sources of energy probably can’t be scaled up to replace fossil fuels entirely, this means the world will have less energy to go around. (It will no doubt soon have less to go around in any case, because fossil fuels are non-renewable and depleting, and we’ve probably already passed the peak of world oil production—but don’t get me started on that.)

Historically, there has been a very close correlation between energy consumption growth and economic growth, so with less energy available it may not be possible to continue growing the global economy in customary ways. Almost nobody in the climate community wants to talk about that, because the very suggestion that strong, effective climate policies will have a significant economic cost makes such policies far less palatable to folks on Main Street, and certainly to politicians.

Yes, precisely. I have warned in my presentation Coal World that unless we start using oil to build Alternative Energy infrastructure, the world will continue on its pathway of energy impoverishment (as the cost of all energy inputs continues to rise) and we will soon enough reach a point where transition to Alternative Energy infrastructure becomes prohibitive. The result would be a world turning back to the cheapest energy it can find–and that is coal. If economies and political bodies seems either reluctant or clueless now about using oil to build out new power generation, then 150.00 dollar oil will not function as the inducement that many presume.

The harsh reality is that, whether one chooses an accelerated energy transition to Alternative Energy either because of climate change, or peak oil, it will mean that economies and countries will have to make a discretionary choice now, in order to be successful in the future. The scale of the problem is that large. And the choice would be to use less energy now, or use more expensive energy now, in order to conduct a 25 year energy transition. Historically, people are just not naturally inclined to take short term pain. Groups of people are especially ill-equipped to make such grand decisions.

We can think of funding energy transition, therefore, as being analogous to funding one’s retirement. However, in addition to saving or devoting capital, economies would have to save or devote energy as well to the cause. Simply put, to any trajectory of future oil consumption used in the normal course of the global economy, we would have to add in a new, enormous consumer of oil: The energy transition infrastructure buildout. And that would place extra price pressure on oil, and thus lead us back to the political and economic intractability problem. Adding further pressure to the challenge is that in any energy transition to Alternative Energy one is choosing to give up either cheaper or higher power-density sources of energy to then latch on to more expensive sources of power generation. Again, not a pathway normally chosen by short-term, profit-maximizing economies.

I actually argue that wind and solar power generation offer tremendous returns–but more on the back end of their lifespans. They are perfectly opposite to coal, therefore, in their full-cycle economics–especially when taking into account all obvious externalities.

Coal is cheap and ready to go in the short-term, but long-term exacts high costs in terms of health and infrastructure maintenance. Solar, on the other hand, requires large up front capital and promises to pay off only later with wonderfully accretive low(er) maintenance costs. Our challenge remains one of human psychology, and our disabling bias for the present. More generally, I wish that those who deign to offer up rosy prospects for energy transition and discretionary carbon reduction evidenced the same mastery of oil, coal, and energy history as revealed in the collected works of Richard Heinberg.