A Call to Action: Executive Summary

by Herschel Specter
President, RBR Consultants, Inc.
mhspecter@verizon.net

This report is a call to action, and it presents a multi-faceted national energy plan that would address the twin threats of petroleum usage and climate change that pose severe, imminent risk to the U.S. economy, environment and national security. It lays out specific goals and actionable approaches – both low-tech and high-tech – that would allow America to avert this looming crisis. By 2036, implementation of this plan should lead to over $11 trillion (2008) dollars in savings through reduced oil consumption and to the re-industrialization of the United States with cleaner air, greater national security, and significant reductions in GHG emissions. By 2050, or before, this country could have a low CO2, sustainable energy system, sufficient to meet all of our energy needs for centuries, at a price that is affordable.

This would require, of course, a nonpartisan recognition of the magnitude of the energy problems we face, and a concerted effort by our nation’s government, business and environmental leaders to galvanize public support behind an ambitious effort to secure our energy future.

It is hoped that the fresh approach advocated here can serve as a common starting point for discussion and action by all stakeholders, eventually leading to the creation of an enduring national energy plan.

A PROBLEM OF WORLDWIDE MAGNITUDE

This is a call to action. The United States is headed into a perfect energy storm, requiring a fresh, clear-headed non-partisan approach to averting that storm. This paper proposes a different way of addressing the problem and a blueprint for adopting a strategy to solve it.

The world economy was severely weakened in 2008 when oil prices hit $147/barrel, precipitating a global recession. Such high oil prices occurred when there was a zero margin between the world’s supply of oil and world demand. The recession quickly suppressed demand, creating a temporary margin between supply and demand. However, this temporary margin is eroding and a number of energy experts now predict significant world oil shortages in the next few years. Economic recovery, and the associated increase in oil demand, will hasten the time when the next zero margin situation could occur.

The current and projected demand for oil is tremendous and increasing, as energy use in China, India, Brazil and other developing countries expands with their improving standards of living and growing urbanization. We face a serious threat of future zero margin situations because the world’s total supply of conventional crude oil appears to have peaked and has started its irrevocable decline. Unlike past recessions where lowered oil prices speeded economic recovery, high oil prices are here to stay.

Complicating these zero oil margin challenges is climate change with its own set of major economic and environmental difficulties. Many climate scientists attribute worsening climate conditions to the burning of fossil fuels –mostly oil, natural gas, and coal — yet these fossil fuels represent a very large fraction of the energy used in the world today. Greenhouse gas (GHG) levels, as measured in parts per million (ppm) of CO2 in the atmosphere, have increased from pre-industrial levels of about 280 ppm to 379 ppm in 2005. According to the International Panel on Climate Change (IPCC) the atmospheric concentration of CO2 in 2005 exceeded the natural range of 180 to 300 ppm experienced over the last 650,000 years. Unless curtailed, climate change is predicted to bring excessive rains in some areas and droughts elsewhere—leading to tens of millions of refugees, dangerously unpredictable weather patterns, extinction of species, a significantly higher sea level, and many other effects.

We face a perfect energy storm: increasing world demand for oil, decreasing world supply of conventional crude oil, the need to significantly reduce the use of fossil fuels, and potentially crippling economic conditions every time the margin between oil demand and supply approaches zero.

Over the past decades, and despite warnings from every President from Nixon to Obama that the U.S. needs to reduce its dependence on oil, our political system has not worked in developing a sustainable national energy plan. In addition to the failure to address our ongoing energy challenges, the lack of a national energy plan also creates enormous uncertainty among those who need to make the large investments necessary to prepare us for a secure energy future.

To address the challenges we face adequately, many simultaneous transformations in our energy system will have to take place. The initial emphasis must go to reducing the risks of oil usage, with greater emphasis on reducing the GHG releases phased in shortly afterwards. But our core strategy must focus on two overriding objectives:

• I. The creation of a long lasting, affordable, low CO2 electric power system
• II. The development of long lasting, affordable, and sufficient sources of low CO2 liquid fuels

CURRENT APPROACHES CANNOT SUCCEED

In the past few years there have been a number of approaches advocated to deal with our energy future. None have the broad, integrated components necessary to address the overall problem.

For example, the “Drill Baby, Drill” approach relies on the extraction of large amounts of oil from conventional and unconventional sources. The world’s supply of oil, however, is becoming increasingly uncertain. Despite a near tripling of world oil prices, non-OPEC production, which accounts for 60% of the world output, has not increased significantly since 2004. The largest worldwide oil find in the last 40 years, off the coast of Brazil, is estimated to contain 8.5 billion barrels of oil. At the present world consumption rate this would only be enough to last 100 days. According to the International Energy Agency (IEA) the world production of crude oil over the next two to three decades will shift away from today’s oil fields towards oil that has been discovered, but yet to be developed and then to oil that has not even been discovered, let alone developed, like oil wells in very deep water. By 2035, according to the IEA, conventional sources would only represent about 19% of the world’s oil production. Very deep water oil is estimated by some to have low recovery rates, in the 5% to 15% range, and is both risky and very expensive to develop.

While there is increasing supply uncertainty, there is a growing demand for oil from China, India, Brazil and other developing nations. If the Chinese consumed as much oil as the average American, it would need all the crude oil the world currently produces. All nations face the same global problem of increasing oil demand with decreasing certainty of supply. The leaders of tomorrow’s world will be those nations that successfully made the transition from fossil based fuels to low CO2 sustainable fuels. The “Drill, Baby, Drill” scenario will not provide a sustainable energy future, nor one that is environmentally acceptable.

A different approach, “Repower America,” depends almost exclusively on the rapid deployment of renewable energy. Repower America is a response to climate change concerns. It, too, will not work in and of itself, since it calls for the restructuring of our whole energy system in just 10 years. To illustrate some of its impractical recommendations, Repower America would have solar thermal energy with storage increase by a factor of over 3,300 in this short ten year time period. Repower America assumes that more wind power could be produced in ten years than the American Wind Energy Association says would take 23 years, under optimistic conditions. While the development of renewable energy is a critical piece of the puzzle, it can only be a small piece — at least for the foreseeable future.

In between these extremes are studies by the National Academy of Sciences (NAS), the Department of Energy (DOE) and the Environmental Protection Agency (EPA), which might be thought of as “Business as Usual” approaches. Business as Usual analyses address incremental opportunities and challenges like increasing population levels, expected improvements in vehicular efficiencies, expected domestic petroleum production, etc. but avoid the extreme assumptions found in the “Drill Baby, Drill” and “Repower America” approaches. None of these reviews takes into account the need to simultaneously deal with the threats from insufficient liquid fuels and climate change in a practical, integrated, and timely manner.

For example, the EPA analysis of H.R. 2454, “The American Clean Energy and Security Act of 2009”, which was passed by the House in 2009 but is now largely thought to be dormant, showed virtually no change in petroleum use from today through 2050. In a comparatively short time the GHG emissions from burning the EPA projected levels of petroleum would then exceed the limits that would have been allowable under H.R. 2454. Thus, it would not solve either the climate change challenge or the energy security threat.

Another example: The 2010 EIA Annual Energy Outlook (AEO) report projected 9.11 million barrels of oil imported in 2035, only down a small percentage compared to import levels in 2009. GHG emissions were projected to increase by 16% between now and 2035. Moreover, the EIA 2010 AEO projection of a steady supply of oil is at odds with a world which faces increasing oil uncertainty at a time of rapid growth in oil demand. The scenario projected by the 2010 AEO would result in the worsening of our economy and exacerbate the serious challenges of climate change. Like other Business as Usual analyses, the EIA 2010 AEO projection simply underscores the need to act dramatically, comprehensively, and quickly.

A FRESH APPROACH

In order to deal with the magnitude of the coming energy crisis, this report recommends a different approach entirely to the problem. It was necessary to establish a set of goals, timetables, and plans, followed by a review of energy technologies and systems. The purpose of this approach to an implementation plan was to determine if the available and developing energy technologies could meet the established goals and timetables.

With respect to dependence on petroleum, this report recommends four goals:

1. Immunize the United States, by 2016, against a near-term recession triggered by the next zero margin oil situation;
2. Eliminate all U.S. petroleum imports by 2026;
3. Reduce U.S. petroleum use to 3 million barrels per day by 2036; and
4. Phase out all U.S. petroleum use by 2050

With respect to climate change, the report proposes two major goals:

1. Limit U.S. GHG emissions to 3000 million metric tons/year of CO2 equivalent by 2036; and
2. Re-evaluate and set new U.S. GHG emissions limits by considering the current state of technology and scientific advancements, in 2036.

The report examines numerous energy technologies, including conservation options, which could be utilized to meet the above energy goals. Many energy sources would have to be redirected towards their long term priority uses. For example, coal’s long term priority use is not in generating electricity but in producing liquid fuel, specifically methanol.

Building upon the analysis of available and developing technology, the report draws upon these various technologies to fit them into an implementation plan that would meet the national security and climate change goals and their timetables. This implementation plan includes both “no tech and low tech” ready solutions, in addition to advanced technologies. Actions like car pools, increased use of existing buses, better train schedules, and other steps were identified and their oil reduction potentials were calculated. Further, the role of coal in our energy mix would begin to change from producing electricity to supplying liquid fuel by capturing coal power plant CO2 and converting it to methanol. This use of CO2 turns an environmental liability into a national security asset. Excess natural gas power plant capacity would be used to replace coal generated electricity.

Each step along the way takes into account various studies that have evaluated how long it might take to develop certain industries, such as the production of tens of millions of plug-in hybrid vehicles and how quickly alternative fuels, such as ethanol and methanol, might be developed. In parallel with the technologies used at each step to reduce petroleum consumption, estimates are made of the associated GHG reductions.

A thorough analysis of the potential success of the initial implementation plan in meeting the established goals shows that it will fall materially short, an analysis presented at length in the report. In spite of all kinds of conservation actions like better home insulation, more use of public transportation, tens of millions of plug-in and hybrid vehicles, more energy storage, car pools, teleconferencing, converting decommissioned coal plants to make methanol, etc., additional action will be needed. This expansion focuses on the creation of a long lasting, affordable, low CO2 electric power system and the development of long lasting, affordable, and sufficient sources of low CO2 liquid fuels. The report details the steps required to meet the petroleum reduction and climate change objectives.

To illustrate, in a recent MIT study on natural gas, meeting long term GHG limits eventually means replacing natural gas electric power plants with low CO2 sources of electricity. The most promising way to do this is to build evolutionary nuclear power plants constructed in U.S. facilities, but with the low capital costs now available in South Korea and China. Where cost effective, renewable energy sources of electricity, including geothermal, should be part of the electricity mix.

With regard to sustainable low CO2 liquid fuels, converting biomass into ethanol deserves serious consideration, provided that it is agriculturally beneficial, does not complicate the GHG issue, avoids food/fuel conflicts, and is cost effective. This report describes an ethanol demonstration program that should be undertaken to prove that these criteria can be met. Methanol, which would be produced in large quantities by the conversion of CO2 effluent from former electricity producing coal plants, should be further expanded. Moreover, energy studies published by Columbia University have analyzed the use of nuclear energy to convert sea water into methanol. This has the potential to eliminate, worldwide, the need for petroleum with a near-zero CO2 release process. Advanced high temperature nuclear power plants, especially those that can utilize thorium or uranium, could be able to supply methanol from sea water for centuries.

NEED FOR DISCUSSION AND ACTION

The likelihood of severe disruption to our worldwide economy and climate is clear if we do not act quickly, boldly and comprehensively in dealing with the dependence on petroleum and CO2 emissions. It is hoped that this report’s new approach to addressing these issues will spark serious debate and lead to the kind of steps that must be taken.