The blog postings that are posted prior to this date have been written earlier over a period of four years. Due to transfers from previous web-sites they have dates that don’t reflect their actual time of writing. Regardless of this I have decided to keep them as they are, since they contain observations and insights about the state of Global Energy Transformation that are still relevant.
In the previous posting I commented on the report of the Climate Commission (“Klimakommissionen”) that were appointed by the Danish Government in 2008. These eminent experts have been working for two years on their report that was published this week, and have, unfortunately, completely missed the important consequences of the decline in the global oil supply for economic growth. This decline is likely to start in the next few years and will be caused by the upcoming global peak in oil production, often referred to as “Peak Oil.” In its report this commission does not even mention the correlation between the global energy supply and economic growth, the reliance on oil in the global transportation sector, or the difficult situation the global economy will face when we no longer can look forward to a steady increase in the oil supply to fuel increased activity in our global production and transportation systems.
This lack of insight is not a only a Danish issue. We certainly have the same problem in Sweden, and in the EU as a whole, with even more detrimental consequences than in Denmark, the country in Europe that is now heading into a large scale development of electric car systems. Throughout the communication from the EU, climate change is quoted as the critical problem that needs to be dealt with in the next two decades, and the goal of transforming energy systems before 2050 as the Danish climate commission suggests is in line with EU goals.
A similar lack of insight permeates a large share of the US debate about energy. In the newsletter “American Interest,” the scholar Walter Russel Mead of Bard College writes an otherwise erudite and insightful column in polemic against the idea of making electric cars the centrepiece of US industrial development over the next decade. Mead argues, based on an analysis of historic economic development that the development of electric cars is not going to revive the US car industry or create a lead for the United States in the face of Chinese investments into technology development and implementation.
Due to the lack of insight into the consequences for an oil dependent society of a decline in the raw material (oil) that fuels global economic growth and that creates the platform for all other economic developments in our globalized economy, the argument of Mead becomes largely irrelevant. It is true, from a historical perspective, that the Chinese growth is a result of this country’s large scale investments in many different areas. The point that is completely missed by Mead is that electric cars is a growth area that will provide the American economy, and subsequently the global economy, with an oil-independent transportation system, that can gradually replace chunks of the US and global car and truck fleets as the oil supply is reduced.
Mead argues that the solutions and systems developed by the innovative company Better Place, with its CEO Shai Agassi do not offer the route forward for US economic development. Without the insight that a decline in the global oil supply, and the lack of a replacement for oil that will soon be available on a large scale will cause a decline in global economic growth if we don’t plan and manage the Global Energy Transformation so that we gradually reduce our dependence on oil and implement renewable energy sources in the areas where these can make the largest impact on future economic growth. When we take into account the risks of a declining global oil supply we realize that the SMART grid systems and the electric car electronic applications of the Better Place offerings are probably the most promising and necessary technologies that are in development on this planet at present.
Sorry, Mr. Mead, this isn’t perhaps primarily about the cars in themselves, or about the American middle class – it is about the development of renewable energy systems, new vehicle technologies, ICT, smart grid technologies, and a host of other technologies that put together into the systems of Better Place can offer the global economy an alternative to fossil fuels that will soon be in decline. Sorry, Mr. Mead, the US will not have the opportunity to decrease the gas prices to even lower future levels, because of the upcoming event of “Peak Oil” and the ensuing decline in the global oil supply.
Incidentally, Denmark is one of the pilot markets of Better Place and Denmark is perhaps the country that, since the 1970’s, has taken the most insightful strategic route forward into the area of renewable energy, and that is pursuing this development even further as they focus on the large scale implementation of electric car systems, partnering with Better Place to drive this development forward. In this respect Denmark is clearly ahead of the rest of the EU, and the rest of the world. With the added insight that the global economy will not have the amounts of oil that we need in order to drive economic growth into the future, Denmark may want to speed up its implementation of electric car systems even further. For most of the rest of the world this insight will create the need for a dramatic change in direction of economic development.
The company Better Place is, based on a well defined strategy and action plan, building a transportation system of the future. This company is setting its sights on becoming one of the leading service providers in the electric car industry of the future. With generous funding from visionary risk capitalists and a global financial institution Better Place will not replicate any success formula from the existing car or transportation industries, instead it is looking to become a provider of car transportation miles for consumers and large car transportation companies.
With electric car and battery technologies in their infancy Better Place has identified some of the key hurdles that need to be overcome in order to achieve large scale transformation of personal transportation. The customer will buy its own electric cars, and Better Place will provide batteries as part of a subscription for mileage for the car and Better Place will provide re-charging services via strategically located charging posts at home and at work, in combination with battery-switching stations along major roads for longer trips.
While most of us have an exceedingly vague picture of the future structure and components of the transportation systems of the future, the success of Better Place will be built around a well crafted strategy for the overall expansion of electric car transportation. This in its turn is built on a deep understanding of the function of the various components of an electric car network. This strategy identifies the key success factors of a large scale launch of an electric car system, and the company has developed its overall strategy based on a strategy for each of the key components.
Even the focus markets of the launch have been carefully identified. One of them is Denmark, the country in the world with the highest taxes and fees on the purchase and ownership of fossil fuel cars. In order to facilitate the rapid penetration of fossil free transportation systems, the Danish government, adopting a visionary method for business development on a national level that since the 1970’s has taken Denmark to the global forefront in wind turbine technology, has made electric car purchases tax-free until 2015. This will provide a basis for the penetration of electric cars in the Danish market, which will grow vehicle and battery volumes and concept and systems development to a level where electric car systems will become competitive and possible to launch into markets that do not have the unique tax advantages for electric cars shown by Denmark. With head-quarters in innovation-friendly Palo Alto, California, Better Place is focusing on other markets with unique launch and early growth potential, such as Israel and Australia.
With experiences from the wind turbine industry, where companies located in companies with wind-power friendly governments, and systems for supporting this technology, such as Denmark and Spain, other countries need to expect that the countries that focus on electric cars at an early stage, and the companies that grow strong based on the policies of these strategically aware governments will become more than transitory phenomena in the global markets for clean technology. Instead, countries without well developed strategies to support clean technologies may permanently fall by the wayside and become faced with the difficult task of catching up to compete against the strong and well established global competitors that are now entering the market in these countries.
A debate is on-going in the New York Times about the future of energy in the US. Bill Gates wrote one article that focused on the need to increase the spending on energy technology research. This article was followed by a reply written by Richard Rosen, a senior fellow of the Tellus Institute in Boston. Rosen argues that research into new energy technology is not likely to create substantially more cost effective energy technologies, to a large extent due to the large volumes of research that has already gone into energy technologies. Also, nuclear power, for instance, is not as inexpensive as many proponents believe. Regardless of this, Rosen argues that we need to increase investment in energy research, but also for the foreseeable future make the most of existing renewable energy technologies, whether it be wind or solar, to secure our need for new energy over the short term.
In my view we need to develop a strategy and a plan both for the short and long term that combines increased research into renewable energy technologies, energy saving technologies, and their implementation in various areas. We need national strategies, but we also need to understand that renewable energy technologies will not be able to be implemented and utilized as stand-alone inventions. These technologies need to become integrated into customer focused business offerings, that combine technologies, applications and a business concept. This needs to be done by systems integrators, similar to the ones that now operate in, for example, telecom industries, retail industries, and many other industries that provide a packaged offering to customers and end-users.
So far very little work has been done on the developing of frameworks for national energy strategies and on the development of concepts for systems integrators. The Global Energy Transformation Institute is one of the few organizations in the global arena that actively develop competence and debate these areas.
I only yesterday saw that Al Gore has published a new book: “Our Choice”, with the subtitle “A Plan to Solve the Climate Crisis”. How exciting that the former Vice President, and Nobel Prize winner, has written a book with a subtitle that eerily rings of the ideas promoted on this web-site and in my own book “Global Energy Transformation”. I cannot wait to read it to see which concept of a plan Al Gore is presenting.
It is also exciting to think about the possible activities that may follow a declaration by such a prominent person, that our choice in the case of energy systems transformation is some sort of a plan. This may open up for a more structured approach to the transformation issue than the current one.
As I said, I cannot wait until I get my hands on this new book. Even though I only have a vague idea about the content, it sure looks promising!!!
The energy efficient solutions of the future need to be built on the basis of an overall picture of how energy efficiency will or can be created in the total system of society.
There has to be overall assumptions about the volumes of goods and people that will need to be transported in the production systems and for leisure in the future. There hass to be assumptions about the role of the cities, their level of self-sufficiency and the role of the countryside, and the location of industry, and administrative functions. The assumption put forward in Global Energy Transformation is that many things will need to change rather dramatically, because we will not have enough energy to maintain current systems in the form that we see them at present. This is due to the global peak in oil production (Peak Oil) that is imminent.
Based on a few overall scenarios, we can model the transportation systems of the future. We need systems for intercontinental transportation of goods and people, based on energy efficient means of transportation, and we need similar systems for medium range (within countries and continents) and local and regional transportation. Again, we need to model these systems on estimates of future transportation volumes.
Once we have developed realistic visions of future logistics, we can discuss the different systems. Clearly, there are differences between countries that force us to use different solutions. In the United States there is a need for connections between a number of very large metropolitan areas, with relatively little people in-between. In Europe, the population is more evenly spread out, but there are significant metropolitan areas that need efficient connections between them. In a country like Sweden, we have a few medium sized centers, with a number of smaller nodes between them.
We know that in order to maintain systems that are similar to the ones that we have, we will have to develop very large amounts of renewable energy very rapidly. We can start to calculate the amounts and the volumes of raw materials or solar energy that we will need. We may be able to reduce the amount of energy needed, if we aim to change production and transportation structures. We can calculate the energy need within different future systems, based on different assumptions of the future.
One thing we can also be certain of is that a future situation will appear, regardless of what we do, but in order to create a future that we want, we need to manage the process of transformation. If we want to create new transportation systems, we cannot only focus on transportation technology and systems, we need to understand the context within which transportation functions, and model transportation solutions based on expected changes in the overall system.
This argument is developed in more detail in “Global Energy Transformation”:
In his new book “Our Choice” former vice President and Nobel Prize Winner Al Gore outlines the opportunities of energy systems transformation. The book starts out where the previous book “An Inconvenient Truth” ended. The book provides extensive discussions of many of the most important technological opportunities for the development of renewable fuels and energy sources for electricity, such as wind, solar energy, nuclear and bio-fuels. Yes, there are clearly an abundance of opportunities, and yes, we need the political will to develop and implement the necessary new technologies. “Our Choice” provides a necessary and enthusiastic account of the activities that we need to initiate, and the business opportunities that these seem to offer.
Al Gore also touches upon the subject of Peak Oil and the impending price increases for petroleum products, but he does not analyze the implications of Peak Oil for our need to reduce our use of fossil fuels. A reduced supply of oil will reduce the use of oil, and there are also problems related to increasing the use of other fossil fuels, such as coal and natural gas, as Richard Heinberg and Julian Darley have argued.
“Our Choice” is mainly about technology, and it focuses on the opportunities. In it Al Gore mentions that it will, in many ways, be a difficult and demanding process to transform energy systems on a large scale, but he does not go into the forms of management, the organization, or the financing opportunities in any detail. Throughout the book he is curiously quiet about the meaning of the word “plan” that is spelled out in the subtitle.
He makes it clear that the government of the United States has a role in the transformation, and he expresses hope that the President, Barack Obama, in 2009, will take strong action to solve the climate crisis. Al Gore also describes the role that “Information” can play in the transformation, but he does not say anything of the greater managerial context that will become necessary in order for the suggested uses of information to make sense.
To summarize, Al Gore focuses on the good news. Yes, it is possible to transform energy systems on a large scale, yes, there are promising new technologies, yes, we need to change the ways that we think about energy and the ways that we use it. “Our Choice” is less explicit on the exact nature of the management challenge, the roles that need to be played by the government, business leaders, and the need of billions in investment into research, technology development and implementation. As only one example we may look at “The Nuclear Option”, which is seems to be increasingly favored even by environmentalists. In his book “Is War Necessary for Economic Growth”, the late Professor Vernon W. Ruttan of University of Minnesota argues that nuclear technology had probably not been developed at all in the absence of large scale and long term government investment in technology development. While new generations of nuclear fission technology, and nuclear fusion, are options for the future, very large research and implementation programs will become necessary in order to develop those. In addition, it takes ten years to build a new nuclear power plant, using the technologies that are already available to us, and we may need very many new plants in the near future.
Al Gore leaves the task of analyzing the management challenges of energy systems transformation to other authors. Fortunately, “Global Energy Transformation” is already available to complement “Our Choice” in this respect. In the very near future a new book will be available from Global Energy Transformation Institute, which describes the softer leadership skills that the leaders in the challenge need to possess, in order to drive transformation in our society of highly specialized individuals and organizations. “Our Choice” needs to be read by many, but we must not stop here and think that Al Gore presents the solution, or a plan. In that sense “Our Choice” is not the last word on the issue of planning in the energy transformation process. Neither is it a book about planning and management of this process. Nonetheless, it is a very important book about the technology solutions that are available to us, and some of the obstacles to change that our society presents.
The role of the government has historically been important in technology development in market economies. Planned activities have taken many forms and complemented market based development:
Project management: As in the case of NASA for the space program and the War Production Board for the transformation of US industry during the Second World War. Adds precision and cost efficiency, some would argue. Certainly adds focus, which is a pre-requisite for precision.
Direct investment into R&D: Basic research at universities and applied R&D for particular applications needed in space or by the military.
Investment support: Loans on advantageous terms have sometimes been provided to facilitate large scale implementation of new technologies.
Early customer of new technologies and applications: In Europe publicly owned companies in telecom and utilities have been early customers willing to take some risk on new promising technologies.
Taxes: Polluting technologies have, for example, been taxed in order to speed up replacement by sustainable alternatives.
Subsidies: Clean technologies have sometimes been subsidized for the same purpose.
Laws: Old technologies and polluting technologies have been banned, as in the case of mercury, which by the 1st of June is banned in dentistry in Sweden.
In order to speed up the transformation of the transportation sector and facilitate the large scale use of sustainable technologies, governments need to apply several of the above. Certain amounts of project management will be necessary in order to make large scale investments by companies possible. Decisions about which fuels and technologies to use will be necessary, the setting of goals and the monitoring of progress is also likely to be unavoidable.
Direct investment in basic R&D at universities is done all the time. These investments will have to become more focused on fewer alternatives. In order to rapidly scale up production of new fuels (we use 83 million barrels of oil per day, globally/1000 barrels per second) we will need to make huge investments in the large scale production units for renewable fuels, or photovoltaic units, or electricity production, which is likely to require loans on advantageous terms.
Public sector organizations and the military may function as large early customers for the new technologies.
Taxes on petroleum based fuels may have to increase and subsidies of new technologies, such as bio fuel cars and trucks and hybrids may have to be put in place.
Laws, at some point I guess it will become possible or necessary to make some technologies or practices illegal.
The transformation of the transportation sector on a large scale is a too large and complex endeavor to be handled by the market on its own. The opportunities for new business growth in this sector are large and we will harvest the fruits of the present efforts if we speed up development.