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With Great Power Comes Great Energy

An excerpt from "Stay the Course: Lessons through Marketing, Business and Environmental Briefs".

Many centuries ago, fossil fuels were known as the “clean” alternative to wood burning. This quickly changed when wood became more expensive than fossil fuels. The United States consumes these limited resources in abundant amounts and eventually they will be scarcer than its renewable alternatives such as solar, wind, hydroelectric, or biomass-generated power. These clean-energy technologies use the sun, wind, water, and plant matter to produce electricity, heat, and transportation fuel which raises an interesting, economical question.: with fossil fuel usage continuing and the costs of converting to more renewable sources high, should we just let supply and demand take over and wait it out?

Allow me to lay out some of the data. 68% of the United States’ power production is produced from petroleum-based products, otherwise known as fossil fuels. The majority of transportation methods in the United States such as automobiles, trains, or planes would become extremely difficult to operate if fossil fuel production ceased. The infrastructure is not in place today to convert these fossil fuel dependent technologies at a quickened pace. In addition, the next largest power production technology in the U.S. is nuclear at 20% of total production. By 2035, 90% of Saudi Arabia’s oil and gas exports will be to Asia and the United States will be importing zero. Largely this shift will be due to shale extraction technology throughout the United States and Britain. This shale revolution has the potential to provide us with about 250 years’ worth of gas supplies. Given the sound logic of using a cost-to-benefit analysis may prove that investing into more cost prohibitive technologies (renewables) will not be worth doing at this time and it may actually be better to use up the supply. After supply is consumed, then a switch to the renewable energy resources would become less cost prohibitive. 

Just like most decisions, there are externalities to riding fossil fuels to their extinction. Four environment-eroding byproducts exist: air pollution, environmental pollution, global warming, and oil dependence. Some of these byproducts include social costs that are not measurable and some which may measurable. As examined, many citizens have to accept externalities to producing goods and services which cannot be cleansed out of our environments. 

My hypothetical question remains: should we deplete these resources until they are extinct and let the market take care of the rest? Will the alternative power sources now become more economical due to increased demand?  Developing a plan that reduces pollution is not difficult, but it is hard to come up with a plan that will minimize the economic costs and the opportunity costs. If we use the entire world’s oil, we will never be able to use a petroleum-based product again. However, by the estimates given, it may be several hundred years till that is true. 

Given that our power needs are continuously growing, what are our solutions? Nuclear power has recently gained global steam (pardon the pun) due to its low greenhouse gas emissions (lower global warming fears) and readiness of its technology. Nuclear risks and accidents are the biggest hurdle to overcome using this technology regularly (anyone remember Three Mile Island or Chernobyl?). From an emissions standpoint, nuclear is safe, however its radioactive waste would have to be disposed of somewhere and no United States citizens wants it in their backyards (that dreaded externality again). 

What about using hydro-electric, geothermal, solar, or wind-powered solutions? These are all sustainable and, in some cases, renewable. Should we invest now into these future technologies to slow down these irreversible consumption trends? In some cases, the ROI in investing into new technologies makes sense when you factor in subsidies and tax credits. As an example, with federal tax rebates in place, geothermal is an energy technology worth investing in, at least up until the federal tax credits becoming unavailable. There are additional tax incentives for solar as well. If these federally funded incentives disappear, will the United States go back to their old ways? 

I believe the answer to whether the U.S. should continue its consumption of fossil fuels to be no. Given our history, the United States should continue to strive to be the pioneer for new technologies. My recommendation would be to continue to encourage investments into these new sources of energy as economically possible because there is nothing “automatic” about innovation. Innovation does help to make our lives easier but many research dollars, hours, and sweat equity are put into projects which have spurred innovation. Since the beginning of time, man has constantly been innovating for new. Think of the wheel, the industrial revolution or the new IoT (Internet of Things) gadgets in our homes today. Rome wasn’t built in a day and neither will the infrastructure necessary to transform fossil fuel usage.

I believe it was Peter Parker (Spiderman’s) Uncle Ben that said, “With great power comes great responsibility.” Is this power something that the U.S. is prepared for?

From an economic perspective, we should wait out the usage of fossil fuels. From an environmental and sustainability perspective, we should slow down fossil fuel consumption, invest into renewable technologies, and ensure that we are paying adequate attention to the social, opportunity, and economic costs. 

For our economy to move into the future, energy sustainability will have to be driven by a combination of big business, government (federal, state and local) and citizen buy-in. Innovations such as smart buildings, smart appliances, and big data will ultimately lead to more sustainable lifestyles because of the integration of these electronics into our everyday living and how it affects the way we live, work, and play.  

 

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Thank Ryan for the Post!

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