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Spectrum of views on energy converge in future, but urgency needed now

November 30, 2018
Precourt Institute

By Mark Golden

Leaders in the energy sector with diverse perspectives share a common view of the future of energy. They also know that success in creating that future requires greater urgency now.

Decision-makers from oil companies, renewable energy companies, utilities, financial institutions, government and academia made that clear at Stanford University’s recent Global Energy Forum. This shared vision of energy’s transition includes electrification of transportation, decarbonization of energy systems at low cost, meeting demand for energy in developing economies sustainably while beating fossil fuels on price, and a tax on greenhouse gas emissions in rich countries.

This complex, costly and comprehensive undertaking will take decades to accomplish, requiring passionate resolve today to avoid devastating changes to the Earth’s environment, participants in the Global Energy Forum agreed.

Bill Gates and Arun Majumdar talking on stage, seated
Bill Gates and Arun Majumdar (Image credit: Dawn Harmer)

Bill Gates, philanthropist and chair of the Breakthrough Energy Coalition, warned that the people who will suffer the most from climate change are subsistence farmers in Africa. “They're going from having one out of 12 years where their harvest fails to the point where it's one out of four years,” Gates said at the meeting, “and that leads to severe malnutrition and starvation.”

To stay below a 2-degree Celsius temperature increase, beyond which the damage to the environment would be catastrophic, “we have 20 years left,” said Arun Majumdar, co-director of Stanford Energy’s Precourt Institute for Energy, which organized the conference. “In the words of Rev. Martin Luther King,” said Majumdar, “we need to innovate with the fierce urgency of now.”

To keep the Earth from warming more than 1.5 degrees C—still a considerable amount of damage—the global budget for emissions will be exhausted in 13 years, explained Chris Field, director of the Stanford Woods Institute for the Environment. “I hope this is compelling motivation for finding the accelerator pedal on the work that all of you are doing to drive an energy transition,” Field exhorted.

For the United States, some problems are already here. Sen. Lisa Murkowski, who chairs the Senate Energy Committee, said that people in her state of Alaska do not talk about climate change in the abstract, because they’re living it. “I see what is happening in these communities that are experiencing coastal erosion, where their water and sewer infrastructure is threatened, and their water supply is threatened,” said Murkowski, adding that fishers must face higher costs and physical danger to feed their villages.

Electrification of transportation

The good news is that energy thought leaders have a pretty good idea where the energy sector needs to be in 20 years, and one key transition—electrification of transportation—is well under way. The growth of electric vehicles is happening much more quickly than expected, forum speakers said, and several of the startups in the forum's Innovation Showcase are hastening the transition.

Oil sector forecasts for EV sales predict modest growth, but the forecasters—like OPEC—have raised their forecasts repeatedly, said Alistair Bishop, director and portfolio manager at BlackRock, a multinational investment management firm.

“Electric vehicles will be broadly cost-competitive with internal combustion engines by the middle of the next decade,” said Bishop. “At that point consumers will have an economic alternative to a gasoline vehicle that has zero emissions at the point of use, lower running costs and improved performance. That to me doesn’t sound like a niche technology.”

Autonomous vehicle technology will accelerate demand for EVs, several speakers said. General Motors’ new vision of “zero crashes, zero emissions and zero congestion” reflects its commitment to electrification, as well as to evolving autonomy and car communication technologies. “We can deliver that over time. It’s what our customers are looking for,” said GM’s Mike Abelson, vice president of EV charging and infrastructure development.

The problem with EVs and sustainability, though, is that the cars rely on electricity that in most countries is still generated primarily by fossil fuels, especially coal.

“I’ve driven electric vehicles for a decade, and I’m a big fan,” said Patricia Poppe, CEO of CMS Energy and its principal subsidiary, Consumers Energy, the largest utility in Michigan. “But let’s have zero-emission vehicles fueled by zero-emission power. That’s the ideal.”

Big challenge of decarbonizing

Transitioning to sustainable energy sources in the electricity sector will be a challenge, and it is just one piece of the decarbonization puzzle. Significant segments of transportation—like airplanes, ships and trains—may never be electrified. Manufacturing, heating, cooling and agriculture meanwhile emit significant greenhouse gases.

“Electricity is just 25 percent of greenhouse gas emissions,” said Gates. “There is no substitute for how the industrial economy runs today.” (Read more on Gates’ talk here.)

The forum consensus: Despite cheap solar and wind power and rapidly declining battery costs for cars and homes, many technological and scientific breakthroughs are needed to decarbonize existing energy systems affordably. For existing energy companies, whether utilities or oil and gas producers, implementing the breakthroughs is a tough balancing act.

“We’re trying to get to a decarbonized end state,” said Anne Pramaggiore, CEO of Exelon Corp.’s utilities division, which has approximately 22 million U.S. electricity and gas customers. “You want to get there as cheaply, as quickly and with the least disruption as possible,” she said. “The largest economy in the world runs on the power grid. We’ve got to be able to innovate while we keep the system we’ve got running.”

Andrew Swiger, ExxonMobil’s principal financial officer, echoed that tension.

“It's fundamentally a dual challenge to provide the energy a growing society needs while addressing the risk of climate change,” said Swiger, “and in addressing that challenge, we see the role of technology as being absolutely key. We’re looking for breakthrough technologies.”

Brian Moynihan and Sally Benson talking on stage, seated
Brian Moynihan and Sally Benson (Image credit: Dawn Harmer)

Analyzing options will be key to successfully managing an increasingly complex energy system, said Sally Benson, who directs the Precourt Institute with Majumdar and is a professor of energy resources engineering. For example, a study of three options for California getting to 100 percent clean electricity by 2045, found that “using out-of-state wind generation, carbon capture and storage, and bioenergy plus CCS are actually much less expensive than the all-renewables option,” she said.

Importance of policies

Better policies in the private and public sector would accelerate the commercialization of any breakthroughs.

Benson asked Brian Moynihan, chair and CEO of Bank of America, how his bank works with companies that produce fossil fuels, especially given the bank’s $125-billion environmental business initiative.

“When we talk with energy companies, we say, ‘Show us the way you’re going to make progress,’” Moynihan answered. “And if they’re willing to do that, I think they should be supported, because that then gets the energy behind making change happen.”

Public policies, meanwhile would benefit from more coherent global or at least regional policies, several speakers said.

Former U.S. Secretary of State Condoleezza Rice, now a professor in Stanford’s Graduate School of Business, complemented the Paris Agreement of 2015 for creating realistic targets, unlike the Kyoto Protocol of 1992. Peter MacKay, partner at law firm Baker McKenzie and former Canadian cabinet minister, and Jamie Parada, the director general of Mexico’s Institute of Innovation & Technology Transfer, advocated for common North American emission standards and an integrated electric grid.

“It’s an engineering, science, policy and technology mix that will take our energy industry to a better future for us and for our children,” said Nobel physicist and former U.S. Secretary of Energy Steven Chu, now a Stanford professor.

Sen. .
Bloom Energy's Josh Richman, Sen. Lisa Murkowski and Arun Majumdar during the
reception at the end of day one. (Image credit: Rod Searcey)

Forum speakers who advocated for the United States putting a price on greenhouse gas emissions—generally discussed as a carbon tax—ranged from Gates and Swiger to California Gov. Jerry Brown and Thad Hill, CEO of Calpine Corp.

“We need to have an economy-wide, national cost of carbon,” said Hill. “All the one-off mandates that are out there—whether it’s renewable portfolio standards or investment tax credits (solar) or production tax credits (wind power) or other things—need to be cleared out.”

Hill, Brown and others admitted that such a U.S. tax would be hard to enact today. Instead, the governor carried out the state’s cap-and-trade carbon market started by Gov. Arnold Schwarzenegger.

“People don’t like taxes, but that's the way to go.” Brown said. “The most important thing is putting the burden on carbon, so it's true cost is recognized and put into the price you have to pay.”

Developing economies

While all developed economies that have not done so already should put a price on emissions, developing economies should not have to pay such a tax, several speakers said.

“In India, are you really taxing those poor people who are just getting air conditioning for the first time? Wow! I want to meet that politician,” said Gates. To applause, he added: “Africa should not be constrained. They should do whatever it takes to reduce malnutrition and starvation.”

GEF participants talk with entrepreneurs at the Innovation Showcase.
GEF participants talk with entrepreneurs at the Innovation Showcase. (Image credit: Rod
Searcey)

Advanced economies, in addition to reducing their own emissions, have a responsibility to invent sustainable energy technologies that are cheaper than coal, gas and oil. The energy division of the Japanese conglomerate SoftBank Group is developing renewable energy projects in countries that have a lot of coal and natural gas, like India and Saudi Arabia. According to the division’s chief operating officer, Abhijeet Sathe, SoftBank Energy is usually told by officials that to sell its projects’ output it must beat the variable cost of coal- and gas-fired plants that run 24 hours a day.

“In most of these places, an electron is an electron,” said Sathe. It is “a tough conversation for us to come in as a renewable energy company, but I think we’re just going to have take this head on and beat that price.”

Energy sector leaders know what needs to be done. Bloom Energy’s CEO, KR Sridhar, described his company’s “extremely aspirational” goal: "Our mission is to bring clean, reliable power that's affordable to everybody on the planet.”

The sense of the forum was that this was the goal of all participants, however daunting. “It's going to take every conceivable market, regulatory, investment, R&D, public and private effort,” said Gov. Brown. “It's almost like—I don't want to say war footing—but it takes some of that heroism to deal with climate change.”

The energy transition must ensure three types of security—economic, international and environmental—to work, said Majumdar, who is a professor of mechanical engineering. “If we could achieve this vision that would be transformational for all of humanity,” he said. “It would be nothing short of a new Industrial Revolution.”