Talkin Bout our Generation by Chris Trayhorn, Publisher of mThink Blue Book, May 15, 2006 Energy independence has been an increasingly popular goal in the United States. However, a goal without a plan is just a wish, said Antoine de Saint-Exupery. While there may be growing agreement that a plan is necessary, there is far less agreement regarding its contents. Meanwhile, U.S. energy demand continues to rise, driven almost exclusively by population growth. The problem of the future of the U.S. energy industry will not solve itself; it is currently exacerbating itself, with a little help from its friends. U.S. energy consumption has grown at a rate of approximately 1 percent per year over the past decade; approximately the same as the rate of population growth. Electric consumption has grown at a rate of approximately 2 percent per year over the period, or approximately twice the rate of population growth. U.S. population is expected to reach 300 million during 2006. Continued growth at the present rate would result in a population of approximately 450 million by 2050. If current energy consumption trends continue through 2050, energy consumption would be expected to increase by approximately 50 percent and electric consumption would be expected to approximately double. The substantial projected growth in U.S. energy consumption would occur against the backdrop of: a rapid global increase in energy consumption, driven primarily by the developing countries; constrained refinery capacity, combined with more complex requirements for refinery output; restrictions on exploration and production affecting approximately 40 percent of estimated U.S. domestic oil and gas resources; constrained energy transmission facilities and increased resistance to the construction of new transmission facilities; an aging electric-generating fleet, challenged by growing governmental pressure to increase efficiency and reduce emissions; increasing governmental and environmentalist pressure to expand the use of renewable forms of energy; and growing international pressure to reduce the emissions of greenhouse gases, primarily CO2. The impacts of these factors have been reflected in rising world oil prices; rising domestic natural gas and propane prices; hurricane-related supply, refinery and pipeline capacity shortages and resulting price spikes; and the shifting of some energyintensive production operations to overseas locations. Generation X Varying end uses compete for supplies of all types of energy in the U.S. economy. Oil is used to produce transportation fuels, as a chemical feedstock and, to a lesser degree, for residential, commercial and industrial heating. Natural gas and propane are used for residential, commercial and industrial space and water heating; process heating; as chemical feedstock; and increasingly (in the case of natural gas) as a power-generation fuel. Coal is used primarily as a power-generation fuel, although it is still used for some industrial process heating. Nuclear energy is used exclusively for power generation. Of the renewable energy sources, ethanol is used primarily as a gasoline additive; solar energy is used for space and water heating and for power generation; and wind, geothermal and hydro are used primarily for power generation. This competition for energy has had the greatest impact recently on the natural gas market, where growing demand for natural gas for electric power generation has increased prices, threatened supply shortages and raised wellhead and retail prices. The expanded use of coal as a power-generation fuel has met increasing resistance because of concerns about the resulting pollutant emissions and because coal has the highest carbon/hydrogen ratio of all fossil fuels, and thus makes the greatest contribution to the production of greenhouse gases. The continued use of coal as a generating fuel is being challenged in many older coal-fueled power plants, because of its lower efficiency and the general absence of pollution-control equipment to reduce the emissions of sulfur and nitrogen oxides. Over the past 10 years, the U.S. EPA has taken a far more aggressive posture regarding what constitutes a major overhaul of these older coal plants which would trigger New Source Performance Standards review of these plants. As a result, some power plant owners have elected to convert older generators to burn natural gas to reduce emissions, rather than installing expensive pollution control systems on these older power plants while others have continued to perform minimal maintenance and repair, rather than battle with the EPA regarding whether more extensive maintenance and repair should trigger New Source review. The development of integrated-gasifier combined-cycle coal generation offers the potential to dramatically reduce emissions from coal-fired power plants, but has relatively limited impact in reducing CO2 emissions. Research is continuing on approaches to capturing and permanently fixing the CO2 emitted by coal-fired and other fossil-fueled power plants, but none of these approaches has been demonstrated commercially. Most new electric power-generating facilities constructed in the United States in the past decade have been natural gas combinedcycle turbine generator plants. Their combination of higher efficiency and the lower carbon/ hydrogen ratio of the natural gas fuel results in a reduction of ~50 percent in CO2 emissions per unit of electric power generated. These plants are operated primarily during the summer months, when electric demand and consumption are highest. Therefore, the gas consumption required for the operation of these plants competes with the demand for natural gas to be pumped into storage to meet peak winter spaceheating demand. This increased demand for natural gas, combined with restrictions on natural gas exploration and production, has resulted in rapid and dramatic increases in natural gas prices for all end uses. Stalled Solutions Nuclear power generation currently provides approximately 20 percent of U.S. electricity. However, no new nuclear generation has been constructed in the nation in 25 years. There remains widespread concern about the possibility of a nuclear accident, as well as about the possibility of nuclear plant sabotage by terrorists resulting in a release of radioactive material from the plants. Several nuclear plants in the United States have reached their original design lives. Some have been retired, while others have been subjected to extensive life-extension projects to keep them in service. The U.S. Department of Energys failure to meet schedules for long-term storage of spent nuclear fuel rods is another issue facing many nuclear plant operators, which are reaching the limits of their ability to store spent fuel rods on site. Renewable sources including hydroelectric dams, geothermal steam plants, wind turbines and solar photovoltaic systems comprise the remainder of the current U.S. generating mix. The expansion of hydroelectric generation is limited by the small number of potential large generation sites and environmental resistance to the construction of new hydroelectric dams. There is also growing pressure from the environmental community to eliminate some existing hydroelectric facilities because of their impacts on fish migration and spawning, as well as other issues. Geothermal generation, particularly from dry hot rock, represents perhaps the largest and potentially most reliable source of renewable generation. However, the technology required to drill the required injection and recovery wells to the required depths is not currently in commercial use. Wind and solar generation are growing rapidly, but from a very small installed capacity base. Both are intermittent sources of power, which require conventional backup to avoid grid interruptions. Both wind and solar generation could be combined with energy storage technologies to deal with the intermittent nature of their output. However, the required storage technologies are also not in commercial service at this time. The daunting challenge facing the U.S. energy industry is to meet growing demand reliably and at reasonable prices in the face of diminishing supplies of fossil fuels worldwide, restricted domestic resource access, aging infrastructure, constrained transmission facilities, environmental pressure to reduce CO2 emissions, immature renewable generation technologies and resistance to the construction of new facilities. The challenges facing the transportation sector are even more daunting than for the other sectors, in that there is no established alternative to petroleum as a transportation fuel. Ethanol and bio-diesel cannot reasonably expand to replace petroleum. Hydrogen is not an energy source, but rather an energy carrier which must be separated from oxygen or other compounds using some other form of energy. Electricity has limited value as a transportation fuel in the absence of an order-of-magnitude improvement in battery storage technology. Potential Sources One existing technology which has the potential to meet much of the growing need for electric power is nuclear generation. Despite persistent safety concerns, nuclear electric generation has an excellent safety record in the United States, as well as in most of the rest of the world. Nuclear generation in the United States has a history of very high capital costs, largely resulting from construction delays and plant redesigns during the construction process. One U.S. nuclear generator was constructed and fueled, but was not permitted to begin commercial operation because of concerns regarding the evacuation plan in case of a nuclear emergency. While these issues were difficult and expensive to tolerate in a regulated utility rate-base environment, they would be absolutely intolerable in nonutility installations funded by private capital. The potential of nuclear energy to meet the growing energy needs of the nation will be severely limited if issues regarding power plant siting, environmental review and approval, construction permitting and operational licensing cannot be resolved in a timely, efficient and effective manner. Some combination of advanced power plant designs, design standardization, fast-track review and approval, and streamlined oversight will be necessary to allow nuclear generation to reach its potential. Another shorter-term approach to meeting growing U.S. energy and chemical feedstock needs is the increased importation of liquefied natural gas (LNG). Again, despite persistent safety concerns, the safety record of the LNG industry worldwide is excellent. However, like nuclear power plants, LNG terminals are faced with siting issues and environmental approvals. Also, increased reliance on LNG would require the construction of new pipeline facilities from the LNG receiving terminals to the markets to be served. These pipelines would be faced with the same siting and environmental hurdles as new power plants, new or expanded electric transmission facilities, the LNG terminals and other related energy facilities. One important factor which could further complicate the expansion of U.S. energy supplies is the imposition of carbon emissions limits which could result from U.S. adoption of the Kyoto Accords, or legislative imposition of emissions limits as proposed by Senators John McCain and Joe Lieberman. Both of these approaches require absolute reductions in carbon emissions, rather than per capita reductions, which impose far greater real reductions in emissions on a growing economy such as that of the United States. For example, lets look at the Kyoto Accords, which would have required the United States to reduce CO2 emissions 7 percent below 1990 emissions levels by 2012. Since the U.S. population is increasing at a rate of ~1 percent per year and is producing a corresponding increase in energy consumption, U.S. energy consumption and associated CO2 emissions will have increased by ~25 percent by 2012 compared to 1990, increasing the total required reduction in emissions to ~32 percent below what they otherwise would have been. This is an impressive reduction in itself. However, what is more important in understanding its significance is that a reduction of this scale is not achievable with improvements in the efficiency of existing coal-fired generation, or the adoption of the more efficient IGCC coalfueled design. It would be barely achievable in the transportation sector by replacing all existing gasoline-fueled vehicles with comparable hybrid vehicles. Finally, it is totally unachievable, beginning in 2006, without retiring billions of dollars in existing facilities and equipment before the end of their economically useful lives. The reduction targets set by the Kyoto Accords are only phase one of a multiphase effort to stabilize CO2 concentrations in the atmosphere at a level of ~450-550 parts per million. Ultimately, achieving this goal would require an approximate 95 percent reduction in U.S. per capita carbon emissions. A reduction of this scale is achievable, based on current commercially available technology, only with a virtually full-scale conversion to nucleargenerated electricity, including electrolytically generated hydrogen for all transportation requirements. This discussion leads to one overarching recommendation: Dont begin vast programs with half-vast ideas. Filed under: White Papers Tagged under: Utilities About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.