The Peculiar Disorder of Energy and Environment

Across the globe the race has started. Instead of one whose outcome will be judged by who lands on the moon or proliferates nuclear weaponry first, this race is more peaceful, but just as political and significant as our past technological missions. With a burgeoning population of 6.5 billion people and a global economy that seeks to grow, demand for energy, material and natural resources are at an all time high. We are now seeing price signals in the marketplace that tell us that constraints to our growth include the availability, reliability and dependability of energy and natural resources like water. In 2007 the price per barrel of oil exceeded $100 for the first time in history. Reports of global energy demand brought on by growth in China and Asia Pacific indicated energy demand was higher than supply. In addition the political environment of 2001-2008 marked a shift in debate about global climate change and how humans should think about their carbon footprint. While no particular tipping point can be referenced, a sandwich of influences has been made by government, industry, non government organizations (NGOs), trade associations, intergovernmental coalitions and consumers.

The Peculiar Disorder of Energy and Environment
This is a tale of tragedy, coming of age, adventure and love. A century from now the story of energy and environment might just be the great American story. For now it begins like this…Energy and environment don’t get along. They have been at odds with one another since the moment oil came bubbling out of the ground and someone discovered that black gold could produce energy; lots of energy. Energy and environment have quite a peculiar relationship. One might call it a disorder. Like illnesses that don’t go away, even with the right treatment, rest and care; the energy and environment disorder has plagued global politics, domestic environmental policy, and philosophic debate on environmental economics for greater than a century. This debate began to hum in the late 1960s and early 1970s, subsided some in the early 1980s but is again a hot button corporate and government policy issue on the minds of all Americans and President-elect Barack Obama as he positions himself on the world stage.

Three Decades of Regret
I once heard a senior executive for a prominent State Energy Office tell an audience of college students in Upstate New York that when he got into the energy business in the early 1970s he was full of optimism and focus. His intent he said, was “to dedicate a career in transforming how industry, businesses, government and consumers perceive and use energy in the US”. Thirty years later, with a tone of regret and humbled defeat this senior leader issued a word of caution to his audience, “don’t listen to conventional wisdom…seek out answers to the complex energy and environmental challenges of the day…and find ways to work together”.

The career state energy leader noted that his thirty year career began with a desire to develop new energy technologies, reduce energy demand, promote energy efficiency and deploy renewable energy technologies on a broad scale. Reflecting that the amount of renewable generation in the US continues to be marginal, that the fuel economy of vehicles has stayed roughly the same and other trends in how we use electricity to the size of our homes and increasing energy demand, the senior state energy leader admitted that he had wished his career would have had more of an impact.

The story about the state energy leader is a mirror image for many within industry and government over the past 30 years. I occasionally hear similar sentiments from senior managers at large electric utilities, big chemical, oil and automotive companies. In each case their reflection of the past is rich with reasons why not more change has occurred, but one can tell in listening to them, a new urgency to make good on the last five years of their professional careers, or desire to launch new careers in “retirement” that take advantage of new opportunities for advancing alternative and renewable energy.

At Least We Know Our Devil by Name
In December 2008 Bruce Piasecki, president and founder of AHC Group, Inc., and author of World Inc., corresponded with a former Senior Vice President of External Affairs for a well known oil and gas giant. This oil and gas executive was also a past participant in the AHC Group’s leader-to-leader benchmarking exchange known as the Corporate Affiliate Program. After a brief discussion on recent happenings on the economy and politics, Bruce Piasecki and this retired corporate energy leader found themselves reflecting on the Peculiar Disorder of Energy and Environment. Over the past thirty years, and in the context of looking forward toward new energy challenges and opportunities in this time of what seems to be a geo-transformational shift in how we perceive and use energy, the former oil and gas SVP noted:

“Over the past couple of weeks, I have read a number of articles and comments which seemed to have fully described the history of energy/environmental efforts…there seems to be little question that the media and activists are searching for the energy/environmental holy grail and that there have been many false starts over the past 40 years…Each addition to the energy mix brings its own set of problems and attributes…

- Methanol was thought by GW Bush to be the solution, but we learned that the consequences of its use were unacceptable. MTBE had the same consequences.

- Ethanol was to be the great salvation to the environment, farmers and consumers but we now learn that the consequences of its use are far more damaging than originally advertised.

- Solar was to be a major contributor to the energy mix but it is now reported that the cleaning solution used to cleanse the panels (and chips) is worse than the nation’s largest coal fired power plant.

- Boone insists that wind is the real solution but we cannot store its product and the visual pollution (see Palm Springs) is awful, and on occasion, the wind does not blow. Importantly, wind is thought to exist where people do not reside and the transmission facilities that are required to move Boone’s products to market will cost billions.

- GM is promoting its Volt which they contend will travel at least 40 miles before it uses a hydrocarbon. And, it requires several hours to recharge. Good for the power companies that can keep their alternative fuel power plants operating all night.

- The Hybrids are a very good development but their cost precludes most consumers from making the shift.

- Natural gas vehicles are great fleet vehicles, since they can be returned to the company base each night so that they can be refilled.

..All of the above are honest attempts to move the world away from hydrocarbons to another energy source. In the meantime, activists would cause the world to discontinue its search for more oil, gas and coal and to discontinue the use. As the economy improves, we will again need major additions to our power sources, yet opposition to new coal fired facilities continue to mount. And we have difficulty determining how many wind turbines or solar panels that we will need to construct to substitute for one new coal fired plant.

My primary concern is the need to accurately evaluate what level of energy that the world will require for the next 25 or so years and then determine the sources of energy that will provide that requirement. The US has 250 million or more existing vehicles that will not be converted to any other energy source. Likewise, many cities and businesses will need increased power, on a consistent basis. If we are to discontinue our use of the energy sources on which we have relied in the past, what will we use? If we inhibit the search for historic sources, what will be the consequences if the alternatives that are being discussed do not fill the gap? We know that extended periods of time are required to find and bring to market the historic sources. Once we make the decision to block this search, we will have set in motion the imperative development of substitutes that are not proven to be sufficient. And, the consequences of the use of the replacement of what we now use with the yet to be determined substitute(s), could prove more harmful than the devil that we know."

The former oil and gas SVP’s comments mirror those of the senior state energy official I began with. We are no closer today, than we were thirty years ago, to settling this Peculiar Disorder of Energy and Environment. The oil and gas SVP also artfully points out, that today we know our devil.

Our devil is destructive, powerful and potentially chaotic. But our devil is known. A knee jerk reaction to financial markets and to the ongoing Peculiar Disorder of Energy and Environment by way of an energy strategy that is not fully thought through, may result in us having a new devil, one more deceitful, damaging and devious that the devil we’ve grown up with. As the oil and gas SVP stated, “…we need to accurately evaluate what level of energy that the world will require for the next 25 or so years and then determine the sources of energy that will provide that requirement”. You sense from this past senior leader for a major energy company the tragedy involved with energy and environment.

The world’s population is growing; energy demand is growing; demand for consumer electronics, better healthcare, better transportation and entertainment are all growing. The world’s population will be demanding more energy in the next 25 years, and as the retired oil and gas SVP points out, there are clear limitations to many of our alternative and renewable energy resources. It is not that the limitations cannot be overcome in 25 years. They can with balanced research, technology development and innovation across all segments of the energy value stream. But new devils lurk behind the promise of renewable energy. While we may treat one environmental challenge (e.g., air quality and carbon emissions) we may be creating a generation of new issues (e.g., water contamination, increased hazardous waste stockpiling, land degradation or unknown human health and safety impacts via the use of uncharacterized chemicals).

Did Our Devil Sell Us Fool’s Gold?
So, has our devil been selling us fool’s gold for all these years? Amidst all of the coming to age debates on energy and environment it seems something has changed, at least in developed countries. Price signals in 2007 triggered a global decrease in demand for petroleum fuel. Conservation and energy efficiency are becoming sexy, yet again. A proliferation in new technology based energy companies is trying to stay alive in a rising sea of financial turmoil. And government is putting money where its mouth is on renewable energy and infrastructure.

In 25 years from now it will be interesting to see if the Peculiar Disorder of Energy and Environment has resolved itself, or if the intelligent questions raised in 1970, 1980, 1990 and today are the same we ask ourselves then. Where do we get our energy from? How do we fill the energy demand and supply gap? Is clean energy and a cleaner environment an oxymoron or can we employ cleaner production methods toward new energy manufacturing to eliminate unforeseeable impacts to human health and environment? Let us hope that our devil is not replaced by a more evil and deceptive being.

Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.

Mark@ahcgroup.com

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