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A Long View Of The Energy Market

Gates, Chu see tie between cheap energy, global human advancement, and profits

by Jeff Johnson
March 19, 2012 | APPEARED IN VOLUME 90, ISSUE 12

Credit: Jeff Johnson/C&EN
Gates (left)and Chu say cheap energy is key to a better world.
Credit: Jeff Johnson/C&EN
Gates (left)and Chu say cheap energy is key to a better world.

Billionaire philanthropist and Microsoft Chairman Bill Gates and Nobel Prize-winning physicist and Energy Secretary Steven Chu hold similar views on the importance of finding new sources of inexpensive energy to better the plight of the world’s poor—as well as to make money. They voiced this commonality during a wide-ranging discussion at a Department of Energy conference late last month.

Although they joined in support for new energy generation technologies and backed greater spending for fundamental research to bring them about, they differed on what those energy sources should be.

During the discussion, Gates urged the U.S. to double its energy R&D spending; Chu pushed for more funding for high-risk, experimental energy technologies; and the audience cheered. The hoots and clapping were not too surprising given the audience of 2,600 technologists and investors at the third annual Advanced Research Projects Agency-Energy (ARPA-E) technology conference held near Washington, D.C.

ARPA-E funds high-risk, small-scale energy research projects with great potential. Although created by Congress before Chu took over DOE, his support has made the agency real with funds, focus, and staff. Through the American Recovery & Reinvestment Act of 2009, Chu provided the agency with its first funds, and he has watched as it has nurtured some 180 research projects over the past three years.

Gates is also a strong backer of transformational technologies such as those supported by ARPA-E. When quizzed by a conference moderator about why he was at an energy conference, Gates explained the tie between inexpensive energy and the focus of the Bill & Melinda Gates Foundation on ending world poverty.

“If you look at improvement in the human condition over the last 200 or 300 years,” Gates said, “the improvements of today really have to do with energy intensification. And if you want to improve the livelihoods of the world’s poorest 1 billion, their access to cheap energy determines if they can afford fertilizer, transport, and lighting—the things we take for granted as part of our lives and our dignity. Without advances in energy, they will remain stuck where they are.”

Those affected most, he added, are the “equatorial small-holder farmers” whose families barely get enough to eat and whose children suffer physical and mental deficiencies from malnutrition. “The imperative is to provide them with what they need to raise themselves up.” In doing so, Gates said, more demand will be created for continued innovation in energy. A benefit of this new energy will be a reduction in greenhouse gas emissions, he added.

Gates underscored that providing cheap energy is one of the top things that would really help the world’s poor.

Chu described a similar vision for global energy expansion, particularly for the world’s 2 billion people who lack basic electricity. Pointing to DOE R&D—at both ARPA-E and the Office of Science—Chu stressed the potential rapid growth of renewable energy, particularly with technological improvements in advanced batteries and solar energy systems. These technologies, he said, have the power to go “viral,” leading to global energy expansion.

He compared the coupling of inexpensive, robust batteries and photovoltaic systems to the viral expansion of the cell phone.

“In a developing country, if you have any spare cash, you get a cell phone,” Chu noted. “Cell phones have leapfrogged the normal telephone transmission network, and we see photovoltaic systems and batteries leapfrogging the electrical transmission grid.”

The result of such widely spread photovoltaic and battery technology in the developing world, Chu continued, “would be to bring this power to small villages and to places where people would be able to read at night, to run a refrigerator to keep medicines safe, and to run things that pump water for irrigation. We see this as having a great potential for human life.”

But Gates sees the technology expansion a bit differently and stressed the need for large, 24/7 baseload energy generation, particularly nuclear power plants. He pointed to his support for TerraPower, a nuclear power developer. TerraPower is exploring a nuclear fast reactor, a “traveling wave reactor,” Gates explained, that uses depleted uranium as fuel and is able to go as long as 60 years without refueling.

TerraPower has recently been in negotiations with China and other countries to build facilities there to demonstrate the technology and eventually possibly construct a plant, Gates said. This ability to develop and sell energy products to the global marketplace as well as in the U.S. is something Gates and Chu agreed is important.

Gates played down similarities between the computer revolution and the nascent energy revolution. The nimbleness of the information technology revolution, which Gates largely led, does not compare well with the “gigantic investments” required in the energy sector for equipment and the inherent risk in such large investments, Gates explained.

“For a software company or even a chip factory, the innovation cycle is two or three years,” he noted, “not the 40- or 50-year cycles needed for a new power plant.” Other hindrances, he said, include government regulations as well as state and utility commission oversight and policies that litter the energy sector.

To move this sector, Gates urged more government support as well as research to encourage companies to take risks with new technologies. He said a 90% failure rate should be expected when investing in complex, high-risk technologies. There should be “thousands of companies working to find 10 or 20 approaches to get us to a magic solution.”

Gates applauded DOE’s use of stimulus funds to kick off energy research programs such as ARPA-E. Although there is more government activity today than there was five years ago, he said, “the magnitude is not at a serious level.”

Referring to DOE’s failed loan guarantee to the solar company Solyndra, Gates said, in the future there will be many other companies in such programs that pay off dramatically. “Clearly I am a fan of risk-taking.”

To drive this sector—be it nuclear energy or renewables—Gates and Chu both said a price on carbon will be required. But perhaps as a reflection of today’s political reality, both stressed that the price need not be immediate.

“We need a price on carbon,” Gates said, “but its role is to get people who build power plants to look out at their investment returns over a 40- to 50-year period and choose between sources to support.” It is not so important that there’s a price today, he said, but it must be crystal clear that there will be a carbon tax in the future.

Chu agreed, adding that he does not use the “T word.” Instead, he offered the example of the Obama Administration’s plan to develop efficient cars that can be sold in the global market, specifically the push, announced last summer, for a 54.5-mile-per-gal vehicle by 2025.

Chu claimed that auto engineers are excited by the innovation challenge and that such fuel-efficiency advances will prove to be a big deal in international trade.

“It is very difficult for American companies to sell an automobile that gets 10 or 15 mpg to a global mass market,” Chu said. “But many people around the world will buy a 40- to 50-mpg car that performs well.”

Gates echoed that view, adding that today’s technological entrepreneurs hoping to sell their products “better have a plan of how to sell their stuff globally, especially in China and Asia, or else they better just not compete.”



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Frederick Dryer (April 18, 2012 4:55 PM)
As a scientist and engineer who has worked on fundamentals related to combustion energy conversion, I strongly support the need for long-term-directed research of high risk and high pay-off on renewable energy approaches to discover and select longer term solutions to global energy use and climate change. However, the discussions in this article are disappointing in that no mention is made of the hurdles to be faced both globally and nationally to reach “the future” where those few ARPA-E projects that survive as high pay-offs will emerge to supplant large portions of our current dependence on fossil energy. This transition scenario is critical to suitably addressing climate change (We cannot continue to deter real reductions in carbon emissions for another fifty years.) and to sustaining national and global economies, even as relative costs of labor in emerging nations and automation constrain job markets in industrialized countries.
Every projection of our future energy scenario concludes that over the remainder of this century the use of carbon based energy resources will continue to supply the majority of the world's energy needs, most coming from coal, petroleum, and natural gas. Bio-renewable resources need to be integrated with these materials in a manner to best reduce net carbon cycle emissions, and it is clear to many of us that little of the transition to long term solutions can occur successfully without emergence of carbon sequestration and storage. Carbon pricing seems to be an unrealistic motivator for technology change in light of what are today's global and US financial states. Additionally, the recent emergence of considerable increases in shale gas and other fossil resources previously considered to be unrecoverable provides further economic incentive for continued use of fossil energy and the need for even larger carbon offset prices if such a stimulus were to be adopted.
"Cheap" energy as is noted in the article is important to raising global living standards of emerging economies, but it is also essential for sustaining and growing our national economy. Rather than just “replacing fossil energy”, developing scenarios to use US fossil energy resources in a carbon constrained world is critical to producing a sustainable job sector within the US and to reducing our needs for energy imports. Some considerable portion of resources addressing energy sector needs should be directed toward the use of fossil and bio-resources in a carbon constrained world that does not depend on subsidized economics, but on true economic competitiveness….and hopefully, this should be accomplished without forcing an increase in fossil energy costs beyond that which is sure to come on the basis of global demand alone.
Our global competitiveness and the need to severely reduce net carbon emissions in the next fifty years or less depend strongly on energy conserving measures. More efficient devices with reduced emissions equally depend on developing and implementing new technologies for real time sensing and control of combustion phenomena. Conservation alone, however, will be inadequate for meeting these long term challenges. Substantial penetration of nuclear and solar/wind resources is going take at least half of this century if not much longer. Thus it is imperative to also focus on utilization of carbon containing energy resources in a carbon constrained environment. Developing and implementing methodologies for carbon sequestration and storage, including solid phase storage is critical to our success and deserves equal if not greater resourcing in comparison to efforts that will likely not emerge as major impacts on energy for much of this century.

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