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Saviors and Saboteurs in Alternative Energy

John Petersen

Last week Societe Generale published a thematic research report titled "A new world order, when demand overtakes supply" which examines the macro-economic and demographic trends that will transform the global economy over the next 20 years. It mirrored the theme of Jeremy Grantham's April 2011 quarterly letter titled "Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever" and did a great job of summarizing an issue I touched on in "How PHEVs and EVs Will Sabotage America's Drive For Energy Independence."

In the words of Societe Generale:

"So, while up until now less than one billion people have accounted for three-quarters of global consumption, over the course of the next two decades, the new Chinese, Indian, Indonesian, Latin American and African middle classes will bring an additional two billion consumers with similar needs and aspirations as today's North American, European and Japanese consumers." (Page 12)

"Beyond growth in demand for finished products, the most spectacular effect likely to be brought about by the stronger development of the emerging economies will be the enormous rise in demand for raw materials." (Page 14)

"A structural increase in raw materials prices is in fact an inevitable consequence of chronic resource insufficiencies, whether we're talking about industrial, energy or agricultural resources." (Page 19)

The following table from Mr. Grantham's quarterly letter summarizes China's current consumption of key energy, industrial and agricultural commodities as a percentage of total global consumption and drives the point home with the subtle clarity of a sledge-hammer.

7.10.11 China.png

If we've seen this kind of demand dislocation as a result of a few decades of growth in China, what's going to happen when the surging middle class populations of India, Indonesia, Latin America and Africa decide to show up for the dinner party? The answer, of course, is that we'll be thoroughly screwed unless we stop wasting time, money and materials on pipe dreams, toys and panacea solutions, and focus instead on finding relevant scale solutions to persistent global shortages of water, energy, food and every commodity you can imagine. We all face a clear, present and persistent danger that can’t even be addressed until we accept the entire ugly reality with all its vulgar implications!

One of the most disturbing conclusions in the Societe Generale report is that while per capita energy demand in advanced economies will remain stable at 5,463 kg of oil equivalent, or maybe even decline to 5,000 kg per person by 2030, global average demand will increase from current levels of 1,818 kg per person to 3,312 kg per person in the low case and 4,228 kg per person in the high case. All of the increased demand will come from emerging and developing economies.

Our fundamental problem is that per capita global production of energy resources is 100 to 200 times greater than per capita global production of the technology metals that underlie all alternative energy schemes. To make things worse, all of those metal resources have critical competing uses that cannot be set aside or ignored in the name of advocacy. At a recent grid-based energy storage conference in Brussels I used the following table to emphasize the point. The orange highlight quantifies available energy resources while the green highlight quantifies technology metal resources.

7.10.11 Energy vs Metals.png

The mathematically challenged optimists in our midst earnestly believe we can solve our energy problems with cool toys like wind turbines, solar panels, electric cars and other materials intensive energy schemes that fire the imagination but can never be sustainable. These aren’t solutions! They’re the energy and transportation equivalent of graphic novels and just a half-step removed from warp drive. In the final analysis, the dreamers who want to waste metals and other natural resources in the name of conserving coal, oil and natural gas are not saviors. They're unwitting saboteurs who can only make the problems worse!

Whether we like it or not, the only technology that has a prayer of generating enough new energy to satisfy even a small fraction of anticipated global demand is nuclear, a point that was forcibly driven home by Bill Gates in a recent interview at the WIRED Business Conference 2011. The naive idea that we can cut hydrocarbon consumption for the laudable goal of saving the planet is sophistry. Given a choice between freezing in the dark and burning hydrocarbons human beings will always choose the later because immediate personal need will always trump long term societal goals, especially fuzzy green goals.

I'm an unrelenting critic of obscene raw materials users like Tesla Motors (TSLA), A123 Systems (AONE), Ener1 (HEV) and Valence Technologies (VLNC) that want to build a future out of making toys for our emerging eco-royalty because I've read about the French Revolution and remember how 'Madame Le Guillotine' put a uniquely sharp edge on popular discontent over conspicuous consumption. These business models are doomed to fail because they're diametrically opposed the needs of society.

The only alternative energy investments that stand a chance of survival, much less profitability, are basic efficiency technologies that slash waste and deliver real savings for every ounce of natural resource inputs. Nuclear power, idle elimination, fuel efficiency, demand response, building efficiency, ebikes, recycling and a host of other technologies that do more with less are the only possible future. Wind turbines, solar panels, electric cars and all of the other feel-good graphic novel schemes are merely pleasant distractions, a bit like Nero's fiddle.

Disclosure: Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long position in its common stock because Axion's disruptive third generation lead-acid-carbon battery technology uses 30% less lead to deliver impressive gains in power, cycle-life, charge acceptance and overall real world utility.



was posted on AltEnergyStocks.com.


       

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Comments

Hi John,

Thanks for the article. The numbers regarding Chains consumption are eye opening. I believe you are partially correct. Firstly, nuclear energy will have to play a part in our future. There are a lot of promising technologies out there: Bill Gates's TerraPower traveling wave reactor, thorium liquid reactor, and I'm interested to see what happens with General Fusion's hybrid magnetic/inertially confined fusion reactor.

You are also correct, that people will have to due with less. The electric car does seem unrealistic (at least in the form as we know it). We certainly can do with far fewer consumer products.

However, I'm drawing the line at renewable energy. I cannot figure out if you are naive or have ulterior motives. Sure you must recognize that it's beneficial to have a diverse energy portfolio. You present no data to validate your opinion that renewable energy sources "aren't a solution". In fact the U.S. Energy Information Administration and U.S. Department of Energy have just issued a report stating that renewables have overtaken nuclear in energy production in the US.

http://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf

Furthermore, in most cases, the elements used in wind, solar, geothermal, and water power are very abundant. Even in the case of wind, it is now recognized that using rare earths in the generator becomes unreasonably heavy for >6 MW.

In the long run, we will have to make due with less, and diversify our energy production.

Jesse

Your comment was fair under the circumstances because the original article did a poor job of highlighting the immense disparity between global energy resource production and global technology metal production.

To better make and support my point, I've added a new table and a new introductory paragraph to highlight the issue. Thank you for helping me make this article better.

I read the EIA summary when it was published and noted that it conveniently includes both conventional hydropower and ethanol from corn as renewables.

Hydropower and electricity from biomass were old hat when I was a kid in the 1960s so treating them as progress in the field of renewable energy is less than honest. Likewise corn ethanol merely turns food for humans or livestock into transportation fuel and exacerbates shortages that are already critical in many parts of the world. Feeding a Hummer instead of feeding people is not what I'd call progress.

When you take hydropower, biomass and ethanol out of the EIA numbers, the contribution of renewables is insignificant.

Your new chart is annual production right? So let's work with those numbers to see what they mean. I have done a back of the envelope calculation for energy content associated with coal uranium and silver. The silver I associate with silicon solar panels. Here silver is by far the most rare material used.

Let’s start with coal.
Annual production = 6.9x10^12 kg
Energy density = 24x10^6 J/kg
Total energy associated with coal = 165.6x10^18 J

Now uranium
Annual production = 42.7x10^12 kg
Of this only 0.7204% is U235
Energy density of U235 = 8x10^13 J/kg (if it is completely burned, which it never is)
Total energy associated with uranium = 24.6x10^18 J

Lastly silver on a Si solar panel
Annual production = 21.4x10^6 kg
Average amount of silver/watt on Si panel = 20g/200W
Lets assume 20% power generation when averaged around the clock
Panels are rated for 30 years (though they normally last longer)
Total energy associated with silver = 35.0x10^18 J

One last consideration is that when coal and uranium are burnt, they are done. Silver can be reused after the panel’s lifetime is over.

Now, this is a back of the envelope calculation, and of course not all silver will go to Si solar panels, but I think you can see that the energy associated with it is substantial. Moreover, this is just one technology, and we should never depend on just one technology. i.e. renewables are complimentary.

John, I think that reason that I’m debating with you on this is because I’m a physicists working on new solar cells and being called a saboteur just leaves a bad taste in my mouth… especially after all my hard work.

Calculating the energy that could be generated with all the silver the world produces is not terribly helpful.

The goal should be calculating the energy that could be generated with all the silver that's available for energy generation and not committed to other critical uses. Getting people to sacrifice silver jewelry is one thing, getting them to sacrifice other high value uses is another. Assessing resource availability in a vacuum without considering critical competitive uses will always lead to the wrong conclusion.

There are many places in the world where solar panels are a truly sensible alternative for populations that need electric power but don't have a practical alternative. Those places don't include the desert Southwest where the solar plants are hopelessly uneconomic without obscene subsidies.

Your work has critical value and should always be encouraged. My objection runs to those who would overstate the value of your work to populations that cannot possibly benefit.

John,
I see this whole metals argument of yours as another version of the problem of the Renewables Gap, a concept much discussed on the Oil Drum. In short, because RE requires an up-front investment of resources for a long lived asset, while traditional energy requires an investment of resources (fuel) over the lifetime of the asset, we're not going to have enough resources available to both make the transition and maintain our current lifestyle.

I suggest you Google "Renewables Gap" and do some reading... it should put your arguments in perspective.

I do think you're wrong about your proposed solution: safe Nuclear power plants are at least as resource intensive as renewable power plants on a per-MWh basis. Sure, we can breed uranium, but what about the energy, cement, and industrial metals that go into the nuke plant.

The only technologies that can help us get over the Renewables Hump without greatly reducing our lifestyle are Efficiency and Conservation technologies. These technologies typically reduce the use of industrial metals and energy over a very short timeframe, and so can free up other resources for other uses.

I invented the concept of Energy Internal Rate of Return to deal with this concept the up-front investment in energy needed for these technologies and pinpoint the ones that have the best chance of working. You can find that article here: http://gree.nr/Cbq9

In order of the best energy returns on investment (and this captures the use of industrial metals through the embodied energy in those metals) they are:

1. Energy Efficiency/conservation
2. Conventional coal
3. Wood Cofiring in existing coal plants.
4. Natural Gas
5. IGCC with Carbon Capture ans sequestration
6. Oil
7. Wind
8. Conventional biodiesel
9. Wood biomass
10. PV and Nuclear (tie)
11. Large hydro
12. Corn ethanol.

You might quibble with the numbers I used, but I think no matter what numbers you put in, you'll find that Nuclear has all the problems that you are worried about here. PV has them as well, but it is improving rapidly in resource efficiency - that's how they are bringing the cost down.

Wind, on the other hand, is not nearly as bad as you imply.

One final note, renewables have a big advantage over nuclear at end of life: many of the materials for renewables can be reused or recycled. When a wind turbine fails, you can still use the tower for a new turbine. At the end of life of a nuclear plant, you have just so much radioactive waste.

I'm not what I'd classify as pro- or anti-nuclear, but when experts predict a doubling or tripling of global energy demand over the next 20 years I don't see anything other than nuclear and natural gas that can be big enough fast enough. We are in a hell of a box right now and most proposed alternative energy solutions aren't truly solutions.

An effective energy policy, which we desperately need but will likely never see, will involve very hard choices that people choose to ignore even when the facts are staring them in the face.

I'm with you 100% when it comes to the importance of conservation, even radical conservation. I also have no fundamental objections to your calculated energy ROIs. I'm deeply disturbed to see the market chasing rainbows when we need real solutions.

I think it's questionable that nuclear *can* scale up rapidly, even putting aside the political and safety problems, and that's because of the very problems you outline in this article: lack of industrial materials and energy to build them. Not to mention the fact that it takes 10 years to build a modern nuclear plant. By the time you've built one, the cost of solar will have halved.

Wind can be built quickly, but the grid and regulatory structure has to be redesigned to handle much more than 20% penetration.

So I think the answer to the question of how we are going to meet the expected demand is simple: we're not.

Peak oil, and the need to work off excessive debt will almost certainly work to make economic growth fall below projections, so the expected electricity demand will simply not emerge.

And efficiency is an untapped resource that can scale up quickly.

When I take "the long view", I concur with many of your points. That being said, the long term can be surprisingly long, allowing travel down a dead end road for an extended period. Further, technology frequently has a way of confounding our best predictions. And, of course "the market" has a way of extending and rationalizing resource life.

Example 1 is the Axion battery. If it works as promoted and if it is adopted as hoped, it could effectively double the amount of lead in the market due to the use of the carbon electrode. A short to medium term "glut" may be possible. (Be prepared to short.)

Example 2 is recent action in the precious metals complex, specifically silver. At USD 50 per ounce, non-mine "production" of silver was quite elevated due to redemption of scrap and jewelry. This seems likely occur again, and again. And, at some higher number, say $100 per ounce, mine production will also increase substantially. On the demand side, this will impact certain lower value uses, freeing up metal for higher value use. And, for many of those higher value uses the incremental cost of higher priced silver will have limited impact. Consider silver's use in PV cells. It is both, important and minimal. Doubling, even tripling the price of silver will add pennies to the cost of a PV cell while other improvements may be removing dimes and, in time, dollars.

Just as I agree that efficiency improvement is a core element of a sound energy policy, so too I believe that recycling and less extravagant use of raw materials will be key to resource management.

Having said that, a few more quick thoughts:
1. The chart indicating China's use of various commodities is somewhat misleading in that many of the "hard" commodities, e.g. steel, are exported as elements of finished goods or even just as processed commodities.
2. The use of the term "resources" in your energy versus technology metals chart can be confusing. The term resource in the context of minerals is frequently used to indicate a specific estimate of the quantity of that material that may be extracted. (I am certain you know this. Just commenting to help avoid confusion of readers.)
3. The indicated annual production of uranium is likely to be irrelevant within a decade. I agree that nuclear may be a key element of the global energy "solution". However, I also believe that the nuclear plants under construction presently are likely to be the last of the PWR and BWR types. Based on progress at several research projects and commitments from "major players" and the cost & risk versus reward relationships, I expect that breeders will quickly dominate beginning early next decade. In particular I suspect that TerraPower is well advanced and the Thorium based MSR may develop relatively quickly. It may turn out that the USA looses relevance in this area as China, India and others move aggressively.
5. I agree that products based on consumption of copious quantities of relatively rare and expensive materials are unlikely to be viable long term. But, niche players can continue to produce products for years, if not decades.
6. I believe PV will play a larger role than it appears you do. It is already an effective choice in many island and remote, sunny locations. Frequently the real cost in such locations is in the range of US$0.25 to 0.35 /kWh. In such locations, think Hawaii or the Turks and Caicos for example, PV is already being actively adopted. If the price of PV drops by 50% and if the price of natural gas and coal increase moderately, both of which seem possible this decade, then PV will have a solid role in "peak shaving". Is PV viable long term as critical resources deplete? I certainly wouldn't claim to know. However:
7. Roughly 5 years ago experts claimed the US was on the verge of a major shortage of natural gas, and then we figured out how to access shale. In 2000, VP Cheney worried that US oil production was in terminal decline (for various reasons). In 2010 US oil production was back to 1990 levels and rising, even after the GOM moratorium. Its amazing what new technology and higher prices can do.

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