Fossil Fuel vs. Renewables

Unfortunately, I think we have very large supplies of coal and nuclear energy which are considered viable. The problem with nuclear is that it's expensive up front, then extraordinarily expensive at the end of the reactor's lifetime. In a time of continually expanding economy this price structure makes sense, but if there were a large downturn (say, a depression) then the end cleanup and maintenance could be overwhelming. Apparently, not a single reactor has yet been fully decommisioned and cleaned up in North America?!

As for coal, there more of it than our atmosphere has capacity to carry if burnt. "Peak oil" may just exacerbate the coal problem, as seems to have happened since 2000 with the higher prices of oil (CO2 emissions have sharply increased since 2000, due largely in part to higher oil prices stimulating coal burning which is more CO2 intense). Developing a "hydrogen economy" will further enable the burning of coal for other energy needs such as cars.

If we rely on market forces which require the cheapest available form of energy to be used, our oil and coal resources will outlast the earth's atmosphere - we will need more intentional decision-making than that.

I would question the notion that since there are "large reserves" of fossil fuels remaining that we have nothing to worry about in the short to medium term.

While there is certainly no consensus on the issue, a significant body of literature (as well as logic) indicates that the "problem point" for fossil fuels is not when we can pump the last drop out of the ground, but rather when we hit the peak of production (as most are hopefully familiar, the concept known as peak oil or hubbert's peak).

By nearly all estimates, we are likely to reach the peak of oil production sometime between now and 2030, with most estimates indicating peak within the decade.

If we take this time frame seriously, and if we believe that adverse cost effects (resulting from demand outstripping supply) will result from peak oil, we have something of a shortened time frame in which to prepare our response.

In my opinion, the only viable energy future is one of significantly reduced demand. We must not only build smarter, but plan our settlements smarter, our modes of production smarter, and live our lives less conspiciously.

However to address the above question, regarding investing in renewables versus investing in cleaner use of fossil fuels, we really need some kind of estimate on the rate of return on these investments in terms of energy production (mostly for renewables) and environmental impact (mostly for fossil).

In terms of renewables - we need a sense of the cost of photovoltaics, wind turbines, and biomass (and tidal I suppose), the land requirements to address energy demand, and the energy they can realistically produce. If we're talking windmills - where are we putting them? Many people consider them eyesores on the landscape and do not want them, they also need windy regions to be productive, and a recent study suggested wind should not be used for more than 10% of our power due to the volatility of the resource. If solar - where do the panels go? What are the costs? How durable are they for a climate like Canada? (ie becoming covered in snow in the winter). If biomass - where is the land we will use for production?

In terms of fossil - I would seriously advise against major investment at this stage of the game in oil-related "cleanup" technologies. There simply is not enough future in the resource to warrant the investment of billions into R&D. Coal on the other hand may be worth a look. Clean-burning coal is probably the future energy source of choice, the only thing holding coal back from being viable is the pollution and Carbon emissions. Resolve these, and we have a resource that can sustain the world's energy needs for another century or so perhaps.

So long story short - where to invest?

1. Significantly into developments that reduce energy demand, and localize production of goods.
2. Moderately into renewale energy sources, with funding commensurate to the feasibility of the technology to meet energy demand.
3. Lightly into cleaning up fossil fuels, mostly in coal.

And as an afterthought - only in nuclear as a last resort to meet immediate demand that cannot be addressed quickly enough by the above investments. There is simply not enough viable uranium out there to justify brining dozens or hundreds of new nuclear plants online.

My 0.02.

For me, it isn’t an either/or question whether we should focus on innovation based on renewables or try to make fossil fuels less damaging to the environment. Clearly, we need to do both. While existing technologies and business practices aren’t perfect, they are improving.

New energy markets are gathering momentum. A Canadian report showed the average annual growth rate in wind energy over 27% and 40% of business respondents using energy conservation practices (Statistics Canada, 2004).

Globally, annual investment in renewable energy sources increases while costs decline. For example, between 1975 and 1995, solar modules costs went from $30 to $5 (World Resources Institute [WRI], 2002). In addition, as costs to mitigate climate change impacts increase, alternative energy sources will grow and new technologies will be developed (WRI, 2002). Progress is being made yet there is still a long way to go.

On the fossil fuel side, a look to the energy industry over years illustrates (Economides, 2000):

&0149;    Higher safety and environment standards
&0149;    95% fewer pollutants produced by cars since the 1960s
&0149;    Decreased surface disturbances
&0149;    Enhanced spill prevention
&0149;    Shift to lower carbon content fuels

Again, progress is being made and there is room for improvement. As I posted in the online discussion for the Royal Roads course on sustainable development, perceptions of "Big Oil" are interesting. Many people think that the industry is all about making money with little regard for environmental or social factors. This isn’t true. Like any industry, it is made up of individuals with hearts and minds, many of whom (including myself) have a commitment to sustainability. The International Petroleum Industry Environmental Conservation Association (an NGO with formal UN status) is a good resource for seeing some of the industry initiatives (www.ipieca.org).

In addition, things have changed over the years in terms of who really has control over the resource. Access to known oil and gas reserves by Western companies is shrinking (85% in the 1960s compared to 16% currently). National Oil Companies (NOCs), which are state-owned or state-controlled currently hold 65% of reserves (compared to 1% in the 1960s). This is having a big impact on production since there are different motivators. Plus NOCs are becoming more active on the global stage (i.e. the Chinese and Indian NOCs partnering on a deal in Syria recently). Countries which allow access by Western companies are having increasingly restrictive tax and royalty regimes (i.e. Bolivia, Venezuela and Ecuador). In addition, reserves replacement ratios are declining. Read the article and view the presentation at: http://www.businessweek.com/magazine/content/06_20/b3984001.htm and http://images.businessweek.com/ss/06/05/oil_charts/source/6.htm. I wonder if having so much of the resource being controlled by sovereign governments (many of which are non-democratic and/or emerging economies, often with little or no environmental regulations) may actually set progress back.

In addition, there is the increasing concern about rig scarcity. This presentation illuminates this issue: http://www.simmonsco-intl.com/files/Oil%20And%20Money%20Conference.pdf. In 1997, Matthew Simmons, who wrote the presentation, predicted that 450 new rigs would be required. By 2007, there will only be 100 new rigs. So, there are questions about the ability to produce. Plus, the industry's assets have aged and rusted, creating the potential for further environmental problems like Prudhoe Bay.

Finally, there are increasing concerns about personnel shortages. Every time oil prices have tanked over the years, lowest level employees were let go. Now, the remaining workforce is aging (I heard that the average age of EGGs [engineers, geologists and geophysicists] at my company was around 50), ex-pats want to come home and many young people aren't that interested in the industry. See: http://www.redherring.com/Article.aspx?a=16854&hed=Talent+Shortage+Slows....

I wonder if these three things (control over the resource, rig scarcity and personnel shortages) may actually result in further increases in prices. While I don’t claim to be an economist, if that happened, wouldn’t it provide further impetus for increased economic efficiency when it comes to renewables which, I understand, are not yet as financially viable?

Other Sources:
Economides, M. & Oligney, R. (2000). The Color Of Oil, The history, the money and the politics of the world’s biggest business, Katy, Texas.
Statistics Canada (2004). Human Activity and the Environment, The Daily, Oct 27, 2004, Ottawa. Retrieved Feb 10, 2006 from
World Resources Institute, United Nations Environment Programme and World Business Council for Sustainable Development (2002). Tomorrow’s Markets: Global Trends and Their Implications for Business, Washington, Paris and Geneva.