Bullet Points: Energy in the 21st Century: Can Muir, Patton, and Gandhi Agree?

R. JAMES WOOLSEY,
VENTURE PARTNER,
VANTAGEPOINT VENTURE PARTNERS

MONDAY, MAY 11, 2009

• Two types of energy systems in the U.S.:
  - Electricity
  - Transportation
• Electricity is almost no oil – 2 percent oil in this country; 51 percent coal; the rest largely nuclear, hydro, and natural gas – very complex large-scale electric grid of course.
• Transportation system is of course 97 percent petroleum fuel-based – petroleum monopoly over transportation – OPEC plus a couple of other dictators – monopoly over oil.
• August of ’04, within a nine-second period, 80 gigawatts, 80 nuclear-power-plants’ worth of power were offline in the Northeastern United States on Eastern Canada, 50 million people out of electricity, billions of dollars lost to the economies of Canada and the United States, some of the areas offline for many days.
• The grid is vulnerable to terrorists and foreign government hackers - cyber threats - the malevolent problem.
  • A malevolent problem is one somebody is trying to create, and that is something that we need to pay a great deal more attention to.
• The grid is largely managed in 50 separate individual public utility commissions in groups of utilities
• The U.S. imports ~15 percent of our natural gas from Canada.
• The U.S. imports two-thirds of our oil from eight of the nine largest oil exporters in the world that are autocratic kingdoms or dictatorships, either in OPEC or Russia.
  • The infrastructure is there and it is vulnerable, and the parts that are here in the U.S. pipelines are vulnerable to some extent to malignant issues – large hurricanes.
• Our problem with oil is the malevolent problems, and they are legion.

• If a commodity has a huge amount of profit attached to it, and it comes into a state that’s already autocratic and dictatorial, it tends to augment the central power of the state.

• A country comes into wealth through widespread commercial activity
  • it tends to build up a middle class, it tends to demand economic reform, and it tends sometimes to demand political reforms – South Korea, Taiwan.
  • Oil tends not to drive nations towards positive economic reform.
• The U.S. borrows between $2 or $3 billion a week when oil is down at $55 a barrel - when oil was up at $145 a barrel, it was close to $2 billion a day.
• By borrowing hundreds of billions of dollars from those two whom we ship Treasury bills, of course we substantially make more difficult the operation of our economy.
• Every billion that you spend on foreign oil goes and stays essentially abroad.
• Each billion spent on imports of overseas oil equates to something on the order of five (thousand) to 7,000 jobs if it’s replaced by domestic production of whether it’s ethanol or petroleum or whatever.
• The difference between what the Saudi imams, the Wahhabis say when they issue their fatwas about their substantive beliefs and the substantive beliefs of al Qaeda is not substantive but procedural
  • a question of who should be in charge.
  • They disagree about who should be in charge.
• Lawrence Wright, author of the “Looming Tower”: a little over 1 percent of the world’s Muslims, the Saudis, control approximately 90 percent of the world’s Islamic institutions.
• We have to do to oil what electricity did to salt a little over a hundred years ago. Until the beginning of the 20th century, salt was a strategic commodity.
  • Salt was the only way to preserve meat, a hugely important part of the human food chain.
  • It mattered whether your country had salt mines. Countries went to war over salt mines.
• We need to get off oil for transportation as quickly and as thoroughly as possible.
• A plug-in hybrid, a Prius that has been changed by A123 to add a 5-kilowat-hour battery charged overnight for about 40-50 cents worth of electricity, can be driven the first 30 miles or so the next day on electricity alone.
  •  Cost is ~2 cents a mile for the first 30 or 40 miles, whereas on gasoline today it’s about 10 cents a mile.
  • Last summer, gasoline was up around 20 cents or so a mile.
• 20-25 percent improvement in carbon emissions by shifting from a regular vehicle to a plug-in hybrid.
  • In a clean-grid state like California, you make about an 80 or 90 percent improvement.
  • In a all-coal grid state like West Virginia, there is no improvement in carbon emissions.
• If you charge with electricity over 100 miles a gallon is possible.
  • A flexible fuel vehicle has a slightly different kind of plastic in the fuel line
  • FFVs can use ethanol, methanol, butanol
• The infrastructure for a plug-in hybrid is an extension cord – $19.95, 25 feet long.
  • PHEVs are a direction the U.S. can take with respect to transportation.
  • Part of the solution is electric; part is increasingly better and better renewable fuels.
• Photovoltaic cells on the roof and the basement batteries can charge the batteries in the car from the batteries in the basement that themselves have been charged by the photovoltaics on the roof
  • Enough solar power is stored in the PHEV batteries to drive for about 30 miles a day.
• Cellulosic feed stocks allow a town to produce its transportation fuel locally.
  • Fermented or gasified or otherwise biomassed from garbage.
• A nuclear power plant under today’s treaties is essentially the planting of an apple seed by a nuclear Johnny apple seed because you can’t nations out of the fuel cycle, either the enrichment of the uranium or the reprocessing of the plutonium under the current system.
  • North Korea and Iran are examples.
• Natural gas is better than oil and much better than coal.
• If you have a wind farm that’s not operating in the day time, or a solar power plant that’s not operating at night, if you have natural gas, you can use a natural gas to balance the grid.
• There is more resistance in the political community to the climate change argument and the cap-and-trade as a solution than there is to moving away from oil.
• A lot of people for different reasons can relate to moving away from oil dependence.
• Cap and trade legislation with any teeth is going to internalize social costs of carbon going into the atmosphere and therefore it’s going to show up on people’s utility bills.
  • As our European friends demonstrated, that didn’t work very well.
  • The EU priced CO2 at under a dollar or under a euro a ton for years, which has no effect
  • The EU then charged/auctioned CO2 credits, resulting in unfavorable financial impacts.
  • A balance with safety valves in place is needed so those who emit CO2 can get permits from the government while the cost of cap and trade remains reasonable for all parties involved.
  • Compromises are important if cap and trade is to be successfully implemented.
• The U.S. needs physical improvements in its electrical grid security, protection of the transformers and the like.
  • Utilities store the big transformers that take several years to build in either South Korea or Northern Europe.
  • The spare transformer right next to the live transformer, making it easy for terrorists to knock out the grid by destroying the large transformers.
• Oil is only about 7 percent of world electricity production. It’s 2 percent in the U.S.
• Gas is most cheaply and easily transmitted by pipeline rather than needing to liquefy it and put it in ships.
• The Japanese can get cars through the system in seven years instead of 17,
  • The U.S. can go twice as fast as we are now to bring new cars into the marketplace.
• The Brazilians finally decided to get serious about going to alternative fuels
  • Back in the early part of this decade, in two years the Brazilians went from ~5 percent to over 75 percent of their new cars being flexible-fuel vehicles that can run on ethanol.
  • Open standard FFVs can run ethanol or methanol or in time, when it comes along, butanol or so forth, and mixtures.
• Corn-based ethanol is not a great deal better than gasoline in terms of carbon emissions, but it’s a lot better in terms of avoiding oil use.
• 90-95 percent of our corn goes for animal feed, not for corn on the cob (human consumption).
• The big thing about electricity is storage- storage changes everything.
• If you store a kilowatt – a 10-cent kilowatt hour of electricity with lead-acid batteries, you add about a buck to the cost.
• If you store a kilowatt with compressed air in an industrial circumstance, you may only double the price, up to 20 cents.
• Flow batteries is an inexpensive way to store energy. Flow batteries add a lot of electrolyte to a battery for stationary storage.
  • For stationary storage, only a few cents is added to that 10 cents/kilowatt cost.
• Once electricity can be stored affordably, renewables become a lot more attractive and useful because you don’t have to match them up with natural gas
  • The potential uses multiply.
  • Solar makes the batteries more useful, and the batteries make the solar more plausible.
• In the ’70s you could buy a Honda that got about 50 miles per gallon.
• Some high-end sports cars in Europe are starting to be made out of carbon composites, and some of these are about 10 times the crash resistance of steel and about half the weight.

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Bullet Points: ENERGY IN THE 21ST CENTURY: CAN MUIR, PATTON AND GANDHI AGREE?