Technological Optimism

I'm a big fan of technology. I buy into the Julian Simon view that any "limits to growth" are wrong-headed because it ignores the fact that the ultimate resource is human ingenuity.

Here are some bits out of Paul Krugman's latest NY Times op-ed looking at the upcoming future for solar energy:

For decades the story of technology has been dominated, in the popular mind and to a large extent in reality, by computing and the things you can do with it. Moore’s Law — in which the price of computing power falls roughly 50 percent every 18 months — has powered an ever-expanding range of applications, from faxes to Facebook.

Our mastery of the material world, on the other hand, has advanced much more slowly. The sources of energy, the way we move stuff around, are much the same as they were a generation ago.

But that may be about to change. We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.

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These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.

But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.

This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.

And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.

But will our political system delay the energy transformation now within reach?

Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

Krugman is making the point that the upcoming 2012 elections are going to be important for many reasons. A big one is that they will decide whether the political right gets to continue blocking technological advance in the energy area. The sad fact is that China is quickly becoming a leader in this area (along with Germany) and the US, which used to lead the world, will soon be a "has been" and utterly negligible. All thanks to the Neanderthal thinking of the Republican party that favours the rich and corruption over the American people and a better future.

The Missing US Energy Policy

I remember teaching high school social studies classes from materials stating that "the end of oil" was at hand. I had to tell them that they would have to give up the idea of owning cars and heating their homes.

Needless to say, that doom-and-gloom scenario never came true. Instead I discovered that my father in the 1930s had been told about "the end of oil" while he was in school. Oh, and over the last 20 or 30 years the idea of "peak oil" has been very popular.

Here is a bit from an article in the Wall Street Journal pointing out that the Bakken formation in North Dakota and Montana puts America back into the same league as Saudia Arabia with oil reserves:

Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

"President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

You'd expect an oilman to make the "drill, baby, drill" pitch. But since 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation's fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.

How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: "No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels."

If he's right, that'll double America's proven oil reserves. "Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," he continues. According to Department of Energy data, North Dakota is on pace to surpass California in oil production in the next few years. Mr. Hamm explains over lunch in Washington, D.C., that the more his company drills, the more oil it finds. Continental Resources has seen its "proved reserves" of oil and natural gas (mostly in North Dakota) skyrocket to 421 million barrels this summer from 118 million barrels in 2006.

"We expect our reserves and production to triple over the next five years." And for those who think this oil find is only making Mr. Hamm rich, he notes that today in America "there are 10 million royalty owners across the country" who receive payments for the oil drilled on their land. "The wealth is being widely shared."

The actual estimating of "reserves" is tricky. The lesson I learned is that governments don't estimate oil reserves. They rely on oil companies. And oil companies have no incentive to find oil for more than a 20 year window into the future, so they will always be predicting the "coming end of oil". Here's the Wikipedia estimate of oil reserves.

Another fundamental lesson to learn from the ridiculous history of decade after decade "end of oil" proclamations: modeling is hard. The conclusions follow very closely from your assumptions. The infamous Club of Rome made ridiculous assumption that "most of the exploitable oil has already been found" and that "energy use will rise exponentially". Both of these are wrong. The amount of reserves is a function of need and ingenuity. The use of energy is tied to technological innovation. Cars today normally get three times and could easily get five times the mileage of cars 50 years ago. As a society matures, infrastructure expenditures fall relative to other consumption, so energy use falls. Oil use has been declining for over a decade in the US. It isn't growing exponentially.

Peak Oil

For the doomsday crowd that follows regular predictions of gloom-and-doom, the "peak oil" story has been a good one.

The typical "picture of doom" is something like this from Wikipedia:

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That picture is pretty convincing. We are on the slide to perdition. Only a bleak and hopeless future awaits us...

But wait a second. Here is a more recent graph from an article in the Houston Chronicle:

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The article goes on to report a "new peak" in production:

North America appears headed for an oil renaissance, with crude production expected to hit an all-time high by 2016, given the current pace of drilling in the U.S. and Canada, according to a study released by an energy research firm this week.

U.S. oil production in areas including West Texas' Permian Basin, South Texas' Eagle Ford shale, and North Dakota's Bakken shale will record a rise of a little over 2 million barrels per day from 2010 to 2016, according to data compiled by Bentek Energy, a Colorado firm that tracks energy infrastructure and production projects.

Canadian crude production is expected to grow by 971,000 barrels per day during the same period, with much of the oil headed for the U.S.

Combined, the U.S. and Canadian oil output will top 11.5 million barrels per day, which is even more than their combined peak in 1972.

Goldman Sachs has estimated the U.S. could move from being the No. 3 oil producer behind Saudi Arabia and Russia to the No. 1 spot by 2017.

It's a reversal of the steady downward production trend that started after 1971, when U.S. oil production peaked around 9.5 million barrels per day.

I know this is a shock and disappointment to the end-of-days crowd. But this is an old story. If you followed the Club of Rome with its best seller in the early 1970s, the book "Limits to Growth" you've seen this tale before. It is so convincing. The end is nigh! Repent!

But human ingenuity keeps foiling that tale of gloom and despair. It is so seductive to believe that there is no hope and we must give up our sinful "modern ways" and go back to our pastoral past when we were disease ravaged and lived an average of 34 years. But those pesky scientists and technologists keep ruining out return to a "golden age" by creating new techniques or helping us conserve or producing a new substitute. This story is older than civilization. But the siren call of "repent! the end is nigh!" keeps winning because it appeals to our dark side that expects us to be punished for "having it too good".

The Club of Rome pessimists are still in business and no doubt still selling their siren song of "the end is nigh!". But you are better off reading "The Ultimate Resource" by Julian Simon. Unlike the Club of Rome, Simon has been right more than wrong. But unlike the Club of Rome, Simon is ignored by the press. It is so much easier to sell papers with the story of doom-and-gloom. Nobody wants to hear that we will "muddle through" or that we can count on "human ingenuity". We want morality plays. We want punishment for sinful ways, the excesses of the past. Nobody wants dull fact, reasoned judgement, and a scientific attitude. It doesn't sell.

Oil and Technology Opening the Door to Energy Self-Sufficiency for the US

Here is a bit from a press release by the American Chemical Society:

New technology that combines production of electricity with capture of carbon dioxide could make billions of barrels of oil shale — now regarded as off-limits because of the huge amounts of carbon dioxide released in its production — available as an energy source. That’s the topic of the latest episode in the American Chemical Society’s (ACS) award-winning “Global Challenges/Chemistry Solutions” podcast series.

Adam Brandt, Ph.D., notes in the podcast that almost 3 trillion barrels of oil are trapped in the world’s deposits of oil-shale, a dark-colored rock laden with petroleum-like material. Brandt and colleague Hiren Mulchandani are at Stanford University.

The United States has by far the world’s largest deposits in the Green River Formation, which covers parts of Colorado, Utah and Wyoming. The domestic oil shale resource could provide 1.2 trillion to 1.8 trillion barrels. But concerns over the large amounts of greenhouse gases — mainly carbon dioxide — released by current methods prevent many companies from trying to extract oil from shale.

Brandt’s answer is EPICC — a self-fueled method that generates electricity, as well as the heat needed to produce that electricity from shale. The report, which appears in ACS’ journal Energy & Fuels, describes how EPICC could generate large amounts of electricity without releasing into the atmosphere carbon dioxide from burning the shale. That carbon would be captured and stored underground as part of the production process.

The new podcast is available without charge at iTunes and from www.acs.org/globalchallenges.

The gloom & doom crowd is going to be seriously disappointed. It reminds me of those in the 15th century gnashing their teeth about the disappearance of old oak forest just as Britain was rising to be the world's sea power. Or those doom & gloomsters who have been rushing about for the last 50 years warning about "peak oil". It is always very popular to linearly extrapolate from the past and discover doom awaits us. But their requires a steadfast ignorance about human ingenuity and technological change. The doom & gloom crowd always ignore "the ultimate resource" as they weave their tales of resource shortages and the doom that awaits us.