Many of you may know Denis Pombriant as a CRM analyst. He is way deeper than that as his bio says "Denis Pombriant lives in the Boston area and writes about the enterprise software market. Denis specializes in disruptive innovation and its effects on business and markets. He has been researching and writing about climate change for a decade."
He has recently finished another book, this time on sustainability and I invited him to write a guest column about it.
I consider Denis a friend - besides analyzing technology vendors, we share a love for history and good food. On this topic, I am ambivalent - I catalog many renewable innovations on the New Florence blog, but renewable energy has repeatedly disappointed, and so we need to show it tough love not continue to write blank checks as I wrote here. However, he makes many points that merit healthy discussion
With the Green New Deal, the national discussion about pollution and global warming has taken on the cast of an economic challenge and this should be seen as a watershed. But what kind?
As I write in my book, “The Age of Sustainability: The Space Race, Disruptive Innovation, and Ecosystem Services,” the science and technology aspects of solving climate change are already well in view. What’s missing is a discussion of economics.
Solving climate change is like solving a Rubik’s Cube. You have to solve all sides at once else you could end up with one perfect side while the others still look like a dog’s breakfast. Solving “the cube” requires minute tradeoffs and negotiations in one’s mind while iterating towards a solution and much the same can be said of climate change. To solve climate change, we need interlocking solutions for carbon abatement, energy provision, and economics.
Up to the present moment a discussion of climate change might likely include controlling emissions and the tacit assumption that our energy paradigm, our reliance on fossil fuels, can somehow remain intact. But both are flawed assumptions. There’s already too much carbon in the atmosphere and oceans, enough to cause severe weather conditions that are getting worse. So, controlling emissions will, at best, slow down the rate of increase but that’s not a solution.
Also, our reliance on fossil fuels is nearing an end, something few want to discuss. But we haven’t found net new oil anywhere on earth since 2003 and the current boom in hydraulic fracking may help extract oil from existing fields, but it’s not a discovery tool. Experts tell different but related stories about oil. For instance,
A 2013 article in The Guardian states, “Official data from the International Energy Agency (IEA), US Energy Information Administration (EIA), International Monetary Fund (IMF), among other sources, showed that conventional oil [production] had most likely peaked around 2008.”19 The article quotes Dr. Richard G. Miller, who worked for BP from 1985 until retiring in 2008, saying, “We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply. . . .New discoveries have not matched consumption since 1986. We are drawing down on our reserves, even though reserves are apparently climbing every year. Reserves are growing due to better technology in old fields, raising the amount we can recover—but production is still falling at 4.1% p.a. [per annum].”20
–The Age of Sustainability
In addition, the 2014 BP Annual Report stated that the Earth had a 53-year supply of oil remaining in the ground (proven reserves) if extracted at current rates. At some point soon, we’ll need to face the reality that we need an energy plan B because it will take time–probably all of those remaining years–to convert to renewable energy sources. So, we’re faced with the unpleasant reality that the current energy paradigm is doing significant harm to the ecosystem we live in, and it’s running out. Humanity is cornered but there are ways out of this maze.
Also keep in mind that we only burn about 60 percent of the fossil fuels we extract the rest goes into products. For instance, there are 500 pharmaceuticals based on coal and it’s an important part of steelmaking. Natural gas is used extensively in making polymers like plastics and other materials, and most carbon sources can be used in making fertilizers, rubber, paints, varnishes, glass, cement, and much more. Petroleum is also the raw material for making jet fuel, something we’ll always need for air travel and defense. So, the fossil fuels that are left are rapidly becoming too valuable to burn in most applications.
Enter economics
The question of economics is becoming important for two reasons. First, it is the gateway to a discussion of writing down the significant investments in the fossil fuel paradigm. This amounts to many trillions of dollars in global ventures supporting oilfields, ocean-going drilling platforms, pipelines, refineries, mines, tankers and more. Most of them will become worthless over the next half century as our energy diet inevitably shifts. There are also storage facilities, liquified natural gas terminals, and distribution channels that we are barely thinking about.
Just consider pipelines. In the US alone there are more than 185,000 miles of liquid petroleum pipelines; 320,000 miles of gas transmission pipelines and more than 2 million miles of gas distribution pipelines bringing natural gas to homes and businesses.
We need a serious discussion about how to write down all of this sunk investment without causing a global recession.
The second economic question worth considering is the so-called Green New Deal, a call for government involvement in all of this. Certainly, there’s a role for government in this massive transition. For example, supporting road construction to both repair the existing infrastructure and to prepare us for electric driving makes sense and is a traditional government responsibility. But there doesn’t appear to be a good reason for government nudging, or investment in, such things as electric vehicle manufacture for instance.
Most major car companies have already announced plans to deliver electric vehicles to the market as soon as this year. It’s a long list including the usual suspects like Ford and GM and most Japanese and German manufacturers including Porsche and BMW. But also, smaller companies like Volvo and the super luxury maker Aston Martin have all made commitments to building electric vehicles.
K-waves
So the Green New Deal exists in a very different economic time and space than its namesake, New Deal from the Great Depression and some contrarians are already griping about the significant costs that could be involved, perhaps rightly so. The original New Deal formed a Keynesian economic stimulus, an approach that put money into the pockets of working people to get a stalled economy moving again. But that’s not the case today.
To understand this economic moment, you need to understand the normal ebbs and flows of modern capitalism that began in the Industrial Revolution. Research shows that on a schedule of 50 to 60 years, the capitalist economy goes through a cycle of invention, distribution, consolidation and decline based on one or more significant disruptive innovations.
For instance, there was an age of steam and steel in which steel-making and steam engines powered the economy. When we developed steam engines small enough to fit in boats and on rails, we ignited a huge transportation disruption and we learned to build those engines out of steel while laying down steel railroads that spanned the continent. That age, as all ages do, eventually commoditized. We still rely on steam to generate electricity and we still build skyscrapers and bridges from steel, but neither drives the economy as they once did.
Today we live at the tail end of the age of information and telecommunications. From the time the silicon chip was patented in 1959 until the present, that innovation has changed or inspired such industries as computers, software, cloud computing, handheld devices, and social media, to name a few. Communications is digitized and from POTS (Plain Old Telephone Service) grew the Internet and communications satellites and much more.
The next age
K-waves take shape because a technological disruption ideally fits the demands of an age. Steam power served the power needs of an industrializing society, railroads and the telegraphy system they brought along, knitted together a continent-girding republic. Computers and modern telephony enabled the information management needs of modern business and finance.
The next K-wave will focus on the energy needs of a world population that will reach 10 billion by mid-century. Some of those needs are well established such as transportation but others are only now emerging. Consider fresh water for example. Many countries are experiencing the early climate-linked effects of desertification when insufficient rainfall and irrigation make farming difficult or impossible. Other regions are experiencing too much rain and flooding during critical planting seasons. Historically, we’ve regarded fresh water as an ecosystem service, something that nature provided and that we didn’t need to think very hard about but that’s changing.
Syria provides an important lesson. Drought hampered wheat farming in Syria, forcing agricultural people to migrate to cities where crowding and resource scarcity contributed to widespread dissatisfaction with their government. The resulting civil war is ongoing, but the diaspora of millions of Syrians has destabilized governments throughout Europe and beyond. The planet cannot afford for this to normalize.
So, some of the new energy inputs will need to be dedicated to things we've taken for granted like provisioning fresh water and providing better irrigation support for dry farming regions. We’ll also need to manage water where it is hyper abundant. There will be other resource needs that we traditionally got from nature that we will need energy to satisfy too.
Final thoughts
The great thing about K-waves is that the seeds of the next one are planted in the present though we might not immediately realize their significance. The first computers were developed in secret near the end of WWII or just after. They were room-filling things made of vacuum tubes and they were hand soldered together. The tubes gave off enormous amounts of heat too. They were the impractical playthings of geeky scientists and few people thought they would lead to pocket size devices that are tens of thousands of times more powerful today.
Our handheld devices represent what could be the ultimate commoditization of computing. There may be a lot of life left in the information technology sector but, like steel-making, it is becoming simply part of the economy and not its driver.
The new economic driver is likely sustainability. The term sums up the most important needs humanity faces in this century. That need translates into demand and with the global population trend this demand will likely translate into the greatest jobs creating, industry producing, and wealth generating opportunity in human history. Failing to take advantage of this opportunity could also spell doom for our species. But history shows we’ve always made the right decisions in similar situations. The opportunities only come around every 50 to 60 years and
Renewables: The “great dual challenge,”
The new General Electric is a shell of its former self as it sheds most of its business units and its industrial coverage is down to its aircraft engine, renewable, and power plant businesses. GE CEO John Flannery has called the three “highly complementary businesses poised for future growth”. Yes, each is based on turbine technologies, but I can see how green zealots cringe when they see the association between fuel guzzling planes, coal and natural gas-driven utilities and wind turbines. It is, however, the reality as GE sees it.
The Washington Post has an article on BP and how the oil giant was “forced to shrink to greatness”. It shows how the US government almost put the company out of business after the Deepwater Horizon explosion and how the rest of Big Oil shunned it. It has trimmed down and is starting to invest again. Renewable investments may reach $500 million a year, a tiny fraction of BP’s $15 billion or more in capital spending. Its big bet is on natural gas and that utilities will increasingly move from coal to gas. CEO Robert Dudley says “This is not a race to renewables. It has to be a race to reduce emissions,”The “great dual challenge,” is to do that while generating enough energy to lift people out of poverty and absorb population growth.
You could argue that GE and BP are not ardent supporters of renewables, but how do you explain the situation in Germany? Foreign Policy says
Yet, in spite of spending hundreds of billions of euros on subsidizing renewables, Germany will struggle to meet its 18% renewables target for 2020. The country continues to rely heavily on its coal and lignite, and more recently on natural gas from Russia.
Progress is more visible in smaller countries like Denmark (especially with wind), Kenya (especially with solar) and Iceland (with geothermal). If you include hydro power in the renewables bucket (many hard-core green fans argue that dams cause ecological damage so aren't as as sustainable) Norway, Canada and Costa Rica are shining examples. The little island of Palau has announced plans to move completely to solar power in the next few years.
There is also good news from the state of California. Assembly Bill 32 pushed the state to reduce emissions by 2020; California did it in 2016, dropping from 1990’s 431 million metric tons to 429 million metric tons.
The next big hope is China which is said to be investing $ 360 billion (mostly in wind and solar energy) during the five-year 2016 to 2020 period.
Renewables are making nice gains in the utility sector, but that is not being matched in transportation (tankers, trucks etc.) and heating – which together account for 3/4 of global energy consumption.
A number of fan boys keep arguing otherwise, but the disappointing German experiment in particular tells us the BP comment about “the dual challenge” will be our reality for the foreseeable future.
Renewables are a bit like Artificial Intelligence. Every few years we get excited with progress but you look a few years later and the adoption progress is uneven.
July 18, 2018 in Industry Commentary, Sustainability, Green Computing | Permalink | Comments (0) | TrackBack (0)