Beginnings and Endings

This week I completed my book on residential renewable energy. Our company also secured some second round funding. In addition, we also got some further encouraging results in our prototyping efforts. It's all good, as they say.

Things are not going so well in the alternative fuels business as a whole, however. Very generally, the press has ceased to interest itself in the industry---always a bad sign—and according to one of my friends who heads a trade association, private funding has all but forsaken the business. Only the algal fuels business still has legs, and at long last doubters are beginning to appear there as well.

Obviously, a year and a quarter of moderate fuel prices have done much to discourage investment. Uninformed financiers see no reason to believe that the price spikes of 2008 will return, and consequently they do not see alt fuels as constituting a very good business.

But evidence has recently appeared that indicates that future high petroleum are altogether likely, coming from, of all places, the International Energy Agency. One of the Agency's researchers, in an unauthorized interview with a reporter for the Guardian, stated that not only was Peak Oil a reality but that it had been for several years and that global oil production would be unlikely to rise much above its current level. This individual further stated Saudi Arabia no longer had any real swing capacity and that Agency personnel estimated Saudi reserves at no more than 100 billion barrels or about that of Iraq, the number two country in conventional petroleum rankings. This same researcher noted fairly obviously that the American business community, as well as most politicians, does not like to see this sort of information widely promulgated, and that the Agency has tended to put the most optimistic gloss possible on its findings to fend off politically motivated criticism.

Interestingly, the Obama Administration, which has been rather more supportive of alternative energy than was its predecessor, has issued no statements as to the possibilities of coming petroleum shortfalls nor has it advanced any coherent policies for dealing with them other than chivvying the auto makers to improve fuel efficiency. Overall, the Administration appears to lack any comprehensive energy policy and apparently has no plans in place for managing the difficult transition from fossil fuel and antiquated nuclear reactors to renewables and possibly some more advanced forms of nuclear generation.

But then careful planning is not something in which present day politicians engage. It's not in their skill set whereas managing public opinion is. Almost any politician of natural stature in either party believes that he or she can either neutralize public consternation over waning fuel availability when it occurs or, better yet, direct public anger attendant upon such shortages toward convenient scapegoats. Or suggest nonsensical policies such as extensive offshore drilling in U.S. coastal waters.

I would further note that the Administration has expressed confidence that the U.S. and China can come to some agreement to mitigate carbon emissions and that such an agreement will provide the basis for further international agreements at the Copenhagen summit on climate change next month. Don't hold your breath. China's industrial development goals cannot possibly be met absent massive increases in carbon emissions. There's no way they can start retiring coal plants and building wind farms while continuing to increase energy consumption. Embracing renewables generally entails reducing energy consumption and stabilizing industrial output, not the other way around. Figure China will continue to pollute like hell for the twenty years. Why only twenty? Because in twenty years they will have drawn down their coal reserves at the current pace of consumption.

Incidentally, I take issue with those predicting China will eclipse the U.S. as the premier industrial power any time soon. Unlike Japan, which is a true industrial and scientific leader, China's industrial establishment is essentially parasitic. That may change, but I don't see many signs of an impending transformation. In the wake of World War II, Japan produced a host of truly innovative entrepreneurs who literally changed the course of industrial society and consumer culture. True, Japan started out as a gigantic job shop and briefly followed the same course as China today, but it didn't remain such.

Japan was also able to industrialize successfully with almost no fossil fuel resources of its own and after initial problems with industrial pollution was able to achieve reasonably good air quality. China has different priorities and a markedly different energy policy.

China does enjoy one advantage as it confronts looming energy shortages. Because it is an autocracy its leadership can make hard decisions quickly and carry them out determinedly. Still, a hard landing is likely simply because the pace of development has been so accelerated and the further resources to sustain such a pace are unlikely to be forthcoming.