Everything you think you know about energy is wrong.
In their new book "The Bottomless Well," Mark Mills and Peter Huber preach that efficiency is wasteful, waste is good and fossil fuels are the next best thing to nuclear power. They say America can thank environmentalists for extra coal burned today.
Star-Ledger technology reporter Kevin Coughlin asked Mills, a physicist and partner in a technology investment firm, to explain.
Let's start with your subtitle: "The Twilight of Fuel, The Virtue of Waste, And Why We Will Never Run Out of Energy." Where's this endless energy going to come from, if this is the twilight of fuel? And what's so great about waste?
The world is awash in energy. Total heavy-oil resources (tar sands) exceed 2 trillion barrels, enough for over one hundred years of global oil demand. North America, not to mention China and Australia, are awash in coal. Hundreds of years of supply. The winds, sun and oceans similarly have essentially inexhaustible energy in flow. Uranium is ubiquitous in the earth.
The point is that our ability to tap in to the energy sources around us is fundamentally a question of the advancement of technology.
The oil under the deep, hostile waters of the North Sea was not available 20 years ago; it is being extracted for costs well under $15 (a barrel) today. Hundreds of billions of barrels of Athabasca tar sands in Canada are being extracted with today's technology for similar costs. The rest of the trillions of barrels will be unleashed with tomorrow's technology.
As to the "twilight" of fuel … simply put, as our economy expands, and the form in which we use energy changes and becomes more technology-centric, the cost of raw fuel becomes less and less impactful. It moves into the twilight of our economy.
High oil prices 30 years ago crippled the U.S. economy. Today, the economy virtually shrugged off the latest spike in oil prices.
This arises, in large measure, because 60 percent of the U.S. GDP is fueled by electricity. Thirty years ago, the share was 40 percent — and the economy was smaller to boot. The fastest-growing parts of our economy are anchored in the digital age, which is entirely electrically fueled.
Importantly, 95 percent of all electricity is made from domestic fuels that are not oil — coal, uranium, natural gas and rainfall, in that order. And more than 85 percent of the net increase in energy supplied to the American economy since 1980 came in the form of electricity.
With electricity, fuel costs are only a relatively small part of the price you pay for the energy you use. Hence, moving fuel into the twilight of the economic equation.
Shouldn't we be speeding ahead with renewable energy, like solar and wind power?
So far, for most uses, diffuse low-grade energy sources like wind and solar are much more expensive than concentrated sources such as oil, coal and uranium. To be sure, there are significant and growing niches where solar and wind are the best solutions; but they are just that, niches.
Why is efficiency wasteful? Why is waste good?
We don't say efficiency is wasteful; we point to the incontrovertible fact that the overall impact of improving efficiency is to increase consumption.
The U.S. economy is 3 times more efficient today compared to several decades ago, and we use not less but twice as much energy overall. The transportation sector is much more efficient — and overall transportation fuel use is up. Compared to two decades ago, all of the primary electricity-consuming devices are much more efficient — refrigerators, lights, motors, air conditioners — yet total U.S. electric consumption is up. This is the nature of efficiency.
Fundamentally, the more technologies we have to make lasers light, or microprocessors run, the better and bigger our economy. Thus we see the increased consumption of energy — the so- called "waste" — as a virtue, a first-order measure of how good things have become.
History has shown that as new efficiencies come to the new technologies, demand for energy rises, not falls. Compared to the first computer, the ENIAC, today you can buy 10,000 times as much computer in a PlayStation and it consumes 1,000 times less electricity. But every teenager on the planet owns one, and overall that adds up to way, way more power consumption than that miserably inefficient ENIAC in 1946.
You guys are pretty bullish on nuclear energy. But what about Three-Mile Island and Chernobyl? How about the nasty problems of nuclear waste, weapons proliferation and nuclear terrorism?
Nuclear energy is by any measure inexhaustible, and in comparison to all other forms of energy, requires vastly less land and ultimately lower environmental impacts. Clearly it is a technology that must be carefully managed — but this is a task up to the skills of the engineers of the 21st century.
The Three Mile Island accident, while destroying north of $1 billion in assets, caused no fatalities — remarkable for an industrial accident of such economic magnitude. The Soviet Chernobyl reactor provides no useful comparison, as it was a profoundly different design built by the Soviet empire that would have been hard-pressed to make a viable toaster oven.
As for nuclear waste, the quantities are minuscule per unit of energy extracted, and are already in inert ceramic form. Modern science and engineering can easily handle this particular challenge. Clearly the issue of proliferation is a serious one, but is fundamentally geopolitical. Our choices on how to light our PCs and homes will not materially impact rogue nations one way or another.
What makes you so sure that fossil fuels are forever? Do you worry about global warming from burning these fuels?
Our main point is that the issue of global warming quickly devolves into a discussion about proposed changes to our energy economy. We merely suggest that one should fully understand the technology and economic realities of energy.
What's your beef with environmentalists?
The environmental movement certainly deserves some of the "credit" for the increase of 400 million tons per year in the use of coal since 1980. The United States burns a billion tons a year now. The environmental movement is well-known for its opposition to nuclear power and, properly or otherwise, gets some credit for halting the order of new nuclear power plants.
The movement had then, and has now, an unrealistic view of the technology and economics of alternatives. Aside from big hydro dams and burning wood, alternatives supply under 1 percent of our electricity. Add this to the fact that the environmental movement failed to understand that demand for electricity would continue to grow.
It is worth noting — though little noted — that uranium was actually the second-largest source of new electricity over the past two decades, despite the fact that no new plants were built. Utilities were able to improve operations so dramatically that the existing nuclear plants increased their output equivalent to burning another 300 millions tons or so of coal. They can't do this again — the plants are now running at their maximum. Thus, the future looks like a lot more coal unless environmentalists embrace nuclear energy. It will be interesting to see what they do.
Global demand for energy is growing fast, along with population. China and India have huge appetites. Why are you so upbeat about the future of energy?
For the same reasons we are here in the United States — the ubiquity of primary energy resources, and the continued and accelerating capabilities of technology to extract energy from our environment. We're not unrealistic, of course, in understanding that geopolitics and practical realities can cause sometimes serious disruptions and problems in near-term energy supplies. But overall, and in the long-run, energy is abundant, and using more of it is very good for both the advanced digital economies and the expanding economies of the world.
What should U.S. energy policy be?
The single most important thing: to ensure adequate supply of reliable and low-cost electricity. The second: to ensure greater use of oil from stable regions of the world, and to increase the stability of those regions of the world where we buy oil.
You are fellows of the Manhattan Institute, a conservative think tank that promotes free-market economics. How does the institute's philosophy figure in your thinking about energy?
My partner is a fellow of the institute, I am not. Our work is intellectually independent of the institute, but we share many common interests. This was not a funded or client-paid-for book.
© 2005 The Star-Ledger