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Global Insights, Strategies and Opportunities for a Sustainable Electric … · 2019. 9. 17. ·...
Transcript of Global Insights, Strategies and Opportunities for a Sustainable Electric … · 2019. 9. 17. ·...
Global Insights, Strategies and
Opportunities for a Sustainable Electric
Energy Future
John N. Doggett, JD, MBA, Senior LecturerGlobal Management, Entrepreneurship & Sustainable Energy
McCombs School of Business @ The University of Texas at Austin
[email protected] www.jndoggett.com
Is This a Curse or a Blessing?
May You Live in Interesting Times
Strategic Inflection Points are Scary
▪ “A strategic inflection point is a time in
the life of a business when its
fundamentals are about to change.
That change can mean an opportunity
to rise to new heights. But it may just
as likely signal the beginning of the
end.”
▪ Andy Grove, Only the Paranoid Survive, 1995
Everyone Needs Ugly Baby Glasses
This Is What A SIP Looks Like
Collateral Damage
IN THE BEGINNING
Foundation of Growth and Prosperity
▪ Electricity
▪ Clean
▪ Reliable
▪ Affordable
▪ Water
▪ Clean
▪ Reliable
▪ Affordable
▪ Without electricity, economic growth
and prosperity are impossible.
Pillars of the Community
▪ We only pay attention to the electric
company when “the power is out.”
▪ Everyone “knows” that the electric
company will restore power quickly, at
no additional cost, at any time of the
day or night, even if a hurricane or ice
storm have destroyed everything.
▪ We expect electricity to be available but
don’t want power plants or
transmission lines in our backyards.
▪ How do you square that circle?
PG&E’s Problems Taint Everyone
▪ PG&E Knew for Years Its Lines Could
Spark Wildfires, and Didn’t Fix Them
▪ Documents obtained by The Wall Street Journal
show that the utility has long been aware that
parts of its 18,500-mile transmission system were
dangerously outdated▪ https://www.wsj.com/articles/pg-e-knew-for-years-its-
lines-could-spark-wildfires-and-didnt-fix-them-
11562768885
▪ California commission finds PG&E
falsified records for years▪ https://www.cnn.com/2018/12/15/us/pge-falsifying-
records/index.html
Politicians Now Attack Electricity
▪ “We need to say that those who are
throwing the carbon into the air that the
rest of us have to breathe, that the rest
of us have to deal with, are the ones
who are responsible for paying for that.
I'm there,” [Senator] Warren said.
▪ Vermont Sen. Bernie Sanders said, “If
you are in the fossil fuel industry,
you're going to be paying more in
taxes, that's for sure.”▪ CNN Town Hall, 9/4/19
The Saudi Refinery Attack
▪ This was not the first attack on a Saudi
facility, but it was the largest and most
sophisticated.
▪ Analysts had identified one of the
targets as being very vulnerable and of
great strategic importance.
▪ So the question is: why were they not
prepared to defend themselves?
▪ California is likely to feel the blunt the
most since they get 21% of their oil
from the Saudis.
“Managing” The Market
If #1 and 2 Stumble . . .
The US Can’t Fill The Gap
Global Warming and Climate Change
Per Capita vs. Total Amount
Look At The White Circle
China Emitted Half of US in 2000
Did You Know This?
EU Carbon Market Collapsed in 2013
▪ The E.U.'s Emissions Trading Scheme
set an overall cap on carbon emissions
for about half of Europe's industries.
Companies get a certain number of
pollution permits that they can trade
among themselves. As the cap ratchets
down each year, the number of permits
is supposed to dwindle and the "price"
on pollution keeps rising.
▪ Assumed that the financial pain would spur
investment in “clean” energy.
A “Glut” of Permits
▪ More than a decade ago, there was a
glut of European permits. Policymakers
initially gave too many away, and then
there was the sub-prime created
recession. So Europe's emissions are
well under the cap and permit prices
had been hovering below $9 per ton
since 2011.
▪ When the EU failed to delay the release
of new permits, the price of carbon
collapsed to $3.40 a ton.▪ https://www.washingtonpost.com/news/wonk/wp/2013/04/20/europes-cap-and-trade-program-is-in-
trouble-can-it-be-fixed/?noredirect=on
California’s Cap & Trade Regime
▪ Since May 2017, every allowance put up
for auction has been snapped up. That
has inspired another concern:
▪ Industries could buy and hoard so many
allowances to emit greenhouse gases now that
they might not need to actually reduce emissions
when the state’s emission target becomes
especially stringent.
▪ A 2016 law established target of
reducing greenhouse gas emissions to
40% below 1990 levels by 2030.
Best Designed Plan Ever?
Business Respond to Incentives
▪ The danger of hoarded emissions
allowances: Businesses buy excess
allowances now, while their emissions
remain below statewide limits, and use
them in the future so they don't have to
install antipollution equipment. As a
result, emissions remain higher in 2030
than the target.▪ (California Legislative Analyst Office)
▪ https://www.latimes.com/business/hiltzik/la-fi-hiltzik-
captrade-20180111-story.html
Regional Greenhouse Gas Initiative
▪ The Regional Greenhouse Gas Initiative
(RGGI) was the nation’s first multi-
state, market-based program designed
to reduce emissions of carbon dioxide
(CO2) in the electric power sector.
▪ RGGI is a cap-and-trade system that
applies to CO2 emissions from electric
power plants that generate 25
megawatts of electricity or more.
RGGI’s Member States
▪ The program began in 2009, was
strengthened after a comprehensive
review in 2012, and currently features a
tightening emissions cap through 2020.
▪ Nine states currently participate in
RGGI: Connecticut, Delaware, Maine,
Maryland, Massachusetts, New
Hampshire, New York, Rhode Island,
and Vermont. (New Jersey participated
in the program through 2011, before
exiting at the end of that year.)
RGGI Is A Big Program
▪ RGGI states cover 1/6 of the U.S.
population and 1/5 of the nation’s GDP.
Most of the nine states’ electricity is
derived from fossil fuels.
▪ RGGI sets annual cap for the region’s
aggregate CO2 emissions from electric
power sector. Cap declines 2.5% per
year from 2015-2020. Pollution permits
(‘allowances’) are regularly auctioned
to power plants. One allowance is
equivalent to one ton of CO2.
RGGI Impact or Fracking’s Impact?
▪ Success of GHG reductions: Across
the RGGI region, CO2 emissions have
dropped over 35% since the program’s
launch in 2009—thanks in large part to
fuel-switching (away from the dirtiest
power plants), improved energy
efficiency, and growing renewable
energy output.▪ Source:
https://www.ceres.org/sites/default/files/Fact%20Sheets
%20or%20misc%20files/RGGI%20Fact%20Sheet.pdf
Carbon Tax
▪ A carbon tax is a fee that a government
imposes on any company that burns
fossil fuels.
▪ The purpose of a carbon tax is to
reflect the true cost of burning carbon.
Those costs are borne by those who
suffer from the effects, such as
homeowners, farmers, and ultimately
the government. Carbon taxes make
sure companies and consumers pay for
the external costs they impose on
society.
Carbon Tax 101
▪ To implement a carbon tax, the
government must determine the external
cost for each ton of greenhouse gas
emission.
▪ One group, the U.S. Interagency Working
Group on Social Costs of Carbon,
developed an estimate of $40 per metric
ton. A tax reflecting this social cost
would increase gas prices by 36 cents a
gallon. It would add $0.02 to the price of
a kilowatt-hour of electricity.
Carbon Taxes Meet Reality
▪ A United Nations report said the price
should be much higher to keep
temperatures from rising above 1.5 C
by 2030. It recommended a carbon tax
of between $135 and $5,500 per ton.
▪ A recent report from the Organization
for Economic Cooperation and
Development found that the average
carbon price across 42 major
economies was $8 per ton in 2018. ▪ https://www.thebalance.com/carbon-tax-definition-how-it-
works-4158043
Carbon Tax and Agriculture
▪ The problem for agriculture is that the
tax could increase the cost of a range
of inputs, including electric power,
natural gas-based fertilizers, diesel fuel
and propane needed to run machinery,
trucks, irrigation pumps, etc.
▪ Farmers will spend nearly $35 billion on
fuel and fertilizer this year, about 10%
of their total production expenses,
according to USDA’s Economic
Research Service.
Carbon Tax Means Higher Prices
▪ According to a report by the
Congressional Research Service, a tax
of $25 a ton of carbon emissions would
generate about $100 billion in revenue
the first year, and raise the price of
gasoline about 8%, or 23 cents a gallon
based on average fuel prices between
2013 and 2017. ▪ https://www.agri-pulse.com/articles/12581-top-
item-on-democrats-climate-agenda-faces-ag-
pushback
Some Think Renewables Are Magic
▪ Want 100% renewable energy and zero
traditional energy sources.
▪ Want to phase out natural gas but don’t
understand what happens when the
sun sets and the wind doesn’t blow.
▪ Claim that they want carbon zero
energy but adamantly opposed to
nuclear . . .which produces zero
carbon emissions.
▪ Naïve at best; political at worse.
The Green New Deal
A Bold New Vision or A Bad Idea?
10-Year Cost of Part of GND
▪ $6.8 trillion to $44.6 trillion for guaranteed jobs;
▪ $36 trillion for federally provided universal health care;
▪ $5.4 trillion to create an all-renewable electric system; and
▪ $1.6 trillion to $4.2 trillion for guaranteed green housing.
▪ https://www.rpc.senate.gov/policy-papers/green-new-
deal-nonsense-on-stilts
Who Pays For This?
Competitive Enterprise Institute
If This Estimate Is Accurate
When You Add Container Ships . . .
Cruise Ship Pollution in Greece
▪ A recent study by the European
Federation for Transport and
Environment found that sulfur oxide
(SOx) emissions from cruise ships in
Greece were 120 times greater than
those produced by all the small
vehicles circulating in the country.
Cruise Ship Pollution in Europe
▪ In 2017, the ships of one of the sector’s
biggest cruise companies dumped 10
times more sulfur oxides into the
atmosphere along Europe’s coasts
than the 260 million cars that were in
circulation on the continent that year.
▪ http://www.ekathimerini.com/243807/article/ekathimerini/
business/alarm-over-air-pollution-emitted-by-cruise-ships
Very Straight Forward Technology
1967 French 240 MW Tidal Power Plant
http://en.wikipedia.org/wiki/Image:Rance_tidal_power_plant.JPG
Producing Electricity for 52 Years
Sihwa, Korea 254 MW on Tidal Inflow Only
South Korea’s Ocean Energy Portfolio
Ocean Currents = Electric Power
NASA/JPL/Cal Tech Ocean Current Prototype
Seawater District Cooling
Ocean Thermal Energy Conversion
This Beats All Energy Sources
This is the Holy Grail
Chinese Tide-Driven Turbine Farm
Chinese Dynamic Tidal-Power Wall
Chinese Ocean Thermal-Energy
Conversion
Applied’s Xi’an R&D Plant
Will China Dominate Clean Energy Tech?
▪ When Xie Lina, a 26-year old Applied
Materials engineer in Xian was asked
whether China would play a big role in
clean energy in the future, she was
surprised by the question.
▪ “Most of the graduate students in
China are chasing this area,” she said.
▪ “Of course, China will lead everything.”▪ New York Times, March 17, 2010