Cheap Power = Prosperity

Climate change, pollution, famine, war, water shortages, terrorism; it’s enough to give one “collapse anxiety,” but is it accurate? Not according to Robert Bryce, an energy writer-researcher who has been covering business since 1989. His books, “Power Hungry,” and the recently published “Smaller Faster Lighter Denser Cheaper,” are exhaustively researched handbooks on how technologies, particularly in energy, are making our lives better—and greener.

In April 2010, he joined the Manhattan Institute as a senior fellow in the think tank’s Center for Energy Policy and the Environment. That we are doomed to scarcity and shortage, says Bryce, is the view advanced by neo-Malthusians and the “de-growth” movement, whose prescriptions by now are familiar: Nuclear energy is bad. Genetically modified food is bad. Coal isn’t just bad; it’s evil. Oil is bad. Natural gas, once thought to be OK, is now bad because the process used to obtain it—hydraulic fracturing—is bad. These all must be replaced by Earth-friendly sources like renewables.

“Neo-Malthusians have overlooked a critical factor that has improved conditions for mankind for centuries: Innovation.”

Catastrophists claim that we are running out of essential commodities. We will surely pay for our sins against Earth. Rubbish, asserts Bryce. The neo-Malthusians have overlooked a critical factor that has improved conditions for mankind for centuries: Innovation. We are continually making things “Smaller, Faster, Lighter, Denser, Cheaper”—hence the title of his new book. The ability to innovate not only makes us richer, it allows us to do more with less. Nor, says Bryce, is it dependent on ideology.

“It might even survive Republicans and Democrats,” he quips. Business leaders and investors, he argues, must keep this in mind and not be dissuaded or discouraged by the incessant drumbeat of doom. He unabashedly celebrates business and the entrepreneur, because they are driving the trend toward smaller, faster, lighter, denser, cheaper. He quotes the 2013 book “Conscious Capitalism,” written by his friend and fellow Austin resident, Whole Foods CEO John Mackey.

“Two hundred years ago, 85 percent of the world’s population lived in extreme poverty (defined as less than $1 a day); that number is now only 16 percent.” Other examples of innovative technologies that allowed us to do more with less include:

  • Over four decades, Americans have tripled the number of miles flown; yet domestic oil consumption increased just 30 percent.
  • In 1970, it took 4,842 BTUs to move a single passenger one mile in a car. By 2008, that figure had declined to 3,501 BTUs, a reduction of about 28 percent.
  • In 1990, sulfur dioxide emissions were 23 million tons. In 2005, they were just 14.7 million tons, according to the EPA.
  • Between 1978 and 2013, Intel increased the computing power density of its best chips 78,000-fold, while shrinking its circuits more than 130-fold.

Like them or not, argues Bryce, hydrocarbons and nuclear materials are denser sources than renewables. They allow us to produce large amounts of energy from relatively small pieces of land. If you want to replace U.S. coal-fired capacity with, say, wind, then find a land area the size of Italy—or the combined area of Kansas, Missouri and Iowa. Keep in mind that the U.S. already has more wind capacity, about 60,000 megawatts in 2012, than any other country.

“Regardless of what you think about carbon dioxide or climate change,”says Bryce, “the best way forward is to embrace natural gas and nuclear.” Fortunately, business is pioneering new technologies such as TerraPower, a private company, bankrolled in part by Bill Gates, that is pursuing a novel traveling wave reactor design. (The company’s vice chairman is Nathan Myrvold, former Microsoft CTO and holder of a doctorate in theoretical physics from Princeton.)

Such initiatives, he says, will further propel the competitiveness of the U.S., which already enjoys the cheapest cost of electricity among the 27 member nations of the EU.

What are the biggest myths about energy?

The biggest myth is that we’re running out of energy. The reality is that we’re just beginning to understand the availability of energy resources that we have, particularly here in the U.S. Remember, it was as recent as 2005 that ExxonMobil CEO Lee Raymond said that natural gas production in North America has peaked. ExxonMobil is a pretty savvy outfit, but they got it wrong. What’s happened since 2005? U.S. natural gas production has increased 41 percent. The myth that we’re running out of energy has been predominant now for a century, and what keeps happening? Innovation. It’s evident in oil and gas exploration, in the downstream sector, in refining, and also in the way that we’re consuming energy. We’re becoming incredibly more efficient. Yet this myth that we’re running out of energy continues to prevail. It’s what certain sectors of society use to justify their rent-seeking and this has been damaging to the U.S. economy.

What will play out with the endlessly debated Keystone XL pipeline and what do you reckon the delay has cost the economy?

It’s really impossible to estimate the economic costs of the delay. In my view, the Keystone XL pipeline doesn’t matter anymore. Why? Because if you look at the amount of oil by rail loading capacity that has been built in North Dakota and is being built in Alberta and North Dakota alone, it represents a million barrels a day; Alberta, another million barrels a day. Keystone was designed for 800,000 barrels a day. So, the combination of the new push for moving more oil by rail has, in many ways, obviated the need for Keystone.

Clearly, moving oil by pipeline is safer and cheaper. But at this point, with the new rail information in place, the oil producers in the Bakken and in Canada are realizing, “We have more flexibility to move our oil by rail.” So this continuing delay on Keystone has led to a predictable response—oil is getting to market by rail instead of by pipeline.

You make a compelling case that the cheaper the energy, the better for the economy, especially for middle- and lower-wage earners. Yet, the prescription from the policy elites is to make energy more costly. Why?

It intrigues and horrifies me how the de-growth idea has become more mainstream. It is being carried by the most famous and probably the most influential environmentalist in America, Bill McKibben. In getting himself arrested protesting the Keystone pipeline in front of the White House, McKibben said he wants a twenty-fold reduction in global hydrocarbon use. And no one ever questions it. Instead,the reaction is, well, of course, that’s what we need to do to prevent climate change. This is a radical agenda, and it’s something that represents an incredible threat, not just to the U.S. economy, but to the global economy. These people want to take us backward. They believe fundamentally that to go forward, we have to go backward. This is silly on its face. For example, one of the prescriptions being advanced is having a global referee to decide who gets to use what energy. We’re going to cede our sovereign power to some unelected entity that gets to decide what size car we drive or how many miles per year we can fly?

Yet, Sierra Club attracts corporate, as well as individual, donations. How do you account for that?

Former Mayor Michael Bloomberg gave the Sierra Club $50 million to fund their “Beyond Coal” campaign. Again, this is deeply silly. Yes, Sierra Club is fighting coal-fired power plants here in the U.S., but they’re also fighting them, with other environmental groups, around the world. Since 1973, coal consumption has grown faster than any other form of energy on an absolute basis. Over the last 10 years, coal use has grown as much as the growth in oil, natural gas, nuclear and hydro combined. You can say “Beyond Coal” if you have other forms of energy to tap. But how do you say you want to go to “Beyond Coal” to someone who doesn’t have electricity? That is not just economically objectionable, it’s morally objectionable.

“Power density,” which is a measure of the energy flow harnessed in a given volume or mass of an energy source, is a key concept in your book. Given the basic physics involved, why is so much money spent developing fuel sources that have low power densities?

Never underestimate the power of the image of so-called green energy. Why are so many people intrigued by these projects? Because they have this imprimatur of being green, and most simply don’t understand the basic physics behind it. I want the public to understand the basic physics and math of energy. Many of these “green” investors are chasing the subsidies, and therein lies one of the big issues. Look at what, in fact, some of the utility executives and independent power generators have said: “Why are they putting money in solar?” With regard to the big solar projects being built in California, I remember one CEO saying that these projects have some of the lowest risk he’s seen as a utility executive. Why are they de-risked? Because the government is providing them with massive subsidies.

Couldn’t technological innovation help boost the power density of some low-density renewables?

No. Wind energy is constrained. We’ve seen bigger and bigger wind turbines. Yes, they’re more powerful, but because they’re bigger, you have to space them farther apart. According to numerous studies, including analyses that I’ve done myself on the power density of wind energy, it’s one watt per square meter, period. End of story. Elvis has left the building. That’s it. Biofuels are a fraction of that, maybe a third of a watt per square meter.

Countries like Germany and Denmark have pulled back on wind—why?

They’ve pulled back on renewables in general because they have come to understand the incredibly high cost. Since 2000, Germany spent roughly $100 billion subsidizing renewable energy, and what are the Germans doing now? They’re going to close their nuclear plants because the Green Party in Germany is so powerful, and they are going to replace them with lignite-fired—low-rank coal-fired—power plants. This is their CO2 strategy? This is how they’re going to save the climate? Makes no sense whatsoever. And further, when you talk about competitiveness, the biggest industries in Germany are going to the German government saying, “We need a rollback on this Energiewende project—that’s the name for their renewables effort—because it’s simply pricing us out of the market.”

Industry will flee Germany if this continues. BASF, the biggest chemical maker in the world, recently said that moving all of their operations from Germany to the U.S. would save on the order of $700 million a year in energy costs. So, industry gets it.What do you make of one of the great buzzwords in contemporary business: sustainability? It’s one of these squishy words frequently used by marketing people, particularly by European companies that can mean anything you want. I’ve never seen a definition. In fact, I know [Whole Foods CEO] John Mackey was invited to speak on sustainable business practices somewhere, and he responded, “When you send me a definition for ‘sustainable,’ I’ll give you an answer on my giving a speech.” Of course, he never heard back. On one level, it’s a buzzword that is devoid of meaning, but which has no value in practice. However, there is also an insidious anti-growth side—anti-economy, anti-jobs. For example, I received an email the other day from the Environmental Law Institution (ELAW), which is trying to block a coal-fired power plant in India because building a power plant there would destroy this fishing village. Think about it. A wealthy environmental interest group in the West wants to prevent development in India because it is concerned about climate change. So they want these fishermen to stay poor and live in their huts because it’s cute? This is fundamentally disgusting.

What actions should business leaders take from the ideas in your book?

It’s up to business leaders to survey their own businesses and determine if their processes are smaller, faster, lighter, denser, cheaper. If so, it should be positive for them and their customers because theyare doing more with less. That’s what we humans have been trying to do since we started walking upright. Getting from here to there faster. Making it smaller, making it denser. This is our nature. And a lot of this palaver is a distraction. If it ain’t profitable, it ain’t sustainable.


J.P. Donlon: J.P. Donlon is Editor Emeritus of Chief Executive magazine.