Energy is development (not just, but also)

In a previous post I suggested that the process of development might not necessarily lead to a great increase of energy per capita consumption (based on the work by Smil). Note, however, that presumes a significant increase in efficiency. The other side of the coin is the lack of access to energy in several developing countries, particularly South Asia and Sub-Saharan Africa, as can be seen in the graph below (source here, h/t The Economist).

This suggests that the distributive problem (between developed and developing countries) is at the heart of any real reduction of consumption per capita, since one might expect that (even with more efficient technologies) in developing countries, catching up will necessarily lead to higher levels of per capita consumption of energy.

Energy transitions and the end (or not) of civilization

Steve recently posted (not I) on the possibility of a big breakthrough in cold fusion technology (hey, he is at the University of Utah after all; on Fleischmann and Pons see here). But even if that occurs in the near future energy transitions tend to be a very slow process as explained by Vaclav Smil (reference below), which should make you a bit more pessimistic.

He suggests that it was in the 20th century that we finally did the transition to oil from coal, and that the 21st should be a slow transition to natural gas, with increasing role, but not yet dominant by alternative technologies. By the way, Smil is way more skeptical than Steve on the possibilities of what he refers to as 'soft energy illusions.'

The process is really slow. He shows that, in the US, only in the 1880s coal surpassed wood as the main energy source, something that occurred in China somewhere in the 1960s, and is still happening in some places in Africa. The 19th century was still part of the millennia dominated by wood burning, and the 20th century was dominated by coal, with oil becoming relevant towards the end. By the way, coal still generates almost 30% of the world's electricity. The figure below shows the time frame of energy transitions.

Given the slow transitions and the effects of biofuel consumption on climate change it would seem that we are doomed. However, Smil is considerably more optimistic (on this he resembles Steve) on the possibilities for the survival of civilization.

The biggest change in last two centuries with respect to energy use is the rapid increase in efficiency. As he notes, in open fires only 5% of wood's energy ends up as useful heat, while today's most efficient furnaces convert around 95% of natural gas to heat. So with better batteries, non-oil based fuels, less wasteful transmission of electricity, and more efficient technologies in general one can expect per capita stocks of useful fossil fuels will be only marginally smaller by the end of the century, and perhaps with a significant reduction on their environmental impact.

In fact, he suggests that with about half today's energy demand it is possible to maintain the quality of life associated with the world's developed countries, and, hence, the eventual decline in oil's share in the global energy supply will not mark the end of civilization (which I'm glad, since I'm kind of personally attached to civilization).

Also, I should point out, increased efficiency may come out of regulation, as noted by Smil. For example, the Corporate Average Fuel Economy (CAFE) regulations, which allowed for a doubling of the average efficiency from 13.5 to 27.5 mpg (and you thought regulations do not work!), were incredibly efficient. The other way to improve efficiency is economic growth (as I argued before; that was I, not Steve).

So it seems that if you want to preserve civilization, growth and regulation is the way to go. Of course that is no guarantee that that we'll get either regulation or the kind of technical change that comes with growth (in particular, austerity seems to suggest a prolonged period of stagnation, but that should not make you happy even from an environmental point of view).

Reference:
Smil, Vaclav (2010). Energy Myths and Realities: Bringing Science to the Energy Policy Debate. AEI Press. Kindle Edition. 

Big news, maybe very big, in alternative energy sources

I have taken to calling my beliefs on the future of energy sources "weird energy." Why? Because the sources I am most interested in seem to violate the Second Law of Thermodynamics. Notice: this is so inviolable, we capitalize it. But they don't.

Why am I so interested in other energy sources? The obvious reason is a quest for zero carbon intensity, so getting rid of the big greenhouse gas. The other one is that the correlation between energy consumption and economic output, no matter how you measure it, and probably no matter when in history you look, is so tight that you could hang wallpaper by it. Some folks think I am weird because of this but, ya' know, data are data when used wisely. And this is really important.

Why think about "weird" sources? Minimally, because none of the current clean alternatives are cheap enough to really matter. They may get there, but if there are cheaper sources that work, why not go for them, even if they seem to violate physical laws. Beyond that, the energy potentials for these sources are difficult to logically digest, they are enormous, and should have enormous effects on economic systems.

With that, this week an independent group of physicists published the results of three series of tests starting in September last year and concluding in March this year on the so-called E-Cat of Andrea Rossi, an Italian entrepreneur.

The big news from the report, found here, is with the most conservative assumptions, the device produces over extended periods a minimum of an order-of-magnitude more energy output than is input or can be explained by any known chemical process. This is very conservative.

How conservative? The most eye-opening story is the first test in September 2012. The independent scientists did not have any participation from Rossi or his people; on their own they (accidentally) drove the device to failure in a fairly spectacular manner: the inner steel container of the device melted; the melting point of steel is ~ 1470 C. An outer ceramic container also melted. Ceramics have a melting point of ~ 2000 C. The active component producing this energy is a card-deck size core with powdered nickel, hydrogen, and some unspecified catalyst. No conceivable set of chemicals can produce such a chemical reaction, so something else is going on.

I won't go into theory here, as there are many and none which are yet sufficient. I will say this report has caught the attention of a wide group of skeptics who are properly evaluating the result.

Here is an image of the device about to destruct:

I believe the image on the left is from a thermal camera.

If this result holds, and Rossi successfully commercializes the device, the world will change dramatically. Possibly soon.

I will continue to use this space for updates that are significant.

Energy demand and costs: Swanson's Law

Graph below shows the distribution of energy demand in the US, from wood burning at the time of independence to gas and oil now.

Renewable sources are still a small share. But there are good news in that front, with solar energy prices falling at a fast pace. According to The Economist, "Swanson’s law, named after Richard Swanson, the founder of SunPower, a big American solar-cell manufacturer, suggests that the cost of the photovoltaic cells needed to generate solar power falls by 20% with each doubling of global manufacturing capacity." Hope springs eternal.

Energy sources in Latin America and Asia

The graphs below (World Bank data) show the sources of energy in a few selected countries in Latin America and Asia. The first thing to notice is that Asia burns way more coal than Latin America, which tends to depend more on hydroelectric and natural gas sources (the US is a natural gas and coal country, by the way).

One reason for the difference is that Latin America does not have a significant share of the global coal reserves. China and India have a reasonable share (the US has the largest reserves of coal, followed by Russia).

In terms of the environment hydro sources are considerably better for emissions (zero) than coal, but do have other impacts, associated with flooding, reduced streams and negative impact on fish migration patterns among the worse. Natural gas is also better than coal. So Latin America is slightly more environmentally friendly. Coal tends to be cheaper (although fracking may be changing that in the US), which gives a competitive edge to Asian countries.

Note that energy is essential for the functioning of the economy. Lenin said that: "Communism is Soviet power plus the electrification of the whole country." Paraphrasing, capitalism is power to the corporations and electrification of the whole world. Note that this implies that sometimes, at least, the constraint to the expansion of demand could come from a supply restriction. Interestingly enough, more often than not, it still manifests itself through an external constraint, since many developing countries are net importers of energy.

The Overton Window for game changing exotic energy technologies

Political scientists invoke something called the Overton Window to describe the range of possible political conversations. Forget for the moment that the political right is trying to control this window.

I want to discuss a different 'Overton Window,' one which involves the possible conversations around truly radical, even exotic, energy sources. A small group of economists, including me, believe that much of what is to be understood in growth and development has a large energy component. So possibilities to radically change the supply and cost of energy causes great consternation. But moving the conversation window even a tiny bit will have great benefits.

Geographically for me, it is truly ironic that in 1989 Professors Pons and Fleischman were tarred and feathered and ridden out of town on a rail over their forced, though admittedly premature, assertion at a University of Utah press conference of low energy nuclear reactions, a.k.a. cold fusion, in their laboratory.

Well, some two decades later several very serious, very credible, scientists have come out of the closet in support of the so-called FP discovery. Scientists from MIT, NASA, and, especially, the US Naval Research and Development arm (SPAWAR), based in San Diego. If you have an open mind, some scientific aptitude, and a life-changing hour, try this. If you want to discuss it, I can follow some of it and guide you, especially around the implications of the high-energy neutron depositions. This is very good and careful science.

Further, at least a half dozen known commercial ventures are underway, one of which (Broullin) received $2 million in venture funding this week. Another, the Andrea Rossi E-Cat project, reports just this week self-sustaining 600C output from their current reactor. The implications of this, if supportable, are profound in two senses: self sustaining implies both electricity output and infinite over-unity possibilities.

Now this sounds all very speculative and even specious, and you may question why it even appears on an Econ blog. Fairly simple in an Overton way: as my research and dissertation leads me to believe there is no more important component of an economy than its energy availability and consumption, these discoveries are game changers, and Economists should try to understand, discuss, and even model the implications. I will leave it there for the moment.

So, if true, we are on the cusp of a radical energy transition. One which 'fixes' global warming and changes all of our Economic growth models. Not a bad time to be an economist. Or a human. Put away your tars, feathers, and rails.

The nagging influence of energy prices

It's been a while since I have posted.  I have a few other things going on, mainly working on finishing my dissertation. I did successfully defend my topic on May 1 (!), and have an awesome committee that understands how to constrain the output in the right way. So, mea culpa, and here is the first in at least a couple of energy-related posts.

For the US economy, it is fairly widely recognized that each recession is preceded by a run up in energy prices. For the US consumer, the most relevant energy price is gasoline. The mechanism by which this price initiates the recession is the negative correlation with spending on consumer durables. Here is what has been happening in the last two years:

As gasoline prices spike, consumer durable spending decreases. And vice versa. The widely recognized soft spot in 2011Q1 is seen here as a run up in gas prices and a decrease in consumer durable spending. We seem to be seeing a similar pattern this year, though consumer durable spending appears already to be recovering. If I have any short term hope for this economy, this graph is its parents. If gasoline prices continue decreasing, PCEDG will increase and help the economy grow. And vice versa.

The mechanism operates because gasoline expenditures are very price inelastic in the short run, and consumers are budget constrained. More spending on gasoline, less on durables, and most of those are manufactured in the US, so it depresses economic performance. This is a very demand-oriented story.

And, this is probably the most fundamental short term dynamic for US growth and the November election. And it is largely out of the control of the politicians.

I will shortly update a post I did a while ago on radical energy solutions that are in the pipeline and promise to break this link between energy/gasoline prices and US economic performance. This post hints at why that break will be so important.