At the annual Future In Review conference, one of the most interesting presentations was that by Amory Lovins of the Rocky Mountain Institute, reviewing their future of energy study that was chronicled in their report and book, Reinventing Fire. In brief, Amory explained in his dispassionate, engineering style, that it is possible to grow the U.S. economy by 158% by 2050, while completely phasing out the use of oil, coal and nuclear power, keeping the amount of natural gas we use steady, and relying instead on renewable energy and distributed grids using no newly invented technology. This could be done at a savings, according to the RMI study, of $5 Trillion. Below is an infographic created by RMI that sums up their scenario for how such a future will be created. The question is, is this a possible or a probable future?
Last week I attended an excellent monthly breakfast program of the Washington Clean Tech Alliance. The April program featured a panel on the future of natural gas. I attended because I am very interested in whether the energy picture has changed as much as it appears, in the past three years.
In 2006 when I wrote my last book, Turning the Future Into Revenue, I began the energy chapter with the following words, “The world is running out of oil. Just in time.” At that time, two years before oil prices hit their (so far) historical high of $147 a barrel, investors and institutions were catching up to peak oil, the knowledge that at some point we will have used up half the oil in the world and started down the back side of the supply curve. The only question is when. It seemed to many observers, circa 2006-2009, that the halfway point had been reached. It is still safe to say that the cheap and easy oil days are mostly behind us, but the energy picture has become more complex recently.
Hydraulic fracturing of oil and gas bearing shale rock, or fracking, when combined with improved horizontal drilling has begun to push the peaks forward in time. The biggest change in the energy picture, we learned last week, comes from shale gas. At the same time I was writing about energy in 2006, the natural gas industry was warning utility commissions that big price increases were on the horizon, because of short supplies, increases that would take the price per million BTU’s to $14. The U.S. and Canada were gearing up to build port facilities to import liquefied natural gas. Today the price hovers a bit below $2, because there is a glut of gas being developed in the shale oil fields in North America, and instead of anticipating import facilities, the focus is on the need for export facilities.
This chart, from the Energy Information Agency, illustrates how much more natural gas is anticipated by 2035, and how much of that comes from shale fields. At the WCTA session that I attended, there was confidence expressed that the gas is there and recoverable. The larger concerns focused on how to develop sufficient demand for all the gas by switching much electricity production and transportation to natural gas. In addition there is concern that the price has been driven so low that exploration and development will slow, having become uneconomical.
On the risk side there are concerns about water supply, as it takes a lot of water to produce a barrel equivalent of natural gas. While gas is cleaner than coal or diesel at the point of combustion, there is concern that gas leakage at the well head can make it actually a dirtier fuel in terms of green house gases, although the industry assures us that this is a technical issue that can be fixed by best practices. And of course there is concern about long run contamination of ground water from fracking chemicals used to force the gas from the shale rock. Again, the industry assures everyone that the shale is so much deeper than ground water there is little chance of contamination through migration. However, since the fracking pipes are left behind when a well plays out, leaving a long term channel between layers of rock, it seems reasonable to predict that some migration will occur in the very long run.
Regardless of the long-term risks, it is pretty safe to assume that an energy hungry world will continue to develop these resources. Whether there is really a 100-year supply, as industry advertising insists, is open to conjecture. But, on the whole, natural gas appears to offer a cleaner and cheaper bridge to the long-term energy future.
This week I had the privilege of delivering the keynote speech to the annual dinner of the Grand Island, Nebraska Chamber of Commerce. I shared the stage with Nebraska Governor Dave Heineman, who greeting the packed house, along with the many winners of annual Chamber awards.
I was thoroughly charmed by the success story of Grand Island, a community of 50,000 in the heart of Nebraska, as well the state success story. Nebraska has weathered the economic downturn in good shape, and has half the unemployment rate as the rest of the nation, at 4%. The state economic performance is better than the nation’s in a variety of economic indicators, including retail sales and growth in exports of goods. Grand Island went after the Nebraska State Fair when it decided to relocate from the state capital of Lincoln a couple of years ago, and now enjoys a beautiful new fairgrounds development. As Governor Heineman said in his remarks, this does not happen by accident.
Picking up on that thought, I opened my keynote speech with my favorite concept, that the future is not something that just happens to us, but rather is something we do. I had decided in this talk to begin with some history, setting the stage with stories of the techno-social-economic revolution of 1900-1930, and comparing that to our own time. Mostly I wanted to get to an important quote from the American industrialist Henry Ford, who said,
There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.
I asked if we are forgetting the third of Henry’s three principles, and illustrated the question with this disturbing chart (Hamilton Project) of annual employment and earnings of American men with a high school diploma only, from 1970 to 2010. What the chart shows is that, in 2010 dollars, such a man earns only half of what he earned in 1970 ($26,000 versus $48,000) and is much less likely to actually have a job. We are moving in the wrong direction.
Having set the stage with some historical perspective, I turned to future trends. Here I outlined six converging forces that shape the future and collectively offer more opportunity to shape a positive future than they do challenges to the future. The forces are:
In that final point I circled back to the beginning. I shared the now classic chart from the Congressional Budget Office illustrating the income growth of the 1% versus the income stagnation of the bottom 80% since 1979, warning that many people get upset by this discussion. But I argued that by focusing on the 1% we have focused on the wrong thing. The great future challenge is how to reverse the stagnation of the bottom 80%, and get their income back on a growth curve. This is not easy in world of global labor competition, but that is what we need to figure out how to do. I concluded with a core strategy for changing this downward slide, and that is preparing for the knowledge value economy, which thus requires educating millions of young people at a much higher level.
It was a positive evening with a great group of people, and I enjoyed this speaking opportunity as much as any in recent years.
You can review the mostly pictorial slides that I used below, from Slide Share.
Glen Hiemstra is a futurist, author, speaker, consultant, Founder of Futurist.com, and founder and Curator of DoTheFuture.com. To arrange for a speech, workshop or consultation contact Futurist.com.
So, we are back. Had a wonderful holiday in Peru visiting Machu Picchu among other places. Truly an awe inspiring place, matched only by New Zealand’s south island, and parts of the Canadian Rockies for grandeur.
We here at Futurist.com continue to work on getting the new site ready to launch. Given that we have years of content and it turns out a rather quirky legacy in terms of some back-room functionality issues, what we thought would be quick and easy has turned out to be a bit harder. We are still hoping to introduce the new look by mid-month, so please stay tuned. We will blog here a bit in the mean time.
Many things are on my mind for 2012 in terms of future issues. Strategic issues include…
How the rich-poor gap issue in the U.S. and the world will play out this year. Interestingly the Greek historian and biographer Plutarch, who lived from 46-120 AD once made this observation, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” Unfortunately, so far the dynamic seems to be mostly that the severely wealthy interpret the current political climate as an attack on them, rather than as a call to re-ignite a system that builds the middle class and lifts up the poor.
Energy and politics. Last year I forecast that 2011 would be a year in which it would become clear whether we’ve hit peak oil, or not. If it did become clear, the evidence is that we have not hit peak oil. Yet, one must wonder whether all the industry hype about shale plays in gas and oil really mean that a new era of abundance is here, or whether this will turn out to be more hype than reality. A whole lot of public policy and global economic implications are at stake.
Climate change and global warming. Strangely 2011 was the year that this topic became virtually forbidden in the U.S. Politicians are not allowed to mention it, unless it is to say either they do not believe in climate change, or that the science is still too uncertain to do anything about it. My friend Dennis Walsh, a sustainability futurist from Canada, surprised me the other day by agreeing – saying its past time to talk about climate change, as there is no prospect of a sufficient public response anyway. Instead, he suggested, going forward it will be better to concentrate on raising the issue of planning for weather anomalies and local catastrophes. This is interesting. You’ll be hearing more from Dennis when we launch DoTheFuture.com, which has also been delayed, but will also launch this month.
Technology dominance. There may still be no more important dynamic in the world than the continued spread of communication technology, namely smart phones and wireless nets. It was strange to stand in Machu Picchu and talk to the kids at home via my iPhone – actually had better reception than some places around Seattle Washington.
Finally, at some point I will say a few words about the Mayan calendar and the impending end scheduled for 21 December this year!
Glen Hiemstra is a futurist, author, speaker, consultant, and Founder of Futurist.com. To arrange for a speech, workshop or consultation contact Futurist.com.
Yesterday I discovered a really terrific website, a blog called Do the Math, by UCSD professor Tom Murphy. He is a physicist and mathematician, who began wondering if commonly held assumptions mostly about the future could be true when subjected to math. For example, in this blog and a related one he wrote earlier Professor Murphy asks if economic growth forever is possible. It has been true in the U.S. since 1650, and virtually all economic models, political reasoning, and personal hopes assume that we can just keep growing as we have. Tom notes the correlation between economic growth and the 2.9% annual growth in energy consumption in the U.S. for the last 360 years. Economic growth has been connected to energy growth. No mystery there.
Unless we can decouple economic growth from increasing energy consumption the merry-go-round will come to a stop, because energy growth cannot continue. Why? Because anything that grows at a regular annual percentage rate enters the realm of exponential growth, where things double over time. Remember the old calculation for the doubling rate? It is basically 70 divided by the percent growth rate. So, if U.S. energy consumption grows at 2.9%, then our energy use will double in 24 years. In 48 years, about 2060, we’d be using four times as much energy as today. Now factor in world economic growth (remember China) and world growth in energy consumption. In his clever blog Professor Murphy proves that if the doubling rates were to continue like this (he actually lowers the annual growth rate in energy to 2.3% so that each doubling takes 100 years) the earth would be producing, and using, more energy than the sun in 1400 years. Peter summarizes:
Let me restate that important point. No matter what the technology, a sustained 2.3% energy growth rate would require us to produce as much energy as the entire sun within 1400 years. A word of warning: that power plant is going to run a little warm. Thermodynamics require that if we generated sun-comparable power on Earth, the surface of the Earth—being smaller than that of the sun—would have to be hotter than the surface of the sun!
1400 years sounds like a long time, but limits of technology will be reached long before that. You can use less energy by increasing the efficiency of cars, buildings, computers and so on but only until they are 100% efficient and then no more (well, you can’t actually get to 100%). Thus increases in the use of energy become “impossible within conceivable time frames” (less than a couple of hundred years). Implication: because economic growth, which everyone wishes for right now, is linked to growth in energy use and that cannot continue, a new economic model that enables prosperity without growth is on the horizon, or had better be.
His blog yesterday, by they way, explored whether it would be mathematically possible to build enough batteries to provide sufficient back-up power to run the U.S. if we were to convert to a solar and wind energy economy. His conclusion is no, not enough raw materials on planet earth, either for lead-acid or for variations on lithium-ion batteries or both.
Check it out.
(Coincidently I will be doing a lunch keynote for the Association for Corporate Growth in Seattle tomorrow, August 4, 2011. What should I tell them?)
Glen Hiemstra is a futurist speaker, author, consultant, blogger, internet video producer and Founder of Futurist.com. To arrange for a speech contact Futurist.com.