Five things Bill Gates gets right on energy
There’s a saying that where you stand depends
on where you sit. When it comes to energy, that holds true. For example, while
I am an energy guy in general, I have spent much of my time in oil and gas.
That colors how I see the future (and the present, for that matter). People who
are deep into solar almost certainly have a different perspective. A mother in
Africa cooking over a wood-burning stove might have a third. And a coal miner
in West Virginia yet another.
Finding a consensus
about what to do next and how, then, becomes difficult. And that is one reason
why I find Bill Gates an interesting voice on energy issues. Having spent his
life in IT and philanthropy, his views do not fit into a single box—and are all
the more refreshing for that. He does have skin in the game. In 2015, he
founded a $1 billion clean-energy fund, the Breakthrough Energy
Coalition, which is devoted to research and development on clean energy. He also has been active on issues
related to climate change and nuclear power.
If I were to sit down
with Gates over a latte in Redmond, we probably wouldn’t agree on everything.
But I think he asks the right questions, in the right way. Here are a few
comments Gates has made over the years on energy that I found particularly
interesting, and my responses to them.
1.
‘Some people argue that deploying today’s technology and developing new ideas
are competitors in a zero-sum game—that doing one means you can’t do the other.
I disagree.’
So do I. In a sense,
it’s not even a choice. The world has a huge investment in the current energy
infrastructure, and it is simply not going to write it off. The idea that there
could be a “moon shot” to go all renewable in ten years is not going to happen.
I also agree with Gates that today’s technology needs to include nuclear. It is the only low-emissions, 24/7 technology now available,
and its safety record is astonishingly good compared with conventional fuels (even without
including pollution-related premature deaths). And yes, that includes
Fukushima, which was poorly designed and sited. New nuclear plants are much
better; Gates himself is an investor in a new nuclear technology.
2. ‘If you
wanted to use [a lithium ion battery] to store enough electricity to run
everything in your house for a week, you would need a huge battery—and it would
triple your electric bill.’
No question: energy
storage is fascinating and important. Reliable and efficient storage is the
missing link for renewables, such as wind and solar, that can only supply power
intermittently. But that has not happened and does not appear imminent. My
McKinsey colleagues, for example, have been tracking storage for years, and the McKinsey Global
Institute sees a promising future. But that future is not nigh. In 2015, a record 221
megawatts of storage capacity was installed in the United States, more
than three times as much as in 2014 (65 megawatts), which was itself a big jump
over the previous years. But more than 160 megawatts of the 2015 total was
deployed by a single regional transmission organization, the PJM
Interconnection market. And
221 megawatts is not much in the context of the total US generation capacity of more than a million megawatts. That battery Gates
mentioned would weigh more than a ton. So think evolution, not revolution—and
remember that we need to keep the lights on in the meantime.
3. ‘The
one thing you can never say about CCS is that it will make energy cheaper than
it is today.’
Right now, coal is the
single largest source of global power and accounts for a third of US
generation. The advantage of coal is that it is cheap and reliable. The
downside is that it is dirty, generating more greenhouse-gas emissions than any
other fossil fuel and contributing to smog and air pollution. The hope is that
carbon capture and storage (CCS) could clean up coal, capturing up to 90
percent of emissions, while still allowing it to be used. The problem, though,
is that doing so has proved very expensive, and the process just hasn’t worked
as well as hoped, despite billions of dollars in investment. There are CCS plants in operation, and more are in different stages of development. At
some point, CCS could well play an important role. But not anytime soon, and
the costs could be high—in a world in desperate need of affordable energy.
4. ‘When you say
to India, “Hey, don’t use your coal, use something that is substantially more
expensive,” you’re asking them to make a trade-off against uplifting those lives
to have the things that we take for granted. If they develop with coal, they
still will have emitted less per person by a factor of four than we have over
the last 100 years.’
Energy policy is not
just about jobs, or pollution, or gas prices, or climate change. It affects all
these things, of course, but fundamentally the use of energy is about improving
the quality of daily life. Consider: the World Health Organization estimates
that three billion people cook and heat their homes using wood or dung. This is
not just inconvenient; it’s deadly, accounting for more than four million premature deaths a year. Compared to that, in many places, more
coal would quite literally be a lifesaver. That is part of the reason India’s
prime minister, Narendra Modi, plans to triple coal production to 1.5 billion tons a year. India also
has ambitious renewable plans, but Modi has explicitly stated
that his country (and others) needs “room to grow.” It’s a conundrum, and an important one. India is
already the world’s third-largest nation in terms of greenhouse-gas emissions (although per capita emissions are low), and it is home to four of the ten most polluted cities. Plus, conditions in its coal
industry can be dire.
But India is also home to 595 million people who lack any toilet facilities and many more who still cook using wood or dung. The country does indeed need room
to grow; low-cost energy is essential. Figuring out the right pathway, and the
mix of new and conventional fuels to use, will be an enormous challenge. The
solutions, as Gates suggests, are not obvious.
5.
‘Right now, the world spends only a few billion dollars a year on researching
early-stage ideas for zero-carbon energy. It should be investing two or three
times that much. Why should governments fund basic research? For the same
reason that companies tend not to: because it is a public good.’
Whatever the question,
when it comes to energy, innovation is the answer. Instead, as Gates has also
pointed out in other contexts, the bulk of spending comes in one way or another in the form of
subsidies, both to consumers and producers. The problem with that is it is
economically wasteful; moreover, by their nature, subsidies go only to existing
technologies. The breakthroughs that will make the biggest difference may not
even have been thought of yet. As I noted in a previous post, publicly funded R&D on energy accounts for only 4
percent of research
budgets, and renewables are only half of that. The International Energy Agency
found that public spending on energy research actually declined between 2011 and 2014. And private spending is not great either—much lower, for
example, than on consumer electronics.
This cannot possibly make sense.
‘To work at scale, current wind and solar
technologies need backup energy sources—which means fossil fuels—for windless
days, long periods of cloudy weather, and nighttime. They also require much
more space; for example, to provide as much power as a coal-fired plant, a wind
farm needs more than ten times as much land. These are solvable problems.’
On this one, I think
Gates is a little breezy, assuming that these problems can be solved. His point
on storage (see number 2) speaks to one issue—that wind and solar need 24/7
backup power, which today can only come in the form of the coal, gas, or
nuclear. The other issue is that it takes a lot more land to create power using
wind and solar than conventional alternatives. The world’s biggest solar farm,
for example, in California’s Mojave Desert, can serve about 140,000 homes
during the day; it occupies five square miles and requires about 9.4 acres of land to generate a single
megawatt (wind takes even more). A natural-gas plant can do that all night, too, on a few dozen acres.
Yes, the efficiency of solar and wind has been improving, but slowly. David
MacKay, Britain’s former chief climate scientist (see postscript below)
estimated that if the United Kingdom’s windiest 10 percent of land, including
much of the coast, were covered with wind farms, it would produce less than 20 percent of the country’s needs. That’s a ton of acreage for
comparatively little energy, and probably more than the people of Britain, who
value the aesthetics of their green and pleasant land, would ever
support. Indeed, there is already backlash. Vermont, too, is having second thoughts, for similar
reasons; in 2013, the legislature passed a three-year moratorium on new wind projects, in
large part to evaluate effects on the Green Mountain State’s landscape. Maybe
the question of land is solvable, as Bill Gates says. But when? And at what
cost? The fact is, fossil fuels are much more energy intensive than renewables.
Oil, for example, moves big stuff with incredible efficiency. There’s a long
way to go before wind-powered batteries or biofuels can push an airplane across
the ocean.
Most of all, though, I
agree with Gates on his essentially optimistic view of the future. Yes, there
are difficult problems out there—but that has always been the case. Not only
are we still here, but more people are living lives of promise than ever
before. As Gates put it, “I believe that every
life is valuable. That we can make things better. That innovation is the key to
a bright future. That we’re just getting started.” I agree.
PS: Gates also
offered this appreciation of David MacKay, Britain’s former chief scientific
adviser on climate, who died in April at age 48. MacKay, a physicist, was the
author of Sustainable Energy—Without the Hot Air (UIT, 2008), a smart, rigorous, and often
witty discussion of renewables. His TED talk on the subject gives a good idea of the book and
introduces MacKay, who by all accounts was warm and well liked. His voice will
be missed.
A version of this article was
originally published on LinkedIn
By Scott Nyquist
http://www.mckinsey.com/industries/oil-and-gas/our-insights/five-things-bill-gates-gets-right-on-energy?cid=other-eml-alt-mip-mck-oth-1607
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