Strategies for the Energy Crisis

After nearly 30 years at Caltech as a professor of theoretical physics and, eventually, provost, Steven Koonin took a leave of absence in 2004 to become BP's chief scientist. After a year of study, he recommended a strategy for the company that has included investments in unconventional sources of oil as well as renewable energies such as solar. The company has also invested $500 million in research on biofuels.

Technology Review's energy editor, Kevin Bullis, sat down with Koonin after his talk at [last] week's EmTech conference to discuss BP's strategy and whether it will be possible to meet the world's energy challenges.

Technology Review: BP has invested a lot of money in research on biofuels. Yet biofuels have come under criticism lately--experts say they've contributed to rising food prices. How much can we rely on biofuels?

Steven Koonin: The Department of Energy and the Department of Agriculture did a study a couple of years ago that said that with domestically produced biomass, you could probably satisfy 30 percent of current gasoline demand without significant environmental impacts or changes to food. That requires better use of agricultural waste, better management of the forests and use of forest products, and some fraction of energy crops. Most of the crops we grow now are for food, and they've been tuned to maximize food yield. We haven't started to maximize energy crops yet, to maximize biomass production per acre per year, as opposed to maximizing food production. There's tremendous technical headroom for doing that.

Brazil, right now, could probably [import] a million gallons of ethanol per year to the U.S. But there's a tariff on imported Brazilian ethanol. If you look at that, you say that the political system is not yet serious about dealing with energy security matters.

TR: When you look at public policy decisions, what are some other mistakes you've seen?

SK: One is confusing transportation with stationary sources of power and heat. What problems are we trying to solve? If it's carbon dioxide emissions, there are cheaper ways to do it than improving transportation. If you improve the efficiency of a vehicle to reduce fuel use and carbon dioxide emissions, for many vehicle technologies it will take several hundred dollars per ton of carbon dioxide. But transport is only 20 percent of energy-related emissions. Heat and power from stationary sources are most of it. At $50 a ton, there's a lot of carbon that can be wrung out of stationary sources. When you start cranking the price up to $100 to $200, that's when you start to affect transport, whereas we can shift to lower-emissions heat and power at $50 a ton.

TR: Why the difference?

SK: There are about twice the emissions, per unit of useful energy, from coal as from gasoline.

TR: But isn't it still worth reducing gas consumption for the United States to reduce dependence on unstable or even hostile countries for oil?

SK: Security of supply is much more important than carbon emissions, in my opinion, in transport.

TR: What's the best way to reduce gas consumption?

SK: Raising the price of driving is the simplest way to induce conservation and efficiency. Look at how much response we saw when the price of gasoline went up to $4.50 a gallon. We've seen it work over the last year. But raising gas prices is very difficult politically to do. In fact, you see the candidates going in the opposite direction.

The prices for gas and for carbon need to be high enough to make some difference, so that means there will be some pain. And it needs to be stable enough so that people can make long-term investments for deploying alternative technologies.

TR: When we look at oil companies, there's a lot of entrenched positions and not much movement. That seems to be a basic institutional problem.

SK: I can only talk about one company that I know well. I've found the folks at BP eager to listen, to learn, to engage in discussions, and to try to do the best job that they can in balancing the short-term operations of the company against these longer-term things. After all, they have a business to run; they have shareholders to report to. They have a responsibility to produce [a certain percentage] of the world's oil every day, which the world needs. So it's a balancing act.

One of the things I have learned, which was surprising but makes sense in retrospect, is that companies are wonderful optimizers of their situation. If the government sets the playing rules appropriately, they will respond strongly and rapidly. So it is a question of getting the right policies in place, as well as a push from within the company.

TR: So the markets aren't going to solve these problems?

SK: Left to its own devices, the market will not price the externality of carbon dioxide, nor will it effectively deal with the security-of-supply problem. I think [that's] because it's longer term, and the markets have a shorter-term focus. I think markets are good for tactical allocation, but it's not obvious to me that they're the right thing for strategic allocation [or] longer-term planning.

TR: Are you hopeful we're going to be able to meet these challenges?

SK: I'm optimistic about security of supply. I see many sources for liquid hydrocarbons. I see great potential for efficiency improvements in U.S. transportation fleets. I am less optimistic about carbon dioxide emissions reductions. The world should give it its best shot, but there are so many forces aligned against it that I think it's going to be very difficult for the world to stabilize emissions, let alone stabilize concentrations of carbon dioxide in the atmosphere.

Carbon dioxide lives in the atmosphere for a very long time--a thousand years or so. What that means is that the atmosphere is accumulating emissions, and emissions right now are on an exponential growth path--2 or 3 percent a year. If we manage to make modest reductions in emissions, it will only be in the rate at which the concentration grows, but it won't stop the growth. So the usual societal response of dealing with a problem partially is not good enough to deal with the CO2 problem. We really need major changes in the ways we produce and use energy if we're going to prevent concentrations from rising. I don't think people understand that.

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