http://www.iea.org/speech/2010/tanaka/AustraliaTanakaWEO2010.pdf

This will change everything. And we are not prepared.

Bookmark It

The biggest problem following the global peak in oil production will be the reduced supply, which will not over the short term be replaced by renewable fuels.

We are dependent on increasing volumes of energy, and especially of oil to fuel the global economy. With decreasing volumes the economy will find it increasingly difficult to grow.

It will take years, and in many cases decades, for renewable fuel technologies to be developed and implemented on a large scale. It takes ten years to build new nuclear plants and the median life time for a car is seventeen years and the same number for a heavy truck is twenty-seven years.

Bookmark It

These eminent experts have been working for two years on their report that was published this week, and have, unfortunately, completely missed the important consequences of the decline in the global oil supply for economic growth.

This decline is likely to start in the next few years and will be caused by the upcoming global peak in oil production, often referred to as “Peak Oil.” In its report this commission does not even mention the correlation between the global energy supply and economic growth, the reliance on oil in the global transportation sector, or the difficult situation the global economy will face when we no longer can look forward to a steady increase in the oil supply to fuel increased activity in our global production and transportation systems.

This lack of insight is not a only a Danish issue. We certainly have the same problem in Sweden, and in the EU as a whole, with even more detrimental consequences than in Denmark, the country in Europe that is now heading into a large scale development of electric car systems. Throughout the communication from the EU, climate change is quoted as the critical problem that needs to be dealt with in the next two decades, and the goal of transforming energy systems before 2050 as the Danish climate commission suggests is in line with EU goals.

A similar lack of insight permeates a large share of the US debate about energy. In the newsletter “American Interest,” the scholar Walter Russel Mead of Bard College writes an otherwise erudite and insightful column in polemic against the idea of making electric cars the centrepiece of US industrial development over the next decade. Mead argues, based on an analysis of historic economic development that the development of electric cars is not going to revive the US car industry or create a lead for the United States in the face of Chinese investments into technology development and implementation.

http://blogs.the-american-interest.com/wrm/2010/09/28/chitty-chitty-bang-bang-the-electric-car-industry-isnt-going-to-save-us/

Due to the lack of insight into the consequences for an oil dependent society of a decline in the raw material (oil) that fuels global economic growth and that creates the platform for all other economic developments in our globalized economy, the argument of Mead becomes largely irrelevant. It is true, from a historical perspective, that the Chinese growth is a result of this country’s large scale investments in many different areas. The point that is completely missed by Mead is that electric cars is a growth area that will provide the American economy, and subsequently the global economy, with an oil-independent transportation system, that can gradually replace chunks of the US and global car and truck fleets as the oil supply is reduced.
Mead argues that the solutions and systems developed by the innovative company Better Place, with its CEO Shai Agassi do not offer the route forward for US economic development.

Without the insight that a decline in the global oil supply, and the lack of a replacement for oil that will soon be available on a large scale will cause a decline in global economic growth if we don’t plan and manage the Global Energy Transformation so that we gradually reduce our dependence on oil and implement renewable energy sources in the areas where these can make the largest impact on future economic growth. When we take into account the risks of a declining global oil supply we realize that the SMART grid systems and the electric car electronic applications of the Better Place offerings are probably the most promising and necessary technologies that are in development on this planet at present.

Sorry, Mr. Mead, this isn’t perhaps primarily about the cars in themselves, or about the American middle class – it is about the development of renewable energy systems, new vehicle technologies, ICT, smart grid technologies, and a host of other technologies that put together into the systems of Better Place can offer the global economy an alternative to fossil fuels that will soon be in decline.

Sorry, Mr. Mead, the US will not have the opportunity to decrease the gas prices to even lower future levels, because of the upcoming event of “Peak Oil” and the ensuing decline in the global oil supply.

Incidentally, Denmark is one of the pilot markets of Better Place and Denmark is perhaps the country that, since the 1970’s, has taken the most insightful strategic route forward into the area of renewable energy, and that is pursuing this development even further as they focus on the large scale implementation of electric car systems, partnering with Better Place to drive this development forward. In this respect Denmark is clearly ahead of the rest of the EU, and the rest of the world.

With the added insight that the global economy will not have the amounts of oil that we need in order to drive economic growth into the future, Denmark may want to speed up its implementation of electric car systems even further. For most of the rest of the world this insight will create the need for a dramatic change in direction of economic development.

Bookmark It

The commission concludes that the Danish energy transformation can be made by 2050 and at virtually not cost to Danish households!

http://www.klimakommissionen.dk/da-DK/Klimakommissionen_report/Groen%20energi%20sammenfatning%20DK.pdf

Unfortunately, the commission does not seem to have taken all important aspects of the future energy development into account:

- The event of the global peak in oil production is coming up in the next few years. The commission mentions this, but acknowledges only an increasing oil price as the consequence, and fails to take into account the effects on the global economy of a diminishing supply of oil to fuel the global transportation sector. The ensuing decline in the oil supply is likely to reduce the opportunities for the global economy to grow. The commission remarks in a key statement that the Danish economy will continue to grow until 2050, but fails to analyze or even mention that an increasing global supply of fuels for transportation is likely to be a pre-requisite, and that large volumes of substitutes for the declining oil volumes will probably become necessary already during the next decade.
- It is not likely that we will be able to draw out the transformation to renewable fuels over the course of four decades, due to the consequences of Peak Oil.
- The International Energy Agency warned in 2009 that the decline in the global supply of oil may put a lid on global economic growth during the next peak in the business cycle, something that is not mentioned by the commission.
- The organization American Energy Innovation Council, founded by Bill Gates, Jeff Immelt (CEO of GE), John Doerr (venture capitalist) and a number of top managers in leading American companies have suggested the formation of an independent national board for energy transformation strategy, as the first recommendation for the US transformation, and substantially increased involvement by the US government in investments in energy technology and its implementation. The Danish commission’s advice is completely based on market based mechanisms in a situation where planned an managed transformation programs seem to be increasingly called for.

The conclusion of the report from the Danish Climate Commission is that the commission has a fragmented understanding of the consequences of peak oil, and the way that this event will become the primary driver of Global Energy Transformation, and the role that needs to be played by manged transformation programs. The economic analysis offered by the American Energy Innovation Council is in this respect much more incisive. Perhaps the Danish Climate Commission needs to rethink some of its conclusions, the time frame for the transformation, and publish an up-dated report when the members have grasped the nature of the Global Energy Transformation challenge?

Bookmark It

In order for each individual country to maintain affluence and economic growth, we need to be able to maintain global supply chains for all kinds of products. At the moment we are dependent on supplies from all over the world to supply us with products for our own production systems and to sell in most types of stores. If we have less oil, we will be forced to reduce economic activity. Initially, this will mean that the least affluent will not be able to buy the petroleum products that they need in order to get to work or to produce on a daily basis. Companies in developed countries will experience increasing difficulties to purchase products from these countries.

In order to be affluent in the future we need to systematically reduce our use of oil at a faster rate than the reduction in global production, or increase the production capacity for renewable fuels so that this increase plus the reduction in oil use at least cancel out the reduction in supplies. This, for reasons explained above, needs to be done for our entire global oil supply, and not only for individual countries that may be in a position to relatively easily replace oil by renewable fuels. This, it has to be repeated, is because every country is dependent on growth in the global economy for its ability to achieve affluence and economic growth. The global economy, in its turn, is dependent on growing supplies of oil and other energy sources, but currently no other energy source can, at short notice, replace oil for transportation.

This does not seem to be clear to the majority of economists, politicians and high level business leaders. Many seem to think that we can adjust to a higher energy price. Yes, this may be possible. It will be much more difficult to adjust to a reduced supply of oil and continue to do business in the same way we do today in the face of declining global volumes.

Bookmark It

Those of us who are already aware of this need to inform politicians and high level business leaders about this.

This is the only possible way forward!

Bookmark It

We use energy to run our global economy, and we are dependent on oil to maintain and expand global transportation networks. We have no large scale alternative to oil for transportation and it will take a number of years to expand the supply of renewable fuels or electricity, and vehicles etc that can run on these, so that they can start to make a dent in the demand curve for oil.

The volume of oil that we produce and use every day is a staggering 83 million barrels. This means that only in order to increase the energy supply to allow for the annual increase in demand of 1,5 per cent, we will have to make more than one million oil barrel equivalents of renewable fuels available in global markets every day. In addition to this we need to make up for the decline in oil production that we will experience in the near future.

This is why we rapidly need national strategies for large scale energy transformation. This is also why all large companies need to assess the impact that higher oil and energy prices, and reduced supply will have on their businesses.

This is what all this is about!

Bookmark It

One board member, Catharina Lagerstam, was appointed in April and she did an independent valuation of the holdings by the board meeting in May, at which she said that the holdings were overvalued by 100 million dollars. When she did not receive the support of the board she resigned. The chairman of the board, Mats Qviberg (the Q in the name of the bank) said: “She did not have strong enough nerves to continue.” Three months later the bank lost its permit from the Swedish organization that oversees the banks, called the FI in Sweden.

Now there is a really strong debate going on here in Sweden about the value of people who develop independent opinions and speak their mind, even if it goes contrary to the views of their superiors. One columnist in the Swedish business daily DI wrote that chairmen of boards are supposed to look for this type of independent, strong and honest board members.

Regardless of this, the scrutiny that I have put forward in the books “Global Energy Transformation” and “Overcoming Overuse” of the way we approach sustainability and the perilous future of affluence and economic growth goes unnoticed.

We will have a government election in September, and the energy issue is hardly even mentioned. Probably due to the fact that Sweden ranks among the best in the world in terms of low carbon emissions! This is mostly due to our high share of nuclear energy and hydroelectric power, but we are as dependent on oil as most other countries, which is the real problem we will be facing as oil production starts to decline.

We need to look for honest scritiny not only in the valuation of companies, but also in many areas in society that are not controlled by companies.

Bookmark It

http://dotearth.blogs.nytimes.com/2010/08/26/a-challenge-to-bill-gates-on-energy-research/

In my view we need to develop a strategy and a plan both for the short and long term that combines increased research into renewable energy technologies, energy saving technologies, and their implementation in various areas. We need national strategies, but we also need to understand that renewable energy technologies will not be able to be implemented and utilized as stand-alone inventions. These technologies need to become integrated into customer focused business offerings, that combine technologies, applications and a business concept. This needs to be done by systems integrators, similar to the ones that now operate in, for example, telecom industries, retail industries, and many other industries that provide a packaged offering to customers and end-users.

So far very little work has been done on the developing of frameworks for national energy strategies and on the development of concepts for systems integrators. The Global Energy Transformation Institute is one of the few organizations in the global arena that actively develop competence and debate these areas.

Bookmark It