Energy 2.0

I originally wrote this post in January 2015. I will try to update it for August 2016. Things are heading in the right direction.

Jan 6, 2015

As we begin the new year and the United States Congress comes back in session one of the stated top goals for Republicans is to approve the Keystone XL pipeline. The pipeline is intended to deliver oil from Canada’s tar sands in Alberta to refineries in the United Sates, but with oil trading at record low prices, it’s a very odd priority. In denying the problem of climate change, Republicans are missing an opporuntiy to solve a looming catastrophe, secure abundant energy for the future, and be the world leader in energy technology.

The pipeline itself reminds me of the recent NYT article in which the new Whitehouse technology advisor, Megan Smith, is working to wean the Whitehouse off of floppy disks. It’s a reminder how comically slow moving the government can be. To me, oil feels like the floppy disk, an antiquated technology that we should be planning to move beyond. Unlike floppies, our reliance on oil production and exploration is progressively more harmful and far more deeply ingrained in US government policy.

Below is an image of Tar Sands mining in Alberta. Incredibly, Canadians are planning to do this to an area the size of Florida:

Canadian Oil Sands

Finding and extracting oil is getting progressively harder as the “low hanging fruit” has been taken. Tar sands involve cutting down all the trees in the area, clearing away the top soil and then begins the nasty, grubby process of open-pit mining. Open-pit mining is extremely destructive and the resulting tar sands require many sessions of refining and processing, thus reducing the net value of tar sands oil. In the old days, you could poke a hole in the ground and “light sweet crude” would gush out. Those days are over.

Petroleum has a long history with various uses in construction (asphalt and tar) as well as oil lamps by the Babylonians, Greeks, Chinese, etc. But what really made the petroleum industry a mainstay was the invention and widespread use of the internal combustion engine and the automobile. Aerosolized gas is sprayed into a chamber and ignited, the resulting explosion moves a mechanical piston. This is roughly a 150 year old technology. The combustion engine has evolved, they are less noisy and more efficient but the underlying premise is still the same.

Petrol has been useful for transportation because its energy density is high. With a tank of gas, a car, boat or plane can go a long way. Petrol doesn’t make sense for powering homes or office buildings or putting power onto the grid. For all these needs, we mostly burn coal (an even older technology). Solar, nuclear, hydro and wind are other good technologies for putting energy on the grid. And solar is unique in that it has no moving parts and can be local (on your roof or backyard) so it can be at the point of consumption (your house). Most importantly solar looks to be on a Moore’s Law Curve. And the sun is a source of huge amounts of energy, 470 exajoules in less than an hour and a half, as much energy as humanity consumes in a year.

Petroleum will be replaced just as the hard drive replaced the floppy disk. And flash memory is replacing hard disks. With flash memory, things like smartphones became possible. We are already seeing battery technology changing transportation with Tesla. Indeed, electric cars are fast becoming mainstream. The mass market for computer laptops and consumer electronics pushed battery technology to the point that electric cars possess significant range and power. And battery technology is getting better every day. Meanwhile, oil is getting harder to obtain, is more damaging to the environment, and is often empowering politically unsavory leaders. As Peter Thiel succinctly puts it in his book Zero to One, “In a world of scarce resources, globalization without new technology is unsustainable.”

For politicians who have run out of ideas, how about pushing for Energy 2.0? There are lots of things the government can do, like tax incentives, research funding, and improved mass transit. The Japanese and Chinese are building magnetic levitating trains that go over 300mph. And Japan’s bullet train, the Shinkansen has already carried over 10 billion passengers. The Hyperloop One has raised over $100 million and is moving quickly. Tesla has completed the first phase of its Gigafactory. Smart grids, smart homes (Nest, etc), efficiency (Opower), solar, battery research and production, and modern nuclear technology are great starting points. For entrepreneurs who are thinking about the next big thing, this is a great area to focus on.