The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  In the developing world, rising incomes and urbanization are driving demand. China literally doubled its electric power system between 2006 and 2010, and is likely to double it again in just a few years. India’s power consumption is expected to increase fivefold between 2010 and 2030. The challenge for developing countries is to increase reliability, ensure that power supplies keep up with economic growth, and avoid shortfalls that constrain growth. It is also to deliver electricity to the 1.6 billion people who have no access at all to electricity but instead burn kerosene or scrounge for wood or collect dung. Billions more receive electric power only part of every day, interrupted by shortages and blackouts, taking a toll on both daily life and economic growth.

  In the developed world, increasing consumption is driven by the everexpanding role of computers, servers, and high-tech electronics. This process is so increasingly pervasive as to be taken for granted. To take a simple example, writing a book three decades ago was done on a manual typewriter, using carbon paper for copies; and research meant trips to the library and wandering through the stacks. Now the book is written on a computer, multiple drafts are produced on an electronic printer, much of the research is done over the Internet, and the final product is increasingly as likely to be read electronically as on the printed page.

  In the United States, electricity consumption is expected to rise at about 1.4 percent per year. That sounds modest when compared with some developing countries today—or to the almost 10 percent growth in the 1950s in the United States when Ronald Reagan was extolling the “all-electric home.” But over 20 years, it means an absolute growth in demand of about a third. That is equivalent to about 150 new nuclear reactors or almost 300 new standard-size coal-fired plants. And every single new facility means a choice over fuels—and a wrangle over what to do.

  MAKING POWER

  Electricity is flexible not only in what it can be used for but also in terms of how it can be made. It is not a primary energy resource in itself, unlike oil or natural gas or coal. Rather it is a product generated by converting other resources. And it is very versatile in the making. Electricity can be made from coal, oil, natural gas, and uranium; from falling or flowing water; from the blowing wind and the shining sun. Even from garbage and old tires.2

  Electric power is a classically long-term business. A power plant built today may be operating 60 to 70 years from now. It is also a big-ticket business—in fact, it is the most capital-intensive major industry in the United States. Fully 10 percent of all capital investment in the United States is embedded in the power plants, transmission lines, substations, poles, and wires that altogether make up the power infrastructure. A new coal plant may cost as much as $3 billion, assuming it can be built in the face of environmental opposition and uncertainty about carbon regulation. A new nuclear power plant may be double that—$6 billion or $7 billion or even more. Assuming the nuclear plant can make its way through the permitting process, it can take a decade or two to site and build, and its lifetime may ultimately extend into the next century.

  Yet the rules, the politics, and the expectations keep changing, creating what economist Lawrence Makovich calls “the quandary.” The business itself is still subject to alternating currents of public policy—and dramatic swings in markets and popular opinion—that lead to major and abrupt changes in direction. The focus on climate change grows more intense. So does antipathy to building new plants. And it is not just the prospect of new coal or nuclear plants that engenders environmental opposition. Wind turbines and new transmission lines can also raise the ire of local publics.

  How, in such circumstances, to meet the needs and close the gap between public expectations and what can actually be built? Both wind and solar still have to prove themselves on a systemic scale. (To each of these we will return later.) Efficiency and the smart grid could reduce or flatten out the growth curves.

  The place to start is with the current mix. In the United States, coal’s share, once almost 55 percent, has declined somewhat to about 45 percent of all electric-power generation. Natural gas is next, at 23 percent and rising; and nuclear, at 20 percent. Hydropower is 7 percent; wind is almost 2 percent; and solar does not register. Over the decades, oil has been squeezed down from over 15 percent to just 1 percent. That is why, despite what is often said, increased renewable or nuclear power would have very little impact on oil use unless accompanied by very widespread adoption of electric cars that plug into the electric grid.

  The other major developed regions are somewhat less reliant on coal. In Europe, nuclear, coal, and natural gas are all tied at 25 percent each. Hydro is 15 percent. Wind and oil are virtually neck and neck, at 4 and 3 percent respectively. Japan is 28 percent coal and 28 percent nuclear, followed by natural gas at 26 percent. Oil is 8 percent; hydro, 8 percent. Wind is negligible. In all three regions, solar has yet at this point to appear in any statistically significant way.

  THE FUEL MIX

  Electricity generation in 2009 by fuel type, in millions of gigawatt-hours

  Source: IHS CERA

  China and India, the world’s most populous countries, rank first and third, respectively, in coal consumption, with the United States placing second. In China about 80 percent of electricity is produced from coal, while this figure is 69 percent for India. Hydropower accounts for 16 percent of electricity production in China and 13 percent in India.3

  The choices on fuel mix are determined by the constraints and endowments of region and geography. Thus, over 80 percent of Brazil’s electricity is hydropower. The choices are also shaped by technology, economics, availability, and the three Ps—policy, politics, and public opinion.

  When it is all added up, however, on a global basis, a triumvirate of sources—coal, nuclear, and natural gas—will remain dominant at least for another two decades. As one looks further out in the years ahead, however, renewables grow, and the mix becomes less clear—and much more subject to contention.

  COAL AND CARBON

  Today 40 percent of the world’s electricity is generated from coal. Coal is abundant. The United States holds over 25 percent of known world reserves, putting it in the same position in terms of coal reserves as Saudi Arabia with respect to oil reserves. A new generation of ultra-supercritical power plants—operating under higher temperatures and pressures—are coming into the fleet. They are much more environmentally benign than the plants that would have been built a generation ago, and because of their greater efficiency they can emit 40 percent less CO2 for the same amount of power as a plant built a couple of decades previously. Today most scenarios have coal use growing on a global basis.

  Between 1975 and 1990 the output of coal-generated electricity literally doubled in the United States. In those years, government policies restricted alternatives, and coal became the reliable, buildable generation source. Policies also promoted coal as a secure energy source and one not subject to political disruption. For many countries, that is still the case. But not in the United States and Europe, where carbon emissions are a major issue. Based on the chemical composition of coal and natural gas, and the greater efficiency of a combined-cycle gas turbine, coal produces more than twice as much CO2 per unit of electricity as does natural gas.

  In 2011 about 25 coal-fired plants were under construction in the United States. But political and regulatory opposition to coal on grounds of global warming has mounted to a level that makes it difficult to launch new conventional coal plants. Permits for coal projects already under construction are being challenged, and a number of new coal power projects have been canceled or delayed in the United States—even after entering advanced stages of development. Some environmental groups have made opposition to building new coal plants a top priority.4

  At the same time, concerns about the health impact of emissions, aside from CO2, and water usage are leading to new regulations. These new rules will significantly increase the operating costs of existing coal plants. The expected price tag for compliance with such
new environmental regulations will likely accelerate the retirement of a number of U.S. coal plants, though the pace is the subject of much debate. These new environmental requirements create a formidable gauntlet for any proposed new plant to run in order to make it through the regulatory approval process.5

  CAPTURING THE CARBON

  What then can be done to reconcile coal and carbon? That challenge preoccupies much of the power industry. Over the last 20 years—pushed by regulation and facilitated by the use of markets—the power industry and the equipment manufacturers that serve it have done a remarkable job in eliminating pollution. Some 99.9 percent of particulates, 99 percent of sulfur dioxide (SO2), and 95 percent of nitrogen oxides (NOx) emissions have been banished by new coal plants. But the amount of carbon, embedded in the carbon dioxide emitted by burning coal, is an altogether different and a much more intractable problem.6

  The most prominent answer today is carbon capture and sequestration (or storage), better known by the shorthand CCS. To “sequester” something is to isolate it or set it apart; the concept here is to keep carbon out of the atmosphere by capturing it and burying it underground. “CCS is the critical future technology option for reducing CO2 emissions while keeping coal’s use above today’s level,” said the MIT study The Future of Coal.

  CO2 can be captured in several ways, either before or after the coal is burned. One of the various methods, the only one that could likely be adapted to an existing coal plant, is capturing the CO2 after burning the coal. For the others it would be so expensive and complicated that it would be cheaper just to scrap the existing plant and build a new one.

  However it is separated out, the captured CO2 is compressed into a “super-critical phase” that behaves like a liquid and is transported by pipeline to a site where it can be safely buried in a secure underground geological formation. The CO2 would be trapped, locked in, the key thrown away, presumably forever.

  In principle, the technology is doable. After all, gases are currently already captured at various kinds of process facilities. CO2 is already transported by pipeline and pumped into old oil and gas fields to help boost production. But when all is said and done, those analogies are limited—different purpose, different geological conditions, not monitored in the way that would be required, and on a much smaller scale.

  The proposed system for CCS is expensive and it is complex, whether one is talking about technology or politics and the complicated regulatory maze at the federal and state levels.

  “BIG CARBON”

  And the scale here would be very, very large. It would really be like creating a parallel universe, a new energy industry, but one that works in reverse. Instead of extracting resources from the ground, transporting and transforming them, and then burning them, the “Big Carbon” industry would nab the spent resource of CO2 before it gets into the atmosphere, and transform and transport it, and eventually put it back into the ground. This would truly be a round-trip.

  Indeed, this new CCS industry would be similar in scale to that of existing energy industries. If just 60 percent of the CO2 produced by today’s coal-fired power plants in the United States were captured and compressed into a liquid, transported, and injected into the storage site, the daily volume of liquids so handled would be about equal to the 19 million barrels of oil that the United States consumes every day. It is sobering to realize that 150 years and trillions of dollars were required to build that existing system for oil.

  Though CO2 is a normal part of the natural environment, at very high levels of concentration it is poisonous. The scientific consensus is that the CO2 could be stored with little or no leakage. “Geological carbon sequestration is likely to be safe, effective, and competitive with many other options on an economic basis,” in the words of the MIT report. But it adds: “Many years of development and demonstration will be required to prepare [CCS] for successful, large-scale adoption.” What happens if there is a leak? Who is legally responsible to fix it? Who is legally liable? Indeed, who owns the CO2? Who manages it and monitors it—and how? What is the reaction of people who live above the storage? Who writes all the legal and regulatory rules that need to be created? And, fundamentally, will public acceptance, if not outright embrace, be sufficient to build and operate a vast CCS system?7

  Then there is, of course, cost. Estimates today, based on experimental projects, suggest that CCS could raise the price of coal-fired electricity by 80 to 100 percent. That can work if a significant price is put on carbon either through a cap-and-trade system or a tax. Such a carbon charge would push up the cost of conventional coal generation without carbon capture, making coal-fired electricity with CCS competitive with conventional coal generation.

  Still there is nothing yet close to a large-scale plug-and-play-type system for managing carbon. A few pilot projects integrating CCS with existing power plants are now under way. “The pace is insufficient,” said Professor John Deutch of MIT. It will take billions of R&D dollars and several large-scale demonstration projects and a decade and a half or more to get to the point where CCS starts to become commercial. It is an engineering challenge—“heavy-duty, large-scale process engineering... relentlessly squeezing cost and performance improvements out of large-scale chemical engineering facilities.”8

  If CCS is still in the future in commercial terms, will coal plants get built in the interim? They may be designed to be “capture ready,” although it’s not clear what kind of technology and system they should be ready for. Still, CCS will likely end up part of the solution to carbon in electric power.

  In the meantime, the innovation imperative for clean coal will be very strong. Perhaps some other technologies will be developed that will offer a different solution to carbon—and perhaps cheaper and less complex. Or perhaps ways will be found to transform the waste product created from burning coal into something itself of value and use. In other words, transform CO2 from a problem into a valuable commodity. The incentive is certainly there.

  THE RETURN OF NUCLEAR

  In a carbon-conscious world, nuclear power’s great advantages are not only the traditional ones of fuel diversification and self-sufficiency. It is also the only large-scale, well-established, broadly deployable source of electric generation currently available that is carbon free.

  Nuclear power continues to make up about 20 percent of total U.S. electric generation, as in the 1980s. But how can that be possible? United States electricity consumption has virtually doubled since 1980; yet no new nuclear plants have been started in more than three decades, and the United States has about the same number of operating nuclear units today as in the middle 1980s. How could nuclear power hold on to its 20 percent share of this much larger output?

  The way that nuclear has maintained its market share is through dramatic improvements in operations. In the mid-1980s, operating problems took plants off-line so that, on an annual basis, they operated at only about 55 percent of their rated total generating capacity. Today, as the result of several decades of experience and an intense focus on performance—including recruitment of those veterans from Rickover’s nuclear navy—nuclear plants in the United States operate at over 90 percent of capacity. That improvement in operating efficiency is so significant in its impact that it can almost be seen as a new source in electric power itself. It is as though the nuclear fleet were doubled without actually building any new plants.

  A NEW LEASE ON LIFE

  In addition to its much-improved operating and economic record, U.S. nuclear power has received another very important boost, without which it would indeed have begun to fade away. Nuclear power plants require a license to operate. This process involved years of applications and review and challenges. (It is estimated that the cost of applying for a new nuclear license today is as much as half a billion dollars.) The operating licenses—granted by the NRC, the Nuclear Regulatory Commission (and before that by its predecessor, the Atomic Energy Commission)—lasted 40 years. That length of time was based, as the
NRC puts it, “on economic and antitrust considerations, not technical limitations.” Whatever happened at the end of those 40-year terms would be a turning point for nuclear power, one way or the other, and would determine if nuclear power had any future in the United States.

  In 1995 Shirley Ann Jackson, a physicist from Bell Labs, became the chair of the Nuclear Regulatory Commission. Licensing was at the top of her agenda. The end of the 40 years was starting to come into view for many plants, and with that the specter that the nuclear fleet would have to be shut down and decommissioned—unless the NRC extended their licenses for another twenty years. And could it be done in time?

  “Some components in plants do wear out, and they need to replaced,” Jackson later said. “If a plant is coming closer to the end of its licensing period, there is less incentive to invest, which could actually lead to premature shutdown of plants. To put it simply, we were potentially going to lose a significant amount of electricity.”9

  The operating record of the nuclear industry had clearly improved, and substantially so. In fact, companies were coming to the commission to request permission for power upgrades, above what had been their maximum output, because of their increased efficiency. In support of license extension, the NRC launched a crucial new initiative to update the safety system that governed the industry, using new tools and capabilities.