Villains or Heros? Our warped perception on essential questions

Alex Epstein(@AlexEpstein) is making the case for the necessity of fossil fuel with unique clarity and persistence. He is speaking this into a torrent of furious hatred of apocalyptic fossil fuel deniers, who threaten the lives of millions of vulnerable people. That’s heroic. Or the incarnation of maliciousness, if you believe the world is going to end in a few short years due to our unreasonable use of totally unnecessary fossil fuels, which are forced upon us by an exploitative state controlled by corrupted and paid for politicians. In that view, Epstein is nothing but a shill.

Public opinion is similarly divided on Bjorn Lomborg(@BjornLomborg), who is either a great benefactor of humanity for his insistence on rank-ordering the greatest suffering and solving as much of it as cost-efficiently as possible, or a heartless climate delayer that demeans the lived experience of people by measuring them in mere dollars. Michael Shellenberger(@ShellenbergerMD ) is similarly seen either a successful activist and best-sell author advocating to use technology to minimize our impact on nature, or a traitor of “real solutions” like solar and wind and sell-out for nuclear.

I try to see the good and the bad in all people. As you might have guessed, I think these authors make on net positive contributions for the discussions about climate change, fossil fuels, nuclear power and society’s path forward. In fact, I even wrote an endorsement for Michael Shellenberger, when he ran for governor. Nevertheless, the usual caveats apply: I am not always in agreement with their positions, formulations or actions.

“Ending fossil fuels within the decade!”

Here, I’d like to look at the question of ending “the fossil fuel industry within the next decade” like 350.org proposed. As society, we act as if it were easy to do so and pressure for divestments, banning for example investments for African countries or using ESG scores to move a lot of capital towards “politically preferred” sectors. Celebrities and politicians are advocating for it, school children are not glued to the TV anymore, but to streets and paintings to protest for it, Hollywood is cranking out movies promoting it. All of them seem deeply convinced that it is the right thing to do. And they insist that only evil or dumb people could be against this great cause.

So is it evil and or dumb to argue against this course of action?

Electricity - the easy question

The discussion about climate change and fossil fuels is often revolving around solar and wind power for electricity. Let us join the discussion right there. It makes sense that electricity has been the frontier of decarbonization efforts, because electricity is the easiest of the problem to solve. It is by far not easy, but easier than for other parts of the economy. Renewables can replace some percentage of power on the grid directly. Electricity is a commodity and customers don’t typically know or care where their electrons come form - as long as they come out of the wall when they need it. From the perspective of the customer, there are no “brands” of electricity, no distinguishing features but a price that is set by an auction.

The auction works by the merit-order principle. This gives the market’s premium on reliable energy to renewable power, without them being able - or up to a certain percentage being required - to offer the reliability that makes customers want to have it and pay for it. Renewable power has had almost everywhere income streams in addition to the price at the auction, like tax credits or guaranteed minimum prices. They are therefore able to “bid low” at the auction and can reap the price that customers are willing to pay for the “marginal” producers, the one that comes in last to provide the power customers need. Overtime, they push more costly producers into idleness and maybe permanent shutdown.

But the replaced fossil and nuclear power plants are dispatchable. That means that you can ramp them up to their maximum output, whenever you want to do so. That will mostly be the case, when your customers request it. You cannot “turn up” the sun or wind. Solar and wind installations can only transform as much power as happens to be available by the weather. If customers demand more power, you are helpless to increase their output. Because the economics of the auction change the composition of the grid, without making sure that there is an alternative to the dispatchability problem, more and more “flexible” power plants with high operation costs need to be on stand-by and have to recoup all of their expenses in the periods of the highest demand. That can send prices skyrocketing. Or they need alternative means of funding.

In Texas in 2021, consumers learned what that means. They will have to pay for the next decades for the electricity that was consumed during the cold spell. Proponents of renewable power would certainly like to put the blame for the prices on fossil fuel. But I think the argument is strong, that the large scale, subsidized build out of renewable power plants has increased system costs and risk. The very existence of large renewable power capacities is the reason, why there need to be fast ramping backup plants with low utility factor, which are therefore asking a high price on their electricity at the auctions. If renewables were capable of producing energy when it is needed or capable of storing energy for extended periods of time, like coal plants which typically have several weeks worth of coal on site, or a nuclear power plant that has typically months worth of fuel inside the reactor, they could eliminate the need for such power plants and the occurrence of weather induced price spikes. But, alas, they can’t. At least not now.

Maintaining grid stability

To maintain the stability of the grid, the questions of amount, timing and locality have to be answered continuously and thoroughly. You need the right amount of electricity at the right time in the right place. It helps no one, when far away off-shore turbines produce a lot of energy, but simultaneously solar power is at its peak. The “excess” energy has to be scuttled. It also doesn’t help you in the evening, when solar energy production was great at noon. Similarly, record hydro production in Washington cannot help you in Texas.

To solve these problems, proponents suggest a few fixes: For example to increase the grid capacity. That means an increase the number of lines that can carry electricity. To prevent blackouts, the lines need to be sized for the worst case to transport large percentages of every region’s electricity demand across continents. That means for most of the time only a fraction of the capacity can be used, which increases costs per unit of energy transferred. And typically people don’t like high-voltage transmission lines near their property. Other ideas are to overbuild nameplate capacity of renewables. So when we build like 50x of what the maximum consumption is, even when solar runs at only 4%, there would still be enough to power the grid. Of course, a lot – maybe most – of the produced electricity will be thrown away. The last idea is to increase storage. We have a few minutes of storage capacity. Depending on your location, you will need months of storage. Most of it will cycle only once or a few times in its service life, which increases the price of electricity beyond the pale. All of these solutions are prohibitively expensive at the moment and impossible to do without massive build outs of mineral mining, for example for copper, lithium, cobalt, nickel and so on, which is highly unpopular. Fossil fuel power plants and nuclear plants on the other hand allowed utility companies to place production in roughly the right amount to roughly where it was needed. That has helped to keep the number of electricity lines reasonably low.

As already hinted at, what countries have done instead of solving the problem of dispatchability with renewable energies alone, is to keep their fossil fuel backup power (up to 100% of the maximum demand) and leave it idle for a lot of the time to be ready on short notice to ramp up. The problem is that these dispatchable power plants are hardly ever profitable at the auction as it is designed today, because subsidized renewable energy makes up a large share of the power consumption. When there is a renewable production crunch, though, the prices they can ask become astronomical. They are like options on financial markets, where you tend to lose a little bit of money constantly, to have the option of cashing in during extreme events. You cannot yet maintain stability in the grid without these plants. They are vital for the grid and all consumers and industry that relies on the grid.

Because ending subsidize for renewable energies is not popular today, but the incentive structure puts electricity grids under pressure, most countries had to crank the intervention spiral for another turn. For example, the IRA extends subsidies (tax credits) to nuclear power plants to keep these plants, which produce large amounts of reliable and low-carbon power, online. Other schemes are to subsidize the conversion of gas power plants to also be able to use oil, which can be stored far more easily and can reduce stress on gas pipelines during cold weather, when these pipelines have to carry the gas used for residential heating and for the gas power plants. “Capacity reserve markets” are springing up at different places to offer income streams for these power plants in addition to the energy auctions.

The hard questions of decarbonization

While it produces considerable pain and costs to decrease the amount of fossil power in the electricity sector, fossil fuels are simply irreplaceable right now in concrete, steel, food and plastics.

4 billion people are alive today that would not be without the nitrogen in fertilizers. Even if we scraped every little dropping of poo and dung as fertilizer, there is no way that we could feed all of us. Almost all fertilizer that allows people to live is made from natural gas.

All our transport solutions need steel: cars, trains, planes, buses, trucks, ships etc. All tools, excavators, cranes etc. that are used for mining minerals are made from steel. Bridges, rails, ports, houses all of them are made of steel-reinforced concrete. As are all foundations of wind power plants.

We consume 1.8 billion tonnes of steel, 4.5 billion tonnes of concrete, 150 million tonnes of ammonia and 370 million tonnes of plastics. These are the “four pillars of modern civilization” as Vaclav Smil is calling them. None of that is possible without fossil fuels. I can recommend his latest book, if you doubt it.

Today, 80% of the world’s energy comes form fossil fuels. Despite all the brave talk about “net-zero”, the irreplaceability of fossil fuels leads the IEA to forecast the energy mix to change to only 66% fossil fuels in 2050, IF all governments delivered on all their climate policies, which they don’t. Not even close.

By the way, wood would make up 15%, most of it still to be burnt indoors by poor people in developing nations, hydro power 3%, nuclear power 5% and only 10% or so are “renewable” as people would understand it. There is no serious institution that believes we could get rid of fossil fuels in the timelines that politicians are eager to promise. Not without untold death and misery that is. If you see an institution promising otherwise, ask them one of Bill Gates’ questions: “What about cement?”

Innovation or Business as Usual?

Could we be surprised by economical advances in Gen III+ or genuine technological advances in GenIV nuclear? By fusion power, electricity storage, geothermal or CCS? Could that decrease the use of fossil fuels far deeper than that? Sure. In fact, I certainly hope so.

I am all for innovation. But we need to get the sequence right! First you have to create alternative innovations; if they are better and cheaper than what you want to replace, market participants will use it voluntarily. If the innovation is not better and you are a politician, you might want to think about pushing the innovation into the market. You can mandate quotas or grant subsidize or even ban what you want to get rid of. There are plenty of arguments to be had about fairness, justice, property, corruption, free choice and so on with doing so, but well will leave it at that. What you cannot - must not! - do, is to ban an absolutely vital part of human life with not even a clue about alternatives.

And the entanglements of fossil fuels and the products you might like can often be indirect and obscure. Almost all of our goods are transported by a truck at one point or another on their way from factory or farm to us. Almost all of these trucks have diesel engines. These used to be polluting. But new technologies, like particle filter or and additive called “AdBlue” that is injected into the exhaust gas to remove hazardous chemicals, makes them relatively clean. This additive is made of water and urea. Modern trucks don’t even start, when the additive tank is empty - the onboard computer forbids it. Fertilizer is mostly urea. When we curtail gas and urea production, we risk our ability to transport, well, anything. Including “biological” food grown without fertilizer. If you did not know that you will not get your organic food, if you ban fertilizer production, maybe you should tone down in advocating for it?

What would happen, if we were to stop funding fossil energy development? Well, we have being doing an experiment on that question in the real world. We halved global investments in fossil energy development from 2011 to 2021. We can see the results now: prices rise. For everything, because we need energy to build and transport everything. Who cannot pay these prices? Poor nations and the poor in each nation. We sabotage the material basis of industrialized live and “pulled the ladder up behind us”. We even wrecked the world’s food production. What is the motivation to wage a war on food?

Why do we do it wrong?

I suspect the reason that politicians in the West do it anyway is partially inspired by some inane management handbooks that would cheer for it as “leadership”, “focusing the mind”, “getting out of the comfort zone” or whatever. But we are not talking about a change in the database technology for a dating app that you want to get through by simply canceling the license contract and giving your engineers no other choice than getting the migration done.

We are talking about decades worth of accumulated physical and human capital for absolutely vital parts of our economy. We have no idea how to replace coal in blast furnaces, no idea about how to replace plastics, no idea how to make glass or cement or steel or fertilizer without fossil fuels at anything near the scale or cost we need.

Failing at this means not simply losing some money and a grudgingly signed renewal with the grinning vendor you wanted to get away from, but death for tens of millions. Not in some distant climate change induced possibility, but now. The risk-reward landscape is different. This is not the place for managerial or executive voodoo. It is hard to imagine how much disregard for human lives you need to have to try something as reckless as this.

Maybe this recklessness comes from the apocalyptical religion that environmentalism has become? Fear of coming doom and love for “pristine nature” or maybe more appropriately “hate for industrialized civilization” as the highest go(o)d far beyond human well-being might make adherents of that idea discount the suffering of people. If it were like that, in this worldview, people would be worthless or at least worth less than nature. Obviously, people of color would be attributed the lowest value, because the rich, mostly white, well-connected people in positions of formal and informal power in liberal democracies put people in South America, Africa and Asia into energy poverty and work diligently to keep them there. For what? Status? Imagined virtue? Some future good? Is this all a “post-modernist” power play, where people that have influence use it to force their will on the world? Is the unwillingness to discuss economic and physical facts also explained by that, because objective reality and facts are rejected by post-modernism, especially when they contradict a pre-conceived opinion? Are nihilists trying to find at least some meaning and joy in orchestrating the destruction of civilization? Is it genuine ignorance? On their part or mine?

I do not know, and it is probably moot (although entertaining!) to speculate, mind-read and paint with a broad brush. Different people will have different reasons for why they act the way they do. It would love to hear their explanations and cost-benefit analysis.

“Listen to the science! But not to economists!”

What ever the motives may be, measured by the consequences, “reducing carbon-emissions” cannot be amongst them, because those are still rising fast globally. And we do not do the things that bring us closer to lowering them, like investing in “RD&D” of at least plausible alternatives, like nuclear, geothermal, storage or fusion – as economist have urged us to do for decades now. Instead, we have been pouring hundreds of billions of dollars in deploying immature renewable technologies with all of their inherent flaws, like intermittency, value deflation, high land and material consumption, mostly funneling taxpayer money to already reasonably well-off homeowners and investors.

What do we have to show for? Germans paid more than $400 billion so far to reduce the share of fossil fuels in the country’s primary energy supply from 84 to 78 percent. They could have built more than 70 EPR nuclear reactors at the Finnish price for it, resulting in about 120GW of clean power, without any assumption about cost declines in building these power plants. That’s far more than enough for 100% carbon free electricity.

Developing countries cannot spend such amounts of money inefficiently. They opt for the cheapest form of reliable energy that they can get. That is why they build coal power plants. (And even Germany is trying to fire its coal plants back up, now that access to cheap Russian gas is gone.) We can begrudge that fact and vilify their political leaders. Or we can work on innovations to offer cheaper low-carbon alternatives. Like the DOE, that is studying the conversion coal power plants to nuclear ones, or TerraPraxis that wants to do the same with GenIV molten-salt nuclear power plants. Even geothermal startups, like Quaise claim that they can repower “terrawatts” worth of fossil power using deep geothermal heat. Although there has not even been a demonstration of break-even fusion gain, even fusion companies like Zap Energy are looking into converting coal power plants. If any of these ideas can be developed to a price-competitive and scalable solution, we would make real progress.

Economists are also not listened to when they lay out the least costly way towards decarbonization - a uniform price on carbon. Or when they tell us about the necessity of weighing the costs of climate change AND the cost of policies trying to counter climate change.

We are told to listen to “The Science”, but apparently not to the science of making decisions under uncertainty and constraints. But why? Could it be that the solutions economists would identify as the most favorable ones are not “fundamentally changing the structure of the capitalist system” or “reducing human numbers to ‘sustainable’ levels”? Could it be, because their solutions would make humans better off? I do not know why we do not choose the rational choice.

What we know is that we are choosing a way that is more costly and will leave more people in poverty. People of color will be disproportionately impacted. In the name of (paternalistically) “protecting” these people from the impact of climate change in a century or so, the West keeps them in poverty. But that leaves these people vulnerable to weather events. Material wealth reduces vulnerabilities. When people are empowered, they can master the vagueries that nature throws at all of us by build better housing and flood protection, better heating and HVAC, being more mobile, having better communication and early warning systems. All of this makes them more resilient to storms, floods, droughts, heat waves and cold spells.

Summary

To summarize the argument:

• We know that fossil fuels are vital. We rely on them for steel, cement, plastics, electricity, transportation, housing and food.

• We have neither developed nor deployed alternatives yet. For many problems, at most lab scale ideas exist.

• We know that poor people are hit hardest by rising energy costs, and we know that underinvesting in fossil fuels raises prices.

• We know that a rational choice will weigh the costs and benefits of fossil fuels, climate impact and climate policies.

Yet, we behave as if these problems do not exist. Without an obvious explanation of why we do it. I only hinted at some of the unflattering proposed explanations.

To come back to the question of this post: “So is it evil and or dumb to argue against this course of action?”, in my opinion the answer is a resounding: “No!”.

On the contrary, without alternatives, the politically orchestrated underinvestment in fossil fuels risks the material existence of billions of people. Without fertilizer, they will starve. Formulating this loudly and clearly, despite being unpopular, is a great service. I am grateful that they offer it to us.

Looking forward to your ideas on Twitter.