California's Energy Lessons
Over the past decade, Vijay Vaitheeswaran served as the Global Environment and Energy Correspondent for The Economist, covering a complex interplay of politics, economics, business, and technology. He test-drove ideas about alternative energy in ZOOM: The Global Race to Fuel the Car of the Future, and more recently authored Power to the People: How the Coming Energy Revolution Will Transform an Industry, Change our Lives, and Maybe Even Save the Planet. In the following interview, hear why Vaitheeswaran (despite being a hard-core New Yorker) thinks that California can lead the way for the rest of the country when it comes to energy issues.
McMansions and clean tech
NOVA: What can California tell us about energy in the U.S.?
Vijay Vaitheeswaran: California is the embodiment of all that is wrong with America when it comes to energy, and yet all that is glorious about America in terms of potential to fix the problem.
On the one hand, this is where Chevron, one of the great oil companies, is housed. This is the land that created car culture, in Los Angeles, and all the excesses of McMansions. But at the same time, it's the most energy-efficient state. It is truly progressive when it comes to clean-energy technology, including the clean cars of the future. They really are coming up with American solutions to the problems that they helped create.
Is California's AB 32 part of the solution? According to this law, industries that emit too much CO2 will start paying a price. Is this a good thing?
A law like AB 32 that imposes, effectively, a form of tax on carbon emissions is a good first step. It will force industries to acknowledge the first rule of business: "What matters gets measured."
Right now, we don't measure carbon dioxide emissions because there's no federal law. It's not illegal in America to emit greenhouse gases. But at the state level, California is taking the lead, making industries measure emissions and recognize they're contributing a harm to society.
That's good, but it's incomplete. Here's why: If all you do is take energy-intensive industries, price them out of California, and they ship over to Arizona or China, have you really solved global warming? Probably not. That's why California's actions can be seen only as a stepping stone to a broader solution.
"When governments put money towards specific technologies, they almost always get it wrong."
Will laws like this result in higher costs for businesses and consumers?
Perhaps in the short term. But when you provide constraints on creative people, you encourage innovation. In the long term, we'll find ourselves in a world with much more efficient technologies. The way we did, for example, in solving the acid-rain problem. In the short term, it cost a little more money for power plants. But we solved the problem at much lower costs than anybody forecast.
Won't some people lose their jobs?
There'll be some job losses, particularly if you're a coal miner, let's say. But then again, if clean-coal technologies take off, there might be a boom in coal, where you get a job doing carbon sequestration. We'll also create entirely new industries. We have to remember that markets are dynamic. It's a dynamic dance of development.
And it's hard to know where the dance will lead.
Exactly. In 1890, in New York, the environmental leaders thought the most important problem of the next century was horse manure on the streets, because that was the biggest problem from the buggies. Even though they already had automobiles for 15, 20 years, they didn't see Henry Ford and the Model T and the revolution that was about to come.
The last buggy-whip maker who went out of business said, "This is outrageous, this is un-American." Well, obviously, America didn't slow down. We went from strength to strength.
As the clean-technology revolution takes off, we won't be able to forecast the disruptive innovations to come. There will be losers. But if we embrace change, we'll find far more winners, and it will be a far cleaner and better world we'll leave to our children.
Coal and conservation
What's wrong with current coal-based power for our electricity?
It's really disgraceful how inefficient America's power grid is. More than half our electricity comes from dirty coal plants. On average, they're over 30 years old—a bunch of clunkers that we keep going by sticking duct tape and band-aids on them. They run at, maybe, 30 percent efficiency.
Also, when we burn coal, it's far away from consumers because it's a filthy fuel. All the heat is vented into the atmosphere, so we have to use more energy to heat our homes. We don't do co-generation, like the Danish and others, where you use the heat and electricity from a little power plant in your basement.
Can we make our buildings more energy efficient in lots of other ways as well?
There's no question that the low-hanging fruit of solving the climate problem lies with buildings. This is the sector [as opposed to transportation and industry] that uses the most energy and emits the most greenhouse gases.
When we design homes in America, we don't think about using the least amount of energy to deliver cold beer and hot showers. We think only about aesthetics or cheap materials.
You aren't a big advocate of energy conservation. Why?
Conservation alone is only one side of the equation. Conservation is related to, but not the same thing, as energy efficiency. I'm a big advocate of energy efficiency. Conservation? I could take it or leave it.
Here's why: Should Grandma, living in Minnesota, really turn down the thermostat on a cold winter night? Answer's probably not. That's conservation. But if you go in and fix her boiler and put in insulation, she'll make it through the cold night. That's energy efficiency.
Efficiency's always good. If you had no energy in the first place, then forget Grandma. That's why I say let's clean up the environmental damage the energy does, and let's use it efficiently. And if you feel like being a conservationist, more power to you.
Soft and cuddly renewables
Is California's push toward renewable energy too aggressive?
California's push on renewables is quite aggressive. But Europe has an even more aggressive target. Within the next five years, they want to achieve what California's targeting for 2020.
Will California reach exactly the right number by the right date? In a way, it almost doesn't matter. What matters is we've gone from the last eight years or so in America—with a federal government that has actively argued against climate change and, in effect, sent a negative signal to the marketplace—to one in California where they're saying, "We encourage you to work in clean tech. We want to see a much higher share coming from renewables."
That is a tremendous boost. Without costing the taxpayer a penny yet, that has brought in a lot more investment capital and intellectual capital into the space.
What's wrong with California's strategy in the energy game?
My concerns about California's aggressive policies have to do with their specific picking of winners. For instance, we'll put Californian taxpayer money into solar panels. Why solar panels? Well, they're kinda soft and cuddly, and we like them. Well, why not wind? Wind is cheaper. Why not geothermal? Why not coal with carbon sequestration?
When governments like Sacramento put money towards specific technologies, they almost always get it wrong. Level the playing field for clean energies, get out of the business of subsidizing any energy, dirty or clean. I think that's the right approach.
The risk in California is that the policymakers fiddle too much with the specific technologies, because that's a role for innovators, for consumers, and the robust interplay of the markets.
"Cleaning up the car could be at the heart of cleaning up the entire energy system."
Are renewables like wind and solar the answer to our energy needs?
There's a huge potential. Let's remember, in one hour more energy arrives from the sun than all of humanity uses in a year. So we can move towards a completely sustainable, renewable economy. It's incredibly impractical, however, to think that you can stop using fossil fuels and go from one to the other overnight. That can't be done, and it won't be done.
Realistically, when we look at what's called new renewables—solar, geothermal, wind, the green cuddly stuff—these renewables in 1970 were about one percent of the world's primary-energy mix. Today? They're two percent. That's it.
So what are we talking about when we say the future belongs to renewables? We mean 100 years, 50 years, but certainly not five years from now. Not the time scale in which we need to get very serious about climate change.
The more seriously you care about climate change, the more you need to think hard about the role, not only for renewables, but for energy efficiency and conservation, for using fossil fuels cleanly, like carbon sequestration. And possibly—though I'm not a big fan—of nuclear as well.
Why aren't you a big fan of nuclear power?
Nuclear has suddenly come back into fashion. One of the founders of Greenpeace supports it. A lot of Greens think it's the only solution to climate change. The British government has made a massive commitment to a new generation of nuclear power plants.
Here's my beef with nuclear: It is one of the most expensive ways to make clean electricity. That money, if it were put towards energy efficiency, if it were put towards distributed power, co-generation, all manner of options, including using fossil fuels cleanly, would be so much more efficient.
I think it's wrong for governments to make a huge bet subsidizing one expensive technology. In the last 30 years, not one nuclear power plant in America has been built. And nowhere has one been built on time at the price promised without cost overruns, other kinds of delays, in Europe or America. Why would we bet on this one technology when we have a panoply of options?
Game changers
What could make renewables like wind and solar more practical?
The game changer could be, in the next 10 years, that we find meaningful energy storage. If there's one technology I'm watching more than any other in the clean energy space, it's battery technology.
If we can store energy reliably, if we can find a technology for the grid that is economical and scalable, then suddenly renewables become mainstream. We're not there yet.
Some environmentalists want to build wind farms and solar farms but don't want them in their backyards, so to speak, the NIMBY [not in my backyard] syndrome. Is that also a stumbling block?
There is something even worse than NIMBY. I call it "BANANA: Build Absolutely Nothing Anywhere Near Anybody." That's a California syndrome.
"I would argue for enlightened progressive public policy that tries to make a difference."
You put a lot of hope in the so-called car of the future. Why?
Cleaning up the car could be at the heart of cleaning up the entire energy system. Here's why: First of all, we can turn over capital stock in cars relatively quickly. A coal plant lives for 60 years, and the utility that built it will fight you tooth and nail if you try to shut it down. People switch cars on average every 15 years.
Cars can be the thin side of the wedge. You green the car, you green the fuels behind the car, and once you put a little electronics into it, you can make the car a micro-power machine that plugs into the grid. This is what Google and a number of other high-tech companies are working on—the smart, clean car of the future that plugs into the grid like a micro-power plant.
Out in front
What's allowed California to lead the way on environmental issues?
First of all, they have the technological base, with universities like Berkeley and national labs like Livermore. At Cal Tech, scientists got to the bottom of what caused smog, which is an extremely complicated scientific problem.
But equally important, they have a progressive body politic, both from the Republican and the Democratic parties, willing to act. You often find gridlock in Washington, where the oil companies and the car companies have much more influence.
Californians also have been willing to pay more for clean energy. For 30 years, they've paid a little more for gasoline that burns cleaner. Californian cars, with special catalytic converters, have been a little more expensive.
When these things come together, you have a perfect storm, in a positive sense— a body politic willing to support progressive policies and a scientific base that can help get it done.
Is California a good model for the rest of the nation?
California is a wonderful model, much better than Scandinavia or Japan. Culturally, we're not gonna live like the Japanese or like the Europeans with their small cars and apartments.
Californians live like the rest of us. But they do it much more intelligently, much more efficiently. The fact that they're much more into the knowledge economy and less into the manufacturing economy only says they've gone farther down the road that the rest of America can and must travel.
Even in the rest of America, let's remember that 80 percent of America's GDP comes from innovation-based industries, not ones based on brute force or dirty manufacturing. We're talking about services, IT [information tech] workers. As Peter Drucker, the great management guru pointed out, we are entering a knowledge economy. California's just one step ahead of the rest of the country.
So clearly you think that California is doing a lot of things well. But is California taking a big gamble with its energy policies?
There's no question that California is rolling the dice with its energy policies. Given the enormous dependence the state has, given its lifestyle, its love of the car, California needs energy, and it's going to import a lot of that energy. It is a risk, and it's particularly risky to start betting on specific clean-energy technologies like solar.
But the bigger risk, I would say, is the risk of inaction in the face of climate change and other environmental concerns, because not doing anything is also a choice. And in this case, I would argue for enlightened progressive public policy that tries to make a difference and that learns by doing. When you get it wrong, you fix it fast. That's less of a risk than standing doing nothing in the face of a challenge like climate change.