WHAT IMPEDES COMPETITION AMONG RAW ENERGY SOURCES?

Although it is technically possible for any one raw source of energy to be substituted for any other source, this is not typically done for some consump­tion sectors. Two examples of this are transportation and commercial/residen – tial heating. In the case of transportation, there is some flexibility, as discussed above, but to be completely flexible, we would need to be able to drive our cars, trucks, trains, ships, airplanes, and so forth on coal, nuclear, wind, solar or any raw energy source. And while this may be technically possible, it is very imprac­tical. Nobody wants to drive a car that resembles a 1900 coal-burning steam locomotive, nor would we want a nuclear reactor in the trunk of our car.

Electricity is the key to making the many raw energy sources exchangeable. Electricity is the most flexible energy source and can be used very efficiently for just about any use. Electricity is already used as an intermediate energy for many devices, but transportation and commercial/residential heating are two exceptions in which electricity is not generally involved. Any raw energy source can be used to generate electricity. In most cases, generating electricity as an intermediate step before the energy is finally consumed is more efficient than using some raw energy source directly for consumption as seen in one example in Table 1.3.

Very few homes or businesses in heating-dominated climates are heated with electricity. However, with today’s prices for heating oil, natural gas, and propane, using technologies powered by electricity or solar is the cheapest and most efficient way to heat homes, businesses, and water. By using electricity or solar for this type of heating, the raw sources of natural gas and petroleum may also be changed to the raw sources of coal, nuclear, and various renewable sources. But it takes time to make these changes. We can’t just wait until pe­troleum is gone and expect to flip a switch to make the necessary change. The technologies which must be employed are air-source heat pumps, ground – source heat pumps, and solar collection. Although these technologies will use less energy and have an overall lower cost over the long-term, they are also costly to install, and thus, many are reluctant to choose them. In fact, many consumers don’t even know that these are the cheapest ways of heating a struc­ture or that they can be used in practically any climate. Newer technologies also have fewer qualified technicians who can design, build, or install them. These factors combine to add a delay in the switch from one raw energy source to another, even when the newer energy source is more efficient and cheaper.

The delay is also true for the transportation sector. It takes time for newer technologies to break into the market. When gasoline prices hovered around three to four dollars per gallon in 2008, it would have been much cheaper to run vehicles on natural gas, electricity from a variety of raw sources, or even on liquefied coal fuels. It would take time, however, for such alternative-fueled ve­hicles to be designed, manufactured, and placed into service across the United States. For natural-gas powered vehicles, a large network of refueling stations would need to be built, in addition to the mass-production of the vehicles themselves. For electric vehicles to be a reality, the production of batteries needed for electric vehicles needs to be ramped up, but this type of sudden large-scale production is difficult for any emerging product. Lastly, the use of liquefied coal requires large production facilities to be built to convert solid coal into liquid fuels that can be refined into gasoline. All of these technologies are being pursued in other nations to a much larger degree than in the United States.

As certain fossil fuels are used up either locally or globally, the consumers of that raw energy will need to switch to some other raw energy source. This requires full competition between the various raw energy sources for all con­sumer sectors. In order for this to happen, it is necessary that all such sources feed into the same energy pool from which all the various energy consumers will draw. This is essentially the purpose of the national electric gird or alter­natively a hydrogen-based economy.

I n a hydrogen-based energy economy, then, some form of raw energy would need to be used to produce this hydrogen, which could then be piped around the country in a network of hydrogen pipelines (Rifkin, 2003). The main advantage of using hydrogen is that energy, in the form of hydrogen, can be stored during times of low demand and high production and then used during times of high demand and low production. An example of the benefit of storage is that solar energy could then be stored for use at night. The short­comings of a hydrogen-based energy economy is that hydrogen is currently much too expensive to produce, store, and convert back into useful energy.

If the national electric grid were significantly updated to have a much larger capacity, this would also provide the infrastructure for all the raw en­ergy sources to compete with each other. The infrastructure for an electricity – based energy economy is much closer to the currently existing infrastructure than is the infrastructure for a hydrogen-based energy economy. Thus the cost of an expanded electric grid is modest. Such large electricity-based net­works would also increase the impact of renewable energies like wind and solar, because it is likely that the wind would be blowing somewhere in the country at any given time, producing energy that would be available to some­one anywhere in the country. It also allows solar energy to be collected in regions with plentiful sunshine and then consumed in regions with less sun­shine. The shortcomings of an expanded electric grid is that it does not offer any inherent energy storage.

Shifting infrastructure for use by other resources is extremely costly and difficult. One difficulty is that of unintended consequences. Consider coal – to-liquid (CTL) technology, which allows coal to compete with petroleum in the transportation sector. When the price for petroleum exceeds $100 per barrel, making synthetic gasoline from coal (CTL) becomes cheaper than making gasoline from petroleum. But to use CTL technology, a huge invest­ment must first be made to build one or many CTL plants at a cost of billions of dollars. In the energy industry, this type of investment is not unheard of, and many energy companies can readily fund this type of investment when they choose to do so. However, it will take years for the investment to pay off with the profits of the synthetic gasoline. When a CTL plant is built, the overall supply of gasoline will increase, and thus by simple supply and de­mand economics, the price of petroleum will decrease. This in turn decreases the price of traditional gasoline. At the same time, the CTL plant will also increase the demand for coal, causing the price of coal, and therefore the price of synthetic gasoline, to rise. These two factors together make the CTL tech­nology less competitive with petroleum. In fact, if the price swings are large enough, they can cause the CTL plant to lose money and go bankrupt, even though it was viable before it started production.

Such a case, of new, competing technologies going bankrupt, is not just a theoretical scenario. Many alternative energy companies went bankrupt be­cause of this situation, and in fact, there are concerns that many of the etha­nol plants that sprang up in the early 21st century will go bankrupt, due to the increased price of biomass feedstock and the falling price of petroleum in late 2008.