Deming explains that fossil fuels will likely remain the world's main energy source for decades to come. This poses a tremendous dilemma that we must grapple with.
Claiborne explained that global temperatures have risen about 1.8°F since pre-industrial times, coinciding with increased burning of fossil fuels as countries have industrialized. Simply stopping fossil fuel use is extremely difficult due to some key barriers.
Delayed Payoff and Individual Behavior Challenges
One major obstacle is the delayed payoff problem. If we start mitigation efforts today to reduce emissions, we likely won't see a noticeable impact on temperatures for 25-50 years based on climate modeling. It's very hard for humans to make sacrifices now without seeing tangible benefits in their lifetimes.
Compounding this is the fact that individual behaviors don't make a meaningful dent - even celebrity "climate warriors" justify things like private jet travel because their personal actions don't move the needle on a global problem. These are psychological barriers.
Transnational Tragedy of the Commons
Climate change is also a classic transnational "tragedy of the commons" issue. While it's a shared atmosphere, countries prioritize their own economic interests. Emissions reduction treaties like Kyoto and Paris have utterly failed to constrain CO2 levels, which have grown 79% since 1990 as nations like China have rapidly industrialized.
The data starkly shows that China's coal consumption alone now accounts for 21% of global energy emissions, with hundreds more coal plants in the pipeline. China-India coal energy is driving rising CO2 levels. We in the West can't force them to change course.
Limitations of Current Policy Responses
The current policy approach of subsidizing renewables like wind and solar has proven ineffective at materially reducing fossil fuel reliance, even as renewable generation has surged over 6x in the last decade. People aren't giving up the energy density advantages of hydrocarbons.
Moreover, renewables face serious obstacles to fully displacing fossil fuels:
- Key population/demand centers lack sufficient renewable resources
- Grid-level battery storage is lacking to overcome intermittency issues
- Massive grid upgrades would be required for full electrification
- Factoring in the hidden costs of backup thermal power and battery storage makes renewables far less economically competitive than advertised.
A Realistic Way Forward
Given these realities, aspirations for a "net zero" emissions future completely eliminating fossil fuels look fanciful based on the unprecedented energy demand reductions required. Deming believes we can still make meaningful progress through a realistic, multi-pronged approach:
- Promote wind and solar where it makes sense based on available resources, but recognize their limitations in fully replacing hydrocarbons.
- Prioritize substituting natural gas for coal in power generation globally. This single step could reduce emissions 18% using existing technology.
- Revive investment in nuclear power as the only proven, scalable zero-carbon electricity source we have available today. Properly deal with the manageable waste issues.
- Redouble R&D into next-gen battery storage and other clean technologies that could be true game-changers.
While not eliminating emissions entirely, this balanced approach could put us on a more viable path. We must deal rationally with the real-world constraints rather than chasing fantasies that lead to ineffective policies.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dr. Matt Waller (00:10):
Welcome to the Matt Waller podcast, where we
look at success at theintersection of technology,
logistics, supply chain, retailand CPG, also known as the
retail value chain.
I want to clarify that thispodcast is distinct from my
responsibilities as a professorin the Sam M Walton College of
Business.
Nonetheless, it aligns with myaspiration to provide practical
(00:31):
insights to professionals andbusiness by showcasing companies
and people that can enhanceyour ability to manage, lead and
strategize and marketeffectively in the retail value
chain.
Before we dive into today'sexciting episode, I'd like to
thank our sponsor, new RoadCapital Partners.
New Road invests in proventechnologies, services and
(00:53):
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They look for companies insupply chain and logistics, as
well as consumer-orientedcompanies.
For more information, go tonewroadcpcom.
I would also like to disclosethat I am a strategic advisor to
New Road.
I'd also like to recognizepodcastvideoscom for the
(01:18):
services they provide for thesepodcasts.
I'm very pleased with theirservices and now, without
further ado, let's get into theexciting episode.
Today I have with me ClaiborneDeming, who is truly an expert
on energy policy.
You're going to see today, he'sthought a lot about this and
(01:39):
done a lot of research.
We're going to be presenting alot of graphs and data and logic
.
This is a very clear-headed,practical approach to dealing
with climate change and energyproblems that we face in the
future.
I think you're really in policy.
(02:05):
If you are involved in justrunning a business, these are
things you need to be familiarwith and for some reason,
although all of this is publiclyavailable, it doesn't seem to
be brought together in a verycoherent way that Claiborne has
brought it together and,furthermore, you don't hear
(02:26):
experts talking about it.
So in this podcast recording,you're going to understand what
is driving us to not makeoptimal decisions, what are the
things driving us to not do that, and also what is the current
situation and what should we dogoing forward.
(02:48):
You're going to hear Claiborneexplain that to us.
He was president and chiefexecutive officer of Murphy Oil
from 1994 to 2008.
Since 2008, he served aschairman of Murphy Oil.
He has participated in the.
(03:09):
He served as chairman of theNational Petroleum Council and
he served as president of the25-year club of the petroleum
industry and served on the boardof directors of Entergy from
2002 to 2006.
(03:30):
But he's been very interestedin energy policy for many years
and I think that'll really comeclear as you listen to this
podcast.
Enjoy Clayburn.
Thank you for joining me today.
Really appreciate it.
Claiborne Deming (03:46):
Thanks, Matt.
I'm delighted to be here.
This topic, which I've calledthe Energy Transition Challenge,
really fascinates me.
Dr. Matt Waller (03:55):
Me too, and I think it's so important for
leaders of major companies,policymakers, et cetera, et
cetera.
People need to be aware of this.
Claiborne Deming (04:09):
I agree, I can just jump right in, please do.
And the challenge ofalternatives is also a dilemma.
There's a big dilemma out therethat we're facing in the energy
world.
And so let me frame it this wayMost climate experts believe
(04:29):
fossil fuel use is the primarycause of climate change.
Dr. Matt Waller (04:32):
By the way, I'm in that camp.
Claiborne Deming (04:35):
But fossil fuel use will very likely remain
the world's primary energysource for many more decades.
So that's the dilemma we'rehooked on fossil fuels, we're
going.
So that's the dilemma.
We're hooked on fossil fuels,we're going to use them into the
future and I'll show you whyand how and how.
It's almost inevitable, butit's very likely.
It causes, it impacts theclimate.
But at the very end of mypresentation I'm going to show
(04:59):
you there's a realistic pathforward.
Dr. Matt Waller (05:01):
That's good to know.
Otherwise, all we're going tohear is bad news.
Claiborne Deming (05:05):
No, and there is certainly a lot of facts that
people need to know in thispresentation, and I think
current policy choices bypolicymakers are ineffective and
I'll show you, I think, prettyclearly why they are.
But I think there's anotherpath forward that makes sense
for us, but I think there'sanother path forward that makes
sense for us.
Dr. Matt Waller (05:25):
Good news.
So now we're looking at thisslide of climate change.
It's over time and it's lookingat temperature changes over
time from 1880 to 2020.
So would you explain this to us?
Sure?
Claiborne Deming (05:40):
Basically it starts at pre-industrial times
1880, and it tracks temperature.
It's NASA data.
Of course NASA wasn't formeduntil the 60s, so it's NASA data
starting then.
And it shows, starting in theearly 60s, a pretty pronounced
increase in surface temperaturesand it's about 1.8 degrees
Fahrenheit over, say, a 1940 or1950 setting.
(06:07):
And I think it's coincidentwith the increased burning of
fossil fuels as the US hasbecome wealthier and more
industrialized and then,especially as the East the rise
of Asia, has become moreindustrialized.
And so I put it in here to sayI think these are the facts and
I think we have to grapple withthem here to say I think these
(06:27):
are the facts and I think wehave to grapple with them.
So why can't we just stop Such agreat question?
Because if we think we have aproblem, why can't we just stop
the behavior which likely causesit?
And I think there's threereasons.
And then the third.
The three reasons cause anineffective policy response.
The first is behavioralbarriers, and I'm going to
explain that more in a minute.
The second is it's atransnational phenomenon, so
(06:49):
it's not just the US that'scausing this issue.
And then I don't thinkalternatives, primarily wind and
solar, are yet realisticreplacements at scale.
And so those three reasons, Ithink, mean that our current and
discussed policy responses areineffective.
I don't think they solve theproblem.
Dr. Matt Waller (07:09):
So this next slide looks at this delayed
payoff problem and for those,you'll be seeing this slide and
it shows the horizontal axis is2010 to 2060.
And the vertical axis is 2010to 2060.
And the vertical axis issurface temperature change.
And so the solid lines that yousee are what you can see.
(07:34):
It's like RCP 8.5.
That stands for representativeconcentration pathway 8.5.
It's a scenario that representshigh emission future, with
increasing greenhouse gasemission over time, leading to
high atmospheric concentrationsof greenhouse gases.
And you'll see the squigglylines around it represent
(07:58):
scenarios that could occur.
So like simulated scenarioscould occur.
So, like simulated scenarios.
But you can see that once youget to 2060, they're distinct.
So you know the path.
The purple line path is verydifferent than the yellow line
path, so could you explain?
Claiborne Deming (08:17):
this to us.
So in this particular case, youstart mitigation efforts in the
year 2010.
So you're emitting less CO2,less methane into the atmosphere
, less greenhouse gas gases tothe atmosphere.
You have to go 25 years before,you see some difference in
these three paths differenttemperature paths but they're
(08:38):
still within the noise of thedata, so you don't know if it's
natural variability or whetherit's the mitigation efforts that
you started 25 years before.
If you go another 10 years, to2045, you start thinking yeah,
there are real differences herebetween these three paths.
My mitigation efforts have beensuccessful, but still, arguably,
(08:58):
it's within the noise of thedata.
You have to go to 2060, 50years after you started the
mitigation efforts, before youcan clearly say absolutely, my
mitigation efforts weresuccessful.
So the point is this who'sgoing to make a decision in 2010
that they're not going to seethe impacts of until 2035, 25
(09:20):
years later, much less 35 yearslater, much less 50 years later?
So it's very difficult forhuman beings to make choices now
that don't have an impact.
Dr. Matt Waller (09:31):
This gets back to the behavioral it is.
Claiborne Deming (09:34):
It's one of the behavioral issues, which
precludes us from makingdecisions to wean ourselves off
of fossil fuels.
You want to see an impact inyour lifetime.
I mean, you want to see animpact immediately.
Of course, you'd like to see itin three years, five years, but
it's difficult to do something.
You don't see any impact for aminimum 25 years.
And there's a first cousin tothis one, matt, and that is
(09:57):
individual behaviors don't havean impact either.
So I've often wondered whyhigh-profiles, self-described
climate activists, climatewarriors, especially the wealthy
ones fly in private planes?
Why do they have more than onehouse?
Why do they have two or threehouses?
Now, they're not bad people andthey're smart people too by the
(10:19):
way.
So why do they make thesedecisions?
Because people can obviouslysee their behaviors.
I said why do they make thesedecisions?
Because people can obviouslysee their behaviors and
criticize them for it.
But they justify it becausethey know if they stop their
behavior it will solve theproblem.
It won't impact the problem.
One iota, and so this isanother behavioral really
(10:45):
powerful reason why it'sdifficult for us to wean
ourselves off of fossil fuels.
Dr. Matt Waller (10:50):
Delayed response is one of impact, and
also individual behaviors don'thave an impact.
This reminds me of the voters'paradox.
And the voters' paradox says,you know, the probability of any
one vote changing an electionis close to zero, very close to
zero, and so you could say it'snot optimal for anyone to do it,
to vote, you know.
But people do it for virtuesignaling and because they think
(11:12):
it's a good thing to do.
But in reality it's a similarkind of a problem.
Claiborne Deming (11:17):
Absolutely, and people don't understand this
really kind of writ large, butit's something that we all face
as human beings when we makechoices every day.
Dr. Matt Waller (11:28):
This next slide energy access and use is
fundamental to progress.
Can you explain that?
Yeah, this is also reallyimportant.
Claiborne Deming (11:37):
The vertical axis is GDP per capita this is
all 2021 data in US dollars.
And then the horizontal axis isannual energy use per person.
That's in barrels of oil.
Dr. Matt Waller (11:51):
Then we have nations in there.
Claiborne Deming (11:52):
So they're plotted against these two.
Dr. Matt Waller (11:54):
Are the size of those circles, like they're
populated?
Yeah, yeah.
Claiborne Deming (11:57):
Good point.
The US obviously is high to theright.
We're very wealthy close to$70,000 a year per capita GDP.
We consume close to 50 barrelsa day 50 barrels a year in oil.
50 barrels a year in oil andour population is 330 million
(12:19):
that's the size of that bubble.
Then if you go down to the left, people who are less wealthy
and who consume less oil.
You have China they're 1.3billion people.
You have India 1.3 billionpeople.
You got Africa 1.3 billionpeople.
You got Central and SouthAmerica about 700 million people
.
And they're quite poor and theyalso they consume very little
(12:41):
energy.
All of them want to be like us,and the only way they can be
like us or be like the Westernworld, western Europe is have
access to affordable energy, andright now, the only affordable,
scaled-up energy source arefossil fuels oil, natural gas
and coal.
Wind and solar haven't yetgotten to the point where they
(13:07):
can scale and where they'reaffordable.
So very, very likely, thesebillions of people down here in
the lower part of the graph thatare poor and don't consume much
energy are going to consumemore energy in the future as
they're aspirationally trying tojoin the middle class, and it's
almost inevitable.
I don't see how this doesn'thappen, quite frankly, and I've
(13:28):
got a great example to show youhow it's happened recently.
Dr. Matt Waller (13:35):
So this next graph is titled Countries with
Middle-Class Ambitions Will WantMore.
Can you explain that?
Claiborne Deming (13:40):
Yeah, so the horizontal graph is over time,
starting in 1965, it goes to2020.
And the vertical graph ismillions of barrels a day of oil
consumption.
And so I've got four differentblocks on here, for lack of a
better word.
One is China, one is selectSoutheast Asia, which is Asia
(14:03):
outside of China, one is Africaand one is India.
By the way, each has 1.3billion people.
And so Deng Xiaoping in the 80sin China became the premier and
he made policy decisions tounleash their economy.
He saw how it worked and heimplemented them, and it did
work.
So China's energy consumptionstunningly went from 2 million
(14:24):
barrels a day Now it's close to16 million barrels a day, so it
was an eightfold increase.
So it shows you when you becomewealthier, when you become more
powerful, which everyone wantsto happen- in their societies
you consume more energy.
Almost inevitably in today'sworld.
That's oil and gas.
Because it's affordable, it'sfungible, it's transportable,
(14:45):
it's got extraordinarily highenergy density.
That's what you use.
So this is the dilemma.
We're likely, as a world, we'regoing to use more and more
fossil fuels over time as thesebillions of people in Africa and
Asia become wealthier.
Dr. Matt Waller (15:01):
So we've been focusing on the behavioral
barriers, but there's also aglobal problem here and you know
a number of treaties have beenworked out between countries.
Have they worked?
Claiborne Deming (15:16):
Interestingly, you'd think, since it's
transnational and it's a problem, let's get together and let's
solve it.
But the data reflects thattreaties don't work, and I'll
quickly go over this.
So the UN formed a frameworkconventional climate change and
that's still the body in placetoday.
It was created in 1992, andthey created a 1990 baseline.
(15:38):
They looked back and they saidokay, global CO2 emissions were
20,500 metric tons in 1990.
They set their first set oflimits on CO2 emissions, or
greenhouse gas emissions, in1997 at Kyoto.
But by 2000, world emissionswere 23,000 metric tons.
(16:01):
So they were up about I don'tknow 15% in 10 years.
The next big meeting was 2015,and it was touted as a big
breakthrough.
But by then global emissionswere at 32,000 metric tons.
So they had increased by 50% in15 years a dramatic increase,
and I showed you the reason why.
It is China.
(16:21):
They became wealthy, theyconsumed a lot more energy and
other Asian did as well.
But the Paris Accords werevoluntary.
They built in some emissionsgrowth.
The pledges they made weren'tmet and the world exceeded the
estimate that they said of CO2emissions, or greenhouse gas
emissions, in 2040.
(16:42):
We exceeded that estimate by2021, only six years after Paris
, and that we now emit 36,000metric tons of greenhouse gases
man-made greenhouse gases.
So ultimately, emissions havegrown by 79% compared to the
1990 baseline.
So these countries meet, thesepolicy makers meet and they set
(17:07):
goals, but they're never made.
They're never met, and there's asimple reason Nation states
always prioritize self-interest.
They're in competition withother nation states.
They realize if their poordon't become middle class,
they'll be voted out of officeor, worse, overthrown.
So they're desperate to makesure that their nations grow as
(17:29):
fast and as quickly as possible.
The only way to do that is tofossil fuel use right now.
And so these treaties don'twork, because nation states or
policy makers say one thing atthe conventions or the treaties
and then do another.
Dr. Matt Waller (17:50):
Well, you know this next slide titled
Transnational Problem.
It's a really interesting slidefrom 1990 to 2001.
And you can see rest of worldIndia, china, us.
One thing I want to point outis after 2021, and Claiborne
explained this to me that's ifthese stay within the stated
(18:14):
policies.
You see at the top that darkline and it says stated policies
.
That's if it stays within thestated policy.
Claiborne Deming (18:23):
Matt.
Good point, because we hadthese stated policies before
2021.
And we said one thing but wedid another and obviously CO2
emissions grew.
This slide's important and it'sgot a couple of important
points to be made from it.
You look at 1990, when the20,000 metric tons of CO2
emissions were mentioned.
The prior slide reflects thatthe US was a quarter of the
(18:45):
world's emissions.
So, fast forward to 2021, we'reat 36,000 metric tons.
We've actually decreased ourCO2 emissions.
The rest of the world's grownand we're less than 15% of the
world's CO2 emissions and so, touse an overused metaphor, we
don't drive the bus anymore.
Anything we do in our countryreally doesn't matter, because
(19:06):
any mitigation efforts that wemake it takes us a long time to
implement them, by the way areoverwhelmed by the growth in the
rest of the world.
That's what this slide reflects.
Dr. Matt Waller (19:15):
Well, you know, even the fact that the blue,
the US, has gone down over thetimes.
It is impressive when you thinkabout it.
Claiborne Deming (19:23):
It's stunning, actually, and the peak for the
US was 2008,.
When we had the Great Recession, obviously industrial activity
stopped or slowed, but then whenwe came back, we came back
slower with CO2 emissions thanwe ever had before, and there's
a reason for it.
One we substituted natural gasfor coal and power generation.
(19:45):
It's an amazingly powerful wayto reduce your CO2 emissions.
Secondly, we made our energyuse more efficient.
Wealthy countries can do it andwe did it.
And third, there's somealternatives in here, so on the
margin, alternatives can make adifference.
Those are the three reasons,but about in that order, of how
(20:06):
we diminished or lessened ourCO2 emissions, but we grew our
economy by 25%.
That is, it's remarkable.
It shows the entrepreneurshipand ingenuity it does.
Dr. Matt Waller (20:17):
I want to point out an anecdote that I've
mentioned to you before, that Ilearned from Craig Harper and
basically, if you look atemissions of heavy-duty Class A
trucks, so semi-tractor trailers, it takes 60 trucks today with
(20:41):
brand new tractors 60, to havethe same amount of emissions as
one truck had in 1980.
So 60 to one and the remarkablething about that is that's over
a 44-year period.
So to your point aboutingenuity and entrepreneurship,
(21:04):
this is remarkable.
Claiborne Deming (21:05):
No, it makes a stunning difference, absolutely
.
Dr. Matt Waller (21:10):
Now looking at alternatives that are not yet
realistic replacements.
We've got this graph that saysthe difficulties of displacing
fossil fuels.
Can you explain that?
Claiborne Deming (21:24):
difficulties of displacing fossil fuels.
Can you explain that?
Yeah, I can.
So first, the first point isthere's three reasons why it's
difficult to displace fossilfuels.
First is energy density, whichis chart to the right.
I'll explain it in a minute.
It's one of the reasons.
The second is the location ofwind and solar, the two major
alternatives, or in the wrongspots, where the people aren't.
(21:46):
And then, third, there's anintermittency issue with wind
and solar, which makes it reallydifficult.
But we'll start with energydensity.
So vertical axis is energy perunit of weight, so in any given
kilogram or pound, how much BTUsare in it?
So in any given kilogram orpound, how much BTUs are in it.
(22:06):
And then the horizontal axis isenergy per unit of volume, so
in an area of space.
So you want to be high to theright, which means you both have
a lot of BTUs in a particularvolume or weight.
And what's up there?
Any particular volume or weight?
And what's up there?
It's gasoline, it's diesel,it's heating oil, it's jet fuel,
coal's up there, even thoughit's not as good as natural gas
(22:30):
or oil.
And what's way down to the leftand to the bottom.
It's lead-acid batteries andeven lithium-ion batteries, and
the example that I think thatcaptures it most is if you fill
up your car with gasoline, thattank weighs 80 to 100 pounds,
but if you have a fullyelectrified vehicle, the battery
pack weighs at a minimum of1,000 pounds, and probably up to
(22:53):
2,000 pounds if you have a lotof range and so it just doesn't
have the energy density.
It doesn't mean that you can'tuse it, it's just it's much,
much, much less efficient in itsuse.
In the space of a battery, youhave just much more energy use.
If that space is occupied by oil, it's just freakishly high
(23:14):
Nature provided that to us andthat's why we massively adopted
it.
So that's really a big obstacle, which is just the physics of
the composition of the energy,and that's what this slide shows
.
The next two I mentionedearlier at the beginning of this
slide were location andintermittence.
Dr. Matt Waller (23:34):
You know this slide is called Location Lack of
Wind in Population and GrowthCenters.
So the dark red means lots ofwind, the light blue means very
little wind.
So how do we endeavor?
Claiborne Deming (23:48):
this.
So this is just global winddata that, of course, they've
calculated over years, and whatit shows you is that the most
intense winds are on thecoastlines and they're typically
in the northern hemispheres,and so wind can have its place,
especially if there's apopulation center on a coastline
(24:09):
in the northern hemisphere.
But the issue that we facetoday and this is a global issue
and the US is not the problem,not the center of the problem is
we have India, we have China,we have Asia outside of China,
we have Africa, and they justdon't have the wind resources.
Typically, you need to scale upand provide wind as an
alternative to fossil fuels.
(24:31):
It's just a fact.
So it's got its spots, but it'sjust not in the right places
where the people are Interesting.
Dr. Matt Waller (24:40):
And so the next slide is also a location slide.
It says lack of solar inpopulation and growth centers.
Claiborne Deming (24:48):
So solar is better and it shows.
We have a lot of solar in thewestern US, we've got it in
certain parts of Africa,certainly in Australia, but look
where we don't have it.
We don't have it in China,except in western China.
There's no people in westernChina.
We don't have it in India andwe don't have it in Asia outside
(25:14):
of China.
And so these massive populationareas that are industrious and
working hard and going toconsume more energy and have and
will in the future, they justdon't have access to solar
resources as much as they should.
Doesn't mean it won't be used,but I believe it's best used on
the margin.
And I doubt that it's going tobe used as a primary source of
(25:34):
energy in those jurisdictions.
So, matt, let's talk aboutintermittency first, because
this is really the largest andbiggest issue to overcome by
renewables.
So imagine electricity demand.
There's some variations in it.
You have a peak demand and thenyou have a base load.
But the variation is only about20-25 percent, and that's
(25:56):
because industrial use is about35 to 40 percent of all
electricity use and it's 24-7.
And think of big officebuildings and stores that have
to be heated and cooled 24-7.
It's not realistic not to do itthat way.
So there's a big baseloaddemand.
So you've got this demand whichhas got to be met.
Then you have the power supply,which is intermittent.
(26:16):
And so how do you square thatcircle?
When the power supply isintermittent and the wind's not
blowing, the sun's not shining,you have to have a full thermal
backup ready to supplant thewind and solar when they're not
generating, and that's expensive.
So you're running two systemsbasically the whole time that
(26:38):
you have intermittent sources ofenergy.
And the second piece is theonly way out of that to have
these two big systems is to havesome type of grid-level battery
storage.
So when you are generating withwind and solar, you're not only
generating to make currentdemand but you're generating to
store for the future, when windand solar are not generating,
(27:00):
not producing.
And the problem in today'sworld is we don't have the
technology for grid-levelbattery storage.
Lithium-ion batteries are verygood, but they don't have the
energy density yet on scale toreplace a full national grid
system if it goes down.
So you still have to maintainthe system of a full 24-7 backup
(27:26):
to meet these issues when theseintermittents are producing,
and so it becomes reallyexpensive, and that's why
jurisdictions with intermittentpower typically have much higher
energy costs than those thatdon't.
Think California, think WesternEurope, specifically Germany.
(27:47):
Now let's go to this slide,because this slide is really
interesting.
It shows you electricity demandover a 300-hour period that's
the horizontal axis and that'sabout 12 and a half days.
And then it shows you, with a40% peak demand supplied by
renewables, how they go up anddown.
Dr. Matt Waller (28:08):
So the brown line's the renewable product,
that's correct.
Claiborne Deming (28:11):
And the dark line is the demand, that's
correct, and so it shows kind ofthe fluctuations, because there
is some fluctuation.
Basically it's a big base loadand so renewables can provide
all of it sometimes, buttypically not.
Sometimes they hardly generateat all.
So this just reflects you needthat 24-7 backup or grid-level
battery storage, which doesn'texist.
(28:33):
But look at the 80% of peakdemand, because that's really
the most interesting one of all,and again, think about it.
The black line is the baseloaddemand and then if the brown
line is 80% of the demand is metby intermittents or renewables.
And so what happens is becauseyou're dormant when you're so
(28:56):
much of the time when you'regenerating from intermittents,
when you are generating to meetthis 80% goal, you have to
generate way too much.
And so there's horrible waste orexcessive waste when you come
to generating from renewables,if you have a really high
percentage of the total baseload that you're trying to meet,
(29:17):
and that's another reason whythey're so expensive.
So the only way out of thisdilemma is really to literally
have grid-level battery storage,because you're way
overproducing, so you need touse that energy and store it
when you're not producing.
But again we don't have it.
So intermittents have so manyobstacles to overcome.
It's just base load demandneeds a X number, but the supply
(29:43):
is bouncing up and down andit's really hard to overcome and
it's extremely expensive.
Dr. Matt Waller (29:49):
And you know, it doesn't even to have these
batteries.
The batteries themselves take alot of energy to create and
then they produce a lot of waste.
That's not so good for theenvironment.
Claiborne Deming (30:03):
I agree with you and you know.
There's another interestingpoint to make, and I think this
is really important for peopleto understand, and that is you
often hear that wind and solarare now cost comparable to other
thermal generation comparableto other thermal generation and
that is because they only lookat the cost of manufacturing the
(30:24):
wind turbine or the solar paneland the installation cost.
But there's three costs whichthey don't include.
They don't include the cost ofthe backup thermal storage,
thermal generation capacity thatyou have to have.
It's 24-7.
It has to be there if we'regoing to meet demand when the
intermittency are producing.
Secondly, they don't includethe cost of any battery storage
(30:46):
which people want to have.
At some point, if we continuedown this policy path, we'll
have some stab at it and it'sgoing to be extremely expensive.
That number is not included.
A third number is you have tomassively upgrade the grid and
we'll look at a slide in aminute If you're going to
electrify everything.
That cost isn't included.
And so they make that claim andit's true if you just look at a
(31:13):
small piece of the cost ofelectricity generation.
But there's three big piecesthat they don't include and if
you're a utility, you have thosecosts and you will have to pass
them on to your rate base oryour consumer.
You go bankrupt.
Dr. Matt Waller (31:31):
So this next slide, building on this, is
location and transmission,another infeasible stretch.
It's interesting because thehorizontal axis, of course, is
time and gigawatt miles is thevertical axis.
But the US Department of Energycollected data for a time and
they quit collecting it, and nowUT Austin has collected it for
(31:52):
a time.
There's no clear plan for thefuture, which is a little scary.
Claiborne Deming (31:58):
Well, this is done in the context of showing
how net zero, which you oftenhear, is a really impractical
thought and people need tounderstand that it's so highly
unlikely to reach a net zeroscenario that it's almost silly
to be talking about it and wecan make bad policy decisions if
(32:19):
we try to achieve net zero.
So this shows the gradualincrease in gigawatt miles over
time.
You have to do it.
Society gets wealthier, societygrows, population grows, so you
have the grid grows and it growssteadily incrementally but
steadily and then it shows youwhere the grid would have to be
in 2050.
And this is PrincetonUniversity and they're really
(32:41):
quite good at this, they're avery accomplished policy shop.
It shows you how many gigawattmiles have to be added to the
grid to get there, and anybodycan see that's not going to
happen.
It's infeasible, and so that'sthe point that I'm trying to
make here.
It just likely, likely, likelywon't happen to meet a net zero
(33:04):
target in the US.
Dr. Matt Waller (33:06):
And one other point I'd like to make is that
60% of our grid is past its50-year life expectancy.
This is another problem.
Claiborne Deming (33:20):
It's a significant problem.
And, as we've discussed,there's an explosion now in
energy use and that's because ofAI, which consumes an
extraordinary amount of energyto do the computing power.
You have cloud computingcenters, you have crypto mining.
Unexpectedly, there's a surgein energy demand Right when we
least need it.
Dr. Matt Waller (33:40):
If we're going to meet these goals, yeah, so
this next slide talks aboutworld fuel demand is likely
persistent, even as renewablessurge.
Could you explain that?
Yeah this is IEA data.
Claiborne Deming (33:54):
It's a Paris-based interpolicy group
funded by the West, which isreally capable people and have
access to a lot of data.
And so it looks at 2021, and itsays hey look, 79% of all the
energy generated in 2021 werefossil fuels.
This is a fact.
These are data.
Then they make projections intothe future, and I've selected
(34:17):
2050, which is when the net zerogoal is supposed to be achieved
.
Dr. Matt Waller (34:23):
It says okay, if you look at steps this is the
one we talked about earlier.
Claiborne Deming (34:27):
They're called policy settings.
It's what governments.
If governments do what they saythey're going to do and, by the
way, they haven't but if theydo what they say they're going
to do on these policy goals inenergy, then energy use will
increase over time, which Ithink is a reasonable assumption
(34:48):
, and the amount of oil and gasis reduced as a percentage from
79% in 2021 to 62% in 2050.
But because the pie has grown,then the 62% is about equal to
the 79% and it shows thedifference.
Obviously is going to berenewables.
(35:10):
So look at the next one, whichis called announce pledges
scenario.
These are aspirational targetsset by governments.
You actually show a decrease inenergy use.
Now look, the only time we'vehad a decrease in energy use was
the COVID shutdown, and it wasvery temporary and we rebounded
quite quickly.
And for us to have a decreasein energy use voluntarily as a
(35:31):
society worldwide isextraordinarily unlikely.
So I almost dismissed the APS.
And then, looking at zero, itshows even a greater decrease in
energy use.
As I showed you earlier,aspirational nations, billions
of people, hard work and peopleweren't going to accept that.
So these latter two, I think,are unrealistic policy settings.
(35:54):
But they're there becausethey've been asked by
policymakers to make thoseprojections.
Anyway, the takeaway is fossilfuels use is likely going to
stay robust into the future.
Dr. Matt Waller (36:08):
And this next slide titled Persistent Coal.
Claiborne Deming (36:12):
Yeah, and this is actually very important, and
this is almost an asterisk tothe prior slide.
It shows China, india, rest ofAsia Pacific and the rest of the
world, and it shows you coalconsumption.
And look at the spike startingin 2000.
That's when the policies thatDeng Xiaoping put into place
(36:32):
really took place, took hold,and so oil and gas use surged,
and so did coal use surge inChina.
And so oil and gas use surged,and so did coal use surge in
China.
And so look at this stat theshare of the world's CO2
emissions from energy, worldcoal, is 40% of that.
Dr. Matt Waller (36:54):
Now.
Claiborne Deming (36:54):
CO2 emissions from energy.
It's kind of a hard number tofind, but it's somewhere 75% to
80%.
So 40% of that.
80% comes from coal, and thenChina alone is 21% of that.
80% comes from coal, and thenChina alone is 21% of that.
So half of the coal, yes, yes,wow.
And look at the next stat.
Currently, there's 258coal-fired power stations either
proposed, permitted or underconstruction in China alone.
(37:17):
Look at the next one Indiaexpects its power plants to burn
about 8% more coal in thefinancial year ending March 2024
.
And so you hear about Chinaadopting all these renewables
and being a powerhouse in solarpanel production.
But look at what they do theyburn coal.
(37:37):
They burn a heck of a lot ofcoal.
And a shorthand way to look atclimate change and impacts, and
what can make a difference isit's a China coal problem that's
where all the incremental CO2comes and soon to be an India
coal problem, because, as theyget wealthier.
(37:58):
That's how they're going tohave to provide power to their
people, Almost inevitablyBecause of the limitations of
the intermittent sources, ofrenewable sources.
Really important to understandthis and we can't stop them,
Matt.
They're going to do this.
They're going to do thisBecause they don't.
They want to keep their jobs.
Dr. Matt Waller (38:16):
And they don't have as much natural gas.
They don jobs, and they don'thave as much natural gas.
They don't.
Claiborne Deming (38:20):
And they don't have much oil either.
They had one large field in thenorthern part of the country
which has largely been depleted,and they don't have natural gas
reserves significant natural,but they have massive coal.
Dr. Matt Waller (38:31):
But the US's contribution to CO2 emissions
from coal is minuscule now it'sgoing to get even smaller over
time.
Claiborne Deming (38:42):
As I mentioned before, that's how we've become
.
We've grown as a society, butwe've lessened our CO2 emissions
.
We've substituted natural gasfor coal in power generation.
That's a really big, single,biggest piece of it.
Dr. Matt Waller (38:55):
Now look at the next slide this one's another
one.
Claiborne Deming (38:59):
It's a reality check.
This shows you the age ofglobal coal-fired capacity.
Everyone says they're not goingto build coal plants anymore
because of the highconcentration of CO2 emitted
when you combust it.
But look at this Two-thirds ofall the coal plants are 20 years
and younger, and so people arestill building these left, right
(39:22):
and center Two-thirds, maybeeven a bit more, actually.
So it's important to know thesecoal plants aren't going to be
retired and aren't going away.
This highlights the dilemmathat we're in as a world.
Dr. Matt Waller (39:38):
So you have made a strong case of this
dilemma.
What are some of the currentand discussed policy responses?
Claiborne Deming (39:49):
Well, I think that's where the rubber meets
the road.
And so, faced with all thesefacts and I think they're all
facts, I do the US has chosen togo down a path of saying we're
going to subsidize wind andsolar.
And the point is this Renewablesubsidies don't work, even when
they do which is kind of afunny way to say it but solar
(40:12):
and wind supply is multiplied bysix, six-fold from 2010 to 2021
.
And so all the subsidies, allthe policies that we implemented
actually did work, but fossilfuel percentage in the country's
mix only dropped from 81% to79%, and meanwhile the pie grew
(40:34):
so that 79% is bigger than the81% was in 2010.
So that 79% is bigger than the81% was in 2010.
Dr. Matt Waller (40:43):
So we as a country are consuming more oil
and gas besides a six-foldincrease, and we're using it
more efficiently?
Claiborne Deming (40:46):
Oh, absolutely .
That's one of the reasons whywe've grown and our CO2
emissions have diminished.
And so a guy who's made thispoint repeatedly he's really
smart is Holman Jenkins, who's acolumnist for the Wall Street
Journal, and he basically sayslook, renewables subsidies don't
work, because all it does isencourage us to consume more of
(41:07):
all energy.
So, of course, we'll driveelectric cars because they're
subsidized, but we're not givingup our gasoline-powered cars,
and so their policy responses,just so far, have been
ineffective.
They work.
We have more of them but westill consume more oil and gas
and so something.
There's a disconnect here.
Dr. Matt Waller (41:27):
You know something?
I want to interject anotheranecdote on transportation, Sure
, and that is that you know, ifwe electrified the heavy-duty
trucks today, it would increasethe total demand on the grid by
10%.
Okay, but it would cause a lotof other problems too, because
(41:52):
you would have to have moretrucks on the road because they
can't haul as much, becausethey're heavier, because of the
batteries they can't go as far.
So in a given day they can'thaul as much, because they're
heavier, because of thebatteries they can't go as far.
So in a given day they can'thaul as much freight.
But if you and in Californiawho's got lots of grid problems,
they have a new policy that isrequiring any incremental
(42:14):
trucking into ports or railyards to be renewable.
So either battery, electric orhydrogen fuel cells.
And of course now, if you gofurther and there's a policy
(42:34):
being considered today on thesethings, if you include medium
and light freight trucks, that'sanother that goes from 10% to
40%.
So all these trucks combined,it's actually 41% additional
demand on the grid.
And so you know, a lot of thesepolicies.
(42:59):
Policymakers aren't takingthese things into account.
That doesn't even count.
Cars, yeah, Automobiles.
Claiborne Deming (43:07):
I know, I know there's just a disconnect here.
It's ineffective and we don'thave the money to build out the
grid to meet it for one thing,or the people to build the wires
and install them.
Dr. Matt Waller (43:22):
Oh yeah, so this next one, this slide says
net zero unprecedented reductionin energy use.
Can you explain this to us?
Claiborne Deming (43:31):
Yeah, so it's a point I made earlier, but this
is really a better graphic wayto describe it.
You hear net zero is a goal by2050.
And it shows world energy useup until now grows every year.
It has to grow.
That's just the way the worldworks.
It will work in the future, butto meet net zero, and this is a
policy scenario set by the IAEA.
(43:52):
again, smart people looked at alot of data.
Came up with this answer yeah,it showed a decrease in energy
use, and then half of the energyused is either wind and solar
and other renewables.
And I think I've already showedyou maybe not conclusively, I
think the data is prettyconclusive that it's hard to
scale wind and solar.
There's too many obstacles withit and the other renewables,
(44:16):
like hydropower, likely perhapseven though people don't want to
dam up rivers anymore, and so Ithink it's unrealistic.
I think, when you hear, netzero is our goal at a
society-wide level, worldwidelevel, maybe individual
companies can do it but at aworldwide level.
(44:36):
It's totally unrealistic.
And if something's unrealistic,why do you talk about it?
Dr. Matt Waller (44:40):
I think it misleads the public, it does.
So you've made a very strongcase here, but now I'd love to
know what are yourrecommendations?
You've been thinking about thisa long time, and this is
well-researched information, andI know you think about it all
(45:00):
the time.
You're very interested inpolicy energy policy so what are
some things you're thinkingabout?
Well, Matt.
Claiborne Deming (45:08):
This is again where the rubber beats the road,
because you can highlight aproblem, but the way I was
trained if you highlight aproblem, you better come up with
a way to solve the problem, andso I think it's got to be
realistic, it's got to beimplementable, it's got to be
cost-effective, and so this ishow I would do it, and I think
this is something that we oughtto consider.
First, wind and solar.
(45:28):
On the margin, a lot of it'sinstalled, and if you generate
it in a place where there's lotsof wind and lots of solar and
as the technology improves, Ithink on the margin, that can be
a very helpful way to implementthis policy.
It's helped work in our countryso far.
By the way, it's one of thereasons why our CO2 emissions
are down, and so I don't thinkit scales worldwide, but I do
(45:53):
think that on the margin itcould be helpful.
Lied, but I do think that onthe margin it could be helpful.
The one which is easily the mostimmediately effective at scale
is to substitute natural gas forcoal and power generation.
It's worked here in the US, andif you could accomplish that on
a scaled worldwide basis, itwould actually decrease CO2
(46:14):
emissions.
So think about that.
The economy doesn't shrink.
You consume more energy, butyou're producing less CO2.
So shouldn't that be a policyobjective that we don't achieve
as a country?
Look, at the numbers, if doneworldwide, you reduce about 18%,
(46:34):
and that's again CO2 emissionsfrom energy.
And energy is about 75% or 80%of all CO2 emissions and 9% if
done by China alone.
So you can reduce CO2 emissionswith existing technology.
There's plenty of natural gasin the world.
The fracking of the world, thesuccess of that, has proven the
(46:54):
point.
We have just trillions of cubicfeet of available reserves.
Dr. Matt Waller (46:59):
Now to do it in China?
Wouldn't we need morefacilities to make liquid?
Claiborne Deming (47:06):
Yeah, obviously they import a lot of
LNG.
Dr. Matt Waller (47:09):
Actually They'd have to import a lot more, so
we'd have to have more ship forthat.
Claiborne Deming (47:14):
Sure, absolutely, and we're building a
lot of LNG export facilities inthe US.
We have to build more, and thenother countries will too.
If you look at the Middle East,they have massive, massive,
massive gas reserves, especiallyin gutter, and they liquefy it
and they ship it around theworld.
You have to do more of it.
Mozambique just made a hugeoffshore discovery.
I read about that world.
You have to do more of it.
(47:35):
Mozambique just made a hugeoffshore discovery and it's
luckily, an American company isthe lead operator in that
project and they're going toliquefy it.
So it's not just the US, it'sother naturally endowed
countries.
Australia's a big energyproducer.
But that's something that justneeds to.
Dr. Matt Waller (47:53):
Which country has the most natural?
Claiborne Deming (47:56):
gas Reserves.
It may be the US given fracking, but if you look at the Middle
East, there are massive reservesthey're conventional, by the
way, so they're a little biteasier to access, a little
easier to scale.
Gutter, in particular, has gotsuch massive reserves.
It's hard to even know what todo with them.
Dr. Matt Waller (48:13):
Really.
Yeah, I didn't know that.
Yeah, and for a long timeIsrael didn't think they had it,
and now they found it right.
Claiborne Deming (48:20):
More than they can possibly consume.
Egypt now has discovered anatural gas offshore in the
Mediterranean.
So natural gas is a real no,there's plenty of it and you
can't do 100% substitutions, butyou can start now and you'll
have an immediate impact on theissue that we're trying to
(48:42):
address.
So it's always perplexed methat climate activists, climate
warriors, don't want to do itbecause it's a fossil fuel.
But it works and it's effectiveand it's proven and it's
inexpensive relative toalternatives.
So it just seems like to me anatural, and so I would highly
encourage folks to consider this.
In fact, we won't solve ourproblem unless we do this Now
(49:06):
the other one is increase ofnuclear power.
I'm going to say somethingreally important.
You can't say this enough theonly scalable carbon-free power
source is nuclear power.
The only scalable carbon-freepower source is nuclear power.
Say it 100 times, because it'strue.
(49:26):
The US has got 93 active nuclearreactors.
We used to have 100.
We decommissioned them.
We shouldn't decommission a one, we should be building more.
They scale.
They provide wonderfulefficient energy use.
The technology is understood.
It's carbon-free.
(49:47):
The first nuclear reactor inthe US was put in service in
1957.
It's stunningly available,technologically understood,
economically viable technologyand we just have developed a
mindset that it's unsafe.
(50:08):
And the primary reason isbecause you create nuclear waste
when you split atoms, when yougenerate energy, and so right
now they're stored on site inall these different plants.
At one point the DOE built abig repository in Nevada called
Yucca Flats, but for politicalreasons it was shut down after
(50:28):
spending $10 billion.
So at one point in our countrywe had policies to increase the
use of nuclear power and takecare of the nuclear waste, but
we don't now, and so the waythat I frame it is that, yep,
nuclear waste disposal is aproblem Very manageable right
(50:49):
now.
There's never been an issuewith it.
Again, we have 93 activenuclear generating plants, and
so we've solved it.
There's better ways to do it ifwe put our mind to it, but we've
solved it.
So you have to weigh that costand that risk against climate
impacts.
And if you think climateimpacts are existential, if you
(51:15):
think the world's going tochange, if you think that we're
not going to be existent as aspecies in 150 years because of
climate then you have to weighthat cost against the cost of
nuclear waste disposal and it'sa pretty easy policy decision to
make Of course you would dealwith nuclear waste disposal.
Dr. Matt Waller (51:30):
We have so far.
Claiborne Deming (51:32):
And, by the way, China's got, I think, 75
nuclear reactors.
They want to build 150 more.
So the world's building thesethings and it's a great way.
It's one of the essential waysto deal with climate.
It scales.
We understand the technology,so we're making a policy mistake
(51:52):
, in my opinion, if we don'treinvest to the nuclear world,
that's great.
Dr. Matt Waller (51:58):
So could you talk a little bit more about
economics and policy, includingcarbon taxes?
I can.
Claiborne Deming (52:07):
So those are substituting natural gas for
coal and building more nuclearplants or things we can do right
now, and they're industrialthings.
But we could also implementsome policy.
No one wants to hear this, butI'm going to say it.
Climate is a classic economicexternality, and externality in
(52:30):
the world of economics is a costwhich the market doesn't price
and we have no mechanism rightnow for pricing carbon.
So there is a role forgovernment.
Government can put a price onit through taxes.
If you tax something and makeit a little bit more expensive
and I would do it slowimmediately or low immediately
and gradually increase it, thenpeople will consume less
(52:53):
hydrocarbons.
So our current system is tosubsidize the construction and
consumption of renewables, butit hasn't retarded the use and
consumption of hydrocarbons.
So you have to put a tax on itif you want to slow that.
Dr. Matt Waller (53:08):
And that would also cause the substitution of
natural gas for coal.
It would.
It would because you would taxit based upon the amount of
carbon in?
Claiborne Deming (53:15):
for coal it would.
It would because you would taxit based upon the amount of
carbon in the product, and sosociety's got to consider this.
The world doesn't want to do it.
Liberals don't want to do itbecause they're fearful they'll
be voted out of office.
Conservatives don't want to doit because it's against their
ethic of higher taxes.
But again, it's a classicexternality.
(53:37):
We think climate is a cost.
The market is a price.
This is a way to price it.
Now I'd love a market system toprice it.
By the way, I think that'd bebetter, but so far we haven't
come up with one, and so thereis a role here, and again I do
it small.
You don't want to disrupteconomies and then gradually
increase it over time.
I think that's important.
You've got to continue toheavily invest in technology.
(53:59):
Now we're investing a ton inbattery technology and all sorts
of technologies to reduceenergy use but also make it more
efficient, so we're notactually driving less.
We need to continue that.
So battery technology has gotto be continued to be worked on
really hard.
Dr. Matt Waller (54:18):
There's an iteration after lithium ion.
Claiborne Deming (54:21):
We got to find it.
We got to find it reallyquickly.
It's got to have more energydensity, yeah.
And then, lastly, I say youhave to adapt to a slowly
changing climate.
We know if we think we knowthis is going to happen.
Then you make changes.
Human beings are adaptable,creative people, so you build
things more resiliently.
You build less on the coastline.
(54:42):
You make choices as a societythat adapt why?
Because we're going to continueto use fossil fuels as I've
shown in I think my presentationand renewables aren't yet ready
, and we're not making thesecorrect policy decisions on
nuclear and natural gas.
And so we need to adapt.
So that's how I would look atit, that's how I would approach
(55:07):
the problem, and I think it'saffordable.
I think the technology is thereand I would do these.
I'd do them promptly, I'd dothem right away, but I would
also do all the research forother ways too, especially
battery technology.
Dr. Matt Waller (55:20):
So, Claiborne, you've made a really strong case
and you've presented a pathforward Very encouraging and
logical, practical.
What final words do you have?
Claiborne Deming (55:34):
You know the final word really is to sum up
what I've said.
And so let me review reallyquickly what I told you there's
a lack of alignment betweenthese different, difficult
behavioral changes and theirimpacts, and so people actually
(55:54):
don't make the changes theythink they ought to make because
there's just no alignment there.
Delayed responses, individualbehaviors don't impact it.
Secondly, it's a sharedatmosphere, but separate
national sources of climateemissions and treaties haven't
solved it and, above all, thisis a really important takeaway
(56:16):
and, above all, this is a reallyimportant takeaway this is a
China-India coal problem.
That's what it is.
Thirdly, the mandate subsidypolicy.
Responses have been ineffectiveand they're extraordinarily
expensive, so why don't youcontinue something which is
expensive and ineffective?
Renewables are unlikely toreplace fossil fuels in a
meaningful way without newtechnology.
(56:37):
I think fossil fuels just havetoo much energy density, too
many advantages, and renewablesdon't have enough going for them
to overcome that.
So you can subsidize them andyou can build them, but people
(56:58):
aren't going to give up theirfossil fuels yet.
But there is a viable way outof this dilemma.
And just to repeat what I justsaid natural gas places coal,
nuclear power bills out,technology approves,
conservation is taken seriouslyand we adapt as a society.
Dr. Matt Waller (57:09):
If we do that.
Claiborne Deming (57:10):
I think we can look each other in the face,
say that we're honestlyaddressing the issue.
We're not doing a pie in thesky type of scenario.
We're not talking about a netzero which is likely not
obtainable.
We're dealing in the real worldand I think we can impact CO2
emissions if we do that.
Dr. Matt Waller (57:28):
Well, Claiborne , thank you so much.
This was very insightful.
I really appreciate you takingtime to do this.
Claiborne Deming (57:35):
Thanks, matt.
I've enjoyed it, and it'salways fun to converse and talk
with someone who's equallyunderstands the issues.
Dr. Matt Waller (57:43):
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mattwallerpodcastcom.
Welcome to the Matt Waller podcast, where we
look at success at theintersection of technology,
logistics, supply chain, retailand CPG, also known as the
retail value chain.
I want to clarify that thispodcast is distinct from my
responsibilities as a professorin the Sam M Walton College of
Business.
Nonetheless, it aligns with myaspiration to provide practical
(00:31):
insights to professionals andbusiness by showcasing companies
and people that can enhanceyour ability to manage, lead and
strategize and marketeffectively in the retail value
chain.
Before we dive into today'sexciting episode, I'd like to
thank our sponsor, new RoadCapital Partners.
New Road invests in proventechnologies, services and
(00:53):
products that serve unmet needsin the marketplace.
They look for companies insupply chain and logistics, as
well as consumer-orientedcompanies.
For more information, go tonewroadcpcom.
I would also like to disclosethat I am a strategic advisor to
New Road.
I'd also like to recognizepodcastvideoscom for the
(01:18):
services they provide for thesepodcasts.
I'm very pleased with theirservices and now, without
further ado, let's get into theexciting episode.
Today I have with me ClaiborneDeming, who is truly an expert
on energy policy.
You're going to see today, he'sthought a lot about this and
(01:39):
done a lot of research.
We're going to be presenting alot of graphs and data and logic
.
This is a very clear-headed,practical approach to dealing
with climate change and energyproblems that we face in the
future.
I think you're really in policy.
(02:05):
If you are involved in justrunning a business, these are
things you need to be familiarwith and for some reason,
although all of this is publiclyavailable, it doesn't seem to
be brought together in a verycoherent way that Claiborne has
brought it together and,furthermore, you don't hear
(02:26):
experts talking about it.
So in this podcast recording,you're going to understand what
is driving us to not makeoptimal decisions, what are the
things driving us to not do that, and also what is the current
situation and what should we dogoing forward.
(02:48):
You're going to hear Claiborneexplain that to us.
He was president and chiefexecutive officer of Murphy Oil
from 1994 to 2008.
Since 2008, he served aschairman of Murphy Oil.
He has participated in the.
(03:09):
He served as chairman of theNational Petroleum Council and
he served as president of the25-year club of the petroleum
industry and served on the boardof directors of Entergy from
2002 to 2006.
(03:30):
But he's been very interestedin energy policy for many years
and I think that'll really comeclear as you listen to this
podcast.
Enjoy Clayburn.
Thank you for joining me today.
Really appreciate it.
Claiborne Deming (03:46):
Thanks, Matt.
I'm delighted to be here.
This topic, which I've calledthe Energy Transition Challenge,
really fascinates me.
Dr. Matt Waller (03:55):
Me too, and I think it's so important for
leaders of major companies,policymakers, et cetera, et
cetera.
People need to be aware of this.
Claiborne Deming (04:09):
I agree, I can just jump right in, please do.
And the challenge ofalternatives is also a dilemma.
There's a big dilemma out therethat we're facing in the energy
world.
And so let me frame it this wayMost climate experts believe
(04:29):
fossil fuel use is the primarycause of climate change.
Dr. Matt Waller (04:32):
By the way, I'm in that camp.
Claiborne Deming (04:35):
But fossil fuel use will very likely remain
the world's primary energysource for many more decades.
So that's the dilemma we'rehooked on fossil fuels, we're
going.
So that's the dilemma.
We're hooked on fossil fuels,we're going to use them into the
future and I'll show you whyand how and how.
It's almost inevitable, butit's very likely.
It causes, it impacts theclimate.
But at the very end of mypresentation I'm going to show
(04:59):
you there's a realistic pathforward.
Dr. Matt Waller (05:01):
That's good to know.
Otherwise, all we're going tohear is bad news.
Claiborne Deming (05:05):
No, and there is certainly a lot of facts that
people need to know in thispresentation, and I think
current policy choices bypolicymakers are ineffective and
I'll show you, I think, prettyclearly why they are.
But I think there's anotherpath forward that makes sense
for us, but I think there'sanother path forward that makes
sense for us.
Dr. Matt Waller (05:25):
Good news.
So now we're looking at thisslide of climate change.
It's over time and it's lookingat temperature changes over
time from 1880 to 2020.
So would you explain this to us?
Sure?
Claiborne Deming (05:40):
Basically it starts at pre-industrial times
1880, and it tracks temperature.
It's NASA data.
Of course NASA wasn't formeduntil the 60s, so it's NASA data
starting then.
And it shows, starting in theearly 60s, a pretty pronounced
increase in surface temperaturesand it's about 1.8 degrees
Fahrenheit over, say, a 1940 or1950 setting.
(06:07):
And I think it's coincidentwith the increased burning of
fossil fuels as the US hasbecome wealthier and more
industrialized and then,especially as the East the rise
of Asia, has become moreindustrialized.
And so I put it in here to sayI think these are the facts and
I think we have to grapple withthem here to say I think these
(06:27):
are the facts and I think wehave to grapple with them.
So why can't we just stop Such agreat question?
Because if we think we have aproblem, why can't we just stop
the behavior which likely causesit?
And I think there's threereasons.
And then the third.
The three reasons cause anineffective policy response.
The first is behavioralbarriers, and I'm going to
explain that more in a minute.
The second is it's atransnational phenomenon, so
(06:49):
it's not just the US that'scausing this issue.
And then I don't thinkalternatives, primarily wind and
solar, are yet realisticreplacements at scale.
And so those three reasons, Ithink, mean that our current and
discussed policy responses areineffective.
I don't think they solve theproblem.
Dr. Matt Waller (07:09):
So this next slide looks at this delayed
payoff problem and for those,you'll be seeing this slide and
it shows the horizontal axis is2010 to 2060.
And the vertical axis is 2010to 2060.
And the vertical axis issurface temperature change.
And so the solid lines that yousee are what you can see.
(07:34):
It's like RCP 8.5.
That stands for representativeconcentration pathway 8.5.
It's a scenario that representshigh emission future, with
increasing greenhouse gasemission over time, leading to
high atmospheric concentrationsof greenhouse gases.
And you'll see the squigglylines around it represent
(07:58):
scenarios that could occur.
So like simulated scenarioscould occur.
So, like simulated scenarios.
But you can see that once youget to 2060, they're distinct.
So you know the path.
The purple line path is verydifferent than the yellow line
path, so could you explain?
Claiborne Deming (08:17):
this to us.
So in this particular case, youstart mitigation efforts in the
year 2010.
So you're emitting less CO2,less methane into the atmosphere
, less greenhouse gas gases tothe atmosphere.
You have to go 25 years before,you see some difference in
these three paths differenttemperature paths but they're
(08:38):
still within the noise of thedata, so you don't know if it's
natural variability or whetherit's the mitigation efforts that
you started 25 years before.
If you go another 10 years, to2045, you start thinking yeah,
there are real differences herebetween these three paths.
My mitigation efforts have beensuccessful, but still, arguably,
(08:58):
it's within the noise of thedata.
You have to go to 2060, 50years after you started the
mitigation efforts, before youcan clearly say absolutely, my
mitigation efforts weresuccessful.
So the point is this who'sgoing to make a decision in 2010
that they're not going to seethe impacts of until 2035, 25
(09:20):
years later, much less 35 yearslater, much less 50 years later?
So it's very difficult forhuman beings to make choices now
that don't have an impact.
Dr. Matt Waller (09:31):
This gets back to the behavioral it is.
Claiborne Deming (09:34):
It's one of the behavioral issues, which
precludes us from makingdecisions to wean ourselves off
of fossil fuels.
You want to see an impact inyour lifetime.
I mean, you want to see animpact immediately.
Of course, you'd like to see itin three years, five years, but
it's difficult to do something.
You don't see any impact for aminimum 25 years.
And there's a first cousin tothis one, matt, and that is
(09:57):
individual behaviors don't havean impact either.
So I've often wondered whyhigh-profiles, self-described
climate activists, climatewarriors, especially the wealthy
ones fly in private planes?
Why do they have more than onehouse?
Why do they have two or threehouses?
Now, they're not bad people andthey're smart people too by the
(10:19):
way.
So why do they make thesedecisions?
Because people can obviouslysee their behaviors.
I said why do they make thesedecisions?
Because people can obviouslysee their behaviors and
criticize them for it.
But they justify it becausethey know if they stop their
behavior it will solve theproblem.
It won't impact the problem.
One iota, and so this isanother behavioral really
(10:45):
powerful reason why it'sdifficult for us to wean
ourselves off of fossil fuels.
Dr. Matt Waller (10:50):
Delayed response is one of impact, and
also individual behaviors don'thave an impact.
This reminds me of the voters'paradox.
And the voters' paradox says,you know, the probability of any
one vote changing an electionis close to zero, very close to
zero, and so you could say it'snot optimal for anyone to do it,
to vote, you know.
But people do it for virtuesignaling and because they think
(11:12):
it's a good thing to do.
But in reality it's a similarkind of a problem.
Claiborne Deming (11:17):
Absolutely, and people don't understand this
really kind of writ large, butit's something that we all face
as human beings when we makechoices every day.
Dr. Matt Waller (11:28):
This next slide energy access and use is
fundamental to progress.
Can you explain that?
Yeah, this is also reallyimportant.
Claiborne Deming (11:37):
The vertical axis is GDP per capita this is
all 2021 data in US dollars.
And then the horizontal axis isannual energy use per person.
That's in barrels of oil.
Dr. Matt Waller (11:51):
Then we have nations in there.
Claiborne Deming (11:52):
So they're plotted against these two.
Dr. Matt Waller (11:54):
Are the size of those circles, like they're
populated?
Yeah, yeah.
Claiborne Deming (11:57):
Good point.
The US obviously is high to theright.
We're very wealthy close to$70,000 a year per capita GDP.
We consume close to 50 barrelsa day 50 barrels a year in oil.
50 barrels a year in oil andour population is 330 million
(12:19):
that's the size of that bubble.
Then if you go down to the left, people who are less wealthy
and who consume less oil.
You have China they're 1.3billion people.
You have India 1.3 billionpeople.
You got Africa 1.3 billionpeople.
You got Central and SouthAmerica about 700 million people
.
And they're quite poor and theyalso they consume very little
(12:41):
energy.
All of them want to be like us,and the only way they can be
like us or be like the Westernworld, western Europe is have
access to affordable energy, andright now, the only affordable,
scaled-up energy source arefossil fuels oil, natural gas
and coal.
Wind and solar haven't yetgotten to the point where they
(13:07):
can scale and where they'reaffordable.
So very, very likely, thesebillions of people down here in
the lower part of the graph thatare poor and don't consume much
energy are going to consumemore energy in the future as
they're aspirationally trying tojoin the middle class, and it's
almost inevitable.
I don't see how this doesn'thappen, quite frankly, and I've
(13:28):
got a great example to show youhow it's happened recently.
Dr. Matt Waller (13:35):
So this next graph is titled Countries with
Middle-Class Ambitions Will WantMore.
Can you explain that?
Claiborne Deming (13:40):
Yeah, so the horizontal graph is over time,
starting in 1965, it goes to2020.
And the vertical graph ismillions of barrels a day of oil
consumption.
And so I've got four differentblocks on here, for lack of a
better word.
One is China, one is selectSoutheast Asia, which is Asia
(14:03):
outside of China, one is Africaand one is India.
By the way, each has 1.3billion people.
And so Deng Xiaoping in the 80sin China became the premier and
he made policy decisions tounleash their economy.
He saw how it worked and heimplemented them, and it did
work.
So China's energy consumptionstunningly went from 2 million
(14:24):
barrels a day Now it's close to16 million barrels a day, so it
was an eightfold increase.
So it shows you when you becomewealthier, when you become more
powerful, which everyone wantsto happen- in their societies
you consume more energy.
Almost inevitably in today'sworld.
That's oil and gas.
Because it's affordable, it'sfungible, it's transportable,
(14:45):
it's got extraordinarily highenergy density.
That's what you use.
So this is the dilemma.
We're likely, as a world, we'regoing to use more and more
fossil fuels over time as thesebillions of people in Africa and
Asia become wealthier.
Dr. Matt Waller (15:01):
So we've been focusing on the behavioral
barriers, but there's also aglobal problem here and you know
a number of treaties have beenworked out between countries.
Have they worked?
Claiborne Deming (15:16):
Interestingly, you'd think, since it's
transnational and it's a problem, let's get together and let's
solve it.
But the data reflects thattreaties don't work, and I'll
quickly go over this.
So the UN formed a frameworkconventional climate change and
that's still the body in placetoday.
It was created in 1992, andthey created a 1990 baseline.
(15:38):
They looked back and they saidokay, global CO2 emissions were
20,500 metric tons in 1990.
They set their first set oflimits on CO2 emissions, or
greenhouse gas emissions, in1997 at Kyoto.
But by 2000, world emissionswere 23,000 metric tons.
(16:01):
So they were up about I don'tknow 15% in 10 years.
The next big meeting was 2015,and it was touted as a big
breakthrough.
But by then global emissionswere at 32,000 metric tons.
So they had increased by 50% in15 years a dramatic increase,
and I showed you the reason why.
It is China.
(16:21):
They became wealthy, theyconsumed a lot more energy and
other Asian did as well.
But the Paris Accords werevoluntary.
They built in some emissionsgrowth.
The pledges they made weren'tmet and the world exceeded the
estimate that they said of CO2emissions, or greenhouse gas
emissions, in 2040.
(16:42):
We exceeded that estimate by2021, only six years after Paris
, and that we now emit 36,000metric tons of greenhouse gases
man-made greenhouse gases.
So ultimately, emissions havegrown by 79% compared to the
1990 baseline.
So these countries meet, thesepolicy makers meet and they set
(17:07):
goals, but they're never made.
They're never met, and there's asimple reason Nation states
always prioritize self-interest.
They're in competition withother nation states.
They realize if their poordon't become middle class,
they'll be voted out of officeor, worse, overthrown.
So they're desperate to makesure that their nations grow as
(17:29):
fast and as quickly as possible.
The only way to do that is tofossil fuel use right now.
And so these treaties don'twork, because nation states or
policy makers say one thing atthe conventions or the treaties
and then do another.
Dr. Matt Waller (17:50):
Well, you know this next slide titled
Transnational Problem.
It's a really interesting slidefrom 1990 to 2001.
And you can see rest of worldIndia, china, us.
One thing I want to point outis after 2021, and Claiborne
explained this to me that's ifthese stay within the stated
(18:14):
policies.
You see at the top that darkline and it says stated policies
.
That's if it stays within thestated policy.
Claiborne Deming (18:23):
Matt.
Good point, because we hadthese stated policies before
2021.
And we said one thing but wedid another and obviously CO2
emissions grew.
This slide's important and it'sgot a couple of important
points to be made from it.
You look at 1990, when the20,000 metric tons of CO2
emissions were mentioned.
The prior slide reflects thatthe US was a quarter of the
(18:45):
world's emissions.
So, fast forward to 2021, we'reat 36,000 metric tons.
We've actually decreased ourCO2 emissions.
The rest of the world's grownand we're less than 15% of the
world's CO2 emissions and so, touse an overused metaphor, we
don't drive the bus anymore.
Anything we do in our countryreally doesn't matter, because
(19:06):
any mitigation efforts that wemake it takes us a long time to
implement them, by the way areoverwhelmed by the growth in the
rest of the world.
That's what this slide reflects.
Dr. Matt Waller (19:15):
Well, you know, even the fact that the blue,
the US, has gone down over thetimes.
It is impressive when you thinkabout it.
Claiborne Deming (19:23):
It's stunning, actually, and the peak for the
US was 2008,.
When we had the Great Recession, obviously industrial activity
stopped or slowed, but then whenwe came back, we came back
slower with CO2 emissions thanwe ever had before, and there's
a reason for it.
One we substituted natural gasfor coal and power generation.
(19:45):
It's an amazingly powerful wayto reduce your CO2 emissions.
Secondly, we made our energyuse more efficient.
Wealthy countries can do it andwe did it.
And third, there's somealternatives in here, so on the
margin, alternatives can make adifference.
Those are the three reasons,but about in that order, of how
(20:06):
we diminished or lessened ourCO2 emissions, but we grew our
economy by 25%.
That is, it's remarkable.
It shows the entrepreneurshipand ingenuity it does.
Dr. Matt Waller (20:17):
I want to point out an anecdote that I've
mentioned to you before, that Ilearned from Craig Harper and
basically, if you look atemissions of heavy-duty Class A
trucks, so semi-tractor trailers, it takes 60 trucks today with
(20:41):
brand new tractors 60, to havethe same amount of emissions as
one truck had in 1980.
So 60 to one and the remarkablething about that is that's over
a 44-year period.
So to your point aboutingenuity and entrepreneurship,
(21:04):
this is remarkable.
Claiborne Deming (21:05):
No, it makes a stunning difference, absolutely
.
Dr. Matt Waller (21:10):
Now looking at alternatives that are not yet
realistic replacements.
We've got this graph that saysthe difficulties of displacing
fossil fuels.
Can you explain that?
Claiborne Deming (21:24):
difficulties of displacing fossil fuels.
Can you explain that?
Yeah, I can.
So first, the first point isthere's three reasons why it's
difficult to displace fossilfuels.
First is energy density, whichis chart to the right.
I'll explain it in a minute.
It's one of the reasons.
The second is the location ofwind and solar, the two major
alternatives, or in the wrongspots, where the people aren't.
(21:46):
And then, third, there's anintermittency issue with wind
and solar, which makes it reallydifficult.
But we'll start with energydensity.
So vertical axis is energy perunit of weight, so in any given
kilogram or pound, how much BTUsare in it?
So in any given kilogram orpound, how much BTUs are in it.
(22:06):
And then the horizontal axis isenergy per unit of volume, so
in an area of space.
So you want to be high to theright, which means you both have
a lot of BTUs in a particularvolume or weight.
And what's up there?
Any particular volume or weight?
And what's up there?
It's gasoline, it's diesel,it's heating oil, it's jet fuel,
coal's up there, even thoughit's not as good as natural gas
(22:30):
or oil.
And what's way down to the leftand to the bottom.
It's lead-acid batteries andeven lithium-ion batteries, and
the example that I think thatcaptures it most is if you fill
up your car with gasoline, thattank weighs 80 to 100 pounds,
but if you have a fullyelectrified vehicle, the battery
pack weighs at a minimum of1,000 pounds, and probably up to
(22:53):
2,000 pounds if you have a lotof range and so it just doesn't
have the energy density.
It doesn't mean that you can'tuse it, it's just it's much,
much, much less efficient in itsuse.
In the space of a battery, youhave just much more energy use.
If that space is occupied by oil, it's just freakishly high
(23:14):
Nature provided that to us andthat's why we massively adopted
it.
So that's really a big obstacle, which is just the physics of
the composition of the energy,and that's what this slide shows
.
The next two I mentionedearlier at the beginning of this
slide were location andintermittence.
Dr. Matt Waller (23:34):
You know this slide is called Location Lack of
Wind in Population and GrowthCenters.
So the dark red means lots ofwind, the light blue means very
little wind.
So how do we endeavor?
Claiborne Deming (23:48):
this.
So this is just global winddata that, of course, they've
calculated over years, and whatit shows you is that the most
intense winds are on thecoastlines and they're typically
in the northern hemispheres,and so wind can have its place,
especially if there's apopulation center on a coastline
(24:09):
in the northern hemisphere.
But the issue that we facetoday and this is a global issue
and the US is not the problem,not the center of the problem is
we have India, we have China,we have Asia outside of China,
we have Africa, and they justdon't have the wind resources.
Typically, you need to scale upand provide wind as an
alternative to fossil fuels.
(24:31):
It's just a fact.
So it's got its spots, but it'sjust not in the right places
where the people are Interesting.
Dr. Matt Waller (24:40):
And so the next slide is also a location slide.
It says lack of solar inpopulation and growth centers.
Claiborne Deming (24:48):
So solar is better and it shows.
We have a lot of solar in thewestern US, we've got it in
certain parts of Africa,certainly in Australia, but look
where we don't have it.
We don't have it in China,except in western China.
There's no people in westernChina.
We don't have it in India andwe don't have it in Asia outside
(25:14):
of China.
And so these massive populationareas that are industrious and
working hard and going toconsume more energy and have and
will in the future, they justdon't have access to solar
resources as much as they should.
Doesn't mean it won't be used,but I believe it's best used on
the margin.
And I doubt that it's going tobe used as a primary source of
(25:34):
energy in those jurisdictions.
So, matt, let's talk aboutintermittency first, because
this is really the largest andbiggest issue to overcome by
renewables.
So imagine electricity demand.
There's some variations in it.
You have a peak demand and thenyou have a base load.
But the variation is only about20-25 percent, and that's
(25:56):
because industrial use is about35 to 40 percent of all
electricity use and it's 24-7.
And think of big officebuildings and stores that have
to be heated and cooled 24-7.
It's not realistic not to do itthat way.
So there's a big baseloaddemand.
So you've got this demand whichhas got to be met.
Then you have the power supply,which is intermittent.
(26:16):
And so how do you square thatcircle?
When the power supply isintermittent and the wind's not
blowing, the sun's not shining,you have to have a full thermal
backup ready to supplant thewind and solar when they're not
generating, and that's expensive.
So you're running two systemsbasically the whole time that
(26:38):
you have intermittent sources ofenergy.
And the second piece is theonly way out of that to have
these two big systems is to havesome type of grid-level battery
storage.
So when you are generating withwind and solar, you're not only
generating to make currentdemand but you're generating to
store for the future, when windand solar are not generating,
(27:00):
not producing.
And the problem in today'sworld is we don't have the
technology for grid-levelbattery storage.
Lithium-ion batteries are verygood, but they don't have the
energy density yet on scale toreplace a full national grid
system if it goes down.
So you still have to maintainthe system of a full 24-7 backup
(27:26):
to meet these issues when theseintermittents are producing,
and so it becomes reallyexpensive, and that's why
jurisdictions with intermittentpower typically have much higher
energy costs than those thatdon't.
Think California, think WesternEurope, specifically Germany.
(27:47):
Now let's go to this slide,because this slide is really
interesting.
It shows you electricity demandover a 300-hour period that's
the horizontal axis and that'sabout 12 and a half days.
And then it shows you, with a40% peak demand supplied by
renewables, how they go up anddown.
Dr. Matt Waller (28:08):
So the brown line's the renewable product,
that's correct.
Claiborne Deming (28:11):
And the dark line is the demand, that's
correct, and so it shows kind ofthe fluctuations, because there
is some fluctuation.
Basically it's a big base loadand so renewables can provide
all of it sometimes, buttypically not.
Sometimes they hardly generateat all.
So this just reflects you needthat 24-7 backup or grid-level
battery storage, which doesn'texist.
(28:33):
But look at the 80% of peakdemand, because that's really
the most interesting one of all,and again, think about it.
The black line is the baseloaddemand and then if the brown
line is 80% of the demand is metby intermittents or renewables.
And so what happens is becauseyou're dormant when you're so
(28:56):
much of the time when you'regenerating from intermittents,
when you are generating to meetthis 80% goal, you have to
generate way too much.
And so there's horrible waste orexcessive waste when you come
to generating from renewables,if you have a really high
percentage of the total baseload that you're trying to meet,
(29:17):
and that's another reason whythey're so expensive.
So the only way out of thisdilemma is really to literally
have grid-level battery storage,because you're way
overproducing, so you need touse that energy and store it
when you're not producing.
But again we don't have it.
So intermittents have so manyobstacles to overcome.
It's just base load demandneeds a X number, but the supply
(29:43):
is bouncing up and down andit's really hard to overcome and
it's extremely expensive.
Dr. Matt Waller (29:49):
And you know, it doesn't even to have these
batteries.
The batteries themselves take alot of energy to create and
then they produce a lot of waste.
That's not so good for theenvironment.
Claiborne Deming (30:03):
I agree with you and you know.
There's another interestingpoint to make, and I think this
is really important for peopleto understand, and that is you
often hear that wind and solarare now cost comparable to other
thermal generation comparableto other thermal generation and
that is because they only lookat the cost of manufacturing the
(30:24):
wind turbine or the solar paneland the installation cost.
But there's three costs whichthey don't include.
They don't include the cost ofthe backup thermal storage,
thermal generation capacity thatyou have to have.
It's 24-7.
It has to be there if we'regoing to meet demand when the
intermittency are producing.
Secondly, they don't includethe cost of any battery storage
(30:46):
which people want to have.
At some point, if we continuedown this policy path, we'll
have some stab at it and it'sgoing to be extremely expensive.
That number is not included.
A third number is you have tomassively upgrade the grid and
we'll look at a slide in aminute If you're going to
electrify everything.
That cost isn't included.
And so they make that claim andit's true if you just look at a
(31:13):
small piece of the cost ofelectricity generation.
But there's three big piecesthat they don't include and if
you're a utility, you have thosecosts and you will have to pass
them on to your rate base oryour consumer.
You go bankrupt.
Dr. Matt Waller (31:31):
So this next slide, building on this, is
location and transmission,another infeasible stretch.
It's interesting because thehorizontal axis, of course, is
time and gigawatt miles is thevertical axis.
But the US Department of Energycollected data for a time and
they quit collecting it, and nowUT Austin has collected it for
(31:52):
a time.
There's no clear plan for thefuture, which is a little scary.
Claiborne Deming (31:58):
Well, this is done in the context of showing
how net zero, which you oftenhear, is a really impractical
thought and people need tounderstand that it's so highly
unlikely to reach a net zeroscenario that it's almost silly
to be talking about it and wecan make bad policy decisions if
(32:19):
we try to achieve net zero.
So this shows the gradualincrease in gigawatt miles over
time.
You have to do it.
Society gets wealthier, societygrows, population grows, so you
have the grid grows and it growssteadily incrementally but
steadily and then it shows youwhere the grid would have to be
in 2050.
And this is PrincetonUniversity and they're really
(32:41):
quite good at this, they're avery accomplished policy shop.
It shows you how many gigawattmiles have to be added to the
grid to get there, and anybodycan see that's not going to
happen.
It's infeasible, and so that'sthe point that I'm trying to
make here.
It just likely, likely, likelywon't happen to meet a net zero
(33:04):
target in the US.
Dr. Matt Waller (33:06):
And one other point I'd like to make is that
60% of our grid is past its50-year life expectancy.
This is another problem.
Claiborne Deming (33:20):
It's a significant problem.
And, as we've discussed,there's an explosion now in
energy use and that's because ofAI, which consumes an
extraordinary amount of energyto do the computing power.
You have cloud computingcenters, you have crypto mining.
Unexpectedly, there's a surgein energy demand Right when we
least need it.
Dr. Matt Waller (33:40):
If we're going to meet these goals, yeah, so
this next slide talks aboutworld fuel demand is likely
persistent, even as renewablessurge.
Could you explain that?
Yeah this is IEA data.
Claiborne Deming (33:54):
It's a Paris-based interpolicy group
funded by the West, which isreally capable people and have
access to a lot of data.
And so it looks at 2021, and itsays hey look, 79% of all the
energy generated in 2021 werefossil fuels.
This is a fact.
These are data.
Then they make projections intothe future, and I've selected
(34:17):
2050, which is when the net zerogoal is supposed to be achieved
.
Dr. Matt Waller (34:23):
It says okay, if you look at steps this is the
one we talked about earlier.
Claiborne Deming (34:27):
They're called policy settings.
It's what governments.
If governments do what they saythey're going to do and, by the
way, they haven't but if theydo what they say they're going
to do on these policy goals inenergy, then energy use will
increase over time, which Ithink is a reasonable assumption
(34:48):
, and the amount of oil and gasis reduced as a percentage from
79% in 2021 to 62% in 2050.
But because the pie has grown,then the 62% is about equal to
the 79% and it shows thedifference.
Obviously is going to berenewables.
(35:10):
So look at the next one, whichis called announce pledges
scenario.
These are aspirational targetsset by governments.
You actually show a decrease inenergy use.
Now look, the only time we'vehad a decrease in energy use was
the COVID shutdown, and it wasvery temporary and we rebounded
quite quickly.
And for us to have a decreasein energy use voluntarily as a
(35:31):
society worldwide isextraordinarily unlikely.
So I almost dismissed the APS.
And then, looking at zero, itshows even a greater decrease in
energy use.
As I showed you earlier,aspirational nations, billions
of people, hard work and peopleweren't going to accept that.
So these latter two, I think,are unrealistic policy settings.
(35:54):
But they're there becausethey've been asked by
policymakers to make thoseprojections.
Anyway, the takeaway is fossilfuels use is likely going to
stay robust into the future.
Dr. Matt Waller (36:08):
And this next slide titled Persistent Coal.
Claiborne Deming (36:12):
Yeah, and this is actually very important, and
this is almost an asterisk tothe prior slide.
It shows China, india, rest ofAsia Pacific and the rest of the
world, and it shows you coalconsumption.
And look at the spike startingin 2000.
That's when the policies thatDeng Xiaoping put into place
(36:32):
really took place, took hold,and so oil and gas use surged,
and so did coal use surge inChina.
And so oil and gas use surged,and so did coal use surge in
China.
And so look at this stat theshare of the world's CO2
emissions from energy, worldcoal, is 40% of that.
Dr. Matt Waller (36:54):
Now.
Claiborne Deming (36:54):
CO2 emissions from energy.
It's kind of a hard number tofind, but it's somewhere 75% to
80%.
So 40% of that.
80% comes from coal, and thenChina alone is 21% of that.
80% comes from coal, and thenChina alone is 21% of that.
So half of the coal, yes, yes,wow.
And look at the next stat.
Currently, there's 258coal-fired power stations either
proposed, permitted or underconstruction in China alone.
(37:17):
Look at the next one Indiaexpects its power plants to burn
about 8% more coal in thefinancial year ending March 2024
.
And so you hear about Chinaadopting all these renewables
and being a powerhouse in solarpanel production.
But look at what they do theyburn coal.
(37:37):
They burn a heck of a lot ofcoal.
And a shorthand way to look atclimate change and impacts, and
what can make a difference isit's a China coal problem that's
where all the incremental CO2comes and soon to be an India
coal problem, because, as theyget wealthier.
(37:58):
That's how they're going tohave to provide power to their
people, Almost inevitablyBecause of the limitations of
the intermittent sources, ofrenewable sources.
Really important to understandthis and we can't stop them,
Matt.
They're going to do this.
They're going to do thisBecause they don't.
They want to keep their jobs.
Dr. Matt Waller (38:16):
And they don't have as much natural gas.
They don jobs, and they don'thave as much natural gas.
They don't.
Claiborne Deming (38:20):
And they don't have much oil either.
They had one large field in thenorthern part of the country
which has largely been depleted,and they don't have natural gas
reserves significant natural,but they have massive coal.
Dr. Matt Waller (38:31):
But the US's contribution to CO2 emissions
from coal is minuscule now it'sgoing to get even smaller over
time.
Claiborne Deming (38:42):
As I mentioned before, that's how we've become
.
We've grown as a society, butwe've lessened our CO2 emissions
.
We've substituted natural gasfor coal in power generation.
That's a really big, single,biggest piece of it.
Dr. Matt Waller (38:55):
Now look at the next slide this one's another
one.
Claiborne Deming (38:59):
It's a reality check.
This shows you the age ofglobal coal-fired capacity.
Everyone says they're not goingto build coal plants anymore
because of the highconcentration of CO2 emitted
when you combust it.
But look at this Two-thirds ofall the coal plants are 20 years
and younger, and so people arestill building these left, right
(39:22):
and center Two-thirds, maybeeven a bit more, actually.
So it's important to know thesecoal plants aren't going to be
retired and aren't going away.
This highlights the dilemmathat we're in as a world.
Dr. Matt Waller (39:38):
So you have made a strong case of this
dilemma.
What are some of the currentand discussed policy responses?
Claiborne Deming (39:49):
Well, I think that's where the rubber meets
the road.
And so, faced with all thesefacts and I think they're all
facts, I do the US has chosen togo down a path of saying we're
going to subsidize wind andsolar.
And the point is this Renewablesubsidies don't work, even when
they do which is kind of afunny way to say it but solar
(40:12):
and wind supply is multiplied bysix, six-fold from 2010 to 2021
.
And so all the subsidies, allthe policies that we implemented
actually did work, but fossilfuel percentage in the country's
mix only dropped from 81% to79%, and meanwhile the pie grew
(40:34):
so that 79% is bigger than the81% was in 2010.
So that 79% is bigger than the81% was in 2010.
Dr. Matt Waller (40:43):
So we as a country are consuming more oil
and gas besides a six-foldincrease, and we're using it
more efficiently?
Claiborne Deming (40:46):
Oh, absolutely .
That's one of the reasons whywe've grown and our CO2
emissions have diminished.
And so a guy who's made thispoint repeatedly he's really
smart is Holman Jenkins, who's acolumnist for the Wall Street
Journal, and he basically sayslook, renewables subsidies don't
work, because all it does isencourage us to consume more of
(41:07):
all energy.
So, of course, we'll driveelectric cars because they're
subsidized, but we're not givingup our gasoline-powered cars,
and so their policy responses,just so far, have been
ineffective.
They work.
We have more of them but westill consume more oil and gas
and so something.
There's a disconnect here.
Dr. Matt Waller (41:27):
You know something?
I want to interject anotheranecdote on transportation, Sure
, and that is that you know, ifwe electrified the heavy-duty
trucks today, it would increasethe total demand on the grid by
10%.
Okay, but it would cause a lotof other problems too, because
(41:52):
you would have to have moretrucks on the road because they
can't haul as much, becausethey're heavier, because of the
batteries they can't go as far.
So in a given day they can'thaul as much, because they're
heavier, because of thebatteries they can't go as far.
So in a given day they can'thaul as much freight.
But if you and in Californiawho's got lots of grid problems,
they have a new policy that isrequiring any incremental
(42:14):
trucking into ports or railyards to be renewable.
So either battery, electric orhydrogen fuel cells.
And of course now, if you gofurther and there's a policy
(42:34):
being considered today on thesethings, if you include medium
and light freight trucks, that'sanother that goes from 10% to
40%.
So all these trucks combined,it's actually 41% additional
demand on the grid.
And so you know, a lot of thesepolicies.
(42:59):
Policymakers aren't takingthese things into account.
That doesn't even count.
Cars, yeah, Automobiles.
Claiborne Deming (43:07):
I know, I know there's just a disconnect here.
It's ineffective and we don'thave the money to build out the
grid to meet it for one thing,or the people to build the wires
and install them.
Dr. Matt Waller (43:22):
Oh yeah, so this next one, this slide says
net zero unprecedented reductionin energy use.
Can you explain this to us?
Claiborne Deming (43:31):
Yeah, so it's a point I made earlier, but this
is really a better graphic wayto describe it.
You hear net zero is a goal by2050.
And it shows world energy useup until now grows every year.
It has to grow.
That's just the way the worldworks.
It will work in the future, butto meet net zero, and this is a
policy scenario set by the IAEA.
(43:52):
again, smart people looked at alot of data.
Came up with this answer yeah,it showed a decrease in energy
use, and then half of the energyused is either wind and solar
and other renewables.
And I think I've already showedyou maybe not conclusively, I
think the data is prettyconclusive that it's hard to
scale wind and solar.
There's too many obstacles withit and the other renewables,
(44:16):
like hydropower, likely perhapseven though people don't want to
dam up rivers anymore, and so Ithink it's unrealistic.
I think, when you hear, netzero is our goal at a
society-wide level, worldwidelevel, maybe individual
companies can do it but at aworldwide level.
(44:36):
It's totally unrealistic.
And if something's unrealistic,why do you talk about it?
Dr. Matt Waller (44:40):
I think it misleads the public, it does.
So you've made a very strongcase here, but now I'd love to
know what are yourrecommendations?
You've been thinking about thisa long time, and this is
well-researched information, andI know you think about it all
(45:00):
the time.
You're very interested inpolicy energy policy so what are
some things you're thinkingabout?
Well, Matt.
Claiborne Deming (45:08):
This is again where the rubber beats the road,
because you can highlight aproblem, but the way I was
trained if you highlight aproblem, you better come up with
a way to solve the problem, andso I think it's got to be
realistic, it's got to beimplementable, it's got to be
cost-effective, and so this ishow I would do it, and I think
this is something that we oughtto consider.
First, wind and solar.
(45:28):
On the margin, a lot of it'sinstalled, and if you generate
it in a place where there's lotsof wind and lots of solar and
as the technology improves, Ithink on the margin, that can be
a very helpful way to implementthis policy.
It's helped work in our countryso far.
By the way, it's one of thereasons why our CO2 emissions
are down, and so I don't thinkit scales worldwide, but I do
(45:53):
think that on the margin itcould be helpful.
Lied, but I do think that onthe margin it could be helpful.
The one which is easily the mostimmediately effective at scale
is to substitute natural gas forcoal and power generation.
It's worked here in the US, andif you could accomplish that on
a scaled worldwide basis, itwould actually decrease CO2
(46:14):
emissions.
So think about that.
The economy doesn't shrink.
You consume more energy, butyou're producing less CO2.
So shouldn't that be a policyobjective that we don't achieve
as a country?
Look, at the numbers, if doneworldwide, you reduce about 18%,
(46:34):
and that's again CO2 emissionsfrom energy.
And energy is about 75% or 80%of all CO2 emissions and 9% if
done by China alone.
So you can reduce CO2 emissionswith existing technology.
There's plenty of natural gasin the world.
The fracking of the world, thesuccess of that, has proven the
(46:54):
point.
We have just trillions of cubicfeet of available reserves.
Dr. Matt Waller (46:59):
Now to do it in China?
Wouldn't we need morefacilities to make liquid?
Claiborne Deming (47:06):
Yeah, obviously they import a lot of
LNG.
Dr. Matt Waller (47:09):
Actually They'd have to import a lot more, so
we'd have to have more ship forthat.
Claiborne Deming (47:14):
Sure, absolutely, and we're building a
lot of LNG export facilities inthe US.
We have to build more, and thenother countries will too.
If you look at the Middle East,they have massive, massive,
massive gas reserves, especiallyin gutter, and they liquefy it
and they ship it around theworld.
You have to do more of it.
Mozambique just made a hugeoffshore discovery.
I read about that world.
You have to do more of it.
(47:35):
Mozambique just made a hugeoffshore discovery and it's
luckily, an American company isthe lead operator in that
project and they're going toliquefy it.
So it's not just the US, it'sother naturally endowed
countries.
Australia's a big energyproducer.
But that's something that justneeds to.
Dr. Matt Waller (47:53):
Which country has the most natural?
Claiborne Deming (47:56):
gas Reserves.
It may be the US given fracking, but if you look at the Middle
East, there are massive reservesthey're conventional, by the
way, so they're a little biteasier to access, a little
easier to scale.
Gutter, in particular, has gotsuch massive reserves.
It's hard to even know what todo with them.
Dr. Matt Waller (48:13):
Really.
Yeah, I didn't know that.
Yeah, and for a long timeIsrael didn't think they had it,
and now they found it right.
Claiborne Deming (48:20):
More than they can possibly consume.
Egypt now has discovered anatural gas offshore in the
Mediterranean.
So natural gas is a real no,there's plenty of it and you
can't do 100% substitutions, butyou can start now and you'll
have an immediate impact on theissue that we're trying to
(48:42):
address.
So it's always perplexed methat climate activists, climate
warriors, don't want to do itbecause it's a fossil fuel.
But it works and it's effectiveand it's proven and it's
inexpensive relative toalternatives.
So it just seems like to me anatural, and so I would highly
encourage folks to consider this.
In fact, we won't solve ourproblem unless we do this Now
(49:06):
the other one is increase ofnuclear power.
I'm going to say somethingreally important.
You can't say this enough theonly scalable carbon-free power
source is nuclear power.
The only scalable carbon-freepower source is nuclear power.
Say it 100 times, because it'strue.
(49:26):
The US has got 93 active nuclearreactors.
We used to have 100.
We decommissioned them.
We shouldn't decommission a one, we should be building more.
They scale.
They provide wonderfulefficient energy use.
The technology is understood.
It's carbon-free.
(49:47):
The first nuclear reactor inthe US was put in service in
1957.
It's stunningly available,technologically understood,
economically viable technologyand we just have developed a
mindset that it's unsafe.
(50:08):
And the primary reason isbecause you create nuclear waste
when you split atoms, when yougenerate energy, and so right
now they're stored on site inall these different plants.
At one point the DOE built abig repository in Nevada called
Yucca Flats, but for politicalreasons it was shut down after
(50:28):
spending $10 billion.
So at one point in our countrywe had policies to increase the
use of nuclear power and takecare of the nuclear waste, but
we don't now, and so the waythat I frame it is that, yep,
nuclear waste disposal is aproblem Very manageable right
(50:49):
now.
There's never been an issuewith it.
Again, we have 93 activenuclear generating plants, and
so we've solved it.
There's better ways to do it ifwe put our mind to it, but we've
solved it.
So you have to weigh that costand that risk against climate
impacts.
And if you think climateimpacts are existential, if you
(51:15):
think the world's going tochange, if you think that we're
not going to be existent as aspecies in 150 years because of
climate then you have to weighthat cost against the cost of
nuclear waste disposal and it'sa pretty easy policy decision to
make Of course you would dealwith nuclear waste disposal.
Dr. Matt Waller (51:30):
We have so far.
Claiborne Deming (51:32):
And, by the way, China's got, I think, 75
nuclear reactors.
They want to build 150 more.
So the world's building thesethings and it's a great way.
It's one of the essential waysto deal with climate.
It scales.
We understand the technology,so we're making a policy mistake
(51:52):
, in my opinion, if we don'treinvest to the nuclear world,
that's great.
Dr. Matt Waller (51:58):
So could you talk a little bit more about
economics and policy, includingcarbon taxes?
I can.
Claiborne Deming (52:07):
So those are substituting natural gas for
coal and building more nuclearplants or things we can do right
now, and they're industrialthings.
But we could also implementsome policy.
No one wants to hear this, butI'm going to say it.
Climate is a classic economicexternality, and externality in
(52:30):
the world of economics is a costwhich the market doesn't price
and we have no mechanism rightnow for pricing carbon.
So there is a role forgovernment.
Government can put a price onit through taxes.
If you tax something and makeit a little bit more expensive
and I would do it slowimmediately or low immediately
and gradually increase it, thenpeople will consume less
(52:53):
hydrocarbons.
So our current system is tosubsidize the construction and
consumption of renewables, butit hasn't retarded the use and
consumption of hydrocarbons.
So you have to put a tax on itif you want to slow that.
Dr. Matt Waller (53:08):
And that would also cause the substitution of
natural gas for coal.
It would.
It would because you would taxit based upon the amount of
carbon in?
Claiborne Deming (53:15):
for coal it would.
It would because you would taxit based upon the amount of
carbon in the product, and sosociety's got to consider this.
The world doesn't want to do it.
Liberals don't want to do itbecause they're fearful they'll
be voted out of office.
Conservatives don't want to doit because it's against their
ethic of higher taxes.
But again, it's a classicexternality.
(53:37):
We think climate is a cost.
The market is a price.
This is a way to price it.
Now I'd love a market system toprice it.
By the way, I think that'd bebetter, but so far we haven't
come up with one, and so thereis a role here, and again I do
it small.
You don't want to disrupteconomies and then gradually
increase it over time.
I think that's important.
You've got to continue toheavily invest in technology.
(53:59):
Now we're investing a ton inbattery technology and all sorts
of technologies to reduceenergy use but also make it more
efficient, so we're notactually driving less.
We need to continue that.
So battery technology has gotto be continued to be worked on
really hard.
Dr. Matt Waller (54:18):
There's an iteration after lithium ion.
Claiborne Deming (54:21):
We got to find it.
We got to find it reallyquickly.
It's got to have more energydensity, yeah.
And then, lastly, I say youhave to adapt to a slowly
changing climate.
We know if we think we knowthis is going to happen.
Then you make changes.
Human beings are adaptable,creative people, so you build
things more resiliently.
You build less on the coastline.
(54:42):
You make choices as a societythat adapt why?
Because we're going to continueto use fossil fuels as I've
shown in I think my presentationand renewables aren't yet ready
, and we're not making thesecorrect policy decisions on
nuclear and natural gas.
And so we need to adapt.
So that's how I would look atit, that's how I would approach
(55:07):
the problem, and I think it'saffordable.
I think the technology is thereand I would do these.
I'd do them promptly, I'd dothem right away, but I would
also do all the research forother ways too, especially
battery technology.
Dr. Matt Waller (55:20):
So, Claiborne, you've made a really strong case
and you've presented a pathforward Very encouraging and
logical, practical.
What final words do you have?
Claiborne Deming (55:34):
You know the final word really is to sum up
what I've said.
And so let me review reallyquickly what I told you there's
a lack of alignment betweenthese different, difficult
behavioral changes and theirimpacts, and so people actually
(55:54):
don't make the changes theythink they ought to make because
there's just no alignment there.
Delayed responses, individualbehaviors don't impact it.
Secondly, it's a sharedatmosphere, but separate
national sources of climateemissions and treaties haven't
solved it and, above all, thisis a really important takeaway
(56:16):
and, above all, this is a reallyimportant takeaway this is a
China-India coal problem.
That's what it is.
Thirdly, the mandate subsidypolicy.
Responses have been ineffectiveand they're extraordinarily
expensive, so why don't youcontinue something which is
expensive and ineffective?
Renewables are unlikely toreplace fossil fuels in a
meaningful way without newtechnology.
(56:37):
I think fossil fuels just havetoo much energy density, too
many advantages, and renewablesdon't have enough going for them
to overcome that.
So you can subsidize them andyou can build them, but people
(56:58):
aren't going to give up theirfossil fuels yet.
But there is a viable way outof this dilemma.
And just to repeat what I justsaid natural gas places coal,
nuclear power bills out,technology approves,
conservation is taken seriouslyand we adapt as a society.
Dr. Matt Waller (57:09):
If we do that.
Claiborne Deming (57:10):
I think we can look each other in the face,
say that we're honestlyaddressing the issue.
We're not doing a pie in thesky type of scenario.
We're not talking about a netzero which is likely not
obtainable.
We're dealing in the real worldand I think we can impact CO2
emissions if we do that.
Dr. Matt Waller (57:28):
Well, Claiborne , thank you so much.
This was very insightful.
I really appreciate you takingtime to do this.
Claiborne Deming (57:35):
Thanks, matt.
I've enjoyed it, and it'salways fun to converse and talk
with someone who's equallyunderstands the issues.
Dr. Matt Waller (57:43):
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We welcome any feedback orquestions related to the podcast
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(58:03):
You can leave your comments onour YouTube channel and rest
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(58:25):
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!