Beyond Fossil Fuels - Power Lunch with Executives and Environmentalists

What happens when energy executives sit down with environmentalists? They come
up with a plan for the future that leaves fossil fuels to the dinosaurs.

source: Marilyn Berlin Snell Sierra Club online July 2002

When Vice President Dick Cheney and his National Energy Policy Development Group met
last year, they were supposed to come up with a plan that would best serve the country.
Instead, Cheney’s task force, made up exclusively of energy-industry executives and
lobbyists, sought massive subsidies for the oil, gas, coal, and nuclear industries; the
construction of 1,300 power plants ("More than one new plant per week, every week for
twenty years running," said Cheney); and increased drilling and mining on public lands.
The only serious attention conservation and renewable energy received was when the
Department of Energy tapped those program budgets to pay for printing 10,000 copies of
the White House plan.

Asked why the vice president would turn exclusively to people like then–Enron CEO
Kenneth Lay for energy advice, Robert Bennett, Enron’s attorney, responded: "Where are
Mr. Cheney and others supposed to get their information from? The yellow pages?"

There are other voices to be heard, though, and other energy paths. For 30 years, the
United States has had the means to meet its energy needs and decrease dependence on
Mideast oil without having to drill, dig, and destroy this country’s exquisite natural places.
So Sierra decided to flip through a more diverse Rolodex to put together our own energy
task force.

We didn’t only talk to environmentalists. We also invited the head of a multinational oil
company, a labor leader, an architect, a state policymaker, and a utility executive. And on
a wintry day in San Francisco, beneath Ansel Adams photographs of blooming dogwoods
and Yosemite Valley, we gathered (several joining by telephone) and talked about how
we might get past the status quo to implement environmentally positive energy goals.

The group, while more inclusive than Cheney’s, was potentially more volatile as well. But
instead of sparks between adversaries (which we worried about), there were genuine
surprises: a corporate head questioning the sustainability of our consumption-based
economy; an environmentalist arguing that growth can be good if we’re growing the right
things; and the man once responsible for some of our largest nuclear power plants saying
that "in this age of terror, we just can’t have them."

All agreed, moreover, that the path ahead can and must lead beyond fossil fuels. Even
BP’s Lord John Browne concurred—though he would not take the bait when the Earth
Policy Institute’s Lester Brown asked him to finally declare what "BP" stood for these
days. (His company had floated the idea in promotional material that the former British
Petroleum was now going Beyond Petroleum.) "BP stands for BP," replied a good-natured
Browne.

Most remarkable was the consensus among participants that a peaceable, sane, and
sustainable energy policy is within reach. "In the United States, we have the means to
kick the oil habit," says the Electric Power Research Institute’s Kurt Yeager. "It’s very
important to set this as a leadership goal." Or not: "If we like Gulf wars," Yeager also
says, "we don’t need to do anything."

Despite the fact that much of the Bush administration’s plan made its way into House and
Senate energy bills, we still have a choice. "Technology isn’t what’s inhibited our energy
policy," says the California Power Authority’s David Freeman. "It’s been pure politics."

All we need is political leadership in Washington with the vision and courage to choose
wisely how we light the way ahead.

Carl Pope: In "Challenges and Opportunities for the 21st Century," the U.S. Department
of Energy published the following statement: "Our environmental well-being—from
improving urban air quality to abating the risk of global warming—requires a mix of energy
sources that emits less carbon dioxide and other pollutants than today’s mix. Our national
security requires secure supplies of oil or alternatives to it. . . . And for reasons of
economy, environment, security, and stature as a world power alike, the United States
must maintain its leadership in the science and technology of energy supply and use."

Those are admirable words, but the Bush administration’s energy plan won’t get us there.

We’ve had recent reminders, both in California, with its energy crisis, and globally, with
the terrorist attacks of September 11 and the turmoil in the Middle East, that we should
be thinking differently about our energy future, particularly when it comes to our use of
fossil fuels. That’s why we invited you all here.

David Freeman: I’m intrigued that you quoted from the Department of Energy. As the
energy-policy coordinator in both the Johnson and Nixon administrations, I was the first
person in the American government with an energy responsibility. Back in the 1960s our
energy policy was to pray for mild weather—and that policy hasn’t changed. The
Appalachian states are still in the hands of the coal people, and politicians still worry
about carrying Texas in the next election. The technical solutions are there; they’ve been
there for a long time. Technology isn’t what’s inhibited our energy policy; it’s been pure
politics.

We always talk about things that are going to require 25 years and we never begin. Just
because it’s going to take a long time to do something is all the more reason to start with
some urgency. If, after the oil crisis of 1973, we had decided we wanted to pay attention
to 19th-century writer Jules Verne, who told us that we were going to eventually get our
fuel from water—namely, by separating the water into hydrogen and oxygen—we would
probably have a hydrogen economy by now.

Pope: Kurt, as president of the utility-funded Electric Power Research Institute you sit in
the heart of the energy business. From your perspective, how does the world look?

Kurt Yeager: I’d characterize the challenge we face using what the Japanese call the
"trilemma" of population, poverty, and pollution. How do we balance those realities on a
global basis, in a century when the conjunction of those forces is becoming extremely
challenging?

We have to learn how to operate in a world of 10 billion people. But, to a large extent,
we’re still operating with a hunter-gatherer mentality, particularly in the energy field.

I, too, see the goal in this century being an electricity-hydrogen-energy economy that will
make us independent of fossil fuels. The Middle East is the only place in the world where
we can get large quantities of oil. As the rest of the world develops we’ll all be sucking on
that same straw. If we like Gulf wars and all the other issues that are dependent on our
addiction to that oil source, then we don’t need to do anything. But if that’s our choice, I
can only see things getting dramatically worse, and creating more and more strains in our
relations with other countries. In the United States, we have the means to kick the oil
habit, and it’s very important for us to set this as a leadership goal.

Lester Brown: Unlike some of the rest of you, I’m not an energy expert. But it’s clear to
me that we have the means to move away from oil and toward renewable energy
resources. Over the last several years, there have been two areas of parallel
technological progress: wind turbine design and fuel cells. Together, these two
technologies are going to provide the basis for restructuring the global energy economy.
Fifteen years ago it cost 35 cents to generate a kilowatt-hour of electricity from wind;
today, it’s down to 4 cents, and the cost is still falling. Wind is now becoming highly
competitive.

In 2001, wind-electric generation worldwide increased by 31 percent; in the United States
it jumped by a staggering 66 percent. Three of the wind-rich states—North Dakota,
Kansas, and Texas—have enough harnessable wind energy to satisfy all the nation’s
electricity needs. Europe can satisfy its electricity needs from offshore turbines. China can
double its electricity from wind alone.

Once you are able to get cheap electricity from wind, you have the option of electrolyzing
water and producing hydrogen. Hydrogen is the fuel of choice for the fuel-cell engines
that every major automobile manufacturer is working on. We’re looking at a situation now
in the United States where farmers and ranchers in wind-rich states could one day be
supplying not only much of the country’s electricity but also much of the fuel to run the
country’s automobiles.

Indeed, the economics of energy begin to overwhelm the economics of agriculture in
terms of potential farm income. We already have in Washington very strong bipartisan
support for wind, particularly from members of Congress from Great Plains states. These
politicians realize that income generated by wind tends to stay in the community. The
turbine for which the farmer gets $2,000 in royalties is probably going to generate
$100,000 worth of electricity in a year. We’re looking at a situation now where, within five
years, there will be thousands of ranchers in this country who will be earning far more
from electricity sales than from cattle sales.

Pope: John Browne, you run one of the world’s largest energy companies. You actually
deal with the practical realities of demand. What kind of energy policy do you support?

Lord John Browne: Any sustainable policy first has to make economic sense. Otherwise,
it is very difficult to support. Second, it must speak to the quality of life, as Kurt Yeager
indicated, with more people on the planet. Third, we need to think about time scales and
transitions. How do we get things done in a way that doesn’t shock the world financial
system, but that achieves an end that is appropriate for the world? Whatever the policy,
it must attend to today’s problems and recognize that the easiest, most graphic gain will
actually come from efficiencies in the current energy system. Fourth, it has to recognize
that there is a changing mix of energies. Over the history of energy consumption, use has
changed and that won’t stop. And fifth, the policy should be determined and enabled by a
world commitment to innovation and technology.

We have to start with realism. During the period of this two-hour forum 31,000 people will
be born. Population growth is pushing up the demand for energy worldwide by 1 to 2
percent a year. And at present, oil and gas appear to be the only supply sources for this
incremental increase in demand. In order to avoid undue dependence on oil and gas—and
the attendant economic and social risks—we need to encourage a diversity of supply. This
would also, and importantly, reduce the carbon impact of the energy consumed.

William McDonough: I fundamentally agree with Lord Browne that the market has to rule
this transition, and the engine of change will be commerce. If we want to change quickly,
we need to do really effective commerce. But I see efficiency as having no intrinsic value
per se. The question is not "Are we doing it right?" in terms of efficiency, but "Are we
doing the right thing?"

Yeager: I, too, believe in market economies, but I question whether technological growth
can keep us ahead of the consumption wolf—particularly if you’re trying to export a
consumption-based economy to the whole world. It seems to me that at some point we
need to say enough is enough.

McDonough: From both an economic and environmental point of view, we need to be able
to say, "Growth is good." The question is: What do we want to grow? Do we want to
grow sickness or health? Do we want to grow intelligence or stupidity? Do we want to
grow prosperity or poverty? We need to change the terms of the debate, and choose
what we want to grow.

When you follow nature’s laws, growth is good. We can have a fecund economy, and we
can have growth that’s not something to be terrified of but celebrated—the way you
celebrate a child growing up, or a tree that grows.

In that context, our firm has done an experiment, and it looks like it’s going to work.
We’ve designed a building at Oberlin College that makes more energy than it needs to
operate. It purifies its own water. So it’s a building like a tree. We’ve made the building
fecund. BP’s solar energy company helped us by donating the solar collectors.

We’re also very involved with wind projects now—I see them as a landscape design
issue, as a way of dispersing and providing a new cash crop across the whole farming
sector. But instead of simply building clustered wind farms, which are basically central
power plants, we are looking at a dispersed system that provides more benefit to more
people. The distribution systems would be different, and they would look beautiful in the
landscape.

Additionally, we’re working on small-scale generation—optimization scenarios in which
there are stationary fuel cells and microturbines every three blocks. It’s what we call
"anticipatory design science." We’re challenging designers to look at the vector on the
costs of renewables as it comes down, and look at the vector on the costs of conventional
production, and then watch these two vectors coming together. Anticipate them so that
you’re ready. Essentially, we prepare our buildings now for photovoltaics so that when
they’re cost-effective we’re ready to put them on. One of the big problems with design is
that people don’t anticipate these things so they never happen.

Browne: Bill, it sounds very interesting. Localized power generation, using fuel cells,
turbines, et cetera, is something that is probably economic today. Obviously, the details
vary country by country, region by region. And yet with the possible exception of Japan,
where they are easing regulations on new buildings, it’s been very difficult to get
architects and developers to take localized power generation seriously. Why is that?

McDonough: This is the bane of my existence. My industry is one of the most conservative
and slowest to change. The banks have a lot to do with that. Fannie Mae and other
banking institutions are all essentially set up for one-size-fits-all financing. They don’t
know how to factor in something that doesn’t meet their criteria. There needs to be
flexibility.

Our firm had the same problem with Ford Motor Company, when we got the contract to
rebuild its Rouge River assembly plant. We spent a year working on that
million-and-a-half-square-foot plant, but the engineers wouldn’t let us do anything. They
just wouldn’t experiment. All they could do was say no. After a year, I almost gave up. We
eventually found a way to pump air directly to the breathing zone of the workers so that
we wouldn’t have to heat and cool the entire building. And we’re going to be doing it at
about 20 percent of what the normal building would cost to heat and cool. But it took
getting everybody past their conventional practice—and it required the vision and
authority of Bill Ford.

Pope: Jane, among the union members who might be at the front-end of change, do you
sense excitement or anxiety about the future?

Jane Perkins: It’s a mixed bag. There are so many inconsistencies in the labor movement.
Take the International Brotherhood of Electrical Workers, for example. Some of its
members build and run power plants. On the other hand, there are members who build
houses and hook up their electricity. The home-construction side of IBEW wants it to be
the solar union. The utility side of IBEW wants everything to stay exactly the way it is.
And so there is a struggle, inside a major union, about what the future ought to look like.

It is also true that in poll after poll, when asked about solar energy, wind power,
efficiency, conservation, hydrogen fuel cells, and so on, union members are even more in
favor of these things than the general public. Clearly, there is a disconnect between the
policies that unions champion and the rank and file.

Pope: The Sierra Club conducted a poll in Michigan last winter. We asked people about
improving fuel-efficiency standards for cars: 85 percent of the general public thinks we
should make the auto companies produce cars that get 40 miles per gallon. But 88
percent of the members of the United Auto Workers think so. This is not the official
position of the United Auto Workers, which worked hand in hand with the Bush
administration to defeat an effort by Senators John Kerry [D-Mass.] and John McCain
[R-Ariz.] to raise fuel-efficiency standards, but it is for 88 percent of its members. Once
again we see how institutions are not nearly as nimble as their stakeholders.

Freeman: California’s a big institution, but we showed the conservation of electricity to be
the most powerful force on Earth in terms of balancing supply and demand. Last summer,
the predictions were that we were going to have 100 or more days of blackouts. But we
appealed to the people of California and gave them incentives. We said that if you save
20 percent compared to last year we’d knock 20 percent off your bill. In other words, we
paid people not to use electricity, and it was cheaper than paying the price-gougers for
the electricity.

We had no blackouts. We tamed that tiger and—knock on wood—the market is under
reasonable control now. We showed that conservation was more than a "personal
virtue," as the vice president had suggested.

At a time of crisis, when the American people are intensely interested in the subject, good
things happen. The problem is that the attention span of the American people is pretty
short, and we haven’t figured out how to connect this issue with the two big issues on
Earth: How do we solve this awesome problem of global warming, and how do we win
the war on terrorism—because we’re not going to win as long as we’re getting our oil
from the nations that harbor terrorists.

A renewable hydrogen economy is obviously the answer; it’s easier and cheaper than
fusion power. Over the years, we have spent more than $50 billion working on fusion
power and it’s still a long, long way off.

Perkins: I’m glad you mentioned nuclear power, because it hasn’t come up.

Freeman: That’s because the market killed it—at least it’s killed fission, which is what
powers our nuclear plants right now.

Perkins: But I’m not sure fission nuclear power is dead.

Freeman: It’s dead except in the hearts and minds of the religious believers in nuclear
power. After September 11, we are surely not so dumb as to build more Trojan horses in
our country. The danger of a penetration into a nuclear reactor—which is difficult but not
impossible—is so horrendous that we’ve got to be out of our minds to build more nuclear
power plants. And I say this as a person who’s had as much experience with nuclear
power as anyone in this country. I shut down eight reactors when I was the head of the
Tennessee Valley Authority, buried one at Rancho Seco [in Northern California], and
nursed one back to health in New York. But in this age of terror, we just can’t have them.

While one can, I suspect, develop highly efficient nuclear technologies, the expense of
insuring them against being blown up is likely to be a long-term economic issue. I’ll
concede that a technological optimist can make a case for breakthroughs that will guard
against internal failure. I just can’t see how you can build a reactor that’s safe from
external attack.

Pope: Kurt, since EPRI is an advocate of nuclear energy as part of the energy mix, I want
to give you a chance to respond.

Yeager: The engineering limitations of the nuclear system we have today are fairly
evident. But I believe it would be a tragedy for future generations if we outlaw nuclear
power because the current generation of engineering doesn’t meet our standards. As a
technologist, I strongly believe that we need to maintain that as an option, and we ought
to be moving that technology forward, not subsidizing it, but allowing it to move forward
on its merits.

Freeman: Well, then, are you in favor of repealing the law that gives nuclear-power
providers free insurance?

Yeager: Ah, now we start to diverge. Given where we are today, no, I would not repeal
the Price-Anderson Act.

Pope: David, you have dealt with resistance to change in the utility sector—particularly at
the Sacramento Municipal Utility District. What was it like?

Freeman: Well, the utilities, if anything, are worse than architects. To put it bluntly, it
takes the Lord Brownes of the world. It takes someone at the top saying, "By golly, we
are going to go down a different path."

One of the big problems with increasing the use of fuel-cell generators, microturbines, and
solar panels—what we in the industry call "distributed generation"—is that you still need
to interconnect with the utilities. Yet the utilities view you as competition. So it’s hard to
get interconnection agreements. They come up with ridiculous standby charges that make
it uneconomic. We need to think of utilities like the automobile industry: It takes a law to
make something happen. We didn’t get seat belts, pollution control, or better mileage
without laws.

Yeager: Your comment about the flawed interconnection structure for distributed
generation is absolutely true, but it’s too easy to attack the industry for being a
stick-in-the-mud. The issue is incentives. We need to fundamentally change the incentives
so that innovation is profitable for the stockholders. Until we do that, there will be no real
pressure to innovate.

I would add that the regulatory system is even more deeply flawed. There is an unholy
alliance between incumbent utilities and regulators to make opening the energy market
as difficult as possible. We do not have deregulation today. We have re-regulation.

We should have an energy architecture that allows us the broadest possible
opportunities. We believe we could put an energy infrastructure in place over the next
decade that could increase the productivity and efficiency of the U.S. energy system by at
least 30 percent, with a similar level of pollution reduction. This would be achieved not
through stringing more wires around the country but by applying the technology we have
available to us today to the existing infrastructure. This would enable distributed
generation to become an integral part of the infrastructure.

Pope: What specifically are the technologies we can use right now?

Yeager: For starters, today we control our power system with mechanical switches that
are little different from those used in the 19th century. Compared with the speed of light,
those mechanical switches have an equivalent delay factor of about ten days. If I were
running a railroad and I said it took me ten days to open or close a switch, for example, I
wouldn’t move many trains.

The fact is that we now have an electric system whose unreliability is creating costs that
are equal to its revenues. But we have the ability to control the power system with silicon
semiconductor-based switches and related devices. Silicon will allow us not only to carry a
lot more electricity on the wires we have, it will also allow us to better control where it
goes, and will fundamentally improve the reliability of that power at its end user.

There is another aspect of the silicon revolution that is also really exciting. It goes back to
Edison’s initial vision of the electricity system as a local DC [direct current] rather than AC
[alternating current] system. If you look at most of the distributed renewable energy
forms, for example, they naturally produce DC electricity. Converting it to AC is both
expensive and inefficient. And if you look at the other end, the user end, digital devices
such as computers and just about everything else use DC power. Most of the cost of
powering those devices is driven by the cost of transforming AC to DC.

We have the means today to transform the electricity distribution system so that when
you’re building a new building, industrial park, or residential development, you can power
it with a DC microgrid that is integrated into the AC power network. By doing this, you
also eliminate the substantial heat and energy losses that result from converting DC to
AC power.

The efficiency and cost advantages of creating an electricity grid like this are dramatic.
This also doesn’t force the transition cost onto those who don’t need it but rather allows
those who need it to begin to build the capability into their power network. Then, solar
power or other renewable energy forms can be incorporated without compromising the
reliability of the network.

McDonough: In the 1980s, Joe Morabito of Bell Labs wrote a white paper on the notion
that utilities and telecommunications were actually the same industry because they both
move electrons—though some are full of power, some are full of information. As a
designer, what occurs to me is that there’s absolutely no reason we couldn’t be sending
the information with the power. There’s no reason we couldn’t tag a kilowatt-hour with
information about where it came from, what its price is, and so on. We could even send
information about the upcoming weather so buildings could pre-cool at night when they
expect a blistering hot tomorrow. In design, information is power and there’s no reason
that power could not be information.

Yeager: Exactly.

McDonough: Now, if we can tag a kilowatt-hour with its source, customers could decide
what kind of power they want. They could say, "I just want wind power," and then pay
the price.

We could then get together with our energy producers and our appliance manufacturers
and our electronics manufacturers. We could sit down with General Electric and say, You
want to bring good things to life? How about a refrigerator that goes back to the old
icebox concept and stores coolness in a block of frozen material during certain hours?
How about a refrigerator with a brain that simply goes shopping and does some diurnal
arbitrage and looks for the cheapest kilowatt-hour, or the greenest kilowatt-hour,
whatever it is you want it to look for? For example, it could go shopping at three o’clock in
the morning, and freeze a block of salts. When you have an appliance with an inherent
storage capacity—such as a refrigerator that can store cold—it wouldn’t have to run
during peak hours.

Pope: It sounds like the concept of smart electricity, where you trade in the dumb meter
for a system that allows the user and the supplier to interact around services.

McDonough: Yes, to communicate. Information is power and power is information.

Freeman: The problem with thinking along those lines is that the technology is so exciting
and interesting that we often lose contact with the people of the world and what the
serious problems are.

Perkins: That’s because the ideas aren’t matching up with the politics. We need to go
from the ideas and all the solutions that are out there and get down to the "normal"
people who respond. The people of California responded to a very simple idea, which was
"We’ll pay you to not use as much electricity." Conservation is a proven way to deal with
an interim problem. Efficiency is a way to deal with an interim problem. But the challenge
is getting the ideas to the "normal person," and having the grassroots political voices
heard in the process.

The labor movement is an important part of getting ideas spread out among people who
can make a difference. But if this is going to happen, it’s very, very critical that worker
issues are addressed. It is not enough to say that all these ideas are going to create new
job opportunities—especially when you’re talking to a mine worker who’s not going to
mine coal, or an autoworker who’s worried that his particular company isn’t going to
transition fast enough to keep him employed.

We also need a plan that says, unambiguously, that there’s a role for government—that
regulation is not a bad thing if we’re talking about regulating against greed, rip-offs, et
cetera. Part of the reason folks in California responded as they did to the energy situation
was that there was rampant greed involved and everybody could see that.

Freeman: We simply have not been successful in persuading the American people that
dealing with energy issues and climate change is a net benefit to all Americans. The
opposition—the coal people, especially, but also a lot of others with economic clout—have
bombarded Congress and the press with questionable numbers about how much it’s
going to cost financially and in terms of safety and jobs. We need to be far more
aggressive in persuading Americans that the cleaner energy path is in their best
interests.

Brown: It was interesting that during the months coming up to the Kyoto Protocol talks
on climate change in 1997, the Clinton administration began to realize that the American
people were not on board on this issue. So it started holding press conferences. The
administration brought together leading scientists, including some Nobel Prize winners, to
talk about climate change.

If we are indeed moving into a period that requires rapid change, then governments may
have to assume responsibility for educating the public. We don’t have time to educate a
generation of teachers, who will educate a generation of kids, who, a generation later,
will become the decision-makers.

This is a new role that governments must play—they need to systematically hold press
conferences, report the latest findings, explain how atmospheric CO2 levels have gone
up, and how we have contributed to it. Let scientists explain what is likely to happen over
the next 10, 50, or 100 years if we continue with business as usual.

I hearken back to Franklin Roosevelt, with his fireside chats, where he sensed the need
to help the American people understand what was happening, and to communicate with
them. Even if he couldn’t provide all the answers, at least he was talking with them, and it
provided a sense of security and common purpose that had not existed before.

Without realizing it, we may have moved into a period where governments now have to
use the bully pulpit to educate—to shape the thinking that will help us bring about a new
energy system.

Yeager: My view is somewhat different. I think one of the problems is that in our society,
everything has to be sold as a crisis. If it’s not a crisis, you’ve got to make it a crisis. It’s
taken a long time to get where we are today with regard to climate change. If we were to
go to zero carbon emissions tomorrow, the levels would still continue to rise.

This is not an argument for doing nothing. Quite the contrary. What we need is a strategic
plan that says the solution is not the tactical step tomorrow but a sustained campaign to
improve the efficiency with which we use energy. Carbon, basically, is a measure of
inefficiency in combustion. Our strategic solution would incorporate innovation and
technology to improve the efficiency of our energy system.

Browne: Yes, you have to think of the time scales. You need to try to figure out as best
as you can what the nature of the world will be—not just for the next quarterly earnings,
but for 30 to 50 years’ time.

These things are impossible to get perfect. But at least you have to build a set of choices
that speak to the way in which the world is likely to go, and the way in which the
consumers of the world, widely taken, are likely to want to be over a longer period.

Fifty years ago, BP put out its first review of world energy. On the cover of this report was
a picture of coal because at the time coal was actually the most important source of
energy. In a short time we’ve gone through all sorts of transitions. Coal has diminished in
importance; we’ve gone to oil, and now gas. Natural gas produces carbon but much less
per unit of workable energy produced than oil, and it’s now outstripping oil as the fuel of
choice in many parts of the world.

But beyond gas, what is there? Well, I think there’s going to be a mix of energies. I
expect oil and gas to be contributing for a long time. But there will be more contributors.
There will be hydrogen, if we can figure out the many challenges involved. There will be
wind. There will be solar. No one silver bullet is clear at the moment.

Freeman: In a discussion I had with Enron’s Ken Lay last August, we talked about the
natural-gas industry as being the transition industry from the age of fossil fuels to the
"solar-hydrogen economy."

In fact, we even talked about the gas infrastructure that Enron had that could be used to
ship, store, and distribute hydrogen produced by wind farms in Texas. We talked about
tapping the enormous wind reserves there to replace the natural-gas reserves that are
being depleted. Do you see the natural-gas industry as being the obvious transition from
fossil fuels to the solar-hydrogen economy?

Browne: You never know. We only find out later how the energy mix work We only find
out later how the energy mix works. Natural gas has some very important attributes. It
has more hydrogen than carbon in a ratio, compared with oil or coal. But we need to
figure out how to reform it in a way that makes sense—that doesn’t simply produce
hydrogen and leave the carbon dioxide in someone else’s backyard. That research is
happening.

Freeman: With regard to natural gas—quite frankly, I’m still with Jimmy Carter, who said
that if you take a long enough view, it probably will go down in history that we were
barbaric to burn up all this natural gas just to make electricity. I’m not sanguine about
what the supply and demand of natural gas, over the next 20 years, is going to be. I
think we’re in for some real price spikes.

I also want to comment on the role of wind power. I, too, think it’s a huge opportunity,
but we probably aren’t focusing it as well as we could. The point about beginning in
earnest with a move toward the hydrogen economy has to be taken seriously. Right now,
I’m negotiating power contracts. This afternoon, I’m working on a wind project.
Unfortunately, in California, the wind doesn’t blow when the peak loads occur. It’s real
hot on summer afternoons because the wind doesn’t blow. We need to begin to match
wind power with electrolysis plants, in order to use wind power around the clock to
produce hydrogen. All this enthusiasm for wind power is a wonderful opportunity to get
the hydrogen economy started. But I don’t see that happening.

As a matter of fact, I want to criticize my good friends Bill Clinton and Al Gore for their
program to build a new generation of fuel-efficient vehicles without having an
alternative-fuel program to match it. We have not begun, in America, any systematic plan
for developing the hydrogen-fuel infrastructure. Now the Bush administration has
endorsed the hydrogen fuel cell but there’s no program for the development of the fuel or
for building hydrogen-fuel filling stations. I mean, let’s have one seat at the table for
common sense, which suggests that the clean technology needs a clean fuel to go with it.
We are not demanding enough of government.

Brown: The key to rapidly moving from the heavy fossil-fuel dependence of today to
renewable energy resources is leveling the economic playing field. Either we eliminate the
subsidies for fossil fuels and nuclear or we do something like extend the wind-production
tax credit. We need to get the market to tell the ecological truth.

Yeager: I am an energy agnostic. I think we should be striving to raise the bar on all the
technologies we’ve been discussing, and then let them seek their rightful place in the
market. For example, say that by 2050 we want our power system to have the following
specifications in terms of cost, reliability, cleanliness, safety, and so forth. Then look at all
the technologies in the world. If you can meet those specifications, you’ve got a role to
play. If you don’t meet those specs, then you don’t. We don’t do that with coal, we don’t
do it with renewables. We tend to be proponents or opponents of a particular solution,
we tend to pre-define.

We ought to say: This is what we, as society, want the energy system to be able to
produce, and you have this amount of time to get there. Why don’t we have the intestinal
fortitude and commitment to make that the basis for our decisions?

Pope: But we have a system for this . . .

Freeman: . . . it’s called democracy.

Yeager: Well, democracy tends to be exploited rather easily.

Freeman: It’s the worst form of government, except for all the others.