Energy's Future- a panel with the Oil Industry, Venture Capital, Academia and Government
photo courtest of API (left to right Murr, Pfannenstiel, Siegele, Vassallo and Victor)
The panel, entitled Energy's Future is in Technology: Innovation in Energy Supply, Energy Efficiency and Alternative/Renewable Energy, was sponsored by Newsweek and the American Petroleum Industry (API). Yes, the American Petroleum Industry; it also sponsored Treehugger's transport for the event.
Many of the comments on the panel addressed the issue that gas prices are driving innovation and people's choices. I was struck by this trend when renting a car at SFO. Despite having reserved an "economy" sized car, I arrived at the counter after midnight and was told that the only cars left were SUVs. In the past SUVs, like convertibles, were luxury rentals, but now they were sitting in the lot like dogs in the pound. The problem was it was 1am and BART had stopped running so SUV it was. I considered the irony of my first SUV driving experience being on assignment for TH! In any case, in gas guzzling form, I headed down the 101 to the panel, which was held at Stanford's brand-spanking-new Yang and Yamazaki Environment and Energy Building. This green building has only been open since March 2008, and is airy with natural light, as well as energy efficient.
David Jefferson, Newsweek's Senior Editor, kicked off the late afternoon panel and Stanford's Dr. James Sweeney, Director of Precourt Institute for Energy Efficiency gave closing remarks. The panelists included: David Victor, Stanford University Professor, and Director of the Program on Energy and Sustainable Development, Paul Siegele, Chevron's V.P. of Strategic Planning, Jackalyne Pfannenstiel, Chair of California Energy Commission (CEC), Trae Vassallo, a partner in the venture capitalist firm Kleiner Perkins Caufield & Byers (KPCB), and Andy Murr, Newsweek's L.A. bureau chief. Jefferson kicked off the panel by remarking, "The only time I really think of going green is when I pull up to the Chevron station and $4 a gallon gas makes money fly out of my wallet!" He posed the question: "What in the future will allow me to run my AC and drive my car as fast and as far as I want, without feeling guilty or going broke?" The simple answer the panelists gave was "nothing," which introduced the subject of the pessimism some of the panelists feel about the short term. They cautioned against Silicon Valley's at times "irrational exuberance" about investing in new arenas such as clean tech/renewable energy and niche solutions.
Renewable fuels require massive investments, new infrastructure, and often long lead times. Chevron's Siegele stated that fossil fuels will continue to provide ~ 85% of the world's energy base, at least through 2030. (Kind of a buzzkill, probably not something we may think Chevron has enough incentive to change).
Panelists also stressed that energy efficiency, as well as renewable sources, will be crucial to solving the problem. Stanford Professor Sweeney stressed that the solutions will not all be technology driven. We need to price carbon correctly and change people's energy use. However, if the consumer does not have the right information about the relationship between the price and what they can do, it won't matter what the price is. "The cleanest energy," Sweeney stated, "is the energy you don't need in the first place". To illustrate, he gave an example of each alternative discussed. For instance, some people are intrigued by nuclear, but we can double the whole nuclear energy industry in the U.S. and just get 8 quads, which is less than you get from a 10% increase in energy efficiency. Similar examples hold true for wind and solar energy as well, so we need to use energy more wisely.
Chevron's Paul Siegele began the panel by stating that the world is not running out of oil, but access to it is limited, and the demand is straining the system. Chevron has experienced firsthand the end of the era of cheap oil exploration. They are drilling to deeper depths, to find more challenged resources. Siegele said that the U.S. must support current sources of energy while other sources are being further developed.
Chevron is using new technology for imaging and extending the life of oil fields (new technology on conventional sources). But, Siegele said, much of the oil and natural gas in the U.S. exists in areas, like the outer continental shelf, that is off-limits for drilling. It is unreasonable, he said, for the U.S. to expect foreign oil companies to expand resource development for U.S. energy needs in their countries, while we ban access to our own domestic supplies. (TH readers' comments?)
Chevron does see the need of diversifying energy supplies. The oil company will be spending $2.7 billion over the next three years on alternative energy, and it is the largest geothermal producer in the world. Siegele also trumpeted Chevron's efforts to be more efficient by installing variable pumps and changing light bulbs.
Venture capitalist Trae Vassallo (KPCB) talked up the excitement her firm is feeling about investing in renewables. Most of their renewable projects exist outside of Silicon Valley, and this is truly a global market. Investments in energy now represent 40% of KPCB's portfolio, and they invest in more than 30 renewable energy companies. Vassallo's firm has invested in energy generation, large scales solar, thin film solar, next generation solar, and geothermal, among others.
In the energy industry, venture capitalists are good at using entrepreneurs to be the seeds of innovation, but despite the excitement, Vassallo admitted there is still a dearth of smart investors willing to come in at the late stages of growth capital, and that only a handful of venture capital firms are really focused on the green sector. Still, the amount of venture capital invested in green technology has doubled each year for the past three years. To illustrate this, Vassallo mentioned that investments in solar energy have risen by 125% over the past three years, while the cost of using solar energy has gone down by 60% during the same time period. But, she added, that should not suggest that a lot of money will not be lost too.
Jackalyne Pfannenstiel of California's Energy Commission (CEC) said that California is focusing on energy efficiency and renewables. California sees that the cheapest way to get reductions is to increase the efficiency in all sectors (buildings, appliances, industrial processes, power plants), and California has incredibly effective programs in this area. Since the 1970's, per capita energy use has increased at the national level, while California has held per capita energy use flat. This has been a result largely of energy efficiency laws for building and energy appliance standards (i.e. in LA, you can't buy a new fridge or build a new building that doesn't meet certain standards). Even more noteworthy, is that the state's per capita energy use stayed constant while per capita GDP during that period--both in California and in the United States--increased. So the economy and energy efficiency can go hand in hand, and there doesn't need to be a tradeoff.
With renewables, Pfannenstiel stressed the need to incent to drive the cost down. She also urged education, though she admitted that consumer behavior is hard to change. The California Public Utility Commission is installing smart meters in homes to empower people by giving them more information. Smart meters provide information that can influence home owner economics. With a smart meter, people see how they use energy, when they use it the most, and which appliances use the most. This information, according to Pfannenstiel, in an easy to understand format, and if combined with price signals will lead to behavior changes. But Pfannenstiel is concerned about the historical precedent of the 1970's, when fuel prices were high and many people just waited it out metaphorically "holding their breath." Pfannenstiel warned that if that happens again, we will have lost a great opportunity for innovation.
California won't make its goal of reducing 20% renewables by 2010 (to 1990 levels), but will make it by 2012, and this will lay out the infrastructure and foundation for the state to meet the goal of a 33% reduction by 2020.
I thought Stanford Professor Sweeney summed up the event nicely in his closing remarks. Everyone on the panel, he concluded, had agreed there is an energy problem and that the problem is multidimensional. And, since economics, energy security, national security, public health, and environmental issues all come into play; the problem requires a holistic approach.
The Q & A portion focused on what political strategies the panelists see as needed. Interesting responses were provoked by the question of what the next U.S. President should do in the first 100 days in office.
Stanford University's Professor Victor stated the need for a regulatory strategy in tandem with Silicon Valley's money and innovation. He also said that public policy cannot be trendy, and cannot be based on the "next big thing." We need, Victor admonished the audience, to be sober, as, even if "a dream were to happen and energy legislation passed next week" it would still take years to implement such legislation and for us to feel its effects. He also stressed that he is pessimistic in the short term because coal is so cheap, especially in China.
KPCB's Vallaso urged that venture capital spending on renewables shouldn't be more than what the government is spending. The government needs to do its' part. To illustrate this, she told us that last year the National Institutes of Health spent $28 billion on research and development, while the Department of Energy spent less than $2 billion on research into renewables, though renewables make up a $4 trillion market. This discrepancy is a big problem. She said the next President needs to set a price on carbon to help the markets.
California CEC's Pfannenstiel said that the problem is global, but that cities, and states, like California, can take the lead and be role models for the nation. California as usual took the lead with Assembly Bill 32, the California Global Warming Solutions Act of 2006. California's policies can be applicable to other Western states, and along with other progressive regions' policies, can be used to set the national model. Her concern was that the next President needs to tell the American people the truth and not lie to them. The next President needs to tell the public that energy prices are high and are likely to stay high, but that isn't necessarily a bad thing because it is driving innovation.
Chevron's Siegele commented that we need a rational energy plan that is national and even global. Globally, China and India need to be on board. California can't solve the problem alone and he furthered that "well intended state by state initiatives, have increased the cost of gas". The plan, he unsurprisingly noted, needs to be fair and not hurt one industry (I wonder which one?) over others. People, he said, mistakenly think that oil companies unilaterally set the price of gas. The next President, according to Siegele, should probably NOT do a lot in the first 100 days, but should "think" about these issues.
Newsweek's Andy Murr opined that, with all due respect to Chevron, the past seven years have been too petro-centric, and the next President needs to open up more to renewables. He further added that "the Department of Energy could use a green fire lit under it". In a more anecdotal mode, Murr also entertained us with a story about his Prius being stolen (who knew there was a big market in used Prius bumpers). When he bought one the second time around, Murr told us, he had to "put down a $1000 deposit", and "stand in line" for six weeks. This was proof to him that the Prius market had changed from when he had first bought a Prius just a year ago.
After the Q and A, a few other bloggers, Maria Surma Tim Hurst and Brian Westernhaus, and I met with Chevron's Siegele. He told us he had a preference for an equitable cap and trade program over a carbon tax and that Chevron already has experience with CDM and cap and trade programs in Europe. Siegele wants something that has flexibility and which will affect all the pertinent industries. And, he stressed again that, yes, China and India need to be brought on board—something TH is eager for as well.
I am glad Chevron and API are at the table, but then again there is a disagreement about whether the private industry, and oil companies specifically, are really the best ones to be pushing this. Although it was heartening to hear everyone agree that there is a problem, we feel that they need to do much more. We need more renewables. We need more government leadership. And we need people as consumers to buy less oil. Barring any future rental car agency mishaps, I for one have had my last SUV driving experience—even if it is kind of exciting for a very short person to feel so tall on the road. I felt better upon returning home to NYC and to the greener modes of transportation of my everyday life—the subway and my feet.
Thanks to Jane Van Ryan of API for the open dialogue and including bloggers.
KPCB and green tech