Optimism and the Future of Energy

Arnold Kling suggested that I explore the fuel cell future in more detail. I intend to delve further into the economics of such technological change, but for now, here’s a compilation of several articles on fuel cell research and how close they are to economic viability. Most current analysts predict about 20 years. This October 1997 Wired story sets the stage by highlighting how hydrogen fuel cells work, what some of their limitations currently are (including cost per horsepower or kilowatt hour, and the infrastructure issue of hydrogen filling stations for fuel cell vehicles), and what kind of research is under way. The author also talks about one of my favorite public relations ploys in hydrogen fuel cells — drinking the exhaust from the pipe. It’s water, good old H2O. I heard a story last fall about BMW’s prototype fuel cell sports car, and how they were doing a marketing gig in Los Angeles, at which Jay Leno took the car for a spin and then rehydrated from the tailpipe!

This July 2001 Wired story specifically addresses the prospect of fuel cells in transforming not just how we generate power, but how we organize the infrastructure of the entire energy network. The story focuses on the distributed resource research done at EPRI an electricity research consortium.

In recent years, a series of technological breakthroughs – and, more important, a critical mass of scientific ideas – has begun to coalesce around a new model for an energy system that would better serve the needs of the near future, while enabling power producers as well as consumers to lessen their impact on the environment in the long term. Both privately and publicly, many at the institute express concern that the policy thrust of the current administration will lock out the most promising set of innovations to emerge in the energy community since the creation of the existing grid in the first half of the 20th century. The end result, they fear, may be to freeze us into high-emissions power pathways for decades to come. …

The smarter energy network of the future, EPRI believes, will incorporate a diversified pool of resources located closer to the consumer, pumping out low- or zero-emissions power in backyards, driveways, downscaled local power stations, and even in automobiles, while giving electricity users the option to become energy vendors. The front end of this new system will be managed by third-party “virtual utilities,” which will bundle electricity, gas, Internet access, broadband entertainment, and other customized energy services. (This vision is reminiscent of Edison’s original ambition for the industry, which was not to sell lightbulbs, but to create a network of technologies and services that provided illumination.)

This vision, which I share, promises to deliver a more robust and flexible energy network. It is also consistent with something I’ve been thinking more about and talking about with several industry folks — a biological/ecosystem metaphor is a better model for a forward-looking, robust, flexible, efficient energy network than the traditionally mechanistic, engineering-focused model of an energy system. Engineering and mechanics are clearly important parts of creating and understanding a dynamic energy network, but we are likely to make some serious policy mistakes if we think only about them.

This abstract of a January/February 2002 Technology review article (access to full article available to subscribers) addresses the role of fuel cells in the electricity grid. It also makes a point that I have emphasized in my own work, although it doesn’t make it explicitly: fuel cells and distributed generation will make electricity transmission contestable. That means that transmission will face potential competition, which will serve as a discipline on the transmission owner’s ability to raise transmission prices, because if they raise prices consumers will be more likely to say, “thanks but no thanks, I’m going to buy and install a combined heat and power system for my production facility, so please take me off the grid.” That’s a much better way to discipline the pricing decisions of transmission owners than the traditional rate-of-return regulation that we’ve had for most of the past century, and in the past decade with stock market returns outpacing the regulated rate of return on transmission investment, has contributed to the dearth of grid network that we are confronting right now.

Now, the cool futuristic stuff: this March 2002 Wired story talks about thermoelelectrics — using heat to generate electricity. This abstract of a November 2001 Technology Review article talks about methanol-powered fuel cells for cellphones — 20 hours of portable talk time from methanol!!! How cool is that? This abstract of a January/February 2002 Technology Review article discusses how new plastics may contribute to making solar power more economically competitive with fossil fuel generation.

The big-picture punch line: our expectations of the future, including technological changes and how soon they are likely to become economically viable alternatives, are very important determinants of our current investment and consumption decisions. And current policy decisions can have large impacts, either positive, negative or mixed, on the future paths of these technological changes. But the problem is that these policy decisions are not made in a vacuum, nor are they made in an environment of certainty about the future. For all of these reasons, a lighter-handed, more flexible approach to energy regulation and energy policy is more likely to result in a robust, reliable, flexible, efficient energy network that behaves as well as a highly evolved natural system.