The Parable of the Boiling Frog

If you are a frog, you jump from a pot of boiling water. But if you are placed in a pot of tepid water that is gradually heated to boiling, you die. This is the parable used to explain why humans react quickly to sudden events but fail to react to slowly changing conditions until it is too late.

Why should we care about boiling frogs? With energy transitions, which history shows take decades to occur, the pace of change may be so slow we hardly notice the shifts underway, much like the slowly cooking frog, until it is too late to jump.

The dean of energy transition research, Vaclav Smil, a retired Canadian environmental professor, has shown how past transitions from one primary fuel to another have required 50 years or more to occur. Initially, humans burned wood since it was readily available, but then they found that coal had more energy in a similar volume of material, making it a more energy-efficient fuel. From coal, humans progressed to oil and now to natural gas, both of which contain more energy per unit and, importantly, fewer carbon emissions.

The most powerful clean fuel – nuclear – has unfortunately emerged as one of the world’s most expensive energy sources due to regulatory constraints on building and operating nuclear-power plants, despite their positive operating performance.

THE PUSH FOR CLEAN ENERGY

Since the late 1990s, environmentalists have warned that the planet is on a path to destruction due to burning fossil fuels that release carbon emissions, which trap heat in the atmosphere and raise temperatures to levels projected to unleash extreme weather events. The worst scenarios predict melting all the ice in our polar regions and flooding the world.

The cries of the environmentalists have grown shriller as atmospheric CO2 concentrations have climbed. They energized the U.N. to create a panel of scientists to study the effects of global warming, but due to broader ecological concerns it was charged with studying all aspects of climate change. Hundreds of scientists assess the latest climate studies and the forecasts of what will happen if we continue to burn fossil fuels. Their analyses and projections drive policy recommendations that the U.N. and governments around the world consider implementing to contain the damage from rising temperatures.

The most significant outcome of this effort is the Paris Climate Agreement, which was agreed to by 196 countries in December 2015. President Barack Obama signed the agreement, committing the U.S. to reducing its greenhouse gas emissions by 26 to 28 percent below 2005 levels by 2025 and to providing up to $3 billion in aid for poorer countries by 2020.

It was the most visible sign of the move to eliminate fossil fuels from our slate of energy choices, and legislative and regulatory actions by governments worldwide are helping accelerate the transition. In the 1600s, wood and charcoal provided all our energy needs. Today, the world has multiple energy sources to choose from depending on environmental, energy-efficiency and power output needs.

Besides the heavy hand of government, fuel choices are also influenced by costs. In the U.S., abundant supplies of clean natural gas emerging from the shale gas revolution of the early 2000s dropped prices below those of coal, encouraging electric utilities to switch to this clean fuel. But even natural gas produces too much pollution for environmentalists, who are pushing for all our electricity to come from wind and solar.

REVOLUTION IN TRANSPORTATION

The clean fuel push is just one of the major energy transitions underway. Another is happening in the transportation sector. Together, they have stirred intense debate over the speed of transition, or how fast water boils. How many new vehicles will be powered by fuels other than gasoline or diesel? Is the only energy choice a battery? Can wind and solar power meet our energy needs? How long before that might happen?

These uncertainties overhang energy company executives as well as the leaders of major oil-exporting countries, all of whom are trying to plan their futures. This shift is an earthquake – destined to redefine the energy landscape.

Battery-powered cars are significantly different from internal combustion-powered cars. They have fewer moving parts but weigh substantially more due to the heft of the batteries. Electric cars are limited in distance by their battery charge, and they’re expensive.

Owners confront different driving experiences such as the length of time it takes to recharge the batteries, which far exceeds the time needed to gas up a car, but they do offer faster acceleration.

Another difference is how the environment – inside and outside the vehicle – impacts its range. The use of heating and air conditioning will cut the distance traveled. Jackrabbit starts and high speeds also limit range. Ambient temperatures reduce battery performance, so people living in the coldest and hottest regions of the country often find their car’s performance limited. And going on long-distance trips necessitates much greater planning.

The push for zero-emission vehicles will also impact the electricity industry and the transition underway there. While natural gas produces 25 to 45 percent fewer emissions than either coal or oil, its low price is the primary problem for environmentalists. They championed natural gas as the “bridge fuel to a cleaner environment” in the early 2000s when prices were extremely high. High gas prices provided cover for the even higher costs of wind and solar power that environmentalists favored. Now, with natural gas prices barely a third of their former highs, the competition with wind and solar is intense.

INTERMITTENCY & OTHER CHALLENGES

A bigger challenge for clean energy fuels is their intermittency. Where does the electricity come from when the wind doesn’t blow or clouds block the sun? Knowledge that the sun sets at night can be countered with backup or alternate power supplies, but intermittency is a greater problem that batteries can help address but not completely solve. Batteries can be charged when clean power sources are producing at their peak, but integrating their power into the electricity grid can be challenging.

To insure the stability of the grid from intermittency issues, utilities are forced to keep traditional fossil fuel plants running to supply power when clean fuel sources are unavailable. This happens daily at dusk. The fuel supply conundrum will be intensified by the growth of the battery-powered vehicle fleet.

Experiments in the U.K. and Austin, Texas show that electric car owners usually recharge their batteries upon arrival home from work, which happens to coincide with increased power needs from air-conditioning, lighting and cooking dinner. These surging power needs can cause blackouts, necessitating neighborhood electricity substation upgrades.

Are these challenges insurmountable? No. But the solutions require time and money, considerations often ignored in optimists’ expectations. Watching the energy shifts underway and trying to gauge how government policy decisions, through incentives and/or mandates, will alter the pace of change are energy and utility executives as well as the leaders of major energy-exporting countries.

Besides energy, another industry watching and trying to define its future is the automobile business. Redesigning vehicle fleets to run on electric power will be a challenge. At the same time, the auto industry business model faces disruption from the growing use of ridesharing services as well as the eventual arrival of autonomous vehicles. These trends will sap new car demand and future energy needs.

Saudi Arabia signaled its concern when Crown Prince Mohammed bin Salman, the next in line to assume the throne occupied by his father, unveiled Vision 2030. The plan envisions transitioning the nation’s economy away from total oil-dependency while also modernizing its society. At the same time the Crown Prince announced plans to sell a stake in the country’s state oil company.

These moves reflect the demographic and social challenges facing Saudi Arabia as well as fears about the sustainability of the country’s economy should oil demand peak in the foreseeable future. The same trends are being confronted by other OPEC members as well. Whether OPEC can withstand the stress of this uncertain future is debatable. Saudi Arabia’s economic evolution reflects another energy transition that will reshape the world’s economy.

TIME TO JUMP?

Dr. Smil predicts that the next energy transition is still decades in the making. Others say it will happen much sooner. The difference in outlooks has our frog in a quandary. Should he jump now or risk being lulled into a slowly warming demise?

For those in industries impacted by these various energy transitions, planning for an uncertain future has magnified the significance of strategic decisions being contemplated today. Should companies invest in more long-term deepwater exploration or increase short-cycle shale investments? Will all cars be electric or will we need gasoline stations for decades to come? Will we need to plan when we can use our electric-powered devices rather than merely switching them on whenever we want? Will expensive power push more people into energy poverty?

The answers to these and related questions will shape our energy future. Being prepared to jump may be an important option.  MarEx