OnImagee reason why the energy business is so fascinating is that smart, thoughtful and well-meaning people can look at the same facts and come to dramatically different conclusions.

Two examples crossed my desk this week: the cover story in the new issue of The Atlantic and a report out today from DB Climate Change Advisors.


In The Atlantic, James Fallows--one of my favorite journalists, who's worth reading on a wide range of topics--argues that clean coal offers the best hope of dealing with the threat of climate change:

To environmentalists, “clean coal” is an insulting oxymoron. But for now, the only way to meet the world’s energy needs, and to arrest climate change before it produces irreversible cataclysm, is to use coal—dirty, sooty, toxic coal—in more-sustainable ways. The good news is that new technologies are making this possible.

He reports in detail on China's efforts to "decarbonize" coal by investing in carbon capture and sequestration (CCS). Duke Energy is engaged in a joint venture with a big Chinese energy firm, Huaneng, to research clean coal.

Essentially, Fallows argues that we need an "all-of-the-above" approach to reduce greenhouse gas emissions--one that encompasses renewable energy, nuclear power, efficiency and clean coal. Fallows quotes Duke's chief technology officer, David Mohler, as follows:

"Emotionally, we would all like to think that wind, solar, and conservation will solve the problem for us,” David Mohler of Duke Energy told me. “Nothing will change, our comfort and convenience will be the same, and we can avoid that nasty coal. Unfortunately, the math doesn’t work that way.”

Fallows goes on to say:

Precisely because coal already plays such a major role in world power supplies, basic math means that it will inescapably do so for a very long time.

But can we forecast the energy future using "basic math"? Maybe. As Fallows notes, technological process in the energy arena has been painfully slow not just in recent years, but for decades. Energy is not like infotech or telecom; it's slow to change and hugely capital intensive, as Silicon Valley venture capitalists are learning, to their dismay. "Energy production is essentially what it was in the time of James Watt," Fallows writes, with the exception of nuclear power plants.

But nuclear power as a climate solution gets passed over lightly by Fallows. Might a major ramp-up of nukes be preferable to investing in clean coal, a technology that's still unproven at scale? I don't know but I suspect that many utility executives in the U.S., if given a choice between the two, would choose nuclear. China is certainly placing a big bet on nukes, as well as on coal.

And, while Fallows allows that "a [technology] breakthrough is what it would take to move beyond reliance on coal," I think he's too quick to dismiss the possibility of such a breakthrough--in solar thermal power, or geothermal, or energy storage, or some form of alternative alternative energy. He also does not give much consideration to the considerable technical, political and legal problems associated with storing vast amounts of CO2--forever--in the ground.

But read this article, and make up your own mind. It's provocative and, as always with Fallows, it's beautifully argued. He was once a White House speech writer so he knows how to make a case.

Then read Natural Gas and Renewables: A Secure Low Carbon Future Energy Plan for the United States, available here for download. This incredibly detailed look at the U.S. energy market for the next 15 years reaches a surprising conclusion: that the use of natural gas, which is now in abundant supply, combined with solar and wind, can cut coal's share of the U.S. electricity market from a little under 50% to less than 25% by 2030.

What's more, it says, very little in the way of new policy--other than current EPA regulation of health pollutants (not GHG emissions) from coal plants--would be need to drive the change.

Here's the introduction to the study, from Kevin Parker, the global head of asset management for Deutsche Bank, and Mark Fulton, who is DB's global head of climate change investment research:

With a Republican controlled House of Representatives, we can now expect a significant change in approach to US energy policy for at least the next two years. There is likely to be, for instance, more resistance to renewable energy incentives in a constrained budget environment. Attention is likely to focus on expanding the use of natural gas which President Obama has identified as an area of bipartisan agreement. The ideas outlined in this report could, we believe, deliver a realistic, low carbon energy pathway over the next 20 years, with a mix of natural gas, renewables, and nuclear replacing old and inefficient coal plants. This energy plan provides a credible, low risk and affordable way for America to achieve a 44% reduction in CO2 emissions from the power sector by 2030 from 2005 emissions levels.
Our key finding is that a significant switch by the US electricity sector from coal to natural gas would be the most secure, least cost approach to lower emissions. (Burning natural gas creates approximately half the amount of CO2 compared with coal). When combined with further renewables and nuclear deployment, this plan would involve a reduction in coal's share of energy generation from 47% currently to 22% by 2030. This would make the Obama Administration's targets of a 17% over all economy-wide reduction in greenhouse gas emissions by 2020 and an 83% reduction by 2050, realistically achievable. And these reductions would be realized by using domestically abundant and secure sources of energy based on known technology that can easily be deployed at reasonable cost. Importantly, our energy plan ensures a reliable electricity system that is not only much cleaner but also more environmentally sustainable.
We emphasize, however, that efficient coal units, renewable and nuclear energy must remain as important components of the over all energy mix portfolio. We envisage wind and solar energy, for example, increasing to 14% of the US energy mix by 2030 compared to just 2% today.
A large-scale switch from coal to natural gas in the US has become possible largely thanks to the major increase in supply from unconventional shale gas. Increasing supply is causing a long term fall in the price of natural gas, making it a far more economic fuel than in the past. We believe shale gas is environmentally sustainable with best practices. And because it is domestically abundant it also provides a high level of energy security.

On a conference call this morning, Mark Fulton said he expects natural gas, wind and solar all to grow at the expense of coal in the next two decades. More than 60 gigawatts of coal plants, he said, are more than 60 years old (!),  terribly inefficient and likely to be retired by 2020. They can be replaced, to a great extent, simply by greater utilization of the existing stock of gas plants.

As for CCS, Fulton and Nils Mellquist, a senior research analyst and lead author of the report, both expressed skepticism on the call. "CCS is not proven at scale," Fulton said, calling it a post-2030 issue. Mellquist called CCS "very experimental at this point."

The truth is banal but worth remembering: that no one can confidently predict the energy future. This would argue for an energy policy that avoids betting on any particular technology, but provides a broad incentive--i.e., a carbon tax or simple cap-and-dividend scheme--to drive investment in a low-carbon future.