Carbon-Zero in the Time of COVID
Ski Milburn
CEO - VAIREX
First, a little background. I’m the CEO of VAIREX, a small company in Boulder that supplies a critical component to the global fuel cell industry to customers in over two dozen countries in North America, Europe and Asia. In other words, most of the developed world. We are deeply embedded in their plans, and very familiar with the national plans of the countries they operate in or sell to.
VAIREX was a huge beneficiary of COVID. Our revenues doubled in 2019-2020 and on track to do it again in 2021, and beyond. We know well that not everyone was as fortunate. Quoting science fiction writer William Gibson,
The future is already here, it is just not evenly distributed.
You can say the same about prosperity, politics and a lot of things, including COVID. China is already post-COVID, life pretty much back to whatever the new normal is going to be. You can go to the disco tonight in Wuhan, where it all started.
Infection rates and COVID deaths in the US in congregate care facilities, nursing homes and assisted living, are close to normal after getting the vaccinations to almost all the staff and residents. That’s a pretty strong indicator of what we can expect in the general population, should take about six more months. So think Fall 2021 unless the COVID variants blow up our plans.
One of the “silver lining” predictions of COVID was that with everyone locked down and out, and Zooming from home, global energy consumption would go down and we would get a peek at what a future world of lower carbon emissions would look like. Didn’t work out that way at all. The computerized building management systems kept turning on the lights and A/C in the empty office buildings, and the gasoline and jet fuel we saved was more than offset by everybody keeping the lights and computers on at home all day.
Computer nerds in Iran bought up every used computer in the country and mined so many Bitcoins in their spare time that the country’s energy consumption is the highest it’s ever been, and they’re even suffering blackouts from it. At least working from home turned out to be profitable for them.
Meanwhile, China’s world-leading Quantum computer, Jiuzhang, is reportedly ten billion times faster than the previous leader, developed by Google. It recently solved a math problem predicted to take all of the computers in the world a billion years to crack in 3 minutes.
That’s enough raw computing power to crack every Bitcoin in the world in a few seconds, should they put it to that task. To make actually using quantum computers easier, a couple of weeks ago the Chinese announced Origin Pilot, an operating system for quantum computer systems and an associated cloud platform for renting time on them. Leading to this joke in the near future:
User: “I just cracked a million dollars’ worth of bitcoins in 3 seconds and deposited the funds in my bank account!”
Origin Pilot: “Here’s this month’s computer services bill, $3 million.”
Pretty much the entire developed world is committed to reaching Net Zero Carbon on a very aggressive schedule, the US the primary outlier. But we did just rejoin the Paris Accord, and our new Secretary of Energy, Former Michigan Gov. Jennifer Granholm, is very strong advocate of zero emissions vehicles.
Detroit has seen the handwriting on the wall for a long time. Both Ford and GM now committed to reaching 100% electric vehicles in the next decade and a half. Their marketing people know what I’ve personally experienced: there’s two kinds of people in the world, people who pooh-pooh electric cars, and people who have driven one. It’s like going from a rotary dial phone on the wall to a smartphone in your pocket, only better.
Most national plans cluster around 100% zero carbon vehicles by 2035-2040, and Net Zero across the entire economy 2050 to 2060. This also requires that we have to build enough zero-carbon renewable generation to power all those cars and trucks by 2040, and three times as much by 2060. History teaches that rolling over the underlying technology of national scale infrastructure takes about three decades. Think canals to railroads, railroads to interstate highways, passenger ships to jet airliners, wired phones to cellphones.
This is really fast, even though climate science suggests we should go faster if we can. The reason it takes so long is not just how much stuff you have to design and build, but also the amortization schedule of all the stuff you built recently and have to write off early. For example, Xcel Energy just announced they’re closing Comanche 3, their biggest newest coal plant, originally scheduled to operate until 2070. Of course, they’re expecting somebody besides their shareholders to pick up the tab for the unrecovered portion of its construction cost.
Whatever the schedule, it takes a lot more effort (including capital and labor) to build something new at scale than just maintenance and scheduled replacement of an existing infrastructure. At this pace, ten to a hundred times as much. Lacking better information, 30X is a good estimate. If you’re looking for big targets to focus a national infrastructure and jobs program on, this is as big as they get.
The cost may seem staggering, even if you only assume that government incentives make up the difference between the market price of the commodity and the current higher price of immature (but rapidly developing) technologies required, and the accelerated portion of the amortization of existing equipment.
The good news is, the Carbon Zero technologies of the future are already demonstrating a cost trajectory that will be less expensive to the end user when fully developed than the fossil-based energy systems we depend upon today. For example, the cost of electricity from our newest wind farms is less than just the cost of the coal that goes into our coal-fired power plants. And, the cost per mile of the electricity to charge the batteries in a Tesla is a fraction of the cost per mile of the gasoline that fuels a conventional auto. Also, engines keep getting more expensive, while batteries are getting cheaper every year.
We’re also starting to see hydrogen fuel cell powered cars and trucks for the applications where long range and fast refueling is more important than just the cost of fuel, the cost per mile of hydrogen is now predicted to end up costing about halfway between electricity and gasoline or diesel fuel.
The Chinese national plan has done the best job so far of calculating the cost to government, assuming that the private sector picks up all of the cost that will be recovered in the market (and yes, “Communist” China is making this very assumption).
Scaled to the US economy, it’s roughly $6 Trillion of government spending, front-end loaded mostly over the next decade. That’s roughly one year of current government spending, or about 10% of the government budget over the time span. It’s also roughly what we’ve spent so far on our post-9/11 spending on wars in the Middle East.
To get an idea of the scale of the physical plant, Net Zero will require us to build renewable energy generation with roughly three times the capacity of the current electric grid, and replace all of the oil wells, refineries, and gas stations with battery and hydrogen production facilities while we simultaneously take all of the (primarily) fossil fuel based systems out of service and scrap them.
This huge, but not impossible, say a couple of hundred trillion dollars over the next 30 years, is 15% to 20% of GNP. That’s actually not much more than we spend now on energy and the stuff that consumes it in all forms, and in the end, everything we do will be cleaner and cheaper.
The number of jobs for this is so large that the entire world may encounter a labor shortage, and we will all be competing for immigrants from everywhere, in a reversal of rising anti-immigration feelings all over the world.
But here’s the rub. Making all that new stuff generates a lot more jobs than just importing, installing and maintaining it (even assuming the highest levels of industrial automation in history). The nature of mass production is that scale drives cost, and so countries that achieve scale first will have a fundamental, enduring cost advantage over countries that follow. In this, China has a built-in advantage because of their huge population.
If the US wants to maximize job creation from this transformation, we have to move a lot faster than we have been.