Students around the world are exhorting their elders to do something about climate change. Have they got it right? Should we be listening more? Or have they identified the right problem, but the wrong solution?
Scientists in Australia Have a Developed Another Possible Way to Fight Climate Change
If we're going to get CO2 and other greenhouse gas emissions under control, we can't count on just one solution. Instead, we're likely going to need a variety of strategies, something I refer to as a "portfolio approach". The "portfolio of strategies" may soon get just a little bit bigger, based upon some exciting news out of RMIT University in Melbourne, Victoria, Australia.
Researchers at RMIT recently reported in the journal Nature Communications
that they had successfully turned CO2 into a coal-like solid at room temperature. The news has been reported in scientific journals, various press releases, even in YouTube videos.
It's potentially a big scientific breakthrough, but possibly not. You may recall in the 1980's there were breathtaking reports that two scientists in Utah, Stanley Pons and Martin Fleischmann, had been able generate a nuclear fusion reaction in a test tube at "cold" temperatures. Sadly, the report was premature, and scientists were never able to replicate the experiment.
The RMIT researchers appear to have been much more careful and thorough, however, and appear to have some promising results. Let's take a look at what they did, then address the significance of the experiment.
Dr. Torben Daeneke and his associates conducted the research at RMIT in Melbourne. Their basic idea is to expose air containing CO2 to a bath of liquid metal that also contains the element Cerium. The liquid metal bath served as a catalyst to convert gaseous CO2 into something else. That something else was flakes of carbon. In effect, the catalyst turned gaseous carbon dioxide into solid carbon flakes. Mind you, the flakes were only about 3 nanometers thick. To put that in perspective, a human hair has a width of about 80,000 to 100,000 nanometers, and there are 25.4 million nanometers in one inch. Not exactly a lump of coal, but the researchers confidently reported that it was solid carbon.
More importantly, they also confirmed in the experiment that the carbon flakes did not come from the catalytic agent, or any other external source for that matter. They confidently reported the carbon flakes were definitely a byproduct of the chemical reaction. Obviously, if there was even a small chance that the carbon flakes came from some other source, the experiment wouldn't have been especially significant.
The idea of trying to turn gaseous CO2 into a solid isn't new. A similar type of experiment has been performed previously. However, what is particularly noteworthy about the findings of the RMIT researchers is that their experiment was conducted at room temperature. Previously, other researchers have converted CO2 into a solid, but the experiment was conducted at 600 degrees Celsius (1,112 degrees Fahrenheit). That would be fine if you were either on the planets Mercury or Venus. The average temperature on Venus is 462 degrees Celsius (864 degrees Fahrenheit), and in the case of Mercury, the temperature ranges from -173 degrees Celsius at night to 801 degrees Celsius during the day (-279 degrees to 1,474 degrees Fahrenheit) . Thus, even if you could construct a plant to convert gaseous CO2 to solid carbon on either Mercury or Venus, it could only be operated part of the day.
Of course, remember that the problem we face with excess CO2 is right here on planet Earth. In theory, we could scale up a process to extract CO2 and turn it into coal flakes at 600 degrees Celsius (1,112 degrees Fahrenheit), but the energy required to do that would likely mean no net energy savings. In the process of generating the heat to make the process work, we'd generate as much waste CO2 as we would extract out of the air! By being able to catalyze CO2 at room temperature, it likely won't require lots of energy.
The Melbourne scientists also found that they could create coal flakes in the process without the side effect of "coking", the build up of carbon in the catalyst. That important because if coking occurred, it would cause the conversion to break down due to build up. If "coking" occurred, it would likely be necessary to clean up the coke on a regular basis, thus reducing the production of carbon flakes.
If the RMIT process can be commercialized, it could be a far superior solution. Most of the other approaches to CO2 capture do not involve creating a solid. Instead, these other approaches capture CO2 and either inject the CO2 into liquids (e.g., creating carbonated beverages) or inject it into the Earth. In each case, the CO2 remains in gaseous form. The great fear is that so long as CO2 remains a gas, it could potentially escape back into the atmosphere. Thus, we might capture a high percentage of the excess CO2 in the air by some process and bury it underground, then accidentally have it escape back into the atmosphere. By converting the CO2 gas into a solid, that problem is avoided.
At the same time, in their paper the RMIT researchers hinted at the possibility of using the carbon flakes produced in the process might be useful in making high performance capacitor electrodes. Such electrodes can be used to store energy in a battery. Thus, the RMIT process might offer the dual benefit of removing excess CO2 from the air, as well as helping to create a useful battery storage technology.
Assuming the basic process outlined by the Melbourne researchers can be commercialized, are there adequate raw material resources available? Some high technology involves rare earth metals which are not abundant in Nature. Fortunately, Cerium, the key catalytic element in the experiment, is widely available.
Cerium itself is element 58 in the Periodic Table. It was discovered in 1803 and is named after the asteroid Ceres. It's a soft, ductile silvery metal that is often used because it tarnishes easily. Nevertheless, it's found a range of products. Traditionally, it's been used in the flints of cigarette lighters, the reason being that it will create a spark when you strike it with a match. The only other metal with that property is iron. As there is ever less need for cigarette lighters, those who mine Cerium have fortunately found new uses for the metal, including in flat screen televisions, low energy light bulbs, and floodlights. Cerium is more abundant than tin or lead, but not quite as abundant as zinc.
The other key component of the catalyst is the liquid solution. In this case the Melbourne scientists mixed the Cerium into a gallium based alloy. Such alloys appear ideal for such an application because they are liquid at room temperature, are non-toxic, and are capable of dissolving most other metallic elements, Cerium included.
Thus, the RMIT scientists have found a way to remove CO2 from the air by using a catalyst at room temperature to produce metallic flakes. The process doesn't violate the laws of physics, doesn't require lots of energy, doesn't require the use of lots of highly obsure materials, and can be done at room temperature.
It looks like a promising technology. Of course, Stanley Pons and Martin Fleischmann thought they had a promising cold fusion technology. Unfortunately, no one could replicate their "cold fusion" experiment. The challenge now is to get other researchers to replicate the findings of the RMIT researchers. Let's hope it can be done.
Even if the results can be replicated, that doesn't mean it's ready for prime time. In fact, it might take many years to commercialize the technology. Unfortunately, immediate solutions are needed to remove the 40 or so gigatons of CO2 we're collectively dumping into the atmosphere. If the RMIT continues to be promising, scientists need to pursue two tracks. The first track is to develop a device that can capture air and expose it to the catalytic agent, effectively replicating what's been done in the laboratory. They'll then need to do on-going engineering work to make the device practical at capturing CO2. Not only that, the device will need to be easily manufacturable so that thousands can be deployed around the world.
The second track will be to continue research into alternative catalytic agents to remove CO2.
Given the need to come up in short order with practical ways to remove CO2 from the atmosphere, it could well make sense to run some type of an X Prize competition. The idea is to award a large cash prize to the first team that can produce a commercially viable version of what the Melbourne researchers have developed. The original X Prize was $ 10 million, so why not offer a $ 10 million prize to the first team that builds a device that can take ordinary air, convert a certain percentage of the CO2 from that air into carbon flakes, then packages the carbon flakes for deposit in the ground? To spur competition even more, maybe make the prize bigger, say $25 million? Alternatively, create multiple prizes for various aspects of the problem.
Even if the device can be built, it won't be a panacea. Instead, it can and should be just part of a total portfolio of solutions. Among other parts of the portfolio are photovoltaic cells to capture sunlight, battery storage, and wind turbines.
Two years ago, what the Melbourne researchers have done would have been considered a crazy dream. A commercially viable version of what these researchers have developed remains a dream today, but concerted effort could make it a reality, possibly in short order. The question for policymakers continues to be, how can such research be spurred? It won't be taxes and it won't be government mandates or regulations, the classic recipe offered for solving the CO2 crisis. Instead, it will likely be scientific innovation that is nudged along by proper incentives. What the Melbourne researchers have developed is certainly an exciting first step. We need to help them, and others, take the next step.
If we can just re-frame the problem, there's a solution to the border wall standoff that might please everyone.
Imagine US President Donald Trump sitting at his Oval Office desk, flanked by House Speaker Nancy Pelosi and Andres Lopez Obrador, the President of Mexico, overlooking President Trump signing into law a bill to create a true border wall, and also providing that Mexico will pay its fair share of the wall.
Crazy, nonsensical fiction? Actually, a real possibility. Below I present a scenario wherein this Oval Office scene REALLY could occur. It would be the truth, just not quite the truth everyone is walking around with presently in their heads. But it could be a desirable reality, if only we can re-frame a difficult, complex issue. Let me show you how.
US President Donald Trump loves things to be big and bold. Even better is if the big and bold idea has his name on it. The idea of building a giant border wall between the USA and Mexico fits the bill perfectly, and the President has been doggedly pursuing it ever since he started running for President.
His even bigger idea has been to get the government of Mexico to pay for it.
Many of the rest of us have been equally dogged in our opposition.
So how do we get from the present reality to that hypothetical Oval Office scene?
If it can be done, it won't be a classic "win/win" negotiation, something Trump doesn't seem to like. Instead, it will actually be a "win/win/win".
So what would that "win/win/win" strategy be? Build a fiber optic "wall".
I'm not claiming this is a new idea, as others have proposed something similar. What I'm proposing is a "re-framing" of this in such a way that others might want to sign on. More about that below, but first, let's look more closely at the idea.
Mexico and the USA share a land border that stretches 1,954 miles from the Pacific Ocean to the Gulf of Mexico. Prior to 1990 the border had little or no fencing. Beginning that year, fencing was put up in the San Diego sector of the border. The Secure Border Fence Act of 2006 called for the construction of about 700 miles of fencing. As of 2016, that fence construction was basically complete. What Trump and many conservatives want to do is reinforce the existing physical walls, which are principally located in urban areas such as San Diego, CA and El Paso, TX and "fill in" the remaining 1,200 miles with a "big beautiful wall": 1,954 miles of big, beautiful wall to be exact.
The idea of that "big beautiful wall", especially in desert and mountain areas, is opposed by a broad range of people, including me, for a lot of different reasons: excessive cost; likely ineffectiveness at preventing illegal crossings and drug smuggling; causing disastrous impacts to wildlife and the environment; and because it would be an ugly symbol not in keeping with the character of our country. Contrary to what many supporters of the physical wall claim, the majority of America opposes the "big, beautiful wall" not because we want an open border, and don't care about border security, it's just we don't think the "big, beautiful wall" is the way to get the job done.
Instead of an old fashioned wall, how about a high tech wall, in the form of a fiber optic cable? Companies such as Optasense and Sensuron have developed technology that turns an ordinary fiber optic cable into a motion detection device. It's been deployed in a range of industries. As an example, fiber optics is now used for leak detection on pipelines. Fiber optic cables can detect the motion of objects crossing over the cable. Not only that, additional technology can discriminate between vehicles, animals, and people crossing. The thinking goes as follows: why not put a fiber optic cable along the border, then rely upon existing systems to act when there is evidence that vehicles or people have crossed? The Border Patrol already has lots of resources in place to act when there is evidence of such movement? Because humans who cross the fiber optic "wall" will be immediately identified, then likely picked up by the Border Patrol using tried and tested methods, the "wall" will accomplish the desired objective of controlling illegal entry, just like the "big beautiful wall". It will have some very attractive additional benefits that the "big beautiful wall" won't: much lower cost; far fewer environmental impacts; and no ugly symbol of exclusion. The most compelling argument for this is that the cost savings of the fiber optic cable could be applied to hiring more Border Patrol personnel and systems.
The fiber optic cable idea is supported by a range of different people. Perhaps the most interesting supporter is Congressman Will Hurd of Texas. Hurd has "a dog in the fight", as his Congressional district is right on the border – about 700 miles of it. Not only that, Hurd is a Republican.
So there's support for the idea, but why do I think Mexico might want to pay for at least part of it? The answer is because Mexico could gain economic benefits from the fiber optic cable.
Fiber optic cables have revolutionized communications. They help power the Internet, but also mobile telephony. The great thing about a fiber optic "wall" is that while the "wall" cable is being used to track illegal crossings of the border, it could also be used to help provide high speed Internet and telephony along the border. The rural portions on both sides of the border lack good Internet and telephony.
Mexico would probably be interested in helping to pay for the fiber optic wall for these reasons. The other reason is because such a cable could also benefit maquiladora plants along the border. Maquiladoras are plants that manufacture or assemble a broad range of products, providing a great deal of employment. Based upon the free trade agreement in place between the USA, Mexico and Canada, these maquiladora plants generate considerable economic output. The addition of the fiber optic wall could help those plants. The other thing the fiber optic "wall" cable could do would be to encourage higher tech facilities to locate along the border. That could benefit both countries.
Given the comparatively lower cost of building a fiber optic "wall", along with the potential economic benefits, Mexico could very well be persuaded to sign on. As such, President Trump could legitimately claim he'd accomplished his goal. Given the potential benefits, Mexico would likely be happy to help out.
Every party to this giant controversy could win. The advantage to Trump is that he could claim not one, not two, but three campaign promises filled: 1) a "wall" from sea to sea; 2) Mexico paying at least part of it, and doing the latter willingly; and 3) economic development for a part of rural America. When you think about it, most of the US/Mexico border is classic "flyover" territory. It needs economic development, and this could help.
Nancy Pelosi and the Democrats could claim a victory because they wouldn't be seeing a giant ugly wall. Not only that, part of the savings from building the fiber optic "wall" might go to other programs of interest to Democrats.
Mexico could claim a victory because it wouldn't have to see the "big, beautiful wall", and the fiber optic "wall" could provide very beneficial economic development, as mentioned earlier.
So if this is such a good idea, why doesn't everyone jump aboard?
Up to now, it's because the entire issue has been framed as a "false choice": either you support the idea of a "big beautiful wall" or you want open borders. This "false choice" has led us to a standoff. The best way to overcome the standoff is to re-frame the issue.
Instead of thinking in term of the "false choice", think of it as "border security and economic development". The question then becomes, is there a way simultaneously to improve border security and economic development, as well as avoid some of the perceived drawbacks of the "big beautiful wall"?
The answer, in the form of a fiber optic "wall" is "YES!"
This idea is big and bold. The only thing missing that might really make this appealing to Donald Trump is that there won't be anything you can see with his name on it. There is one more piece to this idea that will solve that problem.
There's an ongoing need to improve the technology of border security, the fiber optic "wall" being just a starting point. A good strategy for spurring technology development is to create something like the X Prize. Why not create an X Prize equivalent for border security technology?
As I've written before, the original X Prize was created to spur the development of a reusable rocket that could be launched into space at least twice within a two week period. When the $ 10 million prize was first dreamed up, the idea of such a reusable rocket was a pure pipe dream. Funny thing is, researchers often get highly motivated when there's a chance to earn $ 10 million. The question is, how many researchers out there who might be highly motivated to develop technology to make the fiber optic "wall" even more effective? Why not try? I think I know a certain national leader who would love to have his name on such a prize. As part of building the fiber optic "wall", why not create the Donald J. Trump Prize for innovation in border sensing technology?
Sounds crazy, but why not? The goal is to spur the development of high tech solutions to major problems. X Prize competitions can be highly effective. Not only that, such prizes can be given out repeatedly.
Building a fiber optic "wall" rather than a physical wall along the 1,954 miles of the US/Mexico border could provide a big, bold, and beautiful solution both to border security and economic development; and it really could lead to the Oval Office scene I envisioned above, with Donald Trump, Nancy Pelosi, and Mexican President Andres Lopez Obrador all smiling.
It could provide a way to resolve the present impasse.
It could be done, if only we're willing to rethink another "false choice" we've created, and re-frame the problem in a new and creative way.
Rather than try to bludgeon utilities into retiring coal plants, why not consider a more subtle strategy?
How do you get businesses and people to make the right choices? It's an age old question. Is it better to hold the proverbial "gun to the head" via taxes and regulation, or might other, subtler ways achieve the same result? In the debate over what to do about climate change, many argue that the only solution is regulations and taxes. Unfortunately, there's a lot of opposition to regulations and taxes, even from those who very much believe climate change is a very real problem. Instead of that "gun to the head", why not try to nudge people to make the right decision? It's a lot more gentle approach, but it could be way more effective.
Recently the Tennessee Valley Authority (TVA), a Federal government entity that operates electric utilities serving ten million people in seven southeastern states of the USA, decided to close two aging coal-fired power plants, one near Paradise, Kentucky and the other near Knoxville, Tennessee.
The politicians howled, all the way to President Donald Trump, because of the loss of coal jobs.
Not to be deterred, Bill Johnson, CEO of the TVA said, "Let me tell you what this decision is not about – it's not about coal. This decision is about economics." Economics indeed! The TVA estimates it will save about $ 1.3 billion by closing the plants due to not needing to make costly plant upgrades. When you bandy about numbers like that, even climate skeptics will pay attention.
The economics of closing these plants may well be a "flash of the blindingly obvious." In lots of other cases, however, it may not be quite so clear. Yet it seems pretty clear that if we're going to get a significant reduction in greenhouse gas emissions, more such plants need to be closed.
So if you want to get these plants closed, what alternative is there to regulation and taxes? It could be a gentle "nudge". Nudge theory was originally developed by Professor Richard Thaler. While he has worked on the concept for many years, it became well known in 2009 when Thaler, along with law professor Cass Sunstein, published a book on it.
The "nudge" concept is to use positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.
How important is the concept? Well, Thaler received the Nobel Prize in Economics in 2017 for this work.
Let me show you some examples of nudge theory, then show how it might be applied in the case of greenhouse gas emissions.
Consider the problem of getting people to donate organs. Lots of people say, sure, I'd be willing to donate an organ. Most states provide a simple way to make this offer through a driver's license. The problem is, lots of people are honestly happy to do this, but fail to follow through.
The country of Spain, applying Thaler's nudge theory, came up with a solution. Spain started automatically enrolling people in an organ donation scheme. Realizing that some people would object, they also provided a way to "opt out". The result is that Spain now has the highest percentage of organ donors in the world – all thanks to a little nudge.
A few years ago the United Kingdom found that many people were not doing a good job saving for retirement. The government had a pretty good pension scheme available, and surveys showed a high percentage of people knew it was important to save. Unfortunately, like would be organ donors, they just didn't get around to signing up.
The solution was a little nudge in the form of automatic enrollment in the pension scheme with an "opt out" clause for those who didn't want it. The result was an increase in participation from 2.7 million in 2012 to 7.7 million in 2016, and it came without the usual hollering and screaming there would have been if government had mandated the solution.
A further example of a nudge is how children are enrolled in free school meals programs. The system was changed from opt in to opt out, resulting in a significant increase in participation.
Simply put, a nudge can be an effective way to achieve a desired result without "holding a gun to someone's head".
Of course, it's one thing to try to nudge individuals to consider organ donations or enrollment in a pension scheme, but quite something different to try to nudge a company to stop emitting greenhouse gases into the atmosphere.
Or is it? A simple examination of utility economics may tell a different story.
The two aged TVA coal fired plants mentioned earlier are definitely not atypical. According to the US Energy Information Agency, 51% of power generating capacity in the USA was built before 1980, and 88% was built between 1950 and 1990. The capacity weighted age of those coal plants is 39 years. Put another way, most of those coal plants are ready for retirement .
Artificial leaves hold great promise. Just how much is not yet known.
We humans always seem to be searching for the Holy Grail, the "magic bullet" that will solve all of our problems, or at least some of them. The funny thing is, in the case of one of our biggest problems today – climate change – we may be onto the path of finding it.
Don't get out the champagne yet, because there's still a huge amount of work to be done, and even if the work is done, there still is no guarantee.
So just what is this veritable Holy Grail for greenhouse gas induced climate change? An artificial leaf, which is being developed by a variety of scientific researchers.
In a sense, we already have the Holy Grail for climate change. It's called photosynthesis. Trees can take carbon dioxide and water and convert them into simple sugars and oxygen. You might even recall the equation for this from high school biology or chemistry:
6CO2 + 6H2O à C6H12O6 + 6O2
A tree can take six molecules of carbon dioxide and combine these with six molecules of water to create one molecule of simple sugar plus six molecules of oxygen. We humans, as well as other animals, expel carbon dioxide with each breath we take. Trees recycle that into oxygen and sugar.
For most of history that process has been in balance. Unfortunately, with the Industrial Revolution the burning of fossil fuels such as oil and gas has thrown more carbon dioxide into the atmosphere than trees can recycle. If we could plant enough trees and shrubs, in theory we could solve the greenhouse gas problem without changing our current fuel use habits. Simon Lewis, a climate expert at the University of Leeds in the UK, observed in 2009 that "tropical forest trees are absorbing about 18% of the carbon dioxide added to the atmosphere each year from burning fossil fuels."
Right now, worldwide we're generating about 40 billion tons of excess carbon dioxide. How many trees would it take to absorb all of that? The average mature tree can absorb about 48 pounds of CO2 each year, and a forest that covers one acre can absorb at 2.5 tons/year. For those of you more familiar with the metric system, one acre is 4046.8 square meters. Thus, if we could plant about 16 billion additional acres of trees, we could absorb the excess 40 billion tons of CO2 each year. This, of course, assumes that we won't keep increasing the amount of carbon dioxide into the air each year. That may be a bad assumption, at least at present, but let's be optimistic for a moment. How much land area would it take to soak up the current 40 billion tons?
That's an awful lot of surface area, but actually something that is feasible. Just very unlikely!
If we're not prepared or able to do that, there may a second Holy Grail in the works: the artificial tree mentioned before. Now I'm not talking about the kind of tree many of us decorate for Christmas. This would be a veritable "metallic cousin" to your artificial Christmas tree, just that it would have the amazing capacity to convert CO2 into something else.
Scientists have been working on this technology for a number of years. One place where such research has been underway is Harvard University. In fact, Scientific American and the World Economic Forum named Harvard's artificial leaf as the breakthrough technology of 2017.
Singh, assistant professor of chemistry, and his colleague Aditya Prajapati, a graduate student in his lab, proposed solving this problem by encapsulating a traditional artificial leaf inside a transparent capsule made of a semi-permeable membrane of quaternary ammonium resin and filled with water. The membrane allows water from inside to evaporate out when warmed by sunlight. As water passes out through the membrane, it selectively pulls in carbon dioxide from the air. The artificial photosynthetic unit inside the capsule is made up of a light absorber coated with catalysts that convert the carbon dioxide to carbon monoxide, which can be siphoned off and used as a basis for the creation of various synthetic fuels. Oxygen is also produced and can either be collected or released into the surrounding environment.
"By enveloping traditional artificial leaf technology inside this specialized membrane, the whole unit is able to function outside, like a natural leaf," Singh said.
According to their calculations, 360 leaves, each 1.7 meters long and 0.2 meters wide, would produce close to a half-ton of carbon monoxide per day that could be used as the basis for synthetic fuels. Three hundred and sixty of these artificial leaves covering a 500-meter square area would be able to reduce carbon dioxide levels by 10 percent in the surrounding air within 100 meters of the array in one day.
If the UIC leaves are reportedly ten times more efficient than a natural tree, so it may take about ten times more of these arrays than the above calculations would suggest. If the natural forests would require 12.7% of the land, the UIC artificial leaves may require 1 or 2% of the land. Either way, that's a lot of surface area, but presumably substantially less than the area a natural forest would take to remove the comparable amount of CO2.
Once again, a Holy Grail is possibly in sight, but not anytime soon when you consider what it would take to build all these "natural leaf" arrays. The requisite land is one thing, but the capital cost would be another huge hurdle. Not only that, there remains the problem of converting that carbon monoxide into a usable fuel. This of course begs the big question, who is going to pay for this?
Economists will tell you that this is a perfect application of a carbon tax. The proceeds from such a carbon tax could be used to acquire the necessary land, as well as to pay to construct the artificial leaves.
Once again, don't get out the champagne.
So what conclusions can be drawn from this? If there is no practical way either to get all those natural forests planted, or to get artificial leaf arrays constructed, why pay any attention? The reason is because of the potential for additional research to produce even more efficient natural leaf arrays.
The obvious analogy is to Moore's Law. Back in the mid-1960's, Gordon Moore of Intel Corporation noted that the number of transistors that could be packed on a chip was doubling every 18 or so months. Based upon that observation, made using only a handful of data points, Moore forecast the creation of vastly more powerful computers in just a few years. Moore's Law has continued to work for 50 years! Today's computers can do things only in the realm of science fiction when Gordon Moore first developed his "Law". Moore's "Law" worked because of huge amounts of research done to pack ever more transistors onto a chip.
It seems reasonable to believe something similar could happen with respect to artificial leaves. If the University of Chicago's artificial leaves can operate at ten times the efficiency of a natural tree, is it beyond the realm of possibility that could be increased another ten or twenty fold? Following the logic of Moore's Law, a ten or twenty fold increase would be merely a "warm up". If artificial leaves have a Moore's Law "encore", in about 10 years the artificial leaves developed by UIC will be about 120 times more efficient. That doesn't mean you'd only need about 2 million arrays worldwide, because there's only so much CO2 any given array can pull out. However, a much more efficient array might be able to pull out a high percentage of CO2 exhaust from a power plant. As such, in 10 or 20 years it may be possible to have artificial leaves doing the bulk of removal of excess carbon dioxide. The Holy Grail might then be within our grasp.
Even if a "Moore's Law" solution can only make a given array capable of pulling only so much more CO2 out of the air, it might help reduce the capital cost of the array dramatically, making it much more practical to implement this solution.
Once again, don't get out the champagne just yet. Instead, this suggests that we should pursue a "portfolio approach" to CO2 removal. The various parts of the "CO2 removal portfolio" would include the following:
The latter has the problem of nuclear waste, so that portion of the "portfolio" might be a bit risky. The key point to make, however, is that just as the pros tell us to make sure we have a diversified portfolio of investments to ensure financial security, we should have a diversified portfolio of investments to deal with the greenhouse gas problem. Additional research into "artificial leaf" technology should be an integral component of the portfolio.
The latest news out of the University of Illinois at Chicago is certainly encouraging. However, the clock is continuing to tick. We don't have enough time to go about the task of greenhouse gas removal at a leisurely pace. Continued investment in alternative energy technology is extremely important. The alternative leaf may be an unexpectedly valuable tool in the fight against greenhouse gases – maybe even a Holy Grail.
The Green New Deal sounds great, but won't solve the problem. Here are seven steps to make it a great solution.
What should be done to prevent potential catastrophic climate change? Democratic Representatives Alexandria Ocasio-Cortez and Edward Markey are proposing a modern day version of Roosevelt's New Deal, this time to deal with climate change.
Meantime, a significant percentage of Republicans continue to believe that the problem has been way overblown. In their minds, enacting something like the proposed Green New Deal would be wasteful and ineffective, especially because many continue to doubt that humans are causing climate change.
Greenhouse gas induced climate change is a very real problem that needs to be addressed. Republicans are making a mistake by continuing to downplay it. But at the same time, the Green New Deal as envisioned by Democrats isn't going to work. It won't solve the problem.
Action is extremely important, but it needs to be the right kind of action. It will only work if the solution is truly bi-partisan. All we have to do is look at the history of Obamacare to know why getting a truly bi-partisan solution important. Thus, I offer a seven step strategy that I believe could create a real bi-partisan solution, one that both sides will like. More importantly, I think it will work!
Step 1: Stop Acting in an Insane Manner
You've probably heard the definition of insanity: doing the same thing over and over and expecting a different outcome. By that definition, both Democrats and Republicans are insane when it comes to climate change: Democrats, because they keep thinking that doomsday scenarios will scare everyone into acting on climate change; Republicans, because 20+ years of closing their eyes and hoping it will go away just hasn't worked. The Republican strategy risks a repeat of Obamacare, but on a way, way bigger problem!
Unfortunately, the "insane" behavior on each side is actually rooted in a false choice. The false choice for the Democrats is, "you either believe in a nightmare scenario of global warming, or you're a climate science denier."
The false choice for the Republicans is, "if we embrace climate science, it means more big taxes and big government, so the alternative is to deny the science; and eventually the issue will go away."
If each side persists in framing the issue according to its respective false choice, neither will ever build the needed consensus for real action (or maybe "inaction" in the Republican case). So what should each side do? Consider step 2.
Step 2: Re-frame the Problem
In order to stop behaving insanely, each side should attempt to re-frame the problem. The funny thing is, I think it could be re-framed in a way that both sides will find acceptable, even likeable. The greenhouse gas problem should be re-framed as, "how could carbon elimination be the next giant American industry, the next big way to make money?"
Re-frame it as a strategy for economic growth. Focus on the economic side, not on preventing doomsday. Yes, it should reduce the climate change risk, but do it because it could be so beneficial for the economy. Instead of trying to drag Republicans kicking and screaming, frame the problem in a way that they'll want to participate.
The funny thing is, there's a historical precedent for this, on a related issue. Back in the 1970's when Congress was debating the Clean Air Act, the utility industry fought legislation to eliminate fly ash. At the time, all they could think was that getting rid of fly ash would simply increase their costs.
Then someone realized that fly ash could be useful in making concrete. Suddenly, the fly ash became a resource that could be monetized. It was and is to this day. The challenge was to reframe the problem (getting rid of fly ash in the atmosphere) as a business opportunity.
Twenty years ago, the economics of carbon were very different, and Republicans had a good point: alternative energy would be more costly than conventional fuels. Trying to solve the greenhouse gas problem through taxes and regulation wouldn't work very well. Today, thanks to better technology and innovation, the economics have totally changed, and alternative energy has the better economics.
Because the economics have changed so much, it really makes sense now to reframe the carbon problem as a business opportunity. The problem of greenhouse gases can be solved without resorting to the kind of big tax/big regulation solutions that Republicans fear, even abhor.
Two approaches come to mind. First, what are the best ways to extract carbon from the atmosphere to create economic growth and, by the way, maybe save the planet? Second, could energy be produced at lower cost by avoiding carbon altogether?
If you can re-frame the "carbon in the atmosphere" problem as a business opportunity,
and the role of the government is to encourage the development of that business opportunity, not impose a solution, Democrats could provide a way to get Republicans to get on board.
That re-framing will definitely help, but there's a crucial second re-framing – step 3. Let's now turn to that.
Step 3: Make a Carbon Dividend the Basis of Your Solution
Economists have almost universally agreed that the first step in trying to get and keep carbon out of the atmosphere is to find a way to increase the cost of carbon emissions. The generally agreed way to do that is to impose a tax on carbon emissions.
A carbon tax, though, is dead on arrival because of Republican opposition. However, there now is an excellent way to get around the problem, and it's actually a Republican idea.
I've written previously ( see "When a Rose Is Not a Rose Is Not a Rose" ). Even better, check out Ted Halstead's TED Talk. Halstead's brilliant solution is to pair a carbon tax with a carbon dividend: all of the money collected through the tax is then re-distributed to the population pro-rata. It is progressive, not regressive, because lower income people will then to benefit more than the wealthier. Republicans should find it acceptable because it isn't really a tax – it's a transfer pa. It should be a cornerstone of any Green New Deal.
Beyond Halstead's solution, the best thing the government could then do would be to help find ever better ways to reduce the cost of alternative energy, making it even easier for people to make money. The best way to do that is to sponsor basic research and new technology.
Step 4: Focus Attention on Basic Research and New Technology
The key to increasing adoption of alternative energy is improved technology, especially improving battery storage and the technology to capture sunlight and wind efficiently. One of the very best things that could come from a Green New Deal is more funding of basic and applied research in alternative energy and carbon extraction. Such research at major universities and research institutes, should result in the creation of new companies that can exploit technology that results from it. It's already happening, it just needs to happen more rapidly, and on a bigger scale. Any Green New Deal should emphasize this.
Such research will also help to lead to step 5.
Step 5: Encourage Experimentation
One of the best things the government might do is to encourage experimentation. Two forms of experimentation come to mind.
The first is what I call the X Prize strategy. The original X Prize was created by entrepreneur Peter Diamandis to encourage the creation of a reusable space rocket. To win the prize, one needed to send the same rocket into space within a two week period, a seemingly impossible task. The impossible became possible, and the original $ 10 million prize has been awarded, as have prizes in numerous other comparable competitions.
The government could encourage people like Diamandis to offer more prize competitions, for example, via tax credits, to create novel carbon capture technologies, or it could even sponsor such competitions itself through the Department of Energy, for example.
Such X Prize style competitions are already underway for carbon capture and elimination. Consider, for example, the efforts of a company in Wyoming to win a $ 7.5 million prize. The good news is, it is no longer necessary to prove that carbon capture or alternative energy are viable economic propositions. That's already been done. Now the only thing necessary is to create an environment that encourages even more creativity and experimentation. Doing this won't require a huge bureaucracy, or lots of rules and regulations, just proper incentives.
The other strategy is to encourage such experimentation at the state and local level. A lot of that already is going on, but much more is possible.
Further encouragement of entrepreneurs to develop novel solutions to carbon capture and alternative energy will keep the USA as the world leader in reduction of greenhouse gases, the position the USA has held for the past 20 years.
Step 6: Help Businesses Make the Transition
Businesses both large and small now understand that alternative energy is a winning business proposition, and more and more new investments are underway. The problem is the speed of eliminating older investments. As an example, it would be great to eliminate all of the old coal burning electricity plants now and replace them with clean energy. The electric utilities would definitely benefit because of the lower operational cost of alternative plants. Who, however, is going to pay the cost of conversion? Part of any Green New Deal should include incentives to retire older plants more quickly. Lots of creative possibilities here. A great thing a Green New Deal could do would be to help utilities develop and implement a cost effective strategy to eliminate all coal fired plants within 10 years. Do it not by holding a gun to their heads, as regulations might do, but by creating the right economic incentives.
What is often forgotten is that even with all of the foot dragging on climate change, the USA has been the world leader in eliminating carbon from the atmosphere over the past 25 years.
Which points to the Achilles Heel of the Green New Deal, and why it could have limited benefit. The problem is that even if the USA is hugely successful in eliminating greenhouse gases, the real problem lies outside the USA, particularly in the developing world. The only way the worldwide greenhouse gas problem can be solved is through step 7, which I turn to now.
Step 7: Export the Solution
Somehow, someway, the rest of the world needs to succeed at carbon elimination. If the USA eliminates 100% of its human-caused greenhouse gases, but the rest of the world stays on the same path, we won't solve the problem. Somehow, any Green New Deal has to export its ideas to the rest of the world.
For example, other countries need to adopt some type of carbon tax, too. They should seriously consider Halstead's "carbon dividend" strategy.
Besides "exporting" the carbon dividend solution, the best thing a Green New Deal could do would be to encourage future construction of clean energy overseas, as well as the replacement of existing facilities such as coal plants. To accomplish that, the government might encourage the following:
Unfortunately, the level of control the USA has over foreign investment in
carbon elimination is problematic. We cannot impose a solution on the rest of the world. The best thing we could do, however, is invest in things that will continue to drive down the cost of alternative energy, then make that technology available around the world. The more we can show the rest of the world how to make money by eliminating carbon, the more likely we are to succeed.
The greenhouse gas problem needs to be solved. If we think we can do it by imposing taxes and regulation, we're fooling ourselves. However, if we can show the world how to make money by getting carbon and keeping carbon out of the atmosphere, we have the basis for a winning solution. Which choice will we make?
Sometimes things just aren't quite what you think they are. Here's a great example.
While he suffered a big defeat with the government shutdown, Donald Trump could actually turn things around, if he'll just remember some of the basics of good negotiation
His political spin-meisters will doubtless try to do their best. They'll get on the various political talk shows, and write various opinion pieces, all trying to say that Donald Trump didn't suffer a defeat at the hands of Nancy Pelosi and the Democrats over the 35 day governmental shutdown.
They're wasting everybody's time. Unquestionably, it was a disastrous outcome for the President. He almost invariably describes things he does using superlatives. This one was a superlative failure.
But like so many times in life, an initial failure could turn into a triumph. Not only that, it could be an even bigger triumph than the one he was hoping to get – building a $ 5.7 billion dollar concrete or steel wall along the US-Mexico border. At the same time, it could actually be something that not only would his "base" like, it might even be something that Democrats, and independents like me, could really like.
Let me explain how such a dramatic turn of events is possible.
It comes down to something really, really simple. It has to do with one of the "basics" of dealmaking: good negotiating skills.
Whether you like him or not, Donald Trump is a very good negotiator and dealmaker. However, as experts sometimes do, he's forgotten some of the basics.
How could a skilled person forget the basics? It could be because he/she overfocuses on part of an issue and overlooks something else important. Some people have joked that Donald Trump has an "Edifice Complex", as opposed to an "Oedipus Complex". Trump seems to like edifices of all sorts, especially if they are big, shiny, and have his name on them, or at least associated with them. In fact, he seems so pre-occupied with that objective, it might lead him to overlook something important.
What he seems to have overlooked/forgotten is a basic principle of good negotiation: negotiate your "interest", not your "position".
What do I mean when I say, negotiate your "interest", not your "position"? Your "interest" is what you ultimately are trying to accomplish. In contrast, your "position" is what you tell your negotiation partners, and third parties, you want. They are oftentimes not exactly the same thing. In the current case, Trump's "position" is crystal clear: we need to build an edifice, meaning a bigger physical wall on the southern border of the USA, and also fill in the gaps on the existing border wall. Build something that looks like the border wall between Israel proper and the West Bank.
The Democrats – Trump's negotiation partners – have rejected that out of hand. Polls indicate the majority of Americans also reject this physical wall. Most likely, so long as Trump insists on his "position" – getting his physical wall - he will continue to be rebuffed. So what should he do?
He could continue with his current strategy and try to push through his physical wall. The chances of that succeeding, however, are the proverbial "slim" and "none".
Instead, he could go back and see if he can modify his "position" in a way that will achieve his real "interest".
What is Trump's real "interest"? It's to have a secure southern border and a better immigration system. The problem is that he has created a world with only two possibilities: a giant physical wall or an insecure border. Unfortunately, that is what I call a false choice. There are other ways to achieve a secure border without a bigger physical wall. Thus, if he would be willing to abandon his "false choice" of a "physical wall or open border", he could begin to explore alternative ways to achieve his real interest – a secure southern border and better immigration system.
Now even after his latest defeat, he may still think he can get his "edifice" built. Not likely.
So what are possible ways to achieve his "real interest" without getting his "edifice"? One is to create an "electronic wall" using state of the art technology. Another is to spend more money on the Border Patrol to help them do a better job. Another is to change the immigration rules to reduce incentives for desperate Central Americans to apply for asylum. Still another is to expand the E-Verify system, and enforce it more diligently, so that it is more difficult for undocumented people to work in the USA. There are others, but these are some of the obvious ones.
Once a good negotiator understands his "real interests", he/she needs to think about the real interests of the other side. Negotiation is often a process of trying to discern what those real interests are. In the case of immigration, it could very well be that the Democrats and independents have the very same "real interest" of having a better immigration system. For example, Democrats want to solve the Dreamer problem. You'll recall, the Dreamers are the young people brought to the USA as children by their parents, but who are undocumented. Besides the Dreamers, the Democrats want to do something about the eleven million undocumented people already in the country.
But even if Republicans and Democrats don't have the exact same interest, there are some potential ones that might form the basis of a deal. Two come to mind. First, Democrats want a permanent solution to the Dreamer problem. That permanent solution would be some pathway to citizenship, or at least permanent residency. Second, a "real interest" is likely just to come up with some kind of solution to the immigration issue, if for no other reason than to permit everyone to move on to other issues. How about health care, or infrastructure, or any number of other things?
Getting away from the current "position" on a wall, which is built upon the false choice described above, the President could try to create a deal that would achieve his "real interest" and get the other side to buy in because it could help them achieve some of their "real interests". Let's try out some possibilities:
Possibility #1: get funding to build an electronic wall plus more money for the Border Patrol in exchange for a permanent solution to the Dreamer problem. An electronic wall could achieve the same things as a physical one, without creating a physical monstrosity.
That could achieve Trump's real interest of securing the border, and also achieve the opposition's goal of a permanent solution to the Dreamer problem.
Possibility #2: go even further than Possibility #1. Besides the electronic wall, and more funding, but no physical wall, there could be reform of the asylum rules so it is harder to try to get asylum in the USA. That would appeal to Trump's "base", and certainly would be in his interest. But if he wants to do that, he'll have to make a bigger concession to the other side to fulfill some of their interests. That might be changes that will permit lots more undocumented people in the USA to become normalized – maybe even a pathway to citizenship.
Possibility #3: go even further than Possibility #2 by expanding the E-Verify system. That system permits an employer to know whether his/her employees are legally able to work. Put real teeth in the law with fines against employers who fail to follow the rules. Seriously enforcing this could make it very difficult for undocumented people to work in the USA. If they cannot work, they're likely to exit the country without even being asked.
E-Verify is a pretty drastic solution. But even that might be okay with Democrats if they're given something big enough in return. How about a path to citizenship or legal residence for all, or nearly all, of the undocumented people in the USA who have not committed serious crimes? Pretty drastic, but one possible deal would be to give the Republicans one pretty drastic thing they want in exchange for one pretty drastic thing that the Democrats want. Just so long as one of the things isn't a physical wall.
Just as badly as Donald Trump wants a physical wall, the Democrats want to avoid the wall. As such, that actually creates a great negotiating opportunity for Trump. He could tell Nancy Pelosi and Chuck Schumer, we won't build a physical wall, but in return for this concession, I want a gigantic increase in funding for the Border Patrol, and/or a change to merit based immigration system.
These are but a few of the myriad possibilities. Again, the only possibility he should take off the table is the physical wall because that has proven to be a non-starter. Unfortunately, he won't likely take the physical wall off the table until he stops thinking in terms of the false choice of physical wall or unfettered immigration.
So you may ask, if this is such a good idea, why hasn't Trump, the master negotiator, already done it? I admit, it's a head-scratcher to me. The funny thing is, as suggested earlier, good negotiators sometimes forget the "basics", forget to do the obvious. I think this may be one of those cases.
Trump is actually in a great position to "reframe" the debate. After all, he has demonstrated quite a knack for changing the subject when things aren't going his way. Well, they're not going his way on the wall debate, but he could make a "change the subject" move by re-framing the issue from physical wall to something more generic, such as "fundamentally fix immigration".
The crazy thing of all this is, Trump could actually achieve what he really wants: securing the southern border. He just won't be able to do it quite the way he had in mind with the physical wall. The even crazier thing is that Democrats and others might be happy, because as part of the bargain, they'll get things they want. They've already hinted at possibilities.
But nothing will happen until the President does two things. First, stop thinking in terms of the "false choice" of "physical wall or open borders". Realize there are alternative ways to achieve his real interest of a secure southern border. Second, remember to negotiate your "interests", not your "position".
I'm very confident that Nancy Pelosi hasn't forgotten this basic principle.
Now some people are likely to say, taking the physical wall off the table would be caving in. Not at all! It's only a "cave in" if you embrace the false dichotomy of physical wall or unfettered immigration. Trump can overcome this if he reframes the issue as "effective border security". If he does that, it will be much more difficult for his opposition to dismiss the issue.
Many in Trump's "base" will claim that the Democrats have no interest in securing the southern border. I disagree, because the Democrats have clearly indicated they want to come up with a permanent solution for the Dreamers, as well as a better way to handle asylum seekers. There are other things. These "interests" become the basis for forging an agreement with Trump, so long as Trump takes the "non-negotiable" physical wall off the table.
Yes, Trump still has a great opportunity to snatch victory from the jaws of defeat. He still could end up being a hero to his base. He even has the possibility of doing something in a bi-partisan manner, something that seems impossible. All he has to do is eliminate the "false choice" of physical wall or unfettered immigration and negotiate his interests not his position.
For the master dealmaker, it really shouldn't be that hard. After all, sometimes truth is stranger than fiction.
An amazing true story of intrigue that is both instructive, and cautionary
It really is true. Sometimes truth is stranger than fiction – maybe even dramatically stranger. For evidence of this, one need only look at Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice, a book by William Browder, that I recently completed.
I try to read a lot of books, and this was definitely one of the best I've encountered in recent memory. The book's subtitle certainly is tempting. After all, lots of us love good murder mysteries, and we quite often like to read heroic tales of people fighting for justice. This book has both, and even throws in some high finance intrigue, without delving into "eye glazing" detail that would bore most people to tears.
But the book really does more than simply weave all of these enticing elements together.
One thing that makes it such an interesting true story is three highly unexpected things the reader learns about the author, Bill Browder. The first is that Browder is the grandson of Earl Browder, once the head of the American Communist Party. Browder the author comes from a long and distinguished line of left-wingers.
With such a pedigree, what's the most unexpected thing he might be or do? Go to Stanford Business School, then launch a career as a very successful hedge fund manager. The offspring of a bunch of leftwingers/communists becomes an uber-capitalist!
How Browder became an uber-capitalist is the second truly unexpected thing. As he points out, the logical career path for graduates of Stanford and other top level graduate schools of business is consulting, investment banking, or working for well known Fortune 500 firms such as Procter & Gamble and General Electric. Browder, himself, begins with one such firm, but quickly heads off to do something else.
His "something else" is to begin investing in Eastern Europe and Russia at the time of the fall of the Iron Curtain. He was truly on the "frontier", and largely dismissed by his co-workers and superiors at the time. Through perseverance, plus some timely good fortune, Browder created a very successful hedge fund in Russia. He literally became the "go to" guy when everyone else discovered that Browder was on to something big. Very big! The unexpected outcome of all this was that Browder's Hermitage Capital turned into a billion dollar hedge fund at the turn of the 21st century, and Browder was well on his way to financial mogul-dom.
Until he ran into trouble with the leadership of Russia. I won't go into detail about this, other than to say that Browder was denied entry to Russia, and has been battling the Russian government since 2005, in the past few years fearing for his life.
That battle has set the stage for the third highly unexpected thing about Browder. He has gone from being the uber-capitalist head of a major hedge fund to being a major human rights advocate. Besides his own problems with the Russian government, Browder's "conversion" to humans rights advocate is because of a Russian tax lawyer named Sergei Magnitsky.
You might have heard of something called the Magnitsky Act. The Magnitsky Act, passed by the US Congress and signed by President Barack Obama, places sanctions and travel restrictions on certain Russians deemed to violate a range of laws. The Russian government, beginning with Vladimir Putin, absolutely hates it!
The driving force behind the Magnitsky Act was Bill Browder.
So what turned Browder from uber-capitalist into uber-human rights advocate? The torture and death of Sergei Magnitsky at the hands of the Russian government. Magnitsky's death so impacted Browder that his entire life has been transformed. As such, he's joined the ranks of other ordinary people who have had life-altering, transformative experiences:
Moses, who after an encounter with God (in the form of a burning bush), led the Israelites from captivity;
Rosa Parks, who became a civil rights leader after failing to give up her seat on a segregated bus in Montgomery, Alabama in 1955;
Candy Lightener, the woman who founded Mothers Against Drunk Driving (MADD) after her daughter was killed by a drunk driver;
Malala Yousafzai, a Pakistani teenager who became a human rights advocate after an unsuccessful attempt on her life.
Yes, Browder's life has totally been transformed by Magnitsky's death. The Russian government is now going after Browder, himself. Russia has asked Interpol, the international police agency, to issue what's called a Red Notice. Browder, if he crosses an international border, runs the risk of being arrested and deported to Russia to stand trial. But he also should be fearful, even if he doesn't cross an international border, when one considers what happened to Sergei Skripal and his daughter. The two were poisoned by Russian agents in Salisbury, England. The evidence suggests that the Russian government will stop at virtually nothing to eliminate its perceived enemies – and Browder is clearly in that elite circle.
But, if anything, the danger merely makes Browder even more determined. His book is his latest effort in his ongoing battle with the Russian government.
Which leads to the final reason Red Notice ought to be of great interest. That's because it touches upon the great question, what causes some people to embrace an idea, or a mission, in such a completely captivating way? Leaders of businesses and other organizations often ponder the question, how do I motivate my people? The conventional answers are more money and perks, and better working conditions. These things are somewhat helpful, but no one develops the motivation of a Bill Browder because of money, perks, and working conditions!
Consider all of the people besides Browder I mentioned earlier – Moses, Rosa Parks, Candy Lightener, Malala Yousafzai. What's motivated each of these people is a cause far greater than themselves. Browder's cause – avenging Magnitsky, as well as exposing human rights abuses – is what animates him.
Which points to an answer to the question, how do you truly motivate people? The answer is, find a truly compelling idea, then enlist yourself and your people in its achievement.
Things like increasing your sales or profits by 20% won't inspire your people. Great motivational talks aren't likely to do it either. Instead, it's finding something truly inspiring, and far greater than any individual, that will provide the seeds for true inspiration, and truly compelling results.
As with Moses, Rosa Parks, Candy Lightener, and Malala Yousafzai, Bill Browder's the truth of Bill Browder's compelling tale, Red Notice, is clearly stranger than fiction.
A major electric has made an environmental pledge that could well be a brilliant business decision
It seems almost every day we wake up to Earth-shattering headlines. The funny thing is that lots of really significant news gets lost amidst all the "Big Headlines". A great example of this was the recent report that Xcel Energy, a major electric utility based in Minneapolis, MN, plans to become 100% carbon neutral by 2050, a mere three decades from now.
This is big news because Xcel is the first major electric utility to pledge to become 100% carbon neutral, and, moreover, to provide a specific date. Now 2050 is still three decades away, and a lot of greenhouse damage will occur in that time. The other significant thing Xcel said is that within 15 years, it will reduce 80% of the carbon emissions it had in 2005. As such, most of the reductions should come in the next 15 years.
Another reason this is important is because Xcel is the kind of company most environmentalists love to hate. It's a big company – actually a big company with three major operating divisions: Northern States Power, Public Service of Colorado, and Southwestern Public Service in Amarillo. Altogether, it has about 3.3 million electric customers and 1.8 million natural gas customers.
Let's focus on the greenhouse gas emissions of the company. On the positive side, it operates 27 hydro plants and two nuclear plants. Of course, many environmentalists will object to the environmental impact of hydro and nuclear, but at least in terms of greenhouse gases, these 29 plants don't spew anything into the air.
In the greenhouse gas department, however, Xcel presently operates 13 coal fired electric plants that generate a combined 7,697 megawatts of power. More than enough greenhouse gases!
Which brings me back to the "real news". Xcel's management isn't going to eliminate all these coal fired plants because they want to be nice guys, even though they probably are. They're going to do it because it will make good business sense. Oh, I'm sure, management is presently being criticized by environmentalists, and much of that criticism is quite justified, as the utility industry has a very long history of ignoring environmentalists.
Are they doing this because of stiffer regulations? Pretty unlikely, especially given the Trump Administration's efforts to make life easier for the coal industry.
Instead, it's because it's a smart business decision. So let's look specifically at why getting rid of all these coal plants is a very smart business decision.
It get's back to the number one job of the management of a company: make money for the shareholders. In the case of a publicly-owned company such as Xcel, that means figuring ways to maximize the stock price. With that in mind, let's consider how the decision to get rid of coal could help Xcel's managements drive up the company's share price.
Stock prices are influenced by three things: company fundamentals, technical factors, and market sentiment. Let's consider each. The important thing to realize is that of these three factors, the management of a company can only influence one of them: company fundamentals.
Market sentiment is really an overall collective assessment the investing world makes. It depends upon things such as expectations of what the Federal Reserve will do with interest rates; what overall government policy is doing; and things such as the balance of trade and what's happening in foreign markets.
The important thing to realize is that the management of a company can't do anything about market sentiment.
The same is true for technical factors. These include things such as the level of inflation, substitute products, and demographics. For example, imagine that someone creates a great way for everyone to generate their own power, so it isn't necessary to depend upon the electric utility? Pretty much outside the control of the utility company.
Which leaves just one thing that management can do to affect stock prices – company fundamentals – something very much within the control of management. The key things here are the present value of future earnings for the company, as well as what's referred to as "free cash flow".
The best way for management to increase the stock price is to focus on things that will increase the company's earnings and free cash flow. Generally speaking, that comes down to doing the following three things: 1) generate more revenue; 2) reduce costs; and/or 3) increase productivity.
Unlike other businesses, utilities cannot do a great deal about increasing the amount of "product" or "service" it sells. Instead, the typical utility must simply be prepared to produce the kilowatt hours and cubic feet of natural gas that customers demand. The only thing the utility can try to do is to increase the rates charged to customers. That, however, is subject to government regulation.
The management of the typical utility works very hard to convince regulators to increase the rates charged to customers. Of course, on the other side of the table are a whole bunch of interests trying to keep utility rates low. It's a classic political process, and management can to some extent influence stock price by pushing hard to increase utility rates.
That leaves two other ways for management to influence stock prices: reducing costs and increasing productivity.
Here's where the real news is. The cost of alternative energy has gone down so much that wind and solar are now amongst the lowest cost power sources. New wind and solar installations can generate kilowatt hours at a lower marginal rate than can coal and natural gas.
Which means that, other things being equal, the management of companies such as Xcel can make a higher profit/kilowatt hour generated by building wind and solar capacity than by coal and natural gas.
As wind and solar technology continue to improve, that differential is probably only going to increase. Not only that, it will increase to the extent that fossil fuel prices go up.
All you have to do is have some supply disruption of oil and natural gas to have the prices of those fuels go up. Same thing for coal. In the case of coal, regulation could increase the cost of the input.
Utility plants typically have a 30 to 40 year lifespan, so when management contemplates building one, it has to consider not only current costs but the cost of operation over that lifespan. Doubtless, at the present time, the management of Xcel projects that over the next 30 to 40 years, the cost of operating a coal plant can do nothing but increase. Technology isn't likely to reduce the cost of generation. Conversely, the cost of a wind or solar facility has a good chance of continuing to go down over the same time period.
Which means that if the company wants to increase earnings and free cash flow, the better choice will be a zero carbon facility. If it makes that choice, other things being equal, there's a better chance the stock price will go up.
So if that's the case, why not just ditch all of the coal plants right now? Two likely reasons. One is that management believes it lacks the capital and the management time to make such a transition more quickly.
It would have to borrow too much money and couldn't afford the debt service. That problem could be overcome, especially if government regulators provide some type of relief to the company.
However, even if management could swap out all those plants, there is still the problem of spreading management too thin. Building a whole bunch of new plants would tax any organization.
There is a possible way around this problem. That's to have the company purchase alternative energy from a third party and just ditch all of the coal plants. If management could find alternative sources of power and purchase it, it could shut down all of those coal plants more quickly. If it could purchase enough clean power at a low enough price, it would make sense to shut all of the coal plants down as quickly as possible. There are, of course, some important caveats to doing this, but it could make good sense.
Of course, shutting down all those plants might create other problems. The most likely would be the economic impact in the towns where the coal plants are located.
This points the way to another great economic opportunity. Third parties could build new wind and solar plants that would provide clean power at a lower cost than the old coal plants. Xcel's management probably realizes this.
So why not just get third parties to build all of this new zero emission capacity and get rid of all of the coal plants? The short answer may be that government regulation has incentivized utilities to keep operating greenhouse gas polluting coal plants. We'll consider that in the future.
In the meantime, Xcel's management, in my mind, is making a brilliant business decision. I expect other companies will reach the same conclusion, and start doing the same. Which reinforces the idea that if you really want to get rid of greenhouse gases, the best way is through economics and better technology, not politics and regulation.