Energy: China and U.S. Take Different Approaches

The Chinese seem to get it. It will take energy to convert to alternative energy. The Chinese are aggressively protecting their conventional energy supplies. The U.S., on the other hand, is largely just winging it without thinking through what needs to be done.

As one example we're still acting as if ethanol will be a major factor in alternative energy. Ethanol will be a factor in places but it's hardly a major solution. We simply burn too much fossil fuel to make ethanol. And the return on energy input is still very poor.

If anybody ought to be for ethanol, it's George Monbiot of The Guardian. But he writes:

The EPA has to decide whether or not to allow more ethanol to be blended with gasoline. At the moment the limit for ordinary motor gas (petrol) is 10%. The agency is inclined to raise this to 15%. The Alliance of Automobile Manufacturers is trying to prevent or postpone it. I'm with the car makers, though not for the reasons they cite.... Since 2004 I've been banging on about the impact of biofuels on the environment and global food supplies, and I've been horribly vindicated. In 2008 the expansion of biofuel production was directly responsible for the decline in global food stocks, which caused grain prices to rise, catalysing famines in many parts of the world.

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In almost all cases, biofuels made from grain or oil crops create more greenhouse emissions than petroleum. This is partly because they lead to an expansion in total crop production, which means that forests must be cut down, unploughed pastures must be tilled and wetlands must be drained to accommodate it. The carbon stored in both the vegetation and the soil is released and oxidised.

(snip)

But while other countries are starting to re-assess their biofuel programmes, the US is still ploughing ahead.

China on the other hand isn't doing much with corn ethanol. It's investing in different countries to grow biodiesel. Here's a story on China's strategy:

China for example, driven by the projected energy demand of more than a billion increasingly affluent people and the reality of (financial, technological and geological) constraints to future crude oil production has embarked on elaborate biofuels and renewable energy development programs.

The country has acquired on long leases, vast tracts of land for cultivation of biodiesel feedstock: a record 2.8 million hectares in the Congo for oil palm and 2 million in Zambia for jatropha among others.

Now there are things I don't like about the Chinese strategy. I suspect, for example, that countries growing biodiesel for China may find their soil depleted in twenty or thirty years and then what? China will have gotten it's money back on the investment while protecting itself as the world transitions towards other alternative energy forms. Of course the other issue is geopolitical: China is going after countries at the equator with high sun concentration. This could mean something of a monopoly for China (and maybe a new form of colonialism) while everyone else tries to recover from the current economic mess. But it's a clear sign that China recognizes the energy problem facing the world. There are two part parts to the problem: The need for conventional energy sources and the need to use those energy sources to fund the infrastructure and transition to alternative energies. China is working on both parts (see the second half of the above article).

And the U.S.? Well, here's another example of wasting time. Energy Secretary Chu wanted to cut funding for hydrogen research but Congress wants to restore it. Here's the story from the New York Times:

Congress appears close to restoring the $100 million in funding for hydrogen research that Steven Chu, the energy secretary, had cut from his budget in May.

The House of Representatives voted 320-97 last Friday to approve $26.9 billion for the Energy Department, including $153 million for hydrogen and fuel cells in the Energy Efficiency and Renewable Energy program, plus $40.45 million for hydrogen from coal.

Notice the last three words: hydrogen from coal. It's simply a waste of time. It takes energy to create hydrogen. Creating hydrogen from coal does nothing for our energy future. I'm sure the coal companies love it and I'm sure politicians from coal producing states love it. And I'm sure the Chinese are shaking their heads and chuckling at our increasing stupidity. There is probably a future for hydrogen but only after we start creating true alternative energy. Hydrogen technology does not, in no manner or form, create surplus energy. Some day hydrogen may become a convenient carrier of energy but that's all. We don't get energy from power lines but power lines can carry energy from coal plants and gas plants as well as from hydroelectric dams, wind turbines and solar cells. Hydrogen would serve a similar function.

Okay, last story but it has two parts. The first part is from Platts but I've been reading about the problems of small energy companies for several months:

Small and medium-sized energy companies' ability to raise capital is shrinking as banks consolidate their lending on established customers with large asset bases. (See related chart: Banks' shrinking market optimization ($ billion).)

It's largely small and medium-sized American companies that are having trouble raising loans for energy projects. One place American companies have been working in is Canada but that appears to be dropping from lack of loans. Yes, oil and gas consumption is down. But this puts the Chinese in position to take advantage of market conditions. Here's a story from The Globe and Mail about Chinese involvement in Canada's energy sector:

It's being driven by two or three outlooks on behalf of the Chinese. The first, and most obvious, is energy security. On a comparative basis, relative to the size of their economy, they are not blessed with that many natural resources themselves, so they want to get access themselves to the physical barrels, if possible.

The second thing, which drives the importance to the Chinese, is their own view that the industry is running short of natural resources and so it would be a good long-term investment, in and of itself.

The third thing that is really driving the importance of the Chinese market is the fact that that they've got the money They can finance these deals and, particularly in today's marketplace where raising capital is more difficult than it was a year ago, this ends up being a critical factor in deciding if you're a seller that we want to do business with.

They've got the money. Ouch. The people in Washington and on Wall Street need to get real. For that matter, the know-nothing wing of the Republican Party and the business-as-usual wing of the Democratic Party both need to sit down. If they still exist, it's time for the adults to return to the table. Given the condition the world is in and what the solutions are likely to be, those adults had better have a progressive view of things. We need change and it isn't happening fast enough.