EcoLogic Blog

Throughout the panel discussion, I heard a lot about “the energy problem” and how hard it’s going to be to find and implement solutions. But the “problem” was never actually defined. So later on, when Paul Siegele of Chevron was generous enough to sit down with myself, Tim Hurst of Green Options and Ecopolitology, Brian Westenhaus of newenergyandfuel.com and Bonnie Hulkower of Treehugger, (that’s Tim and me with Siegele in the photo) I asked him: “What does Chevron see as the biggest energy problem? Global warming? Energy independence? Health? Finite oil supply?”

“All of the above,” he said. “I think the problem is not well defined because it’s so big and the blame is misplaced. People think we’re the ones setting oil prices, for example.”

In other words, whle oil companies should certainly be held accountable for safe, responsible business practices, it’s our job as consumers to patronize those companies and products we believe in and to responsible too. For example, while it’s nearly impossible to avoid buying gas, we can be as efficient about it as we can. The responsibility is on all of us.

So I asked Siegele how Chevron is assuring its shareholders that – with impending carbon dioxide (CO2) regulation – the company is diversifying enough to lessen the blows from any taxes or regulations on CO2. And by the way, does Chevron have a preference of a carbon tax versus a cap-and-trade system? He responded:

“Let’s step back for a minute. With any carbon regulation that may happen, we want to see China and India brought on board. The U.S. can’t solve this problem on its own. So any agreement should include everyone. Also, carbon regulation can’t disproportionately hurt one industry – it has to be fair across the board. We can’t put the economy at risk. That said, a fair cap-and-trade system would be preferable, but again there are a lot of details to be worked out. We’ve got experience with a cap-and-trade system in Europe and we’re involved in the CDM. But leadership really needs to be thoughtful and determine who pays for what.

To diversify, we’re the largest producer of geothermal energy in the world and we’re investing nearly $3 billion in the next three years in renewables like solar power and biofuels.”

API should be getting me some video clips from the event next week, so be sure to check back for those. My fellow bloggers at Green Options, newenergyandfuel.com and Treehugger are likely have their takes posted soon, as well.

Photo courtesy of API

Dr. James Sweeney, economist and director of the Precourt Institute for Energy Efficiency at Stanford, gave the closing remarks. He cautioned (much like David Victor’s comment about Silicon Valley getting “irrationally exuberant” about cleantech) that we get too excited about relatively small gains related to energy: “We’ve got to stop looking at the tiny steps we’ve made so far and thinking we’ve got a solution to the whole energy problem.” Later, when the other bloggers and I were at dinner with him and representatives from Chevron and API, he told us:

“There’s no silver bullet solution to the energy problem. There’s not even silver buckshot. We should be thinking in terms of silver birdshot!”

In other words, getting these technologies to market and scaling them up to commercial use should be the critical focus. It’s great if there’s one manufacturer out there making an efficient solar power system, but that system then needs to be on every home in American to really make a difference. And it’s got to make economic sense for the homeowner to want to put the system on their house.

There were several questions from the audience, made up of academics, venture capitalists and business folks. One of the most interesting questions was: What do you want the next president to do to address energy in their first 100 days?

Trae Vassallo from KPCB pleaded for a price on carbon dioxide to help the market start to determine the energy winners and losers. David Victor of Stanford said that even if Congress were to come to their senses tomorrow and pass sweeping energy legislation, it’d still take years to implement. This is a slow moving needle. We need massive CO2 reductions at this point. But we also need competitive prices and the ability to compete with other countries.

“The less any policy is anchored in price, the higher the risk. But a price on carbon isn’t enough just on its own. We need a portfolio of crucial technologies.

“I’m optimistic in the long-term, but in the short term - the next few decades - I’m pessimistic. You can build a coal plant in China so cheaply right now. They’re not going to change their trajectory, even if the U.S. does. At this point, we’ve committed ourselves to warming planet.”

Jackalyne Pfannenstiel, CA Energy Commission:

“The new president should not lie to people about the energy situation. The new president needs to say ‘energy prices are high. They’re going to stay high.’ Then they need to explain to people why the prices are high and why that may not be a bad thing. Let’s work with what we have and drive innovation.”

Another question from the audience: Can we really leave this huge problem up to states and municipalities to solve?

David Victor said that it’s dangerous for public policy to be based on what people think is the “next big idea” for solving the energy problem. People grasp on to a solution, think it’s the best idea and then pour money in to it. Silicon Valley acts this way and can be “irrationally exuberant” at times. There has to be a political strategy to go along with the Silicon Valley strategy. He thinks the big question is: How do we keep public policy on the right course without generating massive distortion by telling consumers what to use and how to use energy?

Jackalyne Pfannenstiel of the CA Energy Commission:

“Energy is a global problem and we need to address it globally. But you have to start somewhere. People ask me ‘Does California’s leadership really matter?’ You bet it does! We’re doing things directly applicable elsewhere. California’s policies could be adopted by other Western states. You’re going to get the regional groups working on it, which could set the model for national legislation.”

Andrew Murr of Newsweek commented:

“The Department of Energy could use a green fire lit under it. With all due respect to Chevron, it’s been too petroleum-centric in the past 7 years and we need to branch out. Renewables aren’t just something to talk about.”

Later on in the discussion, Paul Siegele of Chevron disagreed that states or the U.S. can solve this global problem on their own. China and India need to be on board for any change to take place. Different solutions around the world will not work:

“It’s a patchwork of regulations and these state-by-state regulations have increased the cost of gasoline distribution. The successful presidential candidate shouldn’t do much in the next 100 days. They should just think a lot about this problem.”

Our energy system is changing, and the panelists discussed the ways their respective businesses are strategizing for it:

Trae Vassallo of the VC firm KPCB lamented, “”Private investors are spending more than government on this issue - that’s a problem!” Forty percent of all of KPCB’s investments are going towards energy. Their “greentech” portfolio emphasizes three areas: Clean electricity, energy efficiency, and clean transportation.

“This isn’t going to be a winner-take-all energy market. There are going to be lots of solutions to the problem.”

Paul Siegele of Chevron believes we should focus on three areas: Supporting rational energy policies, expanding current supplies, and conserving natural resources:

“Global demand for oil is straining the energy system. The world’s not running out of oil, but there are accumulating risks to the ability to deliver the demand. The American public shouldn’t be asked to trade off prosperity to cut greenhouse gases or diversify the energy supply. It’s unreasonable to expect other countries to expand their access to energy for our needs when we restrict our own.”

Jackalyne Pfannenstiel of the California Energy Commission noted later in the discussion that California has kept its energy consumption flat since the 1970s, thanks to energy efficiency. And its GDP has kept up with the nation as a whole. It’s not necessarily a trade-off.

To clean up their energy system even further, California is focusing on two big strategies: Energy efficiency and renewables. CA has a law that says businesses can’t have a long-term contract (longer than five years) with coal companies because of the risk of impending carbon regulation that could skyrocket fossil fuel prices.

David Victor of Stanford said that there’s going to need to be a political strategy too, and that’s something Silicon Valley isn’t used to. We need figure out what sort of regulatory strategies need to happen in tandem with all of this innovation.

All panelists seemed to agree that energy efficiency is and should be a major focus to curb our energy use and clean up our emissions. But we still need vast amounts of energy…what should we use?

Chevron is excited about geothermal power, and they are in fact the largest producer of the power on the planet (13% of all geothermal generation, mostly in Indonesia and the Philippines where they were already drilling for oil). Siegele continued:

“We’re going to need every molecule of alternative energy. I’m not dismissing it, but if you look at the numbers of where the world is going and who’s driving the price, all of the forms of energy are going to grow. The era of findings cheap oil is over. That’s not to say there’s not an abundant supply, but it’s getting to be very costly to get it. On the other hand, a lot of these good other energy solutions have a distribution problem.”

He was quite straightforward about Chevron’s priorities. Although the company is spending nearly $3 billion in the next three years on renewables, they spend “considerably more” (as in most of their $72 billion after-tax profits) on conventional oil and gas technologies like deep oil drilling and oil shale development.

David Victor of Stanford noted that energy markets are going to get “very interesting” when liquid fuels and electricity fuels like coal start competing with each other. For example, right now liquids are used in transportation fuels and coal makes electricity. Crossing those resources between the markets is something we haven’t done before.

“But the real test of new energy technologies,” he continued, “will be when the price of oil comes down. Can biofuels or more efficient vehicles survive then?”

Jackalyne Pfannenstiel, chair of the California Energy Commission, is concerned about the current focus on high gas prices.

“When this happened in the 1970s and 1908s, people waited it out. If we do that again, we’re not going to take advantage of the opportunities in front of us! I want to hear that investors are taking advantage of this. We can’t hold our breath while prices are high and then go back to exactly what we were doing before. There’s got to be real change.”

But the general consensus on the panel seemed to be that we’re not moving fast enough on renewables to make them a significant market share. Therefore, fossil fuels are going to be our future (85% of our energy, one panelist said, until at least 2030).

Pfannenstiel did point out that although California won’t make its 20% renewables goal by 2010, it will probably hit it in 2011 and 2012. Governor Schwarzenegger wants to make renewables 33% of the energy system by 2020. Pfannenstiel thinks that’s actually going to be easier than the first target of 20% because the infrastructure (transmission, for example) will already be in place.

“And this drive for renewables is driving other technological innovations,” she explained. California’s publicly owned utilities are installing new “smart meters” on homes that will give homeowners huge amounts of information on how they use their energy, when they use it and what appliances, machines, etc in their home use the most. This is leading other technologies like big in-home displays for the information, smart grids, etc. We’re driving new technology with this new information.

Early on in the discussion on energy, the moderator, David Jefferson of Newsweek, profiled himself: He uses efficient compact fluorescent lightbulbs, but not consistently. He cares about polar bears, but cranks the air conditioner. He telecommutes, but he does it so he can work from home in sweatpants, not because he saves gas from not driving his car.

In a lot of ways, he’s just like the rest of us.

This broad but shallow care for the earth/energy/ begs the question: Instead of asking ourselves, “How can we influence consumers to make smarter energy choices?” instead of “How do we force consumers to make smarter energy choices?”

Most of the panelists agreed that people are concerned about green but don’t want to change radically. To be green has to be easy. Trae Vallasso of the venture capitalist firm Kleiner Perkins Caufield and Byers said that it shouldn’t be about changing behavior, but about finding better business opportunities. Money in the pocket - or money taken out of the pocket - will influence consumers’ behavior.

That’s why efficiency may be the best route to curbing energy use; not a silver bullet of course, but it is the cheapest, fastest, most efficient way to cut our energy use. It’s a major investment area for Kliener Perkins, Chevron is constantly looking for new ways to make operations more efficient, and Californians live the most energy efficiently of anyone in the nation. We know it works, it saves money, emissions and time, and it’s being done right now. As Paul Siegele of Chevron agreed: “The cheapest barrel of oil is the one you don’t use.”

Venture Capitalists are really excited about the energy technologies and are putting more and more money into three main areas: renewables, energy efficiency and transportation.

Trae Vassallo made a comment that struck me: Energy industry has been around a long time with little innovation.” There has been a lot of movement from the Goldman Sachs of the world and others, and investors are excited about that.

From a communications point of view, I think there’s also a lot of excitement about energy solutions because of the breadth of issues the topic touches: energy independence, global warming national security, clean air, healthy people, etc. People can wrap their minds around it, understand how it touches so many facets of our lives and the wealth of solutions.

Found my way to San Jose for the American Petroleum Institute/Newsweek dialog series on energy. Waiting in the lobby of the beautiful Sheraton Palo Alto for transportation to the event at Stanford. Haven’t met any other bloggers yet but I know they’re here somewhere. We’ll sniff each other out, I’m sure.

By the way, I rarely fly United Airlines but I gotta say those people are NICE. When I checked in, the lady offered to move me from a middle seat to an aisle or window and there was literally a group hug between a boarding agent and a group of older ladies. Love it.

Now I’m here at beautiful Stanford University and the Newsweek/API sponsored discussion: Energy’s Future is in Technology: Innovation in Energy Supply, Energy Efficiency and Alternative/Renewable Energy has just begun.

Moderator: David Jefferson, Senior Editor, Business and Technology, Newsweek

On the panel: Paul Siegele, Vice President, Strategic Planning, Chevron
Jackalyne Pfannenstiel, Chair, California Energy Commission
Trae Vassallo, Partner, Kleiner Perkins Caufield & Byers
Andrew Murr, Los Angeles Bureau Chief, Newsweek
David Victor, Professor and Senior Fellow at the Woods Institute for the
Environment, Stanford University

Topic: Englighten us on American’s emergent position on renewable energy. Promote energy literacy.

Small group of people, quite intimate. Video set up so I hope to get some video clips later…also a photo