A Tale Of Three Nations

This is a tale of three nations, with each writing its own unique story.

Or are they? After all, appearances can be deceiving. There are times when ostensibly unique stories are woven together into a common narrative.

So let’s review our trio of tales and ask ourselves whether the three nations are indeed writing their own distinctive histories. Or, conversely, whether they are each playing a different role within a single universal saga.

First, let’s discuss Great Britain. During Victorian times, the Industrial Revolution roared to life, powered by the coal mines of Newcastle. Did you know that the phrase “London Fog” often referred to smog events? With a heavy manufacturing economy based on burning fossil fuels, the British air was filthy.

But last week, the fifth largest economy on the planet enjoyed its first full day of coal-free energy in its industrial history. This epochal event was made possible by the nation’s embrace of renewable energy sources.

Now let’s discuss China. Two weeks ago, Greenpeace East Asia released a report that predicted that Chinese renewable energy production would replace 300 million tons of coal by the year 2030. They attributed this projected transformation to the planned quintupling of the size of China’s wind and solar power industries between 2015 and 2030.

Finally, let’s discuss the United States. How is America responding to emerging trends in the global energy industry?

Well, four weeks ago, President Trump signed an executive order to repeal his predecessor’s prior actions to minimize carbon emissions. With a group of West Virginia coal miners standing beside him, Trump justified his desire to support “the truly amazing people … our incredible coal miners … (who) love to mine …

To a certain extent, these are three distinct actions by a trio of unique nations. Each one resides on a different continent, and each one is confronting its own set of social and economic priorities.

But each nation shares our common planet, and each is managing its interests within an increasingly globalized society and economy. If it’s possible to weave together a common story from these individual tales, it might also be possible to anticipate which nations will prosper, and which will become impoverished, as this tale unfolds.

Tesla In Nevada: New World Of Energy

Certain corporate announcements explode across the headlines and shock us all with the realization that we are entering a new world. The emergence of McDonald’s in the old Soviet Union, for instance, embodied the triumph of capitalism over communism. And Steve Jobs’ introduction of the iPad, for example, epitomized the emergence of the mobile internet.

Although it received far less publicity, Tesla’s announcement of the construction of a $5 billion battery “gigafactory” in Nevada (USA) last week may be recognized, eventually, as another such announcement. After all, on several different levels, it exemplifies the emergence of a new world of energy.

How does it do so? Well, Tesla itself is a creature of the age of clean energy. Although electric automobiles were first built in the 1800s, Tesla was formed a decade ago to address environmental concerns like climate change by replacing gasoline powered vehicles with zero carbon emission cars. Elon Musk, its founder and owner, also launched SolarCity with the same goal in mind.

Furthermore, Tesla’s decision to built the gigafactory was necessitated by its plans to introduce its first mass market all-electric automobile, the Model 3. The firm’s senior officers are convinced that environmental concerns will compel middle class buyers to embrace automobiles with zero carbon emissions.

Perhaps most significant, though, is Tesla’s decision to build the factory in Nevada, a state with a very limited manufacturing footprint because of its distance from traditional carbon based energy sources. Nevertheless, the site was chosen because of its ability to generate renewable solar, wind, and geothermal power.

A gigantic factory powered by renewable energy sources, producing massive numbers of batteries for mass market vehicles that emit no carbon pollutants? That is certainly a project that can serve as a harbinger of the emerging new world of energy, one that may be remembered for years to come.

Energy Independence: The American Future

Last week, the International Energy Association (IEA) predicted that the global community is merely five years away from witnessing the emergence of a new leader in oil production. That can hardly be welcome news to Saudi Arabia, of course, the world’s largest oil producer at the present time, or to Russia, its longstanding runner up.

So which nation is preparing to accede to the throne? Is it Canada, with its fields of oil sands in the western province of Alberta? Or Brazil, with its newly discovered wealth of off-shore crude? Or perhaps China, Vietnam, or the Philippines, with their recent discoveries in the South China Sea?

To the surprise of many industry analysts, the IEA predicted that the United States will soon become the world’s greatest oil producer. In addition, the Association forecast that America will supply all of its domestic energy and become a net exporter no later than the year 2030.

Imagine, if you can, a world in which the United States no longer needs to import oil from the Middle East, from Venezuela, or from any other nation. An American economic super power with a stable, secure, inexpensive, and solely domestic source of energy? It could well guarantee the extension of Uncle Sam’s global dominance throughout the 21st century.

Envious Rivals

Of course, America continues to compete with a wide variety of rivals for economic dominance in global affairs. Nevertheless, none of its rivals can visualize a future of energy self-sufficiency.

China, for instance, is aggressively continuing to develop relationships with African nations in order to ensure future access to energy resources. And as a result of the Fukushima nuclear power disaster, Japan continues to struggle with its reluctant transition from nuclear power to alternative sources of energy.

Of all of the major global economic powers, Germany appears to have made the most progress thus far in transitioning from imported fossil fuels to domestic renewable energy sources. But its green energy projects continue to be plagued by massive operating costs that require significant government subsidies.

In contrast, the IEA noted that new discoveries of natural gas fields in shale rock within the United States will likely supplement its surging oil field capacities and convert America from an energy importer into a fuel exporter. The world’s largest economy, an energy exporter? For American corporations and consumers, it certainly represents an enviable future.

The Global Markets

Considering the current configuration of the global energy markets, though, it is important to note that an energy independent America would not be invulnerable to market disruptions in other nations. Indeed, the price of oil is established in the global market place, and it is influenced by factors that influence supply and demand around the world.

That has been true since the middle of the last century, when seven global companies — known as the Seven Sisters — seized control of the supply and the price of oil. Then, in 1960, effective control of supply and price began to shift towards the governments of oil producing nations when Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela formed the Organization of the Petroleum Exporting Countries (OPEC).

OPEC certainly does not exert full control over all global oil prices; West Texas Intermediate (WTI) crude oil, for instance, is traded as a commodity on the Chicago Mercantile Exchange (CME). Nevertheless, because traders and other investors can buy and sell most of the varieties of oil (as well as futures and other derivatives) that are produced around the world, the market price of oil that is both produced and consumed in the United States is affected by industry events elsewhere.

The Isolation Option

The past few years have been markedly turbulent ones for the global economy, of course, with once-reliable market pricing mechanisms struggling to adapt to new conditions. Might an energy-independent America be tempted to withdraw its oil and gas resources from the global markets and isolate itself from the price effects of external supply disruptions?

The scenario is not an implausible one. After all, domestic energy producers in the United States are already prohibited by law from selling large amounts of oil and gas resources to customers overseas. And conservative Republican politicians such as Ron Paul have long advocated for the dismantling of global market institutions such as the Federal Reserve Bank of the United States.

Likewise, many global financial analysts believe that the monetary zone of the European Union is destined to splinter because of centrifugal forces that are pulling apart nations like Germany and Greece. If the world’s financial markets fracture into national entities, the world’s energy markets may do so as well.

Would an American economy with a self-sufficient energy supply and a domestically controlled market mechanism be able to survive on its own? Conversely, would the rest of the global economy be able to survive without it?

These may represent mere rhetorical questions at the present time. In the near future, though, they may become immensely important policy issues.

Google’s Gambit: Investing In The Wind

Politicians, environmentalists, and the private sector have been locked in debate for years over the future of America’s energy infrastructure. Should the largest economy in the world remain powered by oil, or should it switch to nuclear power? How about alternative energy sources, such as wind, water, and geothermal production processes? Or should America continue relying on oil as a primary resource, while simultaneously striving to develop domestic coal and natural gas supplies as well?

Of course, this choice of energy source and production method only represents the first challenge confronting America’s energy policy makers. They face a second challenge as well; namely, how should the energy itself be transmitted from the generation site to the user? Although the general public has always demanded cheap and readily accessible energy, it has no desire to live and work near gigantic towers of newly constructed power cables, fearing everything from property values declines to cancer epidemics.

An innovative solution, though, may have emerged last week from an unlikely source: the online search giant Google. With a single enormous investment decision, the firm may indeed have placed America firmly on the path to energy independence.

Harnessing The Power of The Wind

Most policy makers agree that renewable energy sources provide the most attractive long term potential for meeting America’s energy needs, considering their ubiquitous presence and lack of resultant environmental pollution. Ever since the Dutch first constructed wind mills to power their communal drainage systems and operate their milling factories, every breeze has carried the potential to power industrial societies, at least in the imaginations of romantic environmental visionaries.

Texas energy billionaire T. Boone Pickens has proposed the construction of gigantic wind mills throughout the wind swept Great Plains of the midwestern United States, but his plan has been stymied by the private ownership of prime locations, as well as community opposition to land-based transmission cables. And relatively small wind farms in the Atlantic Ocean, close to picturesque shorelines and islands such as Martha’s Vineyard, have been delayed by environmentalists and wealthy residents who prize their pristine ocean views.

What America needs is a series of wind farms that are as large as the land-based establishments proposed by Pickens, but that are placed far off-shore in the Atlantic Ocean to relieve the concerns of coastline residents. Such remote energy sources, though, would only be technologically feasible with an additional mammoth investment in the underwater sea cables that would be required to transmit the power to the mainland.

Enter Google!

This is where Google stepped into the debate last week, making a $5 billion investment in a proposed off-shore Atlantic Ocean transmission system that would span much of the eastern coastline of the United States, running from New York City to Virginia. Along with a matching $5 billion investment by the clean energy investment firm Good Energies, as well as a smaller stake by the Japanese trading firm Marubeni, the internet giant is placing a huge financial bet on the future direction of the American energy industry.

Why is Google so interested in America’s energy infrastructure? Its motivation should come as no surprise to any internet user; it must operate massive clusters of computer servers to provide its services to a web-surfing public, and those clusters require enormous amounts of energy for operational purposes. Nevertheless, although Google’s investment cannot be construed as a purely altruistic gesture, their decision may result in America’s long term gravitation from an oil-based economy to a wind-fueled one.

President Obama has long advocated that the United States government allocate significant research funds to the development of renewable energy resources. Many experts agree with the President about the wisdom of this strategy, noting (with some trepidation) the competitive investments now being made in China to capture the market for clean and environmentally friendly fuels. At a time when governmental resources are stretched thin, Google has decided to dedicate its significant private sector investment funds to a project that arguably supports the public interest.

Even Short Term Benefits

Interestingly, the project has been ingeniously designed to yield short term benefits as well. For instance, even before the off-shore wind farms are actually built and placed in operation, the transmission system will be able to carry power from the energy-rich southern states to the fuel-hungry northern regions. In other words, the system will be used to better match current supply and demand by utilizing a transmission capacity that is “out of sight and out of mind” to American citizens.

Will it ever be built? Will it successfully wean Americans away from their addiction to fossil fuels? Google itself has just placed a $5 billion bet on these questions, in the hopes that a successful investment will help our nation solve one of our most vexing challenges.