 |
Enabling the Search for Energy Solutions
Remarks by Michael J. Dolan
Senior Vice President, Exxon Mobil Corporation
Financial Times Energy Technology Conference
Brussels, Belgium
May 4, 2010
Thank you, Ed. And thank you to the Financial Times for hosting today’s conference. ExxonMobil is pleased to support this meeting of minds from government and industry to focus on the search for innovative solutions to Europe’s energy challenges.
This morning we heard insightful remarks from two of the European Union’s leading authorities on energy, and from a pioneer in the study of nuclear fusion. We also heard from our first panel about a number of innovations in the transportation sector that could lead to near-term gains in energy efficiency and reductions in greenhouse gas emissions.
This afternoon we will hear from two more panels about technologies emerging over the longer term that have the potential to help transform Europe’s – and the world’s – energy future.
ExxonMobil is proud to be a part of this technology transformation. Continual innovation has been a key to our company’s competitiveness since we first began supplying energy to Europe more than 125 years ago.
It is also the key to addressing the dual challenge all of us face today and in the years ahead – meeting the world’s growing demand for energy while reducing the environmental impacts of energy production and use.
ExxonMobil’s tradition of innovation extends to today. We currently employ more than 16,000 scientists and engineers – about a fifth of our global workforce – who contribute to the development and deployment of new technologies throughout their careers. And over the past five years, we have spent more than $5 billion in technology and applications.
This investment in human and financial capital is paying dividends in the form of promising new technologies with the potential to provide more energy to more people in a more affordable, a more secure and a more environmentally responsible way.
From new, four-dimensional seismic exploration techniques, to giant, high-tech liquefied natural-gas tankers bound for European markets, to lithium-ion battery film separators for hybrid vehicles, to synthetic lubricants for wind turbines, to research in production of biofuels from algae, ExxonMobil is proud to participate in our shared technological progress.
This progress is the product not only of visionary thinking, but also reality-based pragmatism. It is achieved by breakthroughs not only in research labs, but also at demonstration projects, field operations, manufacturing plants, local markets and ultimately the global energy system at large. For a technology to transform our energy system, factors such as availability, affordability and scalability are absolutely crucial.
At the midpoint in today’s conference, I suggest we pause to reflect upon these practical factors driving technological development – not to slow the search for solutions, but to advance it, and to enable true transformation.
Of the many technologies we are discussing today not all will succeed. Some may ultimately prove able to address our shared economic, environmental and security needs in a commercially viable way and on a sufficient scale – and others may not. The unpredictable process of trial-and-error will shape the search for energy solutions in the future – just as it has in the past.
A brief history lesson is illuminating in this regard. The experience of major, developed economies since the Industrial Revolution began on this continent two centuries ago shows that changes in our energy mix are incremental and experimental.
For example, it took most of the 19th century for industrialized nations to transition from a primary reliance on wood for fuel, to a primary reliance on coal. Over the next half century, we saw a major transition to oil as part of the energy mix, which supported rapid expansion in the use of cars and trucks for an increasingly mobile society. And by the year 2000, natural gas – once burned off as a by-product of oil production – had clearly emerged as a key energy source for home heating, industrial processes and electricity generation.
New technologies and newly discovered energy sources interacted in complex and dynamic ways to drive this gradual transformation. It did not happen overnight, and it was not the result of a silver bullet or “eureka” moment. Significantly, it was also not the result of a government mandate or subsidy – although public policy has an important role to play in creating the conditions for investments in innovation, a point I will return to later.
Instead, the transformation of the global energy system throughout modern history has been the result of an untold number of scientists, engineers, managers and operators across the energy industry, as well as also scores of inventors, innovators and entrepreneurs who developed a vast array of technologies that enable the way of life we enjoy today.
Over time, these modern technologies and the energy needed to fuel them have come together in the marketplace to satisfy economic needs and help provide a road to prosperity for people around the world.
This organic, bottom-up approach reflects the nature of energy innovation. The course of technological development and deployment is inherently unpredictable.
New resource discoveries, new consumption patterns, new geopolitical developments, new advances in other sectors of the economy, and countless other factors steer the search for solutions in complex and unforeseen ways. No leader in industry or government can know with certainty what the future holds.
To underscore this point, let me share the experience of my own company. Although ExxonMobil has always been first and foremost an oil, natural gas and petrochemical company, we have, throughout our history, experimented with other energy sources.
For example, silicon-based photovoltaic solar technologies emerged from universities in the 1950’s and ‘60’s, and by the 1970’s and ’80’s, ExxonMobil pursued their commercial development, investing in a solar panel manufacturing business. But after about ten years, we discovered that we could not advance the technology far enough to overcome the economic hurdles preventing them from becoming a viable alternative on a large scale.
Also in the 1980’s, we developed technologies to convert coal and natural gas to clean-burning fuels to help improve energy security around the world. In fact, we were the first to commercialize gas-to-gasoline in the 1980’s in New Zealand. But again, the technology proved inadequate to provide the economic and widely available energy the public demands.
Let me give another example of our research and development in new energy technologies – a technology most of you are probably familiar with. In the 1970’s, the first lithium-ion battery was developed in Exxon’s central research laboratory. This technology eventually powered the cell phones and other electronic devices that emerged in the 1990’s and are practically ubiquitous today.
And to this day, we manufacture the anode/cathode separators that enable batteries to be safe and efficient. This invention ultimately proved economic for electronic devices offering lighter-weight and longer-life batteries consumers demand. Today, we are involved in research to extend this technology to automobiles. It is early days in this research, but once again consumers will decide if the end results are acceptable.
The search for more effective, more efficient and more affordable energy has also taken us in some unexpected directions. For example, last year ExxonMobil announced that we have partnered with Synthetic Genomics, Inc. for research and development of next-generation biofuels from photosynthetic algae.
Our studies showed that algae have several key advantages as a biofuel source. They rely on readily available sunlight, but not on fresh water or arable land, and therefore do not compete with the world’s food supply. They also use carbon dioxide to grow, providing potential greenhouse gas mitigation benefits.
And, perhaps most importantly, algae have the potential to produce economic fuels with the portability and the high-energy content consumers require in transportation fuels. Also, algae-based biofuels may not require a complete turnover of the vehicle fleet or a complete makeover of fuel-delivery infrastructure already in place. These practical considerations of scalability and usability weighed heavily in our decision to pursue this technology.
If research and development milestones are successfully met, ExxonMobil expects to spend more than $600 million, including potentially more than $300 million to our partner SGI, on our algae biofuels program.
If you had asked me just five years ago where we would focus our research and development, I doubt algae would have made the list. But that would not have been the first prediction in the energy industry proven wrong by changing market realities and unexpected discoveries.
To say energy innovation is unpredictable is not to say it is unmanageable, however. Governments and industry can work together to create the conditions that enable the search for solutions to succeed. Too often, perhaps reflecting a sense of urgency to solve problems, policies reflect an arbitrary bias in picking winners and losers. They serve to force conformity around fewer options, rather than fostering new ideas, innovation and competition in the free market that has been vital to expanded prosperity around the world.
Based on our experience, we believe the most effective means of enabling technological progress is through a sound, sensible, stable and unbiased approach to policymaking. With this approach, government authorities help provide a reliable framework that companies and investors – including those involved with energy – need if they are to pursue high-risk but potentially high-yield technologies.
Technological innovation in the energy sector, as in practically every other sector of the economy, is an inherently risky undertaking – and unpredictable risk discourages investment. Many of the risks involved are unavoidable – trial-and-error is the modus operandi of scientific discovery. But at least one risk is avoidable, and that is the risk of sudden and ineffective changes in public policies, laws, and regulations that govern the rewards for risk-taking.
Therefore, the government approach to policymaking most conducive to energy innovation is not focused on micromanaging or manipulating energy markets, but on setting basic parameters and long-term priorities. Rather than narrow tactics, government policy would do best to address broad strategy, and focus on the fundamentals. This focus on fundamentals should start with an understanding of challenges before us. Europe has challenges specific to its situation, such as accessibility to reliable sources of natural gas for power generation. But because the markets for oil and, increasingly, natural gas are global, and because these two sources alone account for over half of global energy supplies, Europe’s energy future is inextricably tied to the world’s. Every country and continent participating in the global energy system shares the same fundamental challenges and opportunities.
The foremost challenge the world faces at this time is returning to a path of sustained and expanding prosperity for people around the world. Key to meeting that challenge is providing reliable and affordable supplies of energy to meet a dramatic increase in energy demand. By 2030 – only 20 years from now – global energy demand will be almost 35 percent higher than it was 2005. That figure takes into account the recent economic downturn, as well as significant gains in energy efficiency expected in the years ahead. It is an enormous number, and represents a stark challenge.
This global energy challenge is stark precisely because energy factors heavily into our standards of living. Imagine life without electric power and appliances, without modern means of cooking, without heating fuels, without the ability to go to hospitals or schools for lack of reliable and efficient transportation. It is hard for us to comprehend.
But for billions of people today around the world such impoverished conditions are not imagined, but real. As we attend this conference today, about 1.5 billion people lack electricity. About 2.5 billion lack access to modern cooking or heating fuels, and they are forced to rely on burning wood, dung, or other dirty and dangerous energy sources to cook and stay warm.
The global energy demand challenge is fundamentally a humanitarian challenge that we are all compelled to meet.
Coupled with this challenge is the environmental one. Thanks to technology, the world has made tremendous strides over the years in reducing the environmental impacts of energy use.
For example, an average-sized vehicle emits 97 percent fewer sulfur, nitrogen and particulate emissions that a similar vehicle did in 1980, thanks to cleaner fuels and the widespread use of catalytic converters and other innovations.
Nevertheless, the risks of climate change due to rising greenhouse gas emissions are real. By 2030, we expect global energy-related carbon-dioxide emissions will be about 25 percent higher than they were in 2005. Emissions in OECD countries are likely to trend lower, however this is offset on a global basis as emissions rise in rapidly developing economies such as China and India. By 2030, developing countries will account for about two thirds of global energy-related carbon-dioxide emissions.
The risks associated with these rising greenhouse gas emissions warrant action – by governments, by industry, and by consumers. We all have a stake in successfully managing this challenge.
This dual energy challenge – meeting growing global demand, while reducing growing global emissions – frames the energy innovation policy debate. We need new technologies that can deliver energy with lower emissions – and we need a strategy for achieving this goal.
I would like to briefly describe four essential elements of an effective energy strategy, from an industry perspective.
First, it is imperative that we develop all commercially-viable energy supplies. The humanitarian challenge we face demands it. Foremost among the energy sources the world requires are oil, natural gas and coal, which remain among the most abundant, available and affordable sources. Reputable authorities agree that these fossil fuels will remain predominant through 2030 at close to 80 percent of the worldwide energy mix.
These are not the only sources of energy we need to develop, however. In fact, since the dawn of the Industrial Revolution, the world’s sources of energy supply have never been more diverse. Nuclear, wind, hydroelectric, geothermal, solar and other sources comprise a substantial part of the energy mix, and represent some of the fastest-growing sources.
Their contributions will remain significantly less compared to hydrocarbons through 2030 because they are building upon a relatively small base within an enormous global energy system. But their important role cannot be overlooked.
In fact, we expect nuclear and renewable energy sources will combine to provide about 40 percent of global electricity demand by 2030.
In pursuing these sources, their commercial viability is key. We cannot divorce energy development and innovation from economics. Artificial supports for energy sources that otherwise could not compete do not ultimately provide a sustainable solution. To be sustainable, new sources of energy need to be economic. They need to meet or exceed the same high standards of accessibility, utility and affordability that energy consumers have come to expect and, indeed, demand.
A second essential element of an effective energy strategy is increasing efficiency. Energy efficiency represents one of the largest “sources” of new energy, and is also one of the most secure and sustainable. In addition, it is emissions-free.
Gains in energy efficiency through 2030 will reduce global energy-demand growth by approximately 65 percent. It is an astounding figure.
Even more astounding is the “what if” scenario – if the world’s economy were to grow as projected through 2030, but efficiency were held flat at 2005 levels, global energy demand would be about 95 percent higher. The power of energy efficiency is clear.
Continuing and accelerating these energy-saving trends can have an immediate and profound impact. Increasing energy efficiency in the transportation, power-generation and industrial sectors is a sensible priority of energy strategy, and a helpful focus of government policy. Technology to improve energy efficiency is available and can be deployed quickly, avoiding greenhouse gas emissions in the near term.
Another element of an effective strategy addresses power generation. The outlook through 2030 shows that the world’s need for electric power generation, especially in developing countries, will grow rapidly. It is the continuation of a long-term trend. In 1980, power generation represented about 25 percent of global energy demand. By 2005, it jumped to approximately 35 percent. And by 2030, it will constitute 40 percent, making it the largest and fastest-growing demand sector.
Power generation is also the sector contributing the most to global greenhouse gas emissions. Many might assume that the use of diesel or gasoline in transportation accounts for more. These products tend to be the most visible source of energy demand, given our everyday, hands-on experiences. But, in reality, emissions from power plants worldwide make up the larger share.
In addressing greenhouse gas emissions, it is only natural then to focus on this sector, as I know many at today’s conference already are. We cannot effectively meet global energy demands and reduce emissions without addressing power generation in a systematic way.
Fuel-switching to natural gas and nuclear for electricity production is an important part of the solution. Advances in liquefied natural gas shipping and unconventional gas production from shale are making this resource more accessible, and natural gas used to produce electricity can reduce carbon-dioxide emissions by up to 60 percent. Nuclear energy generates no carbon-dioxide emissions and is an obvious option.
Coal, however, will continue to be a major energy source especially in developing nations like China and India, given their large coal resources. Carbon capture and storage technology development and deployment must be a priority over the next several decades. Much work is needed to reduce the cost of carbon capture, and to develop the legal framework for long-term carbon storage.
A fourth and final element of an effective energy strategy is to continue long-term research into new technologies. Today’s fields of long-range research like biofuels, fuel cells, and nuclear fusion will require decades to understand and exploit. Much of this research and development will be conducted in industrial research labs.
Governments can be supportive of this in two essential ways. Basic, pre-commercial scientific inquiry is often too removed or too risky for private enterprises to pursue; public support for this sort of fundamental scientific research and development in universities and national laboratories is essential to build scientific understanding.
Governments can also support research and development by expanding and enhancing educational opportunities in science, engineering and math.
Technology is a renewable, man-made resource, and it takes a steady supply of technical and intellectual talent to replenish. Any long-term energy strategy, focused on sustaining progress across generations, must address science, engineering and math education.
Expanding economic supplies, increasing efficiency, implementing carbon capture and storage, and supporting research and development – these are four important elements of any effective energy strategy.
Too often debate is focused on policy tools, rather than these fundamentals – and, unfortunately, without clear consensus on fundamental priorities, ineffective or even counterproductive policies can result.
Our focus instead must remain on enabling the search for innovative solutions to our energy challenges. It is a search that has spanned decades and will span decades moving forward. It is a search driven by markets, not mandates, and involves thousands of scientists, engineers, researchers and others throughout the global energy system.
And, if history is any indication, it is a search that promises to eventually yield technologies that increase energy supplies, reduce environmental impacts, and transform our energy future.
Thank you.
