Global Insights, Strategies and

Opportunities for a Sustainable Electric

Energy Future

John N. Doggett, JD, MBA, Senior LecturerGlobal Management, Entrepreneurship & Sustainable Energy

McCombs School of Business @ The University of Texas at Austin

john.doggett@mccombs.utexas.edu www.jndoggett.com

Is This a Curse or a Blessing?

May You Live in Interesting Times

Strategic Inflection Points are Scary

▪ “A strategic inflection point is a time in

the life of a business when its

fundamentals are about to change.

That change can mean an opportunity

to rise to new heights. But it may just

as likely signal the beginning of the

end.”

▪ Andy Grove, Only the Paranoid Survive, 1995

Everyone Needs Ugly Baby Glasses

This Is What A SIP Looks Like

Collateral Damage

IN THE BEGINNING

Foundation of Growth and Prosperity

▪ Electricity

▪ Clean

▪ Reliable

▪ Affordable

▪ Water

▪ Clean

▪ Reliable

▪ Affordable

▪ Without electricity, economic growth

and prosperity are impossible.

Pillars of the Community

▪ We only pay attention to the electric

company when “the power is out.”

▪ Everyone “knows” that the electric

company will restore power quickly, at

no additional cost, at any time of the

day or night, even if a hurricane or ice

storm have destroyed everything.

▪ We expect electricity to be available but

don’t want power plants or

transmission lines in our backyards.

▪ How do you square that circle?

PG&E’s Problems Taint Everyone

▪ PG&E Knew for Years Its Lines Could

Spark Wildfires, and Didn’t Fix Them

▪ Documents obtained by The Wall Street Journal

show that the utility has long been aware that

parts of its 18,500-mile transmission system were

dangerously outdated▪ https://www.wsj.com/articles/pg-e-knew-for-years-its-

lines-could-spark-wildfires-and-didnt-fix-them-

11562768885

▪ California commission finds PG&E

falsified records for years▪ https://www.cnn.com/2018/12/15/us/pge-falsifying-

records/index.html

Politicians Now Attack Electricity

▪ “We need to say that those who are

throwing the carbon into the air that the

rest of us have to breathe, that the rest

of us have to deal with, are the ones

who are responsible for paying for that.

I'm there,” [Senator] Warren said.

▪ Vermont Sen. Bernie Sanders said, “If

you are in the fossil fuel industry,

you're going to be paying more in

taxes, that's for sure.”▪ CNN Town Hall, 9/4/19

The Saudi Refinery Attack

▪ This was not the first attack on a Saudi

facility, but it was the largest and most

sophisticated.

▪ Analysts had identified one of the

targets as being very vulnerable and of

great strategic importance.

▪ So the question is: why were they not

prepared to defend themselves?

▪ California is likely to feel the blunt the

most since they get 21% of their oil

from the Saudis.

“Managing” The Market

If #1 and 2 Stumble . . .

The US Can’t Fill The Gap

Global Warming and Climate Change

Per Capita vs. Total Amount

Look At The White Circle

China Emitted Half of US in 2000

Did You Know This?

EU Carbon Market Collapsed in 2013

▪ The E.U.'s Emissions Trading Scheme

set an overall cap on carbon emissions

for about half of Europe's industries.

Companies get a certain number of

pollution permits that they can trade

among themselves. As the cap ratchets

down each year, the number of permits

is supposed to dwindle and the "price"

on pollution keeps rising.

▪ Assumed that the financial pain would spur

investment in “clean” energy.

A “Glut” of Permits

▪ More than a decade ago, there was a

glut of European permits. Policymakers

initially gave too many away, and then

there was the sub-prime created

recession. So Europe's emissions are

well under the cap and permit prices

had been hovering below $9 per ton

since 2011.

▪ When the EU failed to delay the release

of new permits, the price of carbon

collapsed to $3.40 a ton.▪ https://www.washingtonpost.com/news/wonk/wp/2013/04/20/europes-cap-and-trade-program-is-in-

trouble-can-it-be-fixed/?noredirect=on

California’s Cap & Trade Regime

▪ Since May 2017, every allowance put up

for auction has been snapped up. That

has inspired another concern:

▪ Industries could buy and hoard so many

allowances to emit greenhouse gases now that

they might not need to actually reduce emissions

when the state’s emission target becomes

especially stringent.

▪ A 2016 law established target of

reducing greenhouse gas emissions to

40% below 1990 levels by 2030.

Best Designed Plan Ever?

Business Respond to Incentives

▪ The danger of hoarded emissions

allowances: Businesses buy excess

allowances now, while their emissions

remain below statewide limits, and use

them in the future so they don't have to

install antipollution equipment. As a

result, emissions remain higher in 2030

than the target.▪ (California Legislative Analyst Office)

▪ https://www.latimes.com/business/hiltzik/la-fi-hiltzik-

captrade-20180111-story.html

Regional Greenhouse Gas Initiative

▪ The Regional Greenhouse Gas Initiative

(RGGI) was the nation’s first multi-

state, market-based program designed

to reduce emissions of carbon dioxide

(CO2) in the electric power sector.

▪ RGGI is a cap-and-trade system that

applies to CO2 emissions from electric

power plants that generate 25

megawatts of electricity or more.

RGGI’s Member States

▪ The program began in 2009, was

strengthened after a comprehensive

review in 2012, and currently features a

tightening emissions cap through 2020.

▪ Nine states currently participate in

RGGI: Connecticut, Delaware, Maine,

Maryland, Massachusetts, New

Hampshire, New York, Rhode Island,

and Vermont. (New Jersey participated

in the program through 2011, before

exiting at the end of that year.)

RGGI Is A Big Program

▪ RGGI states cover 1/6 of the U.S.

population and 1/5 of the nation’s GDP.

Most of the nine states’ electricity is

derived from fossil fuels.

▪ RGGI sets annual cap for the region’s

aggregate CO2 emissions from electric

power sector. Cap declines 2.5% per

year from 2015-2020. Pollution permits

(‘allowances’) are regularly auctioned

to power plants. One allowance is

equivalent to one ton of CO2.

RGGI Impact or Fracking’s Impact?

▪ Success of GHG reductions: Across

the RGGI region, CO2 emissions have

dropped over 35% since the program’s

launch in 2009—thanks in large part to

fuel-switching (away from the dirtiest

power plants), improved energy

efficiency, and growing renewable

energy output.▪ Source:

https://www.ceres.org/sites/default/files/Fact%20Sheets

%20or%20misc%20files/RGGI%20Fact%20Sheet.pdf

Carbon Tax

▪ A carbon tax is a fee that a government

imposes on any company that burns

fossil fuels.

▪ The purpose of a carbon tax is to

reflect the true cost of burning carbon.

Those costs are borne by those who

suffer from the effects, such as

homeowners, farmers, and ultimately

the government. Carbon taxes make

sure companies and consumers pay for

the external costs they impose on

society.

Carbon Tax 101

▪ To implement a carbon tax, the

government must determine the external

cost for each ton of greenhouse gas

emission.

▪ One group, the U.S. Interagency Working

Group on Social Costs of Carbon,

developed an estimate of $40 per metric

ton. A tax reflecting this social cost

would increase gas prices by 36 cents a

gallon. It would add $0.02 to the price of

a kilowatt-hour of electricity.

Carbon Taxes Meet Reality

▪ A United Nations report said the price

should be much higher to keep

temperatures from rising above 1.5 C

by 2030. It recommended a carbon tax

of between $135 and $5,500 per ton.

▪ A recent report from the Organization

for Economic Cooperation and

Development found that the average

carbon price across 42 major

economies was $8 per ton in 2018. ▪ https://www.thebalance.com/carbon-tax-definition-how-it-

works-4158043

Carbon Tax and Agriculture

▪ The problem for agriculture is that the

tax could increase the cost of a range

of inputs, including electric power,

natural gas-based fertilizers, diesel fuel

and propane needed to run machinery,

trucks, irrigation pumps, etc.

▪ Farmers will spend nearly $35 billion on

fuel and fertilizer this year, about 10%

of their total production expenses,

according to USDA’s Economic

Research Service.

Carbon Tax Means Higher Prices

▪ According to a report by the

Congressional Research Service, a tax

of $25 a ton of carbon emissions would

generate about $100 billion in revenue

the first year, and raise the price of

gasoline about 8%, or 23 cents a gallon

based on average fuel prices between

2013 and 2017. ▪ https://www.agri-pulse.com/articles/12581-top-

item-on-democrats-climate-agenda-faces-ag-

pushback

Some Think Renewables Are Magic

▪ Want 100% renewable energy and zero

traditional energy sources.

▪ Want to phase out natural gas but don’t

understand what happens when the

sun sets and the wind doesn’t blow.

▪ Claim that they want carbon zero

energy but adamantly opposed to

nuclear . . .which produces zero

carbon emissions.

▪ Naïve at best; political at worse.

The Green New Deal

A Bold New Vision or A Bad Idea?

10-Year Cost of Part of GND

▪ $6.8 trillion to $44.6 trillion for guaranteed jobs;

▪ $36 trillion for federally provided universal health care;

▪ $5.4 trillion to create an all-renewable electric system; and

▪ $1.6 trillion to $4.2 trillion for guaranteed green housing.

▪ https://www.rpc.senate.gov/policy-papers/green-new-

deal-nonsense-on-stilts

Who Pays For This?

Competitive Enterprise Institute

If This Estimate Is Accurate

When You Add Container Ships . . .

Cruise Ship Pollution in Greece

▪ A recent study by the European

Federation for Transport and

Environment found that sulfur oxide

(SOx) emissions from cruise ships in

Greece were 120 times greater than

those produced by all the small

vehicles circulating in the country.

Cruise Ship Pollution in Europe

▪ In 2017, the ships of one of the sector’s

biggest cruise companies dumped 10

times more sulfur oxides into the

atmosphere along Europe’s coasts

than the 260 million cars that were in

circulation on the continent that year.

▪ http://www.ekathimerini.com/243807/article/ekathimerini/

business/alarm-over-air-pollution-emitted-by-cruise-ships

Very Straight Forward Technology

1967 French 240 MW Tidal Power Plant

http://en.wikipedia.org/wiki/Image:Rance_tidal_power_plant.JPG

Producing Electricity for 52 Years

Sihwa, Korea 254 MW on Tidal Inflow Only

South Korea’s Ocean Energy Portfolio

Ocean Currents = Electric Power

NASA/JPL/Cal Tech Ocean Current Prototype

Seawater District Cooling

Ocean Thermal Energy Conversion

This Beats All Energy Sources

This is the Holy Grail

Chinese Tide-Driven Turbine Farm

Chinese Dynamic Tidal-Power Wall

Chinese Ocean Thermal-Energy

Conversion

Applied’s Xi’an R&D Plant

Will China Dominate Clean Energy Tech?

▪ When Xie Lina, a 26-year old Applied

Materials engineer in Xian was asked

whether China would play a big role in

clean energy in the future, she was

surprised by the question.

▪ “Most of the graduate students in

China are chasing this area,” she said.

▪ “Of course, China will lead everything.”▪ New York Times, March 17, 2010