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Is an Energy Crisis Imminent?

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Is an Energy Crisis Imminent?

10 Blocks podcast July 14, 2022
Infrastructure and energy

Former Popular Mechanics editor and new Manhattan Institute senior fellow James B. Meigs joins Brian Anderson to discuss the state of the global energy economy, the technological innovations that could make energy use more efficient, and the bad policies that contributed to the current crunch.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is James B. Meigs. He's a new senior fellow at the Manhattan Institute; he's also a new contributing editor of City Journal magazine. He's the co-host of the “How Do We Fix It?” Podcast, he writes a tech column for commentary, and is the former editor of Popular Mechanics, among other publications. His coverage of energy, environmental policy, culture, and other topics has appeared in the Wall Street Journal, the New York Times, Slate, and many other publications. And he's been writing a number of articles for City Journal in recent weeks on the state of the energy economy at a time of global turmoil. So, Jim, thanks very much for coming on the podcast.

James B. Meigs: Great to be back, Brian.

Brian Anderson: As I note, you've been covering the energy world, not only for City Journal, but for other publications for a while now. I think you would have to agree that this year is just an anomalous and striking year. The price of oil and natural gas has gone through the roof, there's a number of factors behind the energy inflation we're seeing, including Russia's invasion of Ukraine, obviously, but I wonder if you could just give us a brief survey of what you think is going on here? Why is energy becoming so expensive and how did we get here?

James B. Meigs: Yeah. We are in the early stages of what some analysts believe will be a global energy crisis of the kind we saw in the 1970s, perhaps worse. And the war in Ukraine is a big part of it, but in a way, it's something that has just precipitated an intense demonstration of problems that were already in the works. And a lot of those problems have to do with counterproductive energy policies, particularly in the Western world.

You've seen in Europe and in North America efforts to transition to renewable energy, especially wind and solar, and at the same time, a movement away from nuclear power; efforts to reduce the production of natural gas; efforts to reduce the production and transportation of oil. All those things have led us to a point where we do not have supplies of reliable energy—in the electricity world, what they call dispatchable energy: electricity you can turn on and off as needed as opposed to electricity produced by wind and solar that comes and goes according to the weather. It's not particularly predictable.

So we have made our entire energy system a little bit more brittle, more fragile, less responsive to changes in demand, and as a result, when some incident like the war in Ukraine, or say a major cold snap in the Northeast of the U.S. or in Texas, when those things happen, we find out that our energy distribution system isn't really up to the challenge, and prices skyrocket, sometimes we have blackouts, sometimes natural gas supplies don't get through. So we are living in a time of real vulnerability here in terms of energy.

Brian Anderson: In an essay that you've written for the forthcoming summer issue of City Journal, you look at the European situation, where you note that European officials have favored utopian sentiments over economic and engineering reality. And you point out that Germany has spent an extraordinary amount of money, 500 billion euros on wind and solar infrastructure, biofuels, all these other initiatives over the last 20 years, but the country's total share of energy produced by fossil fuels has fallen only to 78 percent from 84 percent over that period of time. And so now you've got this invasion of the Ukraine that's forced Europe to curtail purchases of Russian hydrocarbons. Just reality is kicking in here. Germany and other European countries have got to face reality.

So they've been depending on Russia now for years for, for energy supply, and now they're looking at, as you just noted, potential blackouts, cold in the winter, a huge problem of energy security. So I wonder what you think might be done to address this problem and deal with this pretty significant crisis.

James B. Meigs: A situation like this, of energy insecurity and shortfalls in energy supplies, it's kind of like a home or a business that goes into enormous debt. What can you do about it? Well, roll back the tape a few years and don't get in the situation in the first place. You use the word utopian in describing some of the policies behind Germany's energy and climate policies, utopian is the right word. There was a disconnect from hardheaded reality and a real reliance on optimistic, almost romantic ideas about what the future should look like, what energy should look like. And I'm actually an advocate for reducing carbon emissions, greenhouse gas emissions. Certainly, I'm an advocate for reducing the use of coal, which has devastating impacts on air pollution and human health, and finding market-friendly ways to evolve beyond those energy sources.

But the idea that you can replace all of that relatively rapidly with wind and solar is simply not realistic, and Germany has discovered that. So now, instead of reducing their carbon emissions, they're actually going backwards and they're reopening coal plants and they are looking to find anything they can burn, basically. And across Europe, people are looking to use oil to make electricity. That's something you only do in an emergency. They're looking to buy coal from anywhere around the world they can. Germany has enormous open-pit coal mines, those are running 24/7.

Brian Anderson: And this all because they don't want to keep open their nuclear energy plants, right?

James B. Meigs: Yeah. Germany had a good fleet of—they were described to me by one analyst as state-of-the-art nuclear engineering—these beautifully made nuclear plants. You can imagine the state of that kind of technology in Germany. And after the Fukushima accident in 2011, they vowed to close those plants years ahead of schedule as part of their overall energy and environmental climate policy. And they actually then accelerated that schedule for closing these plants.

So at the beginning of 2022, they had six plants left producing a large quantity of their electricity. And they closed three on December 31st or January 1st against quite a bit of concern among energy experts and some people in Germany. But the Green Party is very powerful, they're part of the current governing coalition. The Green Party was more or less founded as anti-nuclear weapons and anti-nuclear power, they kind of conflate those two things going back to the 1970s. So this anti-nuclear movement is very deeply rooted on the German left, the European left.

Now they have three plants left, those are scheduled to close at the end of the year, and Germany's Vice-Chancellor, a guy named Robert Habeck, who comes from the Green Party, just announced that no matter what, they weren't going to reconsider, they're not going to keep those last three plants open, and instead, they're going to reopen some coal-fired power plants that they'd shut down. So this is the Green Party speaking—and they're the biggest political force in Germany—against zero-carbon power.

Brian Anderson: Extraordinary. Shifting to the developing world, there's a crisis looming there because of energy costs. You look at Sri Lanka, which is experiencing basically a full-scale collapse right now. You've got mass protests, the president has fled the country, the government is defaulting on its debt, and there are significant shortages of food and energy, but that may be just the beginning of what could be a lot of global upheaval. Ukraine and Russia count for about one-third, I think, of the wheat available on export markets, and they send large shares of corn, barley, vegetable oils, all sorts of things to the global economy.

The Economist recently had a piece noting that households in emerging economies spend about a quarter of their budgets on food. And in Sub-Saharan Africa, that rises to something like 40 percent. So you've written that suspending the Renewable Fuel Standard could help ease some of this coming food crunch. I wonder, if you could explain that, what would this entail and how would it help?

James B. Meigs: Yeah. One of the things I've always been fascinated by is well-intentioned environmental policies that wind up backfiring, and yet for various political reasons, are impossible to repeal or change, or nearly impossible. The Renewable Fuel Standard goes back more than 15 years as part of an effort to move American energy, liquid fuels, diesel, gasoline, away from fossil fuels and towards something renewable, biofuels. The idea was we would develop all these exotic biofuels from things like switch grass or crop waste or other high-cellulose materials that then could be converted into ethanol to burn. That turns out to be really hard.

So the original goal of The Renewable Fuel Standards was never reached, and instead they allow refiners to mix in ethanol that's made from crops, from corn, or biodiesel that's made from soybean oil. If you put soybean oil in a diesel engine virtually unmodified, once the engine gets hot, it can burn that oil so it makes a decent fuel. But then you stop and think we're actually burning food to power our vehicles, does that make environmental sense? Does it make geopolitical sense? And the answer is: it doesn't.

In fact, a recent study from the DOE shows that it takes more energy to make a gallon of ethanol from corn than is contained in that gallon of ethanol. So every time you power your car with ethanol—and you do because every gallon of gasoline you buy at the gas station has about 10 percent of ethanol in it—you are really going backwards in terms of climate. It doesn't really help any aspect of the energy economy or the food economy, except putting money in the pockets of farmers. It's a stealth subsidy to farmers and the big agribusinesses like Archer Daniels Midland that refine these grains into ethanol.

When you look at this looming global food crisis, maybe this is a good time to stop putting 40 percent of the corn we grow into our gas tanks.

Brian Anderson: Yeah. I don't know how quickly you could make that transition, but it seems to make complete sense at this moment of crisis.

James B. Meigs: It wouldn't happen overnight. Markets take time to sort themselves out so we're not going to immediately be able to take all that corn and sell it on the global market, but commodities markets are also very futures-oriented. And even knowing that the supply is going to increase down the road would help put some downward pressure on prices.

Brian Anderson: Let's try to conclude on a more optimistic note. In a piece that you published last spring for City Journal, you detailed a number of innovations that could help deliver low-emissions energy cheaply and efficiently. These technologies, as you describe them, from carbon capture and storage to new nuclear reactor designs, have gained some influence among a growing group of right-of-center folks, which you've called the New Green Right. I wonder if you could talk a little bit about their approach and how viable some of these technologies are and whether we can look to that for some improvement in this global situation.

James B. Meigs: Yeah. On the technology side, there's a lot of promising work going on, especially in nuclear power. There are more than a hundred startups around the world designing new types of compact, very efficient, ultra-safe nuclear reactor designs. And the U.S. government, through the Department of Energy, has been providing some significant seed money, research money to some of these companies. One is called TerraPower; Bill Gates is a major investor in that. Another one that's about to start building a test plant in the Pacific Northwest is called NuScale. There are several others just in the U.S. alone. Canada is a leader in this. So there are some real promising technologies to help us move to the next generation of energy production.

But there's also really promising news on the political front. We think of conservatives and Republicans as being reflexively not caring about climate, they think it's all BS, they're unified against environmental policies—that's no longer true. Even some very conservative Republicans have come out saying, "We do need to take the climate issues seriously, but we're not going to buy into the hype and the Green New Deal type of thinking that we see on the progressive left. We're not going to use climate as an excuse to roll out across-the-board, progressive policies. Instead, we're going to look for practical market-oriented solutions like advanced nuclear power."

And what's exciting to me is, in a time of so much polarization and division, the nuclear area is—one expert I talked to said, "It's a weird wormhole of bipartisanship." The Biden Administration is very supportive of nuclear power to their credit, given that a lot of their progressive base is anti-nuclear. And we are seeing pro-nuclear power policies rolling from the Obama Administration through the Trump Administration and into the Biden Administration. It's not necessarily enough, there are a lot of headwinds against nuclear power in this country, but we are seeing some real efforts to keep the plants we have operating open and not shut them down prematurely, as we did here in the New York area with Indian Point, but also fund some investments in new technologies. Once they get stood up and they're proven, they should be able to move forward and succeed in the market on their own.

Brian Anderson: Well, thanks very much, Jim. Don't forget to check out James B. Meigs's work on the City Journal website. As I noted at the top, he is a new fellow at the Manhattan Institute and contributing editor of City Journal. We'll link to his extensive writings for City Journal on our website, www.city-journal.org, and we'll link to his author page in the description. You can also find City Journal on Twitter @CityJournal and on Instagram @CityJournal_MI. And as always, if you like what you've heard on today's podcast, please give us a ratings on iTunes. Jim Meigs, thanks very much. Great to talk with you, as always.

James B. Meigs: It's my pleasure.

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Photo by Sean Gallup/Getty Images

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