Meeting Global Energy Demand

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The global economy’s great equalizer is fuel. Yet the economics that govern fuel consumption is in turmoil.

Will the wheels of commerce grind to a halt if the developed world can’t get its cell phones and running shoes shipped at a reasonable cost? Will the developing world go hungry if wheat and rice prices rise drastically to compensate for a spike in oil prices? The panel discussion “Meeting Global Energy Demand,” held during the University of Miami Global Business Forum Jan. 15 – 16, 2009, tackled those questions with an eye toward new energy sources that might solve these dilemmas.

Save for one exuberant optimist, the panelists all enumerated the challenges ahead, stressing that the United States and other nations will need to explore a patchwork of alternative energy sources to augment and hopefully replace the world’s depleting oil reserves. And they uniformly stressed that the United States has developed a sense of entitlement for inexpensive gas that will have to change. As panelist Eric Silagy, Florida Power & Light’s vice president and chief development officer put it, the first fuel of choice is conservation.

While FPL must explore alternative energy sources, including wind and solar, it is not a research and development company. “We’re not going to use customer money to do that,” Silagy said. An FPL subsidiary, NextEra, markets renewable energy technology and manages wind, solar, natural gas and nuclear facilities throughout the country. But the utility is actively assessing wind turbine technology. Wind power is not as strong in Florida as in, for example, North Dakota and parts of Texas (hurricanes notwithstanding), he said, but it is viable.

There are few businesses as obsessed with energy consumption as cruise lines. For them, the meter begins ticking once the ships leave port and doesn’t stop until they return. Engineers are constantly tinkering with everything from propeller shapes to types of paint to reduce energy costs (for example, silicone paint helps the vessel glide through water with less friction). And the costs don’t flow just from the massive engine room. As panelist Adam Goldstein, president and CEO of Royal Caribbean International, pointed out, a ship might have 18,000 halogen lights on board, not to mention fuel for cooking, heating and cooling, etc.

Royal Caribbean has been so innovative over the years, experimenting with biofuels and fuel cells as well as solar and wind power, that Goldstein was tapped to join a joint military/business council whose mission is to wean the country from sole-source energy dependence. “Oil dependency undermines U.S. security,” Goldstein said. “True energy security is found in a diversity of supply.”

Geopolitically, the outlook is not good, Goldstein said. Relationships between many of the oil-producing countries and the United States are tense. “We’re very dependent on West Africa,” he noted, then explained how unrest in Nigeria, for example, threatened that supply. In this hemisphere, he mentioned Venezuela, whose president is outright hostile to the U.S. Ultimately, the short-term answer lies with consumers. “This is how you redefine citizenship,” Goldstein said. “Right now we live in a short-term mentality.” That will have to change.

World Fuel Services Corp. CEO Paul Stebbins picked up on that sentiment, noting that in a publicly traded company, taking the long view can be difficult. “I live in 90-day increments,” he said, referring to scheduled earnings reports. “It’s very hard to master the political will” for broad change in such an environment. “Basically we are spoiled,” he said.

Shihab Asfour, associate dean of the University of Miami’s College of Engineering, can only dream of a day when businesses track their energy use with as much scrutiny as Royal Caribbean. He heads the UM-based Industrial Assessment Center, which provides free energy audits to businesses. The IAC is fully funded by the U.S. Department of Energy. Using a device that clamps onto power cables, the audit measures amps used by specific pieces of equipment, “so we get a nice, comprehensive measurement” of energy used, he explained.

One piece of information he’s received from audits done at dozens of companies is that 30 percent to 40 percent of energy is consumed during off-peak hours and the weekends. Around South Florida, it seems, it’s common for businesses to leave air conditioners and lights on all the time. His point was that the technology exists for these kinds of audits to be widespread, inevitably leading to greater energy efficiency. Recounting how he paid the equivalent of $7 a gallon to fuel his car in London a few years ago, Asfour said, “We got spoiled in the U.S.” It is now time for Americans to be responsible consumers, he noted.

It was panelist Nejat Veziroglu who offered a brief, sunny assessment amid otherwise dire pronouncements about the belt-tightening ahead. For decades Veziroglu, professor and director of the Clean Energy Research Institute at UM’s College of Engineering, has been a proponent of hydrogen energy as a replacement for fossil fuels. The co-author of Solar Hydrogen Energy: The Power to Save the Earth, he organized the first major conference on hydrogen energy in 1974, and was seminal in the founding of the International Association for Hydrogen Energy.
“Hydrogen energy will eliminate the petroleum wars,” Veziroglu said. “There will be no pollution or noise in our cities.” He added that worldwide an estimated $6 trillion annual loss can be attributed to environmental damage due to the use of fossil fuels.

From an overhead projector, Veziroglu displayed graphs showing an estimate that we would reach peak oil production in 2020. After that there would be a dramatic decline in supply, which would lead to a gap between demand and production. “We will see that hydrogen energy will be the answer to most of this,” he offered. Once we have turned our attention to this technology, he said, “the world will be a paradise.”

By Tristram Korten