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 / Winter 2008 /Issue 53(originally published by Booz & Company)


Handicapping the Energy Shift

3. The Easy Ethanol Myth: Biofuels are the green solution for transportation.
Reality: This myth is promoted by those in the agriculture sector that stand to benefit from biofuels development, and it is also an at­tractive story for environmentalists. But the “first generation” biofuels available today are at best neutral, and in some cases harmful, from an environmental perspective, once the climate-change effects of land use are factored in. Biofuels are also implicated in food shortages, though the extent of their effect is uncertain. Even the next generation of biofuels under development in 2008 may not be a major improvement. With enough technological development, future biofuel ap­proaches, such as algae-derived fuels that don’t require large amounts of land, may prove to be a truly green solution, but many obstacles stand in the way, and development is going to take a long time.

4. The Carbon-free Power Myth: We can meet the world’s electricity needs by making the switch to carbon-free renewable energy sources such as solar, wind, and geothermal energy.
Reality: It’s true that renewable energy sources — especially wind and solar — have tremendous promise for the future, and ultimately may hold the answer to the problems caused by global climate change (and to many countries’ concerns about energy security). But today they supply only a tiny portion of electric power generation, and significant technological breakthroughs in storage and transmission, as well as supply, will need to be made before renewables can cost-effectively compete on a wide scale with traditional fuels. Even using optimistic assumptions about renewables, we calculate that the world’s energy needs in 2030 will be filled, as they are today, by nat­ural gas and coal. The next 20 years, however, likely will see renewables taking double-digit percentage shares in power generation, and the groundwork being laid for a more significant shift to lower-carbon and carbon-free sources in the future.

5. The No-nukes Myth: Nu­clear energy is dead.
Reality: Much of the debate about meeting future energy needs tends to ignore the positive potential for more nuclear capacity. To­day, nuclear energy supplies some 15 percent of power generation needs around the world from 439 reactors. In some nations, it commands very large market shares. France derives more than 80 percent of its electricity from nuclear en­ergy; Japan’s nuclear share is 35 percent; in the U.S., it’s 20 percent. Moreover, despite persistent fears about safety, the nuclear industry has an excellent record, with the exception of the Chernobyl disaster in the Ukraine in 1986. Concerns remain about the proliferation and storage of nu­clear waste, about the availability of uranium for nuclear fuel, and about the potential link between nuclear energy production and nu­clear weapons production; but these issues, although significant, should not slow down the advance of this technology.

Nuclear energy is a dependable, around-the-clock power supply that does not produce any greenhouse gases — making it the most scalable current power generation technol­ogy that does not contribute to global warming. Today, there are plans to build more than 200 new nuclear plants worldwide, al­though rising costs and supply chain problems are inhibiting the indus­try’s growth.

6. The Private-sector Solution Myth: Industry alone can accomplish the energy shift.
Reality: This myth is the result of the mistrust that has grown in some developed countries, including the U.S., about the ability of government to play a positive role in resolving long-term economic problems. But although it is true that private entrepreneurs and corpo­rations accomplish most of the world’s innovation and R&D and op­erate many of its energy busi­nesses, it is also correct that historically, major shifts in energy markets — France’s embrace of nuclear power, Brazil’s creation of a sugar-based ethanol industry, the rise of wind power in Denmark — were rooted in gov­ernment policy choices. Given the magnitude of the challenge that the energy shift presents, it is clear that government decisions, public–private initiatives, and tax in­centives will be necessary components in achieving major technological breakthroughs and building new energy infrastructure.

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