Governator Pushes Green at ECO:nomics on Friday

Bacara Conference Comes to a Close with Talk of Ethanol, Solar, Wind, Nuclear, Philanthropy, and Oil

The Wall Street Journal‘s “ECO:nomics” conference at Bacara came to a close on Friday with the newspaper’s publisher Robert Thompson saying that it would happen again next year with “absolute certainty.” Those remakrs came after an energized speech from Governor Arnold Schwarzenegger, who said that the federal government has “failed terribly” in promoting and regulating green industry growth.

Speaking with the Journal‘s editorial page writer Kimberley Strassel, the governator detailed his eco efforts, including the hydrogen highway, solar roof initiatives, and fighting against the Bush administration to get heavier standards on tailpipe emissions. “They’re asleep at the wheel right now, and they don’t get it,” he said. He compared those who don’t believe in global warming to those who “don’t believe we have a globe, [those that think] that the earth is flat.”

When Strassel asked whether the state’s green initiatives were good for the economy, Schwarzenegger blurted, “Our objective is not to stimulate the economy. Our objective is to fight global warming.” Regardless, the green movement has created many new jobs and led to an influx of venture capital.

On the regulatory side, Schwarzenegger is a proponent of the cap-and-trade strategy in dealing with greenhouse gases. With caps on allowable emissions, the governator believes that companies are able to see that the state is serious about enforcement. “You’ve got to put a cap on it,” he said. “That’s when you signal to everyone that we’re serious about that and that’s when everyone gets motivated and makes changes.”

So how will California force others to follow their lead? “We don’t want to force anybody. Forcing is the wrong way to go,” said Schwarzenegger. In regards to China, he said, “We have to help them. We have to make them understand. We have to guide them and inspire them” with our example.

“I think good things are happening all over the world,” said Schwarzenegger. “The important thing for us now is that Washington recognizes this point. Washington has failed terribly in creating guidelines.”

On the touchy topic of nuclear power, Schwarzenegger showed similar resolve in wanting to keep all possible solutions on the table. “I myself think that nuclear power has a great future. I think we should look at it seriously again. I know people are scared about it,” he said, but explained that he thinks “technology has advanced so much” in terms of safety and waste. “We need to talk about that,” he said. “It will be an interesting discussion.”

For audio of the governor’s conversation with Strassel, go here.

Friday’s Other Discussion

ETHANOL

Friday morning began with the discussion “Ethanol: Reality or Hype?”, featuring Red Cavaney of the American Petroleum Institute and Vinod Khosla, a venture capitalist. Both agreed that everything is still on the table with regards to what sorts of ethanol energy extraction processes.

When asked when he thought there would be a viable cellulosic ethanol industry in America, Khosla said, “Starting next year,” explaining that some plants are on-line to be operating in 2009. He further promised that ethanol would be “competitive with oil at $45 a barrel unsubsidized in five years,” add ing that it would be another 10 years before ethanol started to affect the price of oil. Cavaney was more cautious about making hard predictions for ethanol’s future.

As many of the discussions do, this one slid into general discussion about what both men thought of the future of fuel. Khosla called solar and wind “great toys” as far as the big energy picture and said that hybrid cars don’t make sense because of their high costs. “A Prius sells well,” said Khosla,” but do so Gucci bags.” After the audience said they believed that oil was more subsidized than other energy sector, Cavaney cited Department of Energy statistics showing oil to be one of the least subsidized industries.

Midway through the conversation, the audience was polled as to what they thought the most important technologies would be into the future. The results: 27 percent voted solar; 12 percent wind, 11 percent biofuels; and 50 percent nuclear.

SOLAR AND WIND

Solar and wind power were then put on the table as part of “Sun and Wind: A Perennial Niche?” On stage was Shi Zhengrong , the richest man in China who enjoys, according to Forbes, a fortune of more than $2 billion. Nicknamed “China’s sunshine boy,” Zhengrong runs Suntech Power Holdings, likely the most successful solar energy company in the world. He was joined by Miles George, the CEO of Babcock & Brown Wind Partners, an Australian firm which grew its portfolio from one American windmill farm in 2003 to 76 farms across the globe today.

Both men are experiencing growth in their businesses – Suntech expects to double its solar energy production to expand to two gigawatts by 2010 – and yet both are suffering from materials shortages, especially in silicon for the solar panels. For George, the hold-up is largely related to existing regulations. Wind is one of the fastest growing energy markets, said George, and there are strong profits. However, many countries and regions don’t have long-term laws on the books. “The real problem here [in America] is that you don’t know whether the rule is going to be extended,” said George. And though growth is steady, wind still accounts for just one percent of the American energy market. The conversation also covered subsidies, which is one of the more common themes being discussed at “ECO:nomics.”

PHILANTHROPY

The money behind the greening of industry was the on the table for “The Prize: The Role of Green Philanthropies,” which saw Peter Diamandis, of the X PRIZE Foundation and Hal Harvey of the Hewlett Foundation take the stage. Last year, the Hewlett Foundation gave between $55 and $60 million to energy and climate change policy-crafting causes, which makes it one of the biggest donors in this sector. The X PRIZE does things a little differently: started as a prize for futuristic aircraft, it’s evolved into a contest for efficient automobiles and is currently developing $100 million in prizes for designs in energy and the environment.

Diamandis compared the public’s impression of automotive efficiency to what we think of littering, explaining, “I believe in 10 to 20 years, people will be shocked if you’re driving a SUV down the road. There will be a stigma.” Diamandis admitted that giving prizes is “just a tool in the toolbox,” that it certainly won’t solve everything. But it keeps people thinking, he explained. “We keep asking the question, mystically,” said Diamandis, “‘What would a car designed by Apple look like?'”

When asked what the environmental community had done wrong, Harvey said that they’ve focused too much on existing laws. “It’s not constitutionally a visionary way to deal with the problem,” said Harvey. “Environmentalists are seen as naysayers rather than inventors, and that’s a tremendous problem.” He sees a great deal of potential in the partnership between innovators and environmentalists.

NUCLEAR

One the conference’s hottest, most relevant topics has been nuclear energy. Enter “Going Nuclear: Panacea or Pipe Dream?,” with John Bryson, chairman of Edison International and Tom Christopher of Areva. Both discussed what Bryson referred to as the coming “nuclear renaissance” with great optimism and a noticeable attitude that nuclear energy is the future, whether environmentalists like it or not.

Though positive about the future, Bryson admitted, “We don’t see a nuclear unit coming on until 2020.” Currently, Edison gets 17 percent of its power from nuclear. He sees a major PR battles ahead – “public acceptance is abolsutely essential,” he said – but remains “cautiously optimistic,” saying that acceptance by the public may come in three to five years, even with powerful memories of Chernobyl and Three Mile Island. In the meantime, Edison is investigating sites both in and outside of California, though there is a moratorium on any new nuke sites in the Golden State until the issue of waste is solved. And with a surging population, that may prove a problem. “One of the reasons nuclear needs to come to California is just the enormous growth,” said Bryson. To meet the gap about the growing energy need, California is using much more natural gas, said Bryson. He said that’s “not a good thing,” instead advocating for “a diversified supply.”

When asked how the public’s fears could be assuaged, Bryson pointed to San Onofre, where two nuclear reactors sit on the coastline. “We’re in these communities all the time,” he said. “It’s quite striking the degree of support and acceptance we have in places like the great surfing community of San Onofre.”

Tom Christopher was more sour about the situation in America. “The United States is far behind the rest of the world in regards to the progress of new nuclear plants,” he said. There are about 40 nuclear plants in various stages of development around the world, and 12 of them are in China; Areva is building eight of those. Much of that technology was developed in the U.S., said Christopher., who argued that much of the designs are safer these days. But design regulations are what hold much nuclear production back, because they are moving targets, and depend on how various regions calculate safety. He and Bryson both pointed to the facilities that recycle their fuel as the model for future nuclear programs.

At the end of the talk, the audience was asked if they thought nuclear power was a major part of solving global warming. Nearly 85 percent agreed.

OIL

Today, oil prices reached $110 a barrel, which made the “Oil: The End of an Era?” talk one of the more anticipated. Featuring Christophe de Margerie of Total and Daniel Yergin of Cambridge Energy Research Associates, the talk centered on the political boundaries to oil extraction and downplayed any sort of “below-the-ground” limitations that peak oil believers espouse.

“I think that is the main restraint,” said Yergin, whose book The Prize: The Epic Quest for Oil, Money, and Power is considered required reading by the energy industry. “This isn’t meant as a joke,” Yergin quipped in attacking peak oil theories, “but this is the fifth time we’ve run out of oil.” He said the end of oil was predicted way back in the 1880s, yet it’s still flowing.

Margerie said that his “first responsibility is to bring clean energy to the consumers,” intimating that he must overcome any opposition – whether environmental or political – to doing so. “The problem today is not reserves,” said Margerie, explaining that the problem is that environmental protection is something that has become the first priority. To the next generation, he explained, it’s the “wrong message to send that we can live without carbon.”

Thought not a very exciting panel, the oil discussion went on longer than any other, as the conference organizers had to stall in order to give the governor time to reach the stage.