Personalized energy: the next paradigm; In the future, energy will be more in the control of...

Consumers want more control over their energy, and they want it cheaper, cleaner, more convenient, and more reliable. They want energy, like other commodities, to be more personalized. Technological improvements will focus on meeting those demands, but they won't happen quickly. Current forecasts

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The primary question we need to ask about the future of energy is whether the old supply-and-demand paradigm of fossil fuels still applies. In that case, the key to solving our energy woes lies in finding ways to increase production of traditional hydrocarbon fuels (such as oil, natural gas, and coal) and promote consumer conservation. But if the old paradigm is out, there may be a whole new paradigm emerging, where new technologies, for instance, could change the whole energy picture.

Right now, we hear too many discussions about drilling more oil, conserving energy, and other actions based on old-paradigm thinking. Indeed, statistics show a big gap between projected energy demand and supplies in the United States: Oil and natural gas consumption are going up and available quantities are going down, so we're going to have a big projected shortfall.

The biggest jump in American energy consumption in the twentieth century was the use of petroleum, and that's almost exclusively transportation. Transportation relies on petroleum to meet 95% of its energy needs, according to the U.S. Bureau of Transportation Statistics. The story on coal is a little bit different. Developed economies such as the United States used to use coal in homes for heating, but that's done almost nowhere anymore. Americans are using more and more coal, but it's to generate electricity in large power plants. Coal is now rarely used at the individual level.

The 2001 report of the president's National Energy Policy Development Group stated, "Renewable and alternative fuels offer hope for America's energy future but they supply only a small fraction of present energy needs. The day they fulfill the bulk of our [energy] needs is still years away. Until that day comes we must continue meeting the nation's energy requirements by the means available to us."

This assertion assumes no changes to the existing energy paradigm: no new technological breakthroughs, no shifts in people's values or consumers' demands, no surprising events--natural or manmade--to alter the energy picture. But this paradigm-blinder limits our thinking--and our forecasts. Paradigms and social systems are rarely permanent, and new technology often drives a transition to other paradigms.

My thesis is that we have just begun the shift away from what I call the "carbon-combustion paradigm" to a new "electro-hydrogen paradigm." The shift is going to be very dramatic in the next 20 years, but the full integration is going to take easily a hundred years. We're going to see a lot of exciting technology innovations in the laboratory and in prototype systems in the next 10 to 20 years, but to go from our current paradigm and all its infrastructure to a new paradigm and all of its infrastructures is going to take a very long time.

Energy and the Consumer

Changes in consumer behavior are driving many trends. In the U.S. market, baby boomers seek convenience, while the elderly put heavy emphasis on the reliability and affordability of power. The question for policy makers and the energy industry is how reliable the electric grid will be in the future. Both baby boomers and Generation X'ers value customization--the personalization of products, especially computers and cell phones. Consumers also want more mobility and longevity in their products. And of course we all want inexpensive energy.

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Along with consumer behavior, there are marketplace trends working toward this paradigm shift, including the effects of more-stringent environmental-quality regulations. The bad news is that no energy system will ever be 100% environmentally friendly; the good news is that the next paradigm will be a lot friendlier than the last one was.

U.S. energy policy calls for greater energy self-sufficiency. An additional need, a new element since September 11, 2001, is security of the energy infrastructure. Before then, people didn't even worry about infrastructure security, but now it's a major issue. The electric grid system is absolutely vulnerable to weather and potential security compromises.

Another marketplace issue is the need for energy-cost stability and continued necessity for economic growth. If you take a strictly conservationist approach to this issue and say this cost stability and continued economic growth can be realized by voluntary simplicity, then you are limited by the old energy paradigm. This low-growth scenario has a low probability of occurring. We need more energy for continued economic growth, and that is still what most people in the world want.

Also impacting marketplace trends are emerging technologies such as those behind a gradual shift now beginning from central-station generation to decentralized, or distributed, generation of power from local sources. The paradigm shift to distributed generation, or distributed resources, parallels the paradigm shift from fossil fuels to hydrogen. For example, one of the biggest needs we have is gasification of coal, though surprisingly little work is yet being done in this area. The current gasification technology has been in existence for at least 20 years, it isn't really very good, and it's very expensive. It's just not competitive.

The Real Hydrogen Future

It's easy to speculate about the hydrogen economy's potential and to go off into science-fiction scenarios. But because Battelle deals with the real-world challenges of governments and corporations, we spend a lot of time separating science from science fiction. So here's a little reality check: All forms of energy are going to have some negative environmental consequences. We need to recognize that fact and then try to make the energy system a lot better in the future than it is today. Another reality check is that no fuels will be free: There will always be costs for both the fuels and their infrastructure of production and distribution. The challenge is to find the new ways that improve the value (benefits/costs) relationship.

The challenge in this transitional period to the hydrogen future is to extract hydrogen from hydrocarbon sources in an affordable way. There are many potential avenues being explored today. The approach at Battelle is to develop a universal reformer for the fuel cell, where we would take methane, methanol, and even gasoline and convert it into hydrogen at the point of burning it. The ability to extract sufficiently pure hydrogen from methane, methanol, or gasoline means that we could continue to use the existing infrastructure (such as all of those gas stations) to distribute safe liquid fuels without the expense and hazards of storing hydrogen today. Avoiding new infrastructure costs in the short run would greatly help the transition to the electro-hydrogen paradigm of fuel cells for both transportation and stationary power generation applications.

Economics really favor the current, fading energy paradigm; economics do not yet favor the next one. We're going to have to see a lot of economic and regulatory changes, as well as technological changes. The challenge is cost. We can make fuel cells, we can produce hydrogen, but we can't do it at competitive prices relative to the existing hydrocarbon system, the carbon-combustion system. Electric utilities use a benchmark of $1,500 per kilowatt capacity; anything costing more than that is simply not competitive enough. Researchers at United Technologies, for example, are getting the cost of the fuel cell down below $3,000 per kilowatt--it has been as high as $15,000--but the price is still too high for general commercialization.

And what about solar cells? There's no question that there's a market today for solar cells, but it's largely a vanity technology for people who put it on their houses. If you take a pocket calculator that has solar panels, generating power measured in milliwatts, and normalize that to a kilowatt, the cost might be as high as $17,000. So, clearly, there's a long way to go before solar technology can replace the carbon-combustion system.

Alternative fuels like wind power, which is now growing, have been attractive because of a number of government incentives and subsidies at both the federal and the state levels.

Technologies to Watch

The technologies to watch include:

* Innovations in materials for batteries and fuel cells, especially PEM (polymer electrolyte membrane) and solid-oxide fuel cells.

* Breakthroughs in reducing diesel emissions.

* Innovations for reconfiguring backup and emergency power generation into distributed generation systems.

* Biofuel development.

* New approaches to the gasification of coal.

* Global warming and carbon-dioxide management.

For fuel cells and batteries, the biggest challenge is in materials development. Exciting new developments in battery technology include the sodium sulfur battery, which the American Electric Power Company is working on in Columbus, Ohio.

For PEM and solid-oxide fuel cells, the name of the game is the materials and getting their costs down. For instance, the current membrane material used in PEM fuel cells now costs as much as $800 per square meter. We need to get the cost down to $8 to make this transition to the next paradigm. So we need technology breakthroughs that bring costs down. In addition, the current use of platinum as the catalyst is obviously very expensive and needs to be changed.

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Reducing diesel emissions is another significant area of research at Battelle and other institutions. Biofuel blending with diesel and other fuels is a very exciting growth area.

Bringing diesel emissions down will promote the transition of current backup generation to distributed resources coordinated with the power grid. Most utilities now dismiss customer-driven backup generation as simply being irrelevant to the grid, but if you can make all of those diesel generators environmentally compliant, and if you can coordinate them with the grid, then you've got a prototype distributed-generation system already in place.

Biofuel development, not just bioblending, is another breakthrough area. The DNA revolution in agriculture is very exciting because we could design plants--not just corn, but also chickweed or garbage grass, for instance--that could be engineered for high-starch content to be more easily converted into methanol.

Gasification of coal is a huge area of research and development. Affordable and efficient coal gasification would enable us to break down the constituent parts of coal and get the hydrogen atoms out of it. In an ideal process, we would be able to separate sulfur and other undesirable constituents out of the coal and extract pure hydrogen. We could also separate out the carbon content that produces carbon-dioxide emission from stacks. An innovative coal gasification technology would be a tremendous boon for the American economy--and the economies of Germany, Russia, China, and India, to mention just a few others. Hydrogen from coal would be a major step in the transition to fuel cells.

The new energy paradigm is also about the environment, and we at Battelle are concerned about global climate change and carbon-dioxide management. To that end, Battelle is actively pursuing approaches like carbon sequestration. We are currently working with the U.S. Department of Energy to evaluate how to capture carbon dioxide and store it underground so that it cannot escape into the atmosphere.

Toward a Distributed Power System

We're not suddenly going to do away with our coal-burning plants, but there are emerging opportunities to use large fuel cells and batteries in conjunction with central generation. This could produce emergency and peak power at the generation site as well as provide supplementary power at distributed sites. By "distributed," I don't mean we're going from the big power plant to the home all in one jump. Energy will be distributed first at the level of neighborhoods and districts, and then we'll work it on down to homes generating their own power. It'll go step by step, but the trend favors personalized energy.

We're going to see some exciting technologies developed in the next 10 years, but it's going to be a slow process toward full-blown commercialization. If we're on a low technology-development trajectory, it will take more time. If we get a couple of breakthroughs in technology or some regulatory changes, then we can be on a faster track, but no sooner than 2008 or even 2010 at the earliest unless a desperate need for power drives the trends faster. Slow progress favors the "tracker" and "adapter" companies and organizations, while fast progress favors the early innovators. Many companies are now agonizing over whether to be the progress leaders or the followers (or fast followers).

Who's going to lead this energy paradigm shift? Who really is going to provide the thought leadership and the breakthroughs? The Japanese are clearly ahead of the Americans in fuel cells. Honda and Toyota are ahead of the Big Three auto manufacturers in Detroit on energy breakthroughs for transportation. Honda in particular is the world leader in thinking through distributed power generation.

As for regulatory leadership, the question is who is going to provide the standards. There's a dearth of leadership for the new energy paradigm in the United States. Neither the federal government nor the states are showing signs of leadership, and there are very few progressive electric and gas utilities out there in the United States. Wherever the leadership comes from for the new energy paradigm, that's who will likely succeed and capture the largest market share.

But for now, those who should lead seem to be saying, "Change is good. You go first."

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RELATED ARTICLE: About Battelle

The Battelle Memorial Institute was established in 1929 in Columbus, Ohio, and now manages or co-manages four of the 16 U.S. national labs. We are in the business of technology development, management, and commercialization. We do mostly government work, but we also have industrial clients. We're independent, meaning we have stakeholders but no stockholders. We are technically not for profit but, as we're reminded daily by our CEO, we are not for loss. We do more than $1.7 billion in business a year, and that's a lot of R & D. Battelle scientists have contributed to a wide range of breakthroughs, such as copy machines, optical digital recording, and bar codes; Battelle's R & D yields between 50 and 100 patented inventions a year.

All corporations and organizations face the challenge of keeping up with and anticipating change. At Battelle, we do futuring. I like to use the word futuring because the participle adds the action of making or doing something. We do trend analysis, expert focus groups, and expert judgment, and we have our own process of scenario analysis based on crossimpact analysis. We also have our own scenarios software, which we've been using for 20 years for our work with corporations.

Battelle studies "consumer value zones," where marketplace trends, new customer demands, and emerging technologies all converge. The study of energy's consumer value zone leads us to conclude, for example, that the future of energy is personal; that is, energy production will increasingly move from large, centralized power plants to distributed power.

Among its outreach projects, Battelle does an annual technology forecast and maintains a separate Web site for our scenarios and trends: www.dr-futuring.com.

For more information, see Battelle's Web site, www.battelle.org.

--Stephen M. Millett

About the Author

Stephen M. Millett is a thought leader at Battelle and co-author of A Manager's Guide to Technology Forecasting and Strategy Analysis Methods. His address is Battelle, 505 King Avenue, Columbus, Ohio 43201. E-mail milletts@battelle.org; Web site www.battelle.org.

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