Deputy Secretary of Energy, United States Department of Energy
Introduce by Robert White


Deputy Secretary of Energy, United States Department of Energy

What new can be said to an audience that has heard a lot about and believes in sustainable development in science? You all know that we have undergone a revolution in the world not just in technology, but there is another revolution that affects energy, and it affects the emerging markets. It is the revolution of the introduction of market systems. The dead hand of state control and ownership has come off businesses in many lands. We have seen an advance in the educational system occur throughout much of Asia, which has allowed productivity to increase enormously. We have seen an explosion in the opportunities that people have in the world that is similar only to the explosion of opportunities we saw in North America during periods of this century. This has implications far beyond energy. It has tremendous implications for the environment, and it has some implications on energy development that I want to share with you. We cannot have the same patterns of energy consumption in the emerging markets as we have seen historically in North America if we are to be able to preserve the air and water of our planet.

That is not to say I am at all a doomsday person. It does mean that we must carefully monitor the economic revolution that is now overtaking the planet and which gives us and our children and our children's children the opportunity to live in a economically truly integrated world. It does not mean that there is potential for vast and deep middle class throughout much of the world's population rather than a middle class being confined to some number of G-7 countries. It does mean that we face some challenges if we are going to avoid the degradation of the environment that is already occurring in the emerging markets as their idea of consumer culture looks more and more like our own. A lot of this has to do with energy.

If we survey the world including Asia, over a trillion dollars of electrical capacity infrastructure is going to be built in the next decade. That is assuming a much lower level of electricity utilization per dollar or GDP than we have experienced in North America.

If a person in China or India wants to have the advantages of mobility that have been given to us by the automobile and bless so many American families, there is going to be an explosion in the use of oil. Already in the last several years we have seen oil markets and oil consumption increase very significantly a million barrels per day, per year in response to the growing Asian demand. All forecasters predict that in the future.

That has consequences beyond the environment obviously. There is a consensus among forecasts that the growing Asian demand for petroleum will require 15 million barrels more of oil by the year 2010 than the world currently has capacity to produce. Almost all forecasters believe that unless there is some dramatic change in institutions or technology, the bulk of that oil will be produced in the Persian Gulf region, and Iran and Iraq will be responsible for much of that increase. We are talking about some serious issues on sustainable development, not only for their environmental considerations but the national security concerns that you addressed this morning.

Technology has offered in the past and does offer in the future a very interesting way out of these dilemmas. There are going to be tremendous opportunities created here and in emerging markets for those who are agile enough to respond to the opportunities.

Let me share with you some of the things that the Department of Energy does by way of example. One of the ways that you attack this problem of the insatiable and growing demand for electricity and oil is by increasing the technical efficiency of energy consumption. Nowhere has there been a greater impact than in the increased fuel economy in the United States and Western Europe in automobiles from 1975 to 1985 and the changes which occurred in Western buildings over the last 10 to 15 years.

We have had tremendous technological advances in buildings, windows, and lighting, often because of government research. The use of ballast lighting was a result of a $3 million program at a DOE national laboratory. It now saves this country over $900 million a year in reduced energy bills. There is a lighting revolution. Incidentally, I too spend some time in Russia about every two months, and as I go to Russia and the Ukraine and see the tremendous potential that is there in the energy efficiency arena, it is incredible. There are bottlenecks in the form of incentives; they have the same bottleneck that we do, some even worse. An example is the extremely limited number of individuals who are proficient in diagnosing how you can change out the insulation, lighting, windows, and other characteristics of a building. Because of their limited number, they have return on investments which typically average between 50 percent and well up into the hundreds of percent on investment, with recovery of the investment within a year.

There is a revolution which is now occurring in renewable energy resources; let me share something exciting with you on that. It used to be that there was a big gap between the hype the advertising and performance on some of the renewable energy resources such as photovoltaics and wind energy. It was sort of new age. It was the "in" thing to endorse in the government in the 1970s. We spent billions of dollars and gave tax credits and benefits, and still we did not see products that were truly competitive and commercial in the market place.

Well, consider this for a moment. There are now projects being undertaken in the Western United States that are 50 to 100 megawatts and above. There are two wind projects and a solar project with financing of that scale which produce energy from a large photovoltaic array and from a number of windmills that cost half the price of the average nuclear power in the West, and only a slight premium, 20 to 30 percent above current coal fired and gas capacity in the Western United States. Now that is progress. In my travels through emerging markets, I find that there is an insatiable curiosity and interest in these technologies.

Just this morning I was in a conference with many of the energy ministers of Latin America. They put on the board their plans for energy development in Latin America. There is a tremendous, almost inexhaustible demand for capital as the countries are privatizing. They want their kids and their grandkids to be able to live in a natural world that resembles the one that we know. They want these technologies. They want technologies that could promise to preserve the land while creating prosperity at the same time.

There is an almost limitless capacity of these nations to invest in these resources so long as the technology is bringing them to economic parity with some of the more conventional resources. The same thing exists in pollution prevention. We have learned the hard way in this country. There has been a revolution that other countries can learn about, and we are creating partnerships in other countries to share experiences in pollution prevention of industrial processes.

There is no reason why the refining and petrochemical businesses or, for that matter, metals or pulp and paper, need to produce the levels of excess product pollution (often toxic) that have been produced in this country.

The companies in this country which have invested in pollution prevention have found something interesting. First, they obtain very high returns on investment. In the Department of Energy's first major-scale pollution prevention projects, we averaged a return on the investment of 160 percent. Dow Chemical Corporation averaged 200 percent return on investment just because their mediation costs are so high. There is a tremendous opportunity for the use of these technologies and market for these technologies in emerging markets.

Last week I was in Mexico. Mexico wants to dispose of its petrochemical plants. It will announce which specific plants they intend to sell this year. This is a big thing for Mexico. This is the first major privatization divestiture of assets in the history of their state-owned oil company since nationalization in the late 1930s.

What do you imagine is one of the biggest impediments? The biggest impediment to privatization is that few people want to accept the liability of that pollution stream at the end of the plant at the refinery. Mexicans, just like us, and just like other people throughout the world, do not want to be responsible for destroying neighborhoods, for creating a workplace in which workers get sick, or for creating air pollution (of which they are reminded daily in their capital city) that decreases their life span. So efforts that the United States government can make to try to share with other countries the benefits of our experience will not only assist in this revolution that is occurring and promising economic prosperity, but they will create tremendous opportunities for those Americans that want to invest their time in it.

I think our emphasis at the Department of Energy in our international programs has been sustainable development. Not only in DOE, but throughout the government, we need all the help that we can get from the many people in this audience and other places. We need to reach out to people who are not so aware of what is going on in the world, to help them realize how important this is. Thank you very much.


There is no area of technological advance that is more central to our ability to bring about environmentally sustainable, economic growth than the energy technologies. Bill has given us an insight into some fascinating and exciting developments that have taken place in energy technologies. The challenge is to see these technologies diffused not only in the developed world, but through the developing world as well.

D. James Baker
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