The force of people wanting to improve their life by increasing their energy consumption is going to overpower the force of people who want to move away from fossil fuels. The expectation of how much energy consumption you need or how much energy generation you need to be a modern nation, I think, that number will shrink as we go forward. I mean, it really has to if the population of the planet keeps on increasing, because eventually there isn't going to be enough. I mean, even now there isn't enough. Hi friends and fellows. Welcome to this special series of conversations involving personalities coming from a number of campuses, including Stanford University.
The purpose of the series is really to unleash thought-provoking ideas that I think would be of tremendous value to you. I wanna thank you of your support so far, and welcome to this special series. GITA WIRJAWAN: Hi, today we have Professor Roland Horne, who is a Professor of Energy Science and Engineering at Stanford University. Roland, thank you so much for visiting Endgame. ROLAND HORNE: Good morning. I want to start out with a number of questions on how you grew up.
You were actually born in the UK, but you spent most of your life both in New Zealand and the United States. Correct. So, my father is an engineer, as am I, and he worked as a civil engineer mostly in large-scale construction. So when we were growing up in Britain, he worked on various construction projects, including power stations as one of the things he worked on quite a lot, and when I was nine years old, he was engaged to work on the construction of the Wairakei Geothermal Power Station in New Zealand, and for that reason we moved to New Zealand. So I was nine years old, so my engagement in geothermal goes back to the family connections for a very long way.
- How did you pick engineering? - I think I was influenced by… I mean, I don't say he influenced me, but I was influenced by what he did. I was always interested in what he did, and it seemed to me kind of a cool career to actually kind of be building things in. - And you did your studies at Auckland University in undergraduate and graduate studies.
What made you move to the United States? - I was looking for a job. So, in those days, and perhaps even now, I'm not sure, it was common for young New Zealanders, on graduation from university, either to get married or to save up for a few years and go overseas for a couple of years for experience. It was known at the time as the OT, or overseas trip, and it was kind of a routine thing that people did. Most of them went to Britain, but some came to the U.S. And at the time, I was motivated by the idea of taking on a faculty position at the University of Auckland, which is where I was, mainly because I think I wasn't very imaginative, so I was just thinking about continuing to do what I was already doing. But to get a faculty position, the most attractive candidates to join the teaching staff of universities in New Zealand, either had overseas Ph.D.s or some kind of overseas experience.
So I thought going to the U.S. for a year or two would help me find more easily a position at the University of Auckland. - Why did you choose California? Just out of curiosity. - Well, I'll tell you this story.
I've told this story many times over the years. People ask me how I came to Stanford, and perhaps what they sometimes mean is, "How did you come to get a job at Stanford?" But at the time, I'd never heard of Stanford, and this is very surprising to people nowadays. Stanford has always been a good school, but in the 1970s it wasn't as famous as it is now. I mean, it was always recognized to be a good quality school, but the big schools in those days were Harvard, MIT, and Caltech, and Stanford was sort of good but not that well known.
And of course, in the 1970s, Silicon Valley was only just getting started. Silicon Valley kind of made Stanford as famous as it is today. So I never heard of Stanford. So, I was looking for a job, and in those days when you did research and published papers, we didn't have the internet. We didn't even have so many copy machines.
Xerox machines were expensive and rare, so what we used to do in those days was, when you published a paper in a journal, we had in our office these postcards with our address on the back, and you would mail a postcard to the author of the paper, and they would mail you back what they called a reprint of the paper. So, when you published a paper, the journal would send you 25 separate copies that you could mail out to people who asked for copies. So I published a paper while I was a graduate student in Auckland, one of the best papers I ever wrote. By the way, it was a good one.
So, I published that paper in the mid-1970s, and I received about 30 of these postcards requesting the reprints. So when I finished my degree a year or a year and a half later, I wrote, and so I sent the reprints. So then, I wrote back to all the people who'd sent the postcard, "So I hope you like the paper, and by the way, I'm looking for a job." And one of the requests had come from Stanford and the guy replied, “Yeah well, come on over.” So I did. - And this was to teach what field again? - I was at that time... So, that was George Homsy, who was a professor in chemical engineering who worked in the field that I had written the paper, which was flood mechanics, and he managed to swing some funding for me in chemical engineering.
My degree is in engineering science, which is kind of applied mechanics actually. But he brought me here in chemical engineering, but in order to raise the money—it's a vision money for my salary, which wasn't that big—he sold a piece of me to the petroleum engineering department. So I was acting assistant professor in chemical engineering, but I taught a class in petroleum engineering at the geothermal class section. - Interesting times in California at that time, particularly in the thermal industry, right? - It was. So, that was right between the two energy shocks. So, we had the energy shock of ‘73 or something like that, followed by the Iranian crisis thereafter. So, there were two energy shocks.
- ‘79 was the Iranian crisis and before that was… - Yeah, so I came in between— 1973 was the first one. So at that time, that's when renewable energy in general, geothermal energy specifically, became big in California, there was an interestingly strong influence by Ronald Reagan, the Republican governor of California at the time, and he kind of opened the door in many ways for regulation of wind, solar, and geothermal in the state of California. And, of course, the same thing happened in the Philippines and in Indonesia too; that's when the geothermal industries in all three places began, more or less. I want to get into this space in a bit. But I want to go back a little bit to New Zealand, where people out there would have referred to renewables as a space program, as the Americans would have alluded to in the 60s and 70s. How did that come about? Yeah, so New Zealand is a small country now and it was even smaller then.
Population that time was maybe two million people, and mostly farming based was the economy at that time. And for engineers, the principal activity is... I mean, the big activities in New Zealand in engineering were large construction projects for energy—hydroelectric projects, for example.
So, if you're an engineer in New Zealand, the most exciting things going on were large-scale construction, mostly of hydroelectric dams, etc., but also geothermal. And geothermal was kind of cutting edge because it wasn't understood at that time very well. Wairakei Geothermal Power Station was basically the second in the world, the first liquid dominated field in the world. So, geothermal was a new technology. The Italians had developed vapor-dominated systems, but liquid dominated systems were new.
So there was a lot of science and technology being developed for geothermal, so that really was, as you say, our space program in New Zealand at that time if you wanted to do something that was leading edge in technology. - What made it happen? I mean, was it propagated by the leadership or it was just something that the civil society took ownership with that made it passion? - Well, at that time, all of those big projects were government-run, all of the power systems. In fact, New Zealand is perhaps incorrect to call it a socialist country.
It was a welfare state, but the government was really the only institution big enough to undertake large projects. And so, they all were and all of the electrical generation and reticulation system was all government run. So, I don't know at what point they began their interest in geothermal. I mean, they've been building large hydroelectric projects for some time, and continued to do so after that as well. But somewhere along the line, somebody thought geothermal might be a good idea and undertook that. It's very curious because the economics would have been very compelling for the other alternatives, right? Well, there were hydroelectric projects in New Zealand on a very large scale.
I mean, they were moving rivers and waters through tunnels and dams. I mean, they were very large scale projects and continued to be so. One of the peculiar things about the Wairakei Geothermal Development was that it actually grew from the British nuclear program.
So the Wairakei Power Station ultimately had three stages of turbines: high pressure, intermediate pressure, and low pressure, and in the original design, the intermediate stage was intended to be a heavy water generation plant to provide heavy water for the British nuclear program, and by the time they eventually constructed it, the heavy water moderated reactors were no longer required, so they replaced the heavy water plant with the intermediate stage steam turbine. So whether or not it originated from the British nuclear program, I'm not quite sure, but they were certainly part of it in its initial discussion and design. And oil, gas, or coal were never part of a conversation? No. So, that was in the late 50s and 60s, so oil and gas was sort of considered to be just available at that time. New Zealand had some coal and even a little bit of oil. But at that time oil and gas was not part of our economy.
And you've got renewables making up about 80% of the energy mix. - Correct. - Is that likely to go to 100%? I imagine so. So, there's a large-scale coal plant in New Zealand.
I think there's only one coal (plant) in New Zealand, but that's more than 30 years old now, and I can't see much enthusiasm for that. And in actual fact, in the 70s, they discovered a quite considerable natural gas field, two of them actually, offshore the North Island. So they reticulated that gas to city gas in Auckland and Wellington, and the pipeline went past that newly built coal-fired power plant and they converted it to natural gas, so it only started burning coal surprisingly in the last 10 years or so as the natural gas is being run down, so that those natural gas fields are reaching end of life so natural gas is going to be a kind of disappearing resource for New Zealand.
And the geothermal was kind of static for a long time because of the cost and the uncertainty. Not terrible but not comparable to hydro and natural gas. So what happened over time was that they explored and had many geothermal resources in New Zealand, much like what happened in Indonesia too, but they just left them on the shelf. But starting in 2000 or so, they started to sort of revitalize the industry, and a lot of geothermal resources have been built in New Zealand over the last 20 years.
It's expanded quite a lot, up to 20 to 23 percent of the total power, and the remainder of the 80%, as you referred to renewables, is almost all hydro, with a little bit of wind and a little bit of solar, but not a large amount. I want to take this to a more macro level in the context of the trilemma amongst climate crisis, energy crisis, and economic crisis. What are your views about where we're headed going forward as to achieve sustainability? That's a pretty broad question, but we can deep dive. I can largely only speak to the energy market. I mean, obviously, there's food and water and all of the other things that are equally important, if not more so.
But, speaking about the energy field, we have, as you know, primary energy of the planet is two-thirds at least fossil fuels. So all of that has to be replaced. And, before we can achieve either sustainability or address climate change, exactly how to do that is not clear, even to I think energy professionals. So, the oil and gas industry, setting aside coal for a moment, the oil and gas industry by itself is the second largest industry on the planet, and you've sort of shut it down overnight.
So I think what we can and will most appropriately do is to draw back from oil and gas, so it will be replaced piece by piece over the next, I don't know how long, but probably 100 years. I think it's a common misconception in the public. I sometimes say that we should just stop tomorrow and do solar instead, and we should do that. We should replace oil and gas with other renewables, including solar, geothermal, and others. But it's not something that you can do overnight.
California actually is a good example of how fast you can do it. California succeeded quite well in putting renewable energy in, and probably on a normal day we get up to 30% renewables. On a good day… - Geothermal is about what? 8 to 9%? - Geothermal is 6% of our electric production in California. But a few decades ago there was this famous piece on peak oil. Would the scenario now be different from how people would have pontificated back then? I mean, at the rate that we're seeing, the rate at which renewables are growing, it just seems within logic that there's no such scenario as peak oil. I think there will be.
So, the common misconception about peak oil is that there is one peak oil, but actually there are two. So, there is a peak in discoveries and there's a peak in production. And the peak in discoveries is actually long gone; it was probably 2005 when we reached the peak in discoveries.
But typically, oil and gas fields last for some decades. And therefore, we can see the peak in production which follows. In the U.S., it was probably 30-35 years after the peak in discoveries, where you obviously have… I mean, that's the simplest of explanations, but there are variations to it. So, tight oil, shale gas, and shale oil, was something which was in many ways unexpected. So that's kind of an increment that got added on to what otherwise would have been the peak.
Without shale oil and shale gas, we would have passed peak in production probably 10 years ago, but the addition of billions of barrels of reserves actually extends the peak. But it doesn't extend it forever. And the hope that people had five to ten years ago that shale gas and shale oil, like we have had in North America, could be propagated elsewhere in the world, has not eventuated. I mean, we do have shale gas and shale oil production in some other places. But in a modest way, nothing like we've seen in the United States.
As you undoubtedly know, the production characteristics of shale wells, even in North America, is very fast. They run down very quickly; they have a useful life of four or five years or something like that. So they're keeping on drilling them by the hundreds of thousands, but eventually you kind of run out of capacity to do that. So, shale gas and shale oil have tremendously expanded the U.S. oil and gas production, doubled it. However, it's not sustainable.
Well, they seem to have been able to bring down costs for extraction, production, and all that stuff. They have. But that's on the supply side. But, what about on the demand side? Do you see that peaking at about 100 million barrels a day? Do you see that declining in the next couple of decades? I famously gave a talk about the future of oil in 2008, as far as I remember. And I predicted that at that time, I think the world's oil consumption was 83 million barrels equivalent of oil and gas.
And based upon the peak predictions of discoveries that were sort of before shale oil and shale gas, I predicted the world would never consume more than 90 million barrels a day. And I said that, which I later regretted, and we're already—I don't know where we're at now—over 100, 103, I think. Forecasts are made to be revised. So, I don't see an expectation that the consumption demand will kind of overpass the supply. And I know others have said, "Well, all of the oil is going to be stranded in the ground because nobody's going to want to buy it." But I honestly don't see that happening.
I mean, it could well be that in some societies it comes to be considered unacceptable to use oil and gas. I mean, we're sort of moving that way in California. However it's a very large ship to turn. Here in Palo Alto, 35% of the vehicles sold last year, were electric or plug-ins of some kind, which is great, but two-thirds of them were not.
Palo Alto probably has the highest concentration of plug-in vehicles on the planet, and there are plenty of places where people can't afford electric vehicles at the moment because they're too expensive. And there are many places where you have people moving out of poverty into the middle class. China is a good example of very large numbers of people doing that, but not only China; many other places too for which the cost of non-fossil fuel transportation is just not imaginable; they have no alternative and don't see an alternative to doing that. So, as we have billions of people moving up the economic scale, I think that will increase demand, not reduce it.
So, even though there are places of more forward-thinking people, who will move in that direction, there are a large fraction of the population of the planet doesn't have that choice or doesn't see that choice or doesn't choose to make that choice. So I think we will exceed 100 million barrels of oil production for some time, and probably increase more from where we're at. If you take a look at the EV guys, they seem to have been able to bring down costs quite significantly in the last 10 years. - Yes, battery costing. - Some even have broken a parity with ice, and it seems that it's going to continue to come down, so it would boil down to the economics at the end of the day.
I'm with you in the sense that I think with respect to maybe some of the developing economies in the world, it's going to be a lot tougher to embrace this new paradigm. But in places like Norway, they got 90% of the cars sold are actually EV, and if you talk to the big oil and gas players, their narrative seems to be more of a transition as opposed to renewability. Explain that. Yes. So, you're right. That is the field that we are playing in, and currently in the oil and gas industry.
So, our research groups here at Stanford changed. We changed our names from SUPRI (Stanford University Petroleum Research Institute) to SUETRI (Stanford University Energy Transition Research Institute), and that's what people are doing everywhere. So the oil and gas companies themselves understand that they won't be producing oil and gas forever, and they're looking to diversify their activities for other kinds of energy production, including geothermal, but not only that— wind and solar as well. So that's the transition which is taking place.
So I don't disagree with that at all. I just don't think it's going to happen very quickly. And so, you have two forces.
You have a growing demand from people moving up the economic scale planet-wide, and you have a demand or a force that is pushing away from oil and gas and away from fossil fuels towards renewables, and they're happening at the same time. I think, however, at the moment at least, and probably for a little time— I don't know how long, 10 years maybe—the force of people wanting to improve their life by increasing their energy consumption is going to overpower the force of people who want to move away from fossil fuels. But there's no question in my mind that's ultimately going to happen, and it's going to be driven by legislation like in Europe, for example, and California too: no more internal combustion engine vehicles after a certain period of time, so that will dampen the demand. However, you recognize what will happen is that if oil and gas are less demanded, the price will drop.
Once the price drops, then the burgeoning economies of the world will sort of swoop in and demand more. So, it's a regulating system. It'll work on both sides. If we take a look at most of the developing economies, they're structurally limited in terms of their fiscal space. If anybody within that camp of developing economies wants to encourage a lot more people to adopt this new paradigm, I just don't see them structurally being able to fiscally support it because with the developed economies, there's been a serious degree of subsidization by the governments for people to adopt this new paradigm. So, at the end of the day, it's going to boil down to the cost structure of either alternative.
But I'm somewhat optimistic in the sense that technological innovations to assure a much more efficient renewable alternative is there. It's on the horizon. Yeah, I agree. I think the technology is undoubtedly there,
and it's getting better and cheaper, so we're on a good path in that direction. It's simply a large problem to overcome if you have to do it nationwide and planet-wide. I do remember the first time I went to Indonesia 30 years ago, when it was just considered normal that every large office building or facility had its own diesel generator because they couldn't rely on the infrastructure for electricity transmission. Within the renewable space, you alluded to the fact that in California, hydro was not legally classified as renewable Correct; that's true in many parts of North America and in other countries. - Why is that? - I think it's political as much as anything.
So during the 70s, when the governments were encouraging renewable energy development, they did it with tax rebates, fee reductions, and things like that to encourage new renewable developments, and the honest answer is I don't know why. But this is my speculation: at the time, there were and still are many large hydroelectric projects. So, the people who owned them could have said, "Okay, we're renewable. Give us the rebates." So that was by not classifying large hydro as renewable, they've never been really accessible for tax advantages and things like that; feed-in tariffs, etc. Small hydro is, but large hydro is not. So currently, it's somewhat paradoxically small hydro is classified as renewable but large hydro is not in California and several other places, many other places.
Talk about the landscape within renewables— you've got hydro, you've got solar, wind, geothermal, and all that good stuff. How are the dynamics amongst these, and how do you see them moving forward? - So they don't compete. If by dynamics you mean a sort of market dynamic state. - Which is likely to grow more than the other? Interesting question. So they have different characteristics: solar is intermittent on a more or less predictable fashion night and day; wind is intermittent in a less predictable fashion but based upon the weather; and actually hydro is kind of intermittent too on the decade scale that we have in California at least.
We've had drought for the last three years, so hydro has really dropped considerably. Then we have a big old rain like we just had, and then hydro is looking good again. So we have these different levels of intermittency, and what that means is that no one of those resources can satisfy the market by itself, and what we need is all of them at the same time. Geothermal, of course, runs all of the time, so the combination of those various renewable resources is a good thing; it's a necessary thing for the grid to actually work in terms of how they develop. As we have seen over the last few years, solar has grown cheaper and cheaper, and that's the reason why it's expanded as rapidly as it has. However, we're coming now.
We've already reached a point now, where California at least, is kind of saturated with solar. So, at one o'clock in the afternoon on a sunny day, we have more electricity than we can use to the point the price can go negative. So, solar is kind of maxed out in its classic format and the technology now required to make more solar is storage, currently based upon batteries, so solar now joins in the partnership with battery storage to keep the growth curve, but that of course makes it more expensive. And if you build a solar farm that you can't run all of the time because you've got access during the middle of the day, then of course that lowers the income from it and increases the cost. So, again, it's a kind of self-regulating market that, when you get past the point where you're generating electricity that you can no longer sell, then its costs go up to the point that you don't build anymore. Wind has increased. Actually, wind grew first in California
because at the time it was cheaper than solar, but wind has kind of leveled off somewhat too, mostly, I think, in competition with solar, which became cheaper, so that kind of crimped somewhat the enthusiasm or the expansion of wind. But as the cost levels kind of go up and down, wind obviously has still capacity to be built further in California and many other places too. You know, if on the assumption that some of these renewables are actually intermittent in nature, that makes it difficult for supply and demand to intersect.
And I was talking to some people the other day who were thinking of taking advantage of this scenario. This could be a tradable commodity. And how real is that? I think it's actually working that way already.
So there are people on the market, who will have a gas peaker plant with no other idea in mind that they may run it for an hour every couple of days just to fill in a gap somewhere, and get five dollars a kilowatt hour for just filling in a gap when it's most needed. So there are people who are making bets on gaps in the market. You can actually approach anybody with a wind turbine, anybody with a solar panel, even anybody with an EV, to the extent that there's access to energy, let that be redistributed for other purposes and stuff like that. And that, I think, is a... not sure if that's an exciting future, but that's something that probably needs to be thought of.
Certainly. I mean, the integration with EVs in particular. So if we substitute all of our internal combustion engine cars with EVs, then we have a significant demand for electricity in order to make that work. Not an overwhelming demand, it's not as big as actually people imagine it to be. However, it's sludge. So from that point of view, you have to think about when you're going to actually charge those vehicles.
And it's obviously a good time to do it would be at one o'clock in the afternoon when solar is at a max. Unfortunately, that's not when people want to charge their EVs. It's most convenient to pull in the garage at night and plug it in at 6 PM, which of course is actually the peak of the demand for electricity. It used to be interesting enough. 10 years ago, PG&E, who supplies our trustee to the north, not in us here, but a bit north of here in San Francisco.
They introduced time-of-day pricing on their grid, and people who had EVs could program their cars. They plug them in but they're programmed not to start charging until midnight. So after midnight, PG&E actually sold the power at a lower price because the demand was low and they had plenty of capacity on the grid. That is no longer true, so the cheapest price is not after midnight. I actually don't know what PG&E sells for now. But in the middle of the day on the statewide grid, we can have negative pricing; that's when the cars should be charging, but unfortunately, they're not at home at that time.
I want to ask you about the grid. What the consequences are with respect to the grid in the context of how we're seeing solar growing so fast and how it's getting democratized to the extent that it's going to get so much more democratized the need for the grid will decline, and to an extent, even geothermal. As geothermal heat pump capabilities get a lot more democratized within residential areas, at least, then the need for the grid is also going to decline.
Well, the need for the grid will change, that's for sure in its character. So, currently in California, the so-called "behind the meter" solar, which is people's rooftops and they're generating electricity but it's not coming through their electricity meter, or if it does, it goes in the other direction, is more or less similar in capacity to the grid-connected solar, but it's somewhat less. But anyway, they're of the same magnitude. So there's a lot of "behind the meter" solar, which belongs to individuals or is supplied anywhere directly to individuals, and from that point of view, you're right: they don't need the grid. However, that's only eight hours of the day.
So there are two reasons why we still need the grid. One of them is because people who are generating rooftop solar need to be supplied for the remainder of the day, and then secondly we need the grid to take advantage of the excess electricity that those distributed sources are actually generating. But, you're right. Overall, if everybody had solar panels or... - geothermal heat pumps. - Yep. Geothermal source heat pumps,
then they could be kind of independent for part of the day or maybe in increment of the totality of their energy consumption they could supply their own. So they could be actually borrowing from the grid during the night and supplying the grid during the day, so they could be a component of the distribution rather than just a consumer. I mean, technological innovation is only likely to take us to a point where there is going to be enough energy absorbed by the solar panel during the day for all 24 hours, right? Yes. So storage becomes the technology again that we need. And if there's a need for a grid that would be for basically redistributing that access energy for other purposes, so it just seems existential for the pre-existing grid. - Yes. I don't believe, however, that it's going away. - Oh no, no, no. - It's certainly going to change.
- Yeah. talk about geothermal. Why is it growing at a less rate than solar? - It's more expensive, simply spoken. - But not in the long run, right? - Correct. So, the older geothermal systems have made billions of dollars for the California generation, and those in Indonesia too, very profitable operations actually. The difficulty with geothermal is the geological uncertainty. So, the problem is that when you build a solar farm, you have a certain number of panels, you have a good understanding of what this insulation is like, in other words, how much sun is going to shine over the course of the year, so you can predict with good accuracy how much electricity you're going to generate, and eventually you can do that with geothermal too.
But it probably takes you a number of years and some hundreds of millions of dollars to discover exactly how much it's going to generate and how long it's going to last. That's my field, actually, geothermal reservoir engineering—figuring that out. And so, if you are a banker or a company wanting to invest in electricity generation, geothermal is a riskier bet.
It may ultimately be more profitable. It may ultimately be cheaper electricity, but you don't know that in advance. So it's one of the reasons why resource companies like oil and gas companies are a good fit for geothermal development because they understand it, because oil and gas are exactly the same: you never know exactly what's going to be there. So, resource uncertainty is, I think, the principal difference between geothermal, wind, and solar.
- Would it be a higher risk than oil and gas? - Similar. - Similar. - Well, it differs in an important way in some ways, so if you're in an onshore environment for oil and gas and you drill a well and find some oil, you can sell it for a hundred dollars a barrel tomorrow, so then you have an income stream. Geothermal isn't that way.
So you can drill a well, you can find some steam, and you have the potential to generate electricity; however, you can't sell it yet. So you have to drill 20 to 30 more wells, and you have to spend two or three hundred million dollars to build a power plant and a steam gathering system, etc., before you can make any money, so your upfront cost, your capital investment, has to be upfront, and it has to be paid up two to three years in advance before you can actually start taking income. How much is, in terms of capacity, installed already? Would it be like in the tens of thousands of megawatts around the world? I think 12,000 megawatts is our current capacity, if I remember correctly. - And the biggest would be in the U.S.?
- Yes. The U.S. is 3000, Indonesia is in excess of 2000, Philippines 2000 also. - Okay, and Indonesia is the largest geothermal resource potentially. What would it take for countries like Indonesia to jump on this bandwagon? - Capital. I think the only thing that's holding Indonesia back is access to large amounts of capital. I mean, obviously, if you're the government of Indonesia, you have many things that you need to spend your capital on.
You've got a large population; you've got to think about food and transportation, etc., so I'm sure there's plenty of capital in the nation, but it's a question of prioritizing what you're going to spend it on. Well, there is capital but there is a lot more capital outside Indonesia. Yes, I'm sure that's true. My question is with respect to what it would take for all kinds of capital to participate so that it does become a pretty successful narrative from a sustainability standpoint.
Well, that's a financial question to which I'm not really expert to answer. But I think that what other countries have done usefully, and of course Indonesia did this too both in oil and gas energy and geothermal, is to bring in outside concessionaires who provided the capital and developed a resource, and then receive income from it. It's a structured arrangement, but it means you have outside agencies who have the capital, so you don't have to supply it yourself.
It's obviously advantageous, ultimately, and a successful project if you supply your own capital. However, you've got someone else who takes the risk in a build-operate-transfer away, that can be very effective. It has been done in Indonesia; the weighing window is an example. - Right. To what extent would tariff matter? - I'm sure that helps a lot too. So, building tariffs is the mechanism that has been used in many countries: Japan, Germany, and the Philippines, to develop geothermal.
The U.S. doesn't do it quite that way, but production tax credits are how it's done here, but that's worked well as well. It started about 10 years ago when the production tax credit first got applied to geothermal; that sort of accelerated development a lot, and of course, the production tax credit was supplied to wind and solar before that, and I'm sure that contributed to the expansion that we've seen there too. I mean, some of the international capital holders and technology holders have decided not to stay in places like Indonesia. One argument would have been tariff-related, in the sense that it's not as perhaps appealing as in some other countries. The economics do matter at the end of the day.
I'm sort of in a camp that thinks and believes that, until and unless debt gets recalibrated, we're not going to see critical mass. And I want to put this in the context of how nations like Indonesia would like to be a modern nation. Right now, our electrification is probably to the extent of between 1000 to 1500 kilowatt hours, whereas countries like Singapore are at about 10,000 kilowatt hours. If you want to be a modern nation, you need to be at least 5,000 kilowatt hours. So you need to basically multiply your pre-existing power generation capabilities by five times. And we have about 72,000 megawatts worth of power generation capabilities, most of that is basically carbon-emitting.
So if you want to be a modern nation, you need to multiply by five; you need to build a delta of about 270,000 megawatts at the rate of only building 3,000 megawatts a year, most of that is in coal. You know, our kids and grandkids are going to have to wait a long time, about 90 years, right? 270 or 280,000 megawatts divided by 3000, that's about 90 years. What do you think could be the solution for developing nations like Indonesia to become modern nations within our lifetime? Because you need something that's clean, something that's scalable. Geothermal I think could be of scale, right? Yes. So, geothermal in Indonesia specifically is reported, I think, believably, to be able to reach 20,000 megawatts, which would make it… - It's now 2000, so you need to multiply that by 10. - So that would be hugely greater than the United States, but that's not going to happen quickly, and it's not going to increase your national capacity by a factor of five.
In fact, it's going to increase it by 25%, so geothermal alone cannot do it, although it's certainly one of the steps that could be taken and should be taken. So, how do you get the rest? You know, it rains a lot in Indonesia, as I have noticed from personal experience, so hydro seems attractive. But the supply is on the other side, the demand is on the opposite side. How do you (connect)? Well, I think they go in both directions. So, what you have in Singapore is the example you gave of a nation which is almost exclusively a consuming nation.
It doesn't produce anything other than people and ambition. So you can sort of move. I mean, the demand and the supply can actually go in opposite directions, as they have in other places. That's perhaps an oversimplification, but the State of California has an energy demand today, which is almost exactly the same as it was in 1980 per capita. The rest of the United States is double today what it was in 1980.
So, California, by regulation as well as by culture, if you like, has stabilized its energy demand at a specific level, more or less roughly speaking. Perhaps in the future we can start to take it downward, so therefore the expectation of how much energy consumption you need or how much energy generation you need to be a modern nation, I think, that number will shrink as we go forward. I mean, it really has to if the population of the planet keeps on increasing, because eventually there isn't going to be enough.
I mean, even now there isn't enough, so demand will go down—not hugely, but anyway it will creep down. - It is still going to be like kilojoules. - Right, and the production has to increase. So, I've been holding back on this word called "nuclear" because that's something that somehow a lot of people around the world are afraid to mention. And I just see that as a possible alternative in terms of scale and cleanliness.
And put that in the context of what we have to achieve by 2050, 2040, and 2030. 2050: carbon neutrality, absolute carbon neutrality. We're just not going to get there unless we do something a little bit different, if not starkly different, from pre-existing paradigms. We need for sure a huge amount, a tremendous amount of energy production, which is not fossil fuel generate from somewhere. And the number of alternatives for that are few, and nuclear is one of them at the same time, so that's the economic and sort of the engineering answer. But we also have to consider the social aspect of it as well.
However sensible an idea nuclear is, there are many people willing to reject sensible ideas for various reasons of their own. The United States has sort of gone full circle twice on nuclear because tremendous enthusiasm in the 60s and 70s, 100 nuclear reactors running in the United States, but the last one was built in the 1970s, and then the reaction against them built up to the point that they no longer became viable. Three Mile Island was a turning point.
But starting in the 2000s, before 2010, nuclear started coming back on the table. Companies were making plans to actually talk about (it); they were making plans to actually build new nuclear power plants in the United States. Until 2011, which was Fukushima, and suddenly all of the enthusiasm instantly disappeared. And, of course, not only in the United States but in other countries too: Germany and even in France, which depends critically… - 70% - Yeah, 70% nuclear - And they've done okay. But even there they had some very innovative ideas for fast radio reactors which ultimately got crimped. Actually before Fukushima.
You know, the data that I've looked at suggests that the number of casualties by way of nuclear in the last few decades would have been about three to four thousand people per year, compared to air pollution, which would have cost about seven to eight million deaths per year. However, I just don't see any practical solution for a lot of developing countries out there until and unless we start thinking about game-changing the pre-existing energy equation, and that inevitably would have to involve a nuclear narrative. Unless we want to wait 90 years to become a modern nation. I think that's true from an engineering and technological standpoint, that's true. We face this problem in almost all technologies, including geothermal. You know, there's strong resistance against geothermal in some countries, Japan being one of them, because of the concern about the loss of hot water production for spas and hotels or whatever, which people care about a lot.
In other places in Europe, the concern is induced seismicity, so there are technological or social concerns against many of these technologies that cause them to be slowed down. To an engineer like me, what that means is to address the technological challenges; you don't just say, "Okay, well that's horrible; forget about that." Unless you've got some suitable alternative, which I don't think we do, and I think nuclear is in that category too. Technologically, there needs to be solutions for the challenges that people are concerned about; whether or not those will be sufficient to kind of pacify people's concerns, I'm not so sure about (that). I was in Tokyo in March of 2011 and saw the Fukushima nuclear plant explode on live TV, and I have to tell you that was one of the scariest moments in my life, knowing it was 200 kilometers from where I was at the time. I went there just a couple of months to see the consequences.
But, yeah, I'm just sort of spinning my head on how we make sure that this planet becomes more environmentally friendly. I mean, we become more environmentally friendly with the planet, and how we modernize properly, because we're not Norway, we're not the United States. I mean, there's a lot of people in the world that are like, countries like Indonesia.
How many times have you been to Indonesia? I do remember I used to go once a year. Probably 30 times, I don't remember. Tell us what would have been the most interesting moment you had. I mean, you've taught there a couple of times, right? Yes. I used to go every year, until 2015 actually, when the oil price… I used to teach well-test analysis for a company in Jakarta called LDI Training.
They first invited me there in 1990, and I did it every year, and sometimes I taught twice. I taught a geothermal class as well and used to always be in Jakarta, subsequently in Bandung, a couple of times I taught in Yogyakarta and Bali as well. But, one of the most interesting experiences I had was that they used to always use the Hilton, actually no longer called the Hilton in Jakarta. But, on one particular occasion, the Hilton was full when they wanted to have the course, and they had it instead in one of the other big hotels: Shangri-La. Anyway, they had a nightclub in Shangri-La. And again, I don't know what was going on in Jakarta that summer, but all of the hotels were booked, and all of the meeting rooms in the Shangri-La were also booked, so they had the course in the nightclub - I’m sure everybody was paying attention.
- during the daytime of course they were otherwise using it. - That's a new idea. - So I had the class there with the silver ball with the mirrors on and all of the round chairs, etc., so we held the course on the dance floor, so we had the table set out there with the computer.
- Any PowerPoint presentation? - Oh yes. And of course they tore it all down every afternoon and put it all back the next morning. So that was the time I performed in the nightclub in Jakarta.
Roland, I want to end the conversation on where you think the world is headed towards 2045 or even 2050. Are you optimistic about achieving carbon neutrality? I'm optimistic that we'll move in that direction. I think we're already moving in that direction so it's pretty clear that this is something that's already happening. I don't honestly believe we're going to reach neutrality by 2050, that's too soon. But I think we can have a good shot at it. That said, don't mistake what I'm saying here.
I think we should strive for, we should target 2050 for carbon neutrality. I think regulation, people's behavior, etc., should be targeting that; actually achieving it, however, I think it's going to be more difficult. What would it take? I'm in a camp that believes that it's more about technology as opposed to policy.
I think there are three components: technology, policy, and also human behavior. And the vector on human behavior has not been good over the last five years. People are growing more extreme in both directions, and that's not a good sign for reaching consensus of moving in a positive direction where a good idea like phasing out internal combustion engine vehicles is propagated in one state, and in response to that, another state introduces legislation to ban electric vehicles, simply just for spite. So, this kind of reaction is not helpful, and moving towards the two extremes is holding us away from an advantageous middle, which is probably what we need to get to where we need to go. Where do you see the mix of renewables heading to in 2045? Will that still be filled mostly with solar or a lot more about geothermal and hydro? - I think all of the above.
I think the cutting edge or the leading edge that we're at right now is based upon storage. So, the technology we need now is storage. Storage actually enables all of those renewables and any others that any people may come up with.
So how that works is probably a combination of things: be grid connected to storage; be people with big batteries in their garage that will keep their lights on overnight. - Do you see planes being electric in the near foreseeable future? Ships and boats will be a lot easier. - Yeah, transportation by ocean could certainly be done differently, even sail the way that we used to do, it is not a bad idea at all. Planes are obviously a lot harder but people are producing electric planes. - Right. Small ones already. - You know, biofuel powered planes certainly are feasible.
Yeah, do you see a transatlantic, transpacific airplane, being electrified in the next 30 years? - I don't, but I'm quite sure that there's people who are smarter than I working on that. I mean, never say never. I think what we're likely to see, ultimately, we're seeing it already, is a movement away from transatlantic/transpacific travel, instead of me traveling to teach well-testing in the Jakarta Hilton, teaching it by remote, which actually we've started to do so. I think telecommuting and telecommunication will substitute a lot for transportation. It already has. The pandemic kind of taught people how to do that.
We already knew how to do it, but they taught them to do it, and that is a change; it's a structural change in the way people are working now that they didn't five years ago, and not all of it was good, but some of it was good, and we can take advantage of that to actually cut down on moving people and large objects from place to place and just do what we need to do where we are at the time. - But the storage of the data, the competition of the data will require energy in the back. - It will. But much less than moving a professor
from one side of the planet to the other. - And burning a lot less. - Yes. - Thank you so much, Roland. - Thank you. That was Professor Roland Horne from Stanford University. Thank you.
2023-03-14