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Black Sea Energy and Economic Forum 2009
Speakers:
- General Chuck Wald, Director and Senior Advisor, Deloitte & Touche; Board Member, Atlantic Council
- Claudio Zito, CEO and Country Manager, Enel Romania
- Lady Barbara Judge, Chairman, UK Atomic Energy Authority
- Ana Palacio, Senior Executive Vice President, Foreign Relations, Areva Executive Committee; Former Foreign Minister of Spain; Board Member, Atlantic Council
- Santiago Seage, President and CEO, Abengoa Solar
October 1, 2009
GEN. CHUCK WALD: I have been in the military and I have to tell you that Fred Kempe was very impolite to have this panel here. But we’re here.
But I appreciate those in the back, try not to fall asleep during this; this is a post-lunch discussion and our friends from Spain tell me that the siesta period in Spain now has been suspended. And they now work through the afternoon and then into the night. So they work double; so they’re used to this.
But earlier we heard several different aspects of energy and the economy here, security, the environment, et cetera. Through the panels the speakers all made very good points. Our discussion during this period is going to be on “The New Energy Mix.” And it’s basically about alternatives, renewables, et cetera.
And, as was pointed out earlier, I think world demand, from what I can see, what I’ve read and heard – and we heard earlier – will only increase over the next years. Maybe linear, maybe even more than linear. China will be at double-digit growth this year and in the future. I was talking to our friends from Georgia today. They predict by 2011 they’ll be back in positive growth; the region here will grow.
The United States, I’m sure by 2011, will probably be up in the higher – between five- and 10-percent growth again at some point. Even more by China coming up.
(Audio break.)
GEN. WALD: – on carbon. And in the United States the pressures are mounting. We had a conference on the Council for Competitiveness in America last week, where Vice President Biden, Secretary of the Energy Chu, Secretary of Transportation LaHood, and Secretary of Commerce Locke all spoke. These were 250 senior CEOs of large corporations in America and university presidents. And the discussion over two days ended up being almost totally about green energy and the requirement for both legislation and opportunities. So we talk about that. And then competition for what the next energy is going to be. And again, that’s in a time where we’re in a world recession, but coming out of it. The opportunity for venture capitalists is significant.
I’ve been to California, Palo Alto, Silicon Valley several times over the last year. I’m going down again at the end of the month. Lawrence Livermore Lab is in the process of doing a test toward the end of the month, using 192 large lasers that are going to be focused on a BB-sized piece of hydrogen and they hope to develop fusion.
Now, hydrogen energy is a ways out as far as being prolific, but that could be eventually more the alternatives and more the solutions. But in the interim, there’ll be several alternatives that’ll be available and we’re going to need all of them.
And then lastly, before I introduce the panel, have them start answering questions; I went to a British-American Business Council meeting about seven months ago. And we had a panel, one on solar, one on wind, one on coal and one on nuclear. The Westinghouse person talked about how nuclear was the answer and the wind person, et cetera, et cetera. And my question to them was, isn’t this a little Pollyanna? But it seems to me that all the alternative energy folks should actually get together to get legislation because there’s not enough for – one of these alternatives is going to fill the need for everybody.
So that being said, we have great panel. We have one more coming, Claudio Zito’s just arrived at the hotel and he’ll join us in a minute.
Lady Barbara Thomas Judge, chairman of the U.K. Atomic Energy Authority and in 1980 was appointed by the president of the United States as the youngest-ever commissioner of the U.S. Securities and Exchange Commission. Where were you over the last couple of years?
LADY BARBARA JUDGE: In Hong Kong.
GEN. WALD: Yes, in Hong Kong, right.
The Honorable Ana Palacio, senior executive, vice president of the AREVA executive treaty and former foreign minister of Spain, the first female foreign minister of Spain. We’re honored to have you.
Mr. Santiago Seage, CEO of Abengoa Solar, and then Mr. Claudio Zito will be joining us. He’s the CEO and country manager of Enel Romania.
I’ll start with you, Lady Judge. We talked about alternative energies and the fact that there’ll be a requirement for all types. And you’re a nuclear expert. The question I’d have for you is how do you see nuclear energy growing from what it was here – you mentioned earlier in a question that it looked like it became stagnant for a while – globally, but also in European setting? And the specific question would be why and how did France get so ahead of everybody else in nuclear energy development.
LADY JUDGE: Okay, let me just say that as far as I’m concerned, we talked about three different problems in energy this morning – energy security, do we have enough; energy independence, where does it come from; and climate change, which is the problem that we are facing as a world today. And all of those are the energy problems that we have in front of us. And at least from one point of view, nuclear answers them all.
As many of you know, nuclear is carbon free, so it’s good on the climate change point. Energy independence – you build a nuclear power plant in your country, as the Romanians have, and you have it here. You’re not dependent upon having the energy come from any other foreign country. And security of supply – when you build a nuclear power plant, you have energy, which is base load generation. It’s not just top up like renewables. It has a base load and you have it all the time and the price is relatively stable.
There is a big infrastructure cost in the beginning to build the power plant, but as somebody said, there’s a big technology cost around carbon capture and storage, huge costs around proving the technologies of renewables. So with respect to nuclear, they say is economic with oil at about $55 a barrel.
Okay, so nuclear, what are the problems of nuclear? You have to think quickly in nuclear. The politics – will the government agree to it? The price – it’s expensive. The people – there’s a skill shortage. How do we deal with it? The parts – there’s a sort of a queue. If everybody in the world is building a new nuclear plant, certain parts are very much dependent on one factory in Japan. The planning – where do you put it? Do we want it here? Do we want it here? People say, “not in our backyard.” And the press – how do you get the press on side to agree that the people will like it?
Those are the issues; I said I would say them. And maybe we can talk about how to deal with them. But France did it all right, to answer your specific question, unlike the rest of us in the world who confronted the first oil shortage and we’re worried about not having enough petrol, but we wind up and fuse around to get our car filled. The French realized that they didn’t have enough – that they were dependent on Arab oil and they didn’t like it. They just didn’t like it at all.
The president of the republic did what no other head of state did around the world at the time, but what a good CEO would do. He had an away day. And he got to come to a beautiful chateau outside of Paris, which the French would do. The whole cabinet came, plus two other people: a labor leader and a psychiatrist. And there they were in this beautiful chateau outside of France, wonderful food, beautiful wine, and they spent the day deciding how they were going to explain to the French people that what the French people wanted was nuclear.
And what happened was that a few days later, they came back to Paris. And the president of the republic stood in front of the Elysee Palace and had a big conference, a big conference, a big press conference. And he said to the French people and the journalists who were assembled, “nous sommes les Francais.” We are the French. We are the French. We cannot – we, the French, cannot be dependent on any other nation. And probably the French said any lesser nation, but we probably don’t know that. Okay, so they say, we are the French. We cannot be dependent. And this is what we’re going to do.
Remember the psychiatrist and the labor leader: We’re going to build nuclear power plants. And remember the labor leader. Nuclear power plants have lots of jobs – that deal that was made in the corridors the day before: We’re going to build nuclear power plants in this country and this is what we’re going to do. You, little town in the South of France, if you take a power plant, remember that ring road and that government building that you want, a new mairie? It goes with the power plant. And you little power plant in the South of France, you want a children center and a swimming pool; that big infrastructure project goes with the power plant. And you little plant in the front of Spain, in the top, near the British, you want a road to Paris. Well, of course, that goes with the power plant.
And what they did long ago, in the ’70s, was they got the population to understand that big infrastructure projects bring jobs, that having a secure supply of electricity was a good thing, and communities were vying for the right to have a power plant in their backyard. And the French did it because the French government was behind it and they pushed it very hard.
The answer to a lot of my questions, which we ought to raise later, all those Ps – people, place, planning, price – is, is the government with you? Can the government determine that what you need is nuclear as at least an alternative? We need renewables. We need oil. We need gas. We need coal. But if you look at nuclear, it deals with security supply, energy independence, climate change. You can do it, but you have to do it now because the energy gap in the world is coming and nuclear takes a long lead time.
So if people want to do it, like the Romanians, who have two new power plants coming on-stream in the next few years, they have to think about doing it now.
GEN. WALD: Yes, just a couple of points, in America, if we were to start to replace our plants now, which there’s a push to do that, legislation’s difficult, we probably can replace 20 percent of which we’re doing. Twenty percent is what we’re using for nuclear – or getting from nuclear by about 2050. So the best we can do is stay neutral very possibly. But I agree it’s coming. But there’s another P in there. That’s proliferation. And there’s another issue and that’s used fuel.
So while we’re on the topic, how does France look at that and how do you look at the proliferation issue?
LADY JUDGE: Proliferation is one of the keys. You’re exactly right. There are those people that say that once the nuclear technology is in places like Pakistan, the nuclear genie is out of the bottle. Now, we’re with a lot of security people here and I don’t do security. I do turning on the lights. But there is, in fact, an issue about giving out nuclear technology to various parts of the world, but it’s already out there.
If you look at what’s going on – the Turks are building. The Romanians are building. The Egyptians are building. The Abu Dhabi government is building. Jordanians are building. The Chinese are building at the rate that we can never get the right statistics. The Indians are building. The Brits, we hope, are going to build. Romans just changed their plans and the Italians are going to build. Who knows what’s going to happen in Germany with the new government? It’s happening.
We are building nuclear power plants around the world because we need more energy. We need secure sources of supply. So what we need to do is have international organizations get together to determine what to do with nuclear knowledge and to keep it within the bounds of civil nuclear power plants.
With the waste, you are exactly right. That is the one P that we can’t find a name for the waste. Maybe it’s la poubelle for the French, which is waste basket.
There is an issue about waste. There are a number of countries like France which recycle it. But for those that don’t, deep geological storage has been determined to be what we should do with the waste. We should build a big cavern. They’re doing it in Romania. They’re doing it in Finland. The French have decided to do it, but they’re not doing it yet.
What’s deep geological storage? Well, you find the right kind of terrain. You build a big road down into the middle of the earth. You build a big cavern. You put a lot of different kind of lead lining to keep what’s inside inside and not out. You lay the rods in. And then you close up this big cavern and it’s safe for 1,000 years.
Now, people always say, 1,000 years, that’s not enough. And what I say is this group may not remember it, but in the 1850s the British won the war against the Chinese called the Opium Wars. And what they won was Hong Kong Island. And they took Hong Kong Island for 150–year lease – 99-year lease, only 99-year lease then. And for those Brits in 1850, 99 years was forever. So for us here in the 21st century, 1,000 years is a pretty long time. And if we can keep it safe for 1,000 years, science will come along and find another route. And that’s why it’s called deep geological storage with retrievability because that cavern that I described can be opened up for the next way to deal with it.
But think about 1,000 years and what was happening 1,000 years before. So we believe that you need to do it neatly, and besides the waste is there anyway. One more minute. The waste that we talk about, the waste that we have in the world today is not driven by civil nuclear power. It’s from the weapons program.
Remember that nasty little Cold War that we were all involved with and all those nuclear submarines, et cetera? Well, that’s what they did with the waste. They just threw it out like that.
And so 90 percent of the waste that exists on the planet today is from the weapons program in the Cold War. Only 10 percent is from the civil nuclear power. And indeed, the new technology for nuclear plants is different from the old technology. And it emits only 10 percent of the waste that used to be emitted in the old technology.
So whether or not we ever build another nuclear power plant, we need to deal with the waste and we believe that science has a solution.
GEN. WALD: Thank you. We’re going to switch a little bit and I’m going to get the foreign minister on the last question here, which I think is really the crux of this. But in the interim, in the United States for example, most people equate energy initially with petroleum. Our transportation fleet uses 98 percent gasoline. But in the United States only 2 percent of our energy comes from renewables out of all the energy we use. We use 22 million barrels oil a day, which is one fourth of all the fuel in the world. So for the United States to replace quite a bit of that fuel with alternatives is going to take a large effort and you’re going to have to have a scalability issue.
One of the areas that the United States actually has leading technology and was wind, but we didn’t employ it, mainly because of lack of leadership, but actually the cost of inexpensive fuel.
They tell me that to change the transportation fleet over in the United States, if we had an alternative that was viable, affordable, and available, takes about eight to 10 years. We have almost 300 million vehicles in America, which is – we have more than one vehicle per person in America almost. So it’s scalable. But in the meantime, Santiago Seage is from Abengoa and he’s going to talk to us a little bit about his views on wind and then where the world’s going. And just when I hand it over, I hope you talk about China.
I just read today that China produces 40 percent of the solar panels in the world today. They use almost zero – they don’t even make a percentage of the use of solar electricity, but starting next year, they’re going to pass the United States in the amount of solar they use in one year. And that’s where they’re going.
Santiago?
SANTIAGO SEAGE: Okay, I think that going forward, as we have discussed here, obviously ensuring that we have a sustainable way of producing energy, both for electricity and transportation, is key. And this is probably more obvious now than a few years ago, when we have all been exposed to the reasons why it should be that case.
Therefore, finding sustainable ways of producing energy, which for me at least means renewable energy, is one of our biggest challenges. And typically, we hear two reasonings against renewable energy. One of the reasons we hear is, this is not real power; this is peak power only. You cannot really solve the issue of turning on the lights every day.
The reality is that today we have a number of options that we didn’t have in front of us 10 years ago. Wind, we all know about it. We all know it’s a big power. We all know the advantages, reasonable cost, very close to a combined cycle in many geographies. And we know the limitations, which is a peak producer that actually provides electricity whenever the wind blows, therefore you need to have a very robust grid and you need to be ready to backup that production when needed at least for a few years. Obviously storage, storing electricity is something that will happen. We’ll become in the future efficient enough and the cost will decrease enough to make wind more of a base load source.
Nevertheless, in the last few years, we have seen great developments in other renewable energies. We’ve seen photovoltaics decreasing costs very sharply. Still, again, this is another source of power that produces whenever you have the sun out. It matches better demand in most countries. So it’s closer to what you need, but it still it doesn’t produce 24 hours a day.
Nevertheless, costs are decreasing. You can do it distributive, so you can have it very close to the consumers, saving transmission, and competing with a retail price, which in some markets today already photovoltaics can compete with the retail prices.
But we have other sources of energy, of renewable energy. We have geothermal. We have biomass. We have high temperature solar thermal. These are sources that until recently were used in very few examples worldwide that today are becoming mainstream in some countries. And these technologies, what they have in common is the fact that they can be base load.
You, in biomass for example, you can produce whenever you want. In geothermal, in many cases, you can do the same thing. In high temperature solar thermal or concentrating on solar power, in those regions of the world with enough solar radiation, you can restore the energy, in this case thermal energy.
So we have in front of us now the possibility to increase significantly the percentage of an energy mix coming from renewables. It doesn’t have to be anymore a 10, or a 15, or a 20 percent of your grid. With distributed energy and with these dispatchable sources of renewable energy, you can reach much higher percentages of your mix and there are places where you can even think about half of your mix coming from renewables.
The other reasoning we hear sometimes is that these sources of power are very expensive. It is true that when you compare the cost of a coal plant that was built in the 60s with the cost of renewables, yes, renewables is much more expensive. Now, if you start to do the comparison using the cost of building plants today and you’re including the cost of the emissions, then you start to see that the gap in some cases has already disappeared and in some other cases the gap is much smaller than what you thought.
So even without thinking that the cost of these technologies will decrease sharply in the next year, as it will, the economic case for renewables makes much more sense in many geographies, not in all obviously, than what it used to.
So my point of view is that renewables has to be a very important mix in the energy production in most countries. I talk mostly about electricity. In transportation, I think, you can do a similar reasoning.
GEN. WALD: Can you talk a little bit about what Spain or the European Union writ large is doing about improving the electrical grid, the transportation of the energy itself through smart grid because that’s a big buzz word in America, as you know, and again both an opportunity and a challenge.
MR. SEAGE: Yes, obviously some of the renewable energies I was discussing require you to have a very good grid. And I think that in that regard, when you look at grids in Europe, at least in many countries in Europe, what you see is that Denmark, Germany or Spain are coping with percentages of wind specifically or wind on photovoltaics that many people thought were impossible to cope with a few years ago. And that’s done obviously by improving your grid, but also by managing your grid much more efficiently. Smart grid as a buzz word is very fashionable now in the U.S. and the new administration is pushing that concept. And it is true that it helps an existing grid to be able to cope with some of these renewable energies.
In that regard, I think the U.S. has a huge challenge, which is to improve their grid, to make sure that they end up having one grid and not a number of isolated or mostly isolated grids in different areas of the country. As you know, Texas for example, is completely isolated from the rest of the country. There’re many things to be done there and I hope that the new administration will succeed in what is a huge challenge because of the way the grid has been built in the U.S.
GEN. WALD: Yes, Santiago really pointed out another really key point about energy is often we’ve talked about the confluence of energy, security, or national security if you will, global security, and then climate change as the three kind of overlapping Venn diagram issues that all have to be addressed simultaneously. The easiest one, frankly to me, is to address the energy issue itself, to make it more available, et cetera. But the other two have to be addressed too.
But one of the things that comes to mind, I think, is – and we can talk about a little bit later – but your concept of where we should go with storage because that’s going to be a huge part.
In America, solutions roll off people’s lips like crazy. We’re going to go to ethanol. We did the ethanol thing in America for a while, which was corn-based. Then everybody found out that first of all you’re taking all the feed corn away from the cows and the farmers, et cetera. Number two is that isn’t compatible with the regular, the normal infrastructure of a gasoline based transportation system. So ethanol can’t be put in a regular gas pump because it mixes with water, so that’s costly.
Then you talk about we’re going to electrical fleet. We’ve got a robust fleet and all that.
So for every good thing, there’s a negative thing. And for a while there – this was very short time ago in America – coal is going to be the answer, is going to be coal to liquid. Now, we’ve got one of our friends on the board here that can talk you in a sidebar, talk about a new, special way to make liquid coal out of coal – called liq-wax – liq-wax I guess it is – that’s clean.
And again, I’ve talked to a friend about this and I’m not sure what the downside is yet, but there’re all these different ideas out there, most of them good. But one of the questions I’d ask Santiago before we get to the minister is there’s been discussion about solar panels in space and having this capacity to actually transmit electricity. Have you thought of that or is that viable or is it realistic rather than expensive?
MR. SEAGE: One day maybe I think it’s – for the moment is not even R&D.
GEN. WALD: Okay, yes. Well, thank you, we’ll talk more. I’m sure there’ll be questions on that. But Madame Minister, the issue then to me as kind of a reason for this conference is this is a global issue. That’s a regional issue here in the Caucasus in Europe, no doubt about it.
But the real issue is a global issue and a solution. The driver for the demand will be China, India, and other countries emerging, particularly China and India, and China with a middle-class coming on soon. The global population increase – we’re going to go from six-and-a-half billion people today to, by 2025, it’ll be nine billion people in the world and growing. And the demand is only going to increase.
The climate change issue is not trivial. I think even in America there’s been the conclusion made that climate change is carbon based or at least exacerbated by man and that something has to be done about it. There’re some naysayers there but the problem is something has to be done. And whether we like it or not, it’s going to be an international pressure to do it. It’s competition for economy as well.
But talking about the emerging markets, the other issue is going to be what type of institutions are going to be there to answer some of these questions we’re talking about. How do we actually govern this process that we go through?
I’m a free-market kind of a believer, an Adam Smith kind of guy, but on the other hand, free markets don’t always take care of everything. There was an allusion to it this morning. Ninety percent of the oil reserves in the world are owned by national owned companies. That’s not a free market. Free markets are free markets. So free markets aren’t going to drive the change here. So it’s going to have to be either entrepreneurship or recognition of a requirement to change.
So Madame Minister, what would you say of that?
ANA PALACIO: Thank you, Gen. Wald. Allow me to make two very brief comments on the nuclear and especially on the issue concerning France because I think that what you raise and the ex-commissioner, even as always, Barbara Judge was extremely pedagogic.
I would add just two comments. There is leadership in France at the origin. De Gaulle The goal from the outset, which means with the Compagnon de la Liberation, which means that all the elite is behind idea, bets on nuclear and on space, which means that the transition, what Barbara Judge said, was much easier than in other countries because all the elite, from right to left, was behind this idea.
The second issue is that I think that one must analyze the consequences taken by France on Suez, on the Suez Canal on the Algeria war.
Now, on proliferation, I fully agree with what Barbara said on this issue as well. However, there are encouraging signs. I think that there must be a change in culture. Countries must accept is not a sovereign pride issue to have enrichment or to have recycling. And a very good example is the United Arab Emirates. They can afford everything and nevertheless in their agreements, especially the one called 123 Agreement with the United States and they accept that they will never enrich and they will never recycle that. And this is also interesting for the future, for the change of culture on recycling used fuel. Used fuel is not waste, it is used fuel. And in this 123 Agreement of the United States with the Emirates, it is said that the used fuel will be recycled but not in the Emirates. And it’s very important that in this region, in front of the Iranian approach, there is another multilateral approach. And on the rest, I fully agree, but maybe we can go.
Now, on waste, I think that we have to accept that nuclear, when we address nuclear, we address our imagination. It’s the symbolism of we are just playing with nature, with the essence of nature and playing in a sense with eternity, which was what Barbara said. And I think that on this, if you read the 2006 waste law in France, it’s very intelligent because it doesn’t even go to 1,000 years. It goes to something that everyone can imagine and can project and can feel comfortable with, which is 150-200 years. And I think that this is another issue where the French example, as with in used fuel recycling, is something that has a (bear ?) to the future.
Well, with this, what we are saying here just can be summarized in a very simple sentence. One of the drivers, it’s not the most important driver of globalization not to derail, is an intelligent affair, a constructive solution to this energy equation. And which is the energy equation? Of course, for me, as a Spaniard, the energy equation of Spain interest me and I have to address the policy of my government. It just wanted to get out of nuclear or say that in 2050 we will rely exclusively on renewables. And if I’m German or if I’m French, I have other position.
And of course a region – and you are right. For us, the European Union equation is very important, what the mix will be for the European Union and all the connected issue of grids, of interconnections, which I fully agree with what has been said. But I think that we had a lot to work on this issue or the opening or liberalization of certain markets related to energy in order to really have a European Union policy.
But honestly, the equation that matters most is the world equation, the global equation. And why? Because of this issue of energy being the – in my opinion – or at least one of the important drivers. Globalization can derail for very many different factors, but what is sure is that if we don’t get right the energy equation, globalization will derail.
There are, I think, two aspects. The first is that in order to succeed globalization has to be inclusive. And inclusive, as you said, is just addressing that 1.6 billion people today do not have access to electricity, that we are going to be 9 billion people. As we have seen a very strict correlation between development and electricity. And especially this is clear in China and India that have been the two regions that have taken big amounts of people. Two hundred and fifty million people have just escaped this abject poverty that is present in so many other places.
So there we have. If as minister of India a year ago was telling me, Mr. Rakesh of energy, was telling me, you know, you may say what you want, you Westerners, but we will go on burning our coal and we know that it’s a very polluting coal. And we know that it makes a lot of ashes, but this is what we have. And I cannot afford to say no, I’m not going to build a coal plant because this is going to pollute.
China – China incorporates to the grid – has been incorporated to the grid all these last years the total capacity of Spain plus the Netherlands, almost the capacity of Great Britain every year from very polluting coal origin.
These are issues that affect us, that interest us, and that we have to take into account, because in the end these are common issues. But of course, globalization in order not to derail of course has to be inclusive, but it has also to be sustainable. And where is this sustainable? Of course, there is this issue of climate change that has to be taken into account. We may go back to it later. But it’s also sustainable for us and this is our interest as developed countries, as these OECD countries. And we need security of supply and a reasonable price. And in order to get this, once more, we need to address this intelligent mix. And we need to address this intelligent mix in our equation, but also in the general global equation.
What is this mix? Well, what we know – and this is my conclusion – is that there is no silver bullet. Of course, I will not say that nuclear is the solution, but honestly there is no solution right now without nuclear. And when you see the figures, you see that. Of course, we all have to understand that there might be a fantastic breakthrough tomorrow in one of the areas, maybe in magnetic power from the Earth or whatever, but this is not foreseeable now. And what even optimist forecasts say is that in order to get from such a breakthrough discovery that would be the silver bullet, to its implementation in industrial terms, we have to fill that gap. And we really have to count on the technologies available.
So we need all these sources of energy. This has been said this morning. We need all of them and we need to blend them in an intelligent way. And I think that we have – in the developed world, we have a certain responsibility and Europe has pioneered this idea of the responsibility of the developed world in reaching an intelligent energy mix, betting on renewables, betting on just R&D on carbon capture and storage, betting – and I think for me this is the first thing – betting on how to store the energy. All this, I think, it’s a must.
Now, one last footnote. Europe has led in this issue until now. Now, honestly, you Americans, you have to understand that in the run-up to Copenhagen, although Europe has fixed not just the targets, but has this package energy climate that has to be implemented in the member states and all of this is there, the world is looking to the United States. The world will not move until unless the United States takes a very strong position. And this is – this, as Europeans, we have to acknowledge.
Our weight alone is not enough to push Copenhagen forward. So for the United States, for the Obama administration, there is – they’re to – responsibility of leadership in all this issue, and I hope that we will soon know a very clear position from the United States towards this conference because it’s essential for all of us.
GEN. WALD: That’s very well-said. I want to come back to that just a second. Just kind of a comment from my perspective as a former military person involved with the military today.
I agree the U.S. needs to show leadership and frankly I think France showed leadership nationally when they decided to go to nuclear power. Whether it’s the right thing or not, that was leadership and it’s all about leadership – international leadership.
But the U.S. military, as an example, just the magnitude – you talked about scaling and Santiago kind of alluded to that. The United States Air Force uses more fuel than any other entity in the world, per day. And the U.S. government uses 2 percent of the fuel in the U.S. kind of coincidental with the alternative renewables. But the U.S. military uses 1.5 percent. So even though you have one entity that’s the largest user of fuel in the world, it’s a very small amount even in the United States.
But the government has directed the U.S. military to put the fully burdened cost of any acquisition the U.S. military gets in the future. So the next time we buy an airplane, we’re going to have to have the lifecycle cost or fuel for that airplane figured into the competition, which is kind of an interesting way to start putting efficiencies into things. And I think that’s wise.
The question, again, Minister, for you, as your point about the globalization, global warming, climate change and leadership – and I couldn’t agree more – and Copenhagen is looming large, it’s going to be a challenge to get it through our U.S. Congress – again, it’s a leadership challenge.
But my question specifically is there’s no doubt that the argument presented by India and China specifically, and other emerging economies, has some validity. The U.S. uses 25 percent of the fuel in the world today, emits 25 percent of the carbon. We only produce 3 percent of the fuel, by the way, from a fossil fuel standpoint. And that’s just factual, whether we like it or not.
And India and China, particularly China, say, if we’re going to go through a reduction of carbon process through a global protocol, through Copenhagen let’s say, that says we’ll all do a reduction in our carbon emissions by 2030, let’s say – that’s upwards to 80-percent lower than today’s emissions – China says, hey, wait a second. We’re just starting to emerge here. We’re just becoming a capital, a production economy, and you’ve had all these years to do it. It’s not fair. And you know, you can almost make a point on either side of that.
My question is – what kind of a protocol do you think would be acceptable? I can envision one where the U.S. has a certain ramp, maybe China and India has a lower ramp but eventually it kind of merges out here at some point. What would you recommend to get to an end state?
MS. PALACIO: Well, honestly, I’m going to express a vision that is not shared even in the European Union, but realistically I think that the solution or the agreement in Copenhagen will be much more along what Australia has proposed, which is that there won’t be an international covenant binding but just voluntary kind of peer review approach so that – I mean, it’s not what I wish that it were, but this is where I think the realistic – my impression that the realistic approach will be. Maybe there’s agreed with – it’s complemented with some kind of international just commitments, but the core of it, in my opinion, will be much more with a voluntary basis and peer pressure and peer review than anything else.
Frankly, we are October. This is December. And when you discuss with the people that are daily discussing these issues, it’s very (green ?) to reach a very, as the European Union wished, a very ambitious.
As you very well know, we are still debating between the European Union and the United States were the base year has to be one or the other which, you know, less, eight or 10 weeks from the conference. However, I think that this in this area, reaching a common approach, reaching an agreement that might evolve into an international covenant would be, in my opinion, a fair outcome.
I must say that there are many that are quite pessimistic about what might come out of Copenhagen. I think there will be a common declaration each country fixing its own goals more or less behind the curtains agreed with the others, but without an international public law mechanism of appraisal, much more a peer pressure and peer review.
GEN. WALD: Now, that may be realistic. I would – my only advice to all the people at the side, this is, take the Hippocratic Oath. Do no harm when you’re doing this. You can’t make it worse than it is, I hope.
But I’d ask Lady Judge and then Santiago just to quickly comment on that as well and then we’ll open it up to questions to the audience.
LADY JUDGE: Chuck, as I always agree with Ana, I definitely agree with her today. I think Copenhagen is going to be a disappointment. It’s pretty much going to be a disappointment for everybody because there’s so much ideal about climate change.
Remember, climate change only came back on the agenda of Americans very recently, whereas the Brits and the European Union has been pushing on climate change for a much longer time. And there never can be – the expectations are so high in some quarters they can never be reached. And frankly, I don’t know. There are more Americans here who are in America, but healthcare and other things that come more on the agenda than climate change at the moment.
The other thing about climate change which I do believe in is it is an issue for reach people. It’s an issue for people who are worried about their children and their grandchildren and their grandchildren after that. At the moment, people are worrying about their jobs. They’re worrying about their houses. They’re worrying about how much money it’s going to cost when they see that extra green tariff in their energy cost. This is about truth, right?
And I was talking to the head of Enel – maybe coming back – who was saying – and also the head of another European utility that said, if you ask people to people even 5 percent more of their normal energy bill for green energy, they say, no, thank you very much. They don’t want it. They don’t want smart meters if it’s going to cost them anything. They only want it if they think it’s going to be free.
So I think energy – that’s one of the reasons I particularly like nuclear because nuclear is climate friendly. It doesn’t emit carbon. It deals with energy security problems. It deals with energy independence. It may not have the luster of being renewable, it may not have the charm of being the sun and the wind but it’s base load generation. Every time you turn on the lights, they go on.
We were sitting around in England the other day talking about what we’d signed up to with the European goals for 2020, 2030, 2040, about bringing renewables on stream because we’ve signed up it. Everybody signed up to it in the European Union. And they said, well, you know, this is legally binding.
Well, what is legally binding? What’s going to happen if we don’t make those calls? Because most of us believe, as worthy as they are, we’re not going to be able to make them.
So I think Copenhagen is going to be a challenge and I totally agree with Ana.
GEN. WALD: Thank you. Santiago?
MR. SEAGE: I agree that it’s going to be a challenge and I agree that consumers and people in general wouldn’t pay anything else to (what is sold ?). But I also think that there’s no way around it.
I mean, when you sit down with scientists, with the people who have been working in the United Nations panel, people who are supposed to know technically the issue, they scare the hell out of you. I mean, their message is basically, either we solve it and we solve it very soon, or our grandchildren, they will have physical difficulties to live. It’s not that things will be more expensive or – you know, these people are very, very serious.
So I think it’s a question of leadership. I don’t think that the reasoning that is not so urgent is valid. I think that it has to be solved no matter what leadership. And I also think that in the U.S. the effort that was done before the summer on the energy and the climate change bill was very positive. The targets that were there could really make a change at least a few decades from today, not so much in the very short term.
But I agree that probably the priorities today are elsewhere and it will be very difficult to get anything done, which is a pity because you were talking before about free market and competition. Until we have some sort of global framework where all the countries know which are the rules, we will be having weird situations.
As a tiny, little example: today, you mentioned before that 40 percent of the solar photovoltaic panels are manufactured in China. Actually, nobody knows, but 40 percent probably is a reasonable estimation. Three years ago it was a few percentage points.
Is it true that the best technology in the world is suddenly in China to produce those PV panels? The answer is no. The answer is there are lots of very innovative approaches in Europe and the U.S. which might go nowhere simply because China has decided that photovoltaics manufacturing is key and they are using extremely cheap financing from the government plus – which is a bit more worrying – what they are doing these using dirty coal generation plans to produce the raw material.
Energy cost is very important in a photovoltaic panel. So if your energy cost is subsidized and it’s a dirty coal plant that doesn’t pay anything for emissions, what you do is you pack dirty energy, you ship it to the U.S., and you get a good price.
Now, does that make any sense? It does not, but until we have a framework of rules by which China has to decrease emissions and has to put a price on emissions, this will happen. Should we do it now or not? I agree with Ana. It’s not obvious when is the right time. It’s not obvious whether people who are still going to have access to power should be forced to wait because of these reasons. But we need a global framework and we need it very, very soon. I don’t think it will happen in Copenhagen but we need to see when it can happen.
GEN. WALD: I couldn’t agree more. There’s a huge competition – it’s probably the wrong word – dichotomy, I guess, between the need for energy and then climate change.
And two years ago, I was involved with a study for the Center for Naval Analysis in America, which is a nonprofit, with 14 four-star generals, retired admirals, and the issue was climate change and national security. And so we’ve all obviously thought about that, but we weren’t really necessarily advocates of the problem.
And after a year of meeting probably every two weeks with senior people around the world, (we had ?) 14 people came out of that saying, this is a serious national security problem.
Now, that is the elephant in the room in Congress. I’ll tell you, when you get 14 generals go up to Congress and say, we’ve got a problem national security-wise – so that’s been ongoing.
I will tell you that the U.S. military hasn’t. Now, they’re being driven by legislation to a certain extent too as I alluded to earlier. But I’m currently on a study for the National Academy of Sciences for the chief of naval operations on climate change and naval acquisition. And you said it yourself, so what? The problem when the military buys a piece of equipment, a large piece, for example, the new fighter aircraft we’re getting in America is the largest single acquisition cost in the history of the world: $300 billion. That’s a lot of money. And that aircraft will be with the U.S. military for 30 to 40 years. B-52s are flying today. When we retire those, B-52s will be 90-years-old. I mean, grandchildren’s grandchildren will be flying them.
So the issue will be how do you make the right decision on the acquisition for this day and age because it’s going to be very costly.
Number two is, just from a pure what are you strategically doing in the world from a military perspective in the future – if the water rises three feet, the Navy loses ports. Now ports are pretty expensive. They’re real expensive. I’m talking tens of billions of dollars. If it goes to 4.5 feet, we’ll lose Diego Garcia which is one of the most strategic spots in the Pacific. That’s just from a practical standpoint.
Then you look at places like Bangladesh. The belief is if water rises three feet, you’ll displace 17 million people in Bangladesh. And where do you think they’ll go? The Sahara is growing by a mile perimeter every year. The Darfur was not about race. It was about arable land. In 1996, the United States military was called into Mozambique because they had two typhoons back to back. The entire country flooded.
So as a military person, you have to start planning for what does that mean to me? And so from my perspective, this isn’t just about I like trees and I don’t want trees to do die, et cetera. This is about national security for all of us.
And as Santiago pointed out, unless you really study it, it’s an easy thing to trade off because today I want my economy to work. I want to have my income. So it takes huge leadership.
Just a couple of observations and then we’ll open up to questions. One is I found out from the head of the National Nuclear Energy Institute in America that if you took all the used fuel – they call it now instead of waste fuel in America – it sounds better – but if you took all the waste from nuclear power plants and, by the way, military nuclear reactors which – for those who don’t know – ironically, the U.S. military has the same amount of reactors as the civilians in the America: 103 each.
If you took all that waste that we produced since the beginning and put it in in 50-gallon drums and stacked it up on each other, it would be 10-feet high and fill an end zone on a football field. That’s it. So it isn’t a lot. It’s not a lot out there.
Then lastly, from the standpoint of alternative fuels, the U.S. Navy signed a contract with a company in California called Solazyme recently that makes biofuel out of algae and they do it in a technique that’s really unique. It’s not like scraping algae off the water and they put it in these vats in darkness and it produces a very high-quality fuel.
They’re going to do that test on an F-15 on a frigate the next month. That fuel is producible at an equal cost as a gallon of gasoline or a barrel of oil would cost. So there are alternatives. The scaling issue is a problem and then the transportability issue.
So I’d leave it at that but I’d open it up to questions now and you can ask any – or each individual on the panel. Thank you. Any questions? Front row, second.
Q: My name is Razvan Nicolescu and I’m from Petrom. I have one question and one comment. My question is about the evolution of the nuclear fuel market. And I’m referring to the uranium market because we have – you have been saying a lot of things about the nuclear sector but I didn’t hear anything about the uranium market, and I think it’s a very important issue.
I used to work – I used to be a member of the advisory board of the European Supply Agency and I know that there are lots of issues regarding the uranium market. And your comments will be very welcome.
And my comment is about the Copenhagen Agreement and about the climate change discussions. I personally believe that the most important issue that should be solved, if we really want to have an agreement in Copenhagen, is related to the financial assistance for the developing countries, and we should be very pragmatic. And when I say “we,” I’m referring to the European Union and to the United States. We should be very pragmatic and we should understand that the developing countries need our help and if we continue to say that who pollutes should pay we will not have an agreement in Copenhagen.
So we should take the responsibility and we should understand the need for the financial assistance and we should make a solution very fast. We should find a solution very fast, otherwise we will not have – or we will have a very general political agreement without the appendix, which you know from the Kyoto protocol that is the most important. The protocol is something very general with lots of desires, but the most important thing is the appendix and we really need the appendix otherwise the general protocol is something that will not help much.
GEN. WALD: Thank you. We’ll get to the question. I’m just going to make a comment on your comment, which I think is a good one. But again, for every good idea that I’ve come up – not my personal ideas – heard, there are second, third order effects that sometimes make it difficult.
In India, for example, TATA has built a new car that many of you have heard called the Nano. It’s a $2,500 car. Those who’ve been to India – I’ve been there plenty of times – people drive around in motorcycles like crazy. It’s dangerous, but they can afford them. It’s their only mode of transportation. And to get to the Indian population into middle-class similar to what China’s trying to do, TATA has come up with this car. Twenty-five hundred dollars is about the cost of a motorcycle.
Nice idea. It’s safer. It gets transportability, et cetera. The problem is they’re all going to be normal combustion engine cars. They’re going to sell over a million a year. So that car is going to be with us for 10 years. It will be 10, 20 million cars, whatever the case might be. It’s sort of the antithesis of what we’re trying to do. But it happens, right?
But back on the question, I’d ask Lady Judge maybe to comment on that and others on the panel.
LADY JUDGE: I was interested in the same question so I joined the board of a uranium company so I would learn about uranium. First of all, there’s plenty of uranium in the world. It’s – it just hasn’t been economic to pick it up. We have about 50 to 70 years’ worth of uranium very easy to find.
Second of all, uranium is like oil – the more you look, the more you find, or at least the more you look, the more you spend, the more you find. So when and if we build a fleet of nuclear power stations that needs uranium, we need only to start to look a little deeper and we’ll find it.
But the key to the uranium point, which is interesting as compared to the oil point, is that uranium is in friendly countries. It’s in Australia. It’s in America. It’s in Canada. It’s in some – it’s in Africa. It’s in this region – there’s quite a lot of uranium in this region. It’s in a lot of places that we don’t have to worry about, or at least we from the Western world – and most of us here are from the Western world – don’t have to worry about a stable relationship with Australia. We don’t have to worry about a stable relationship with Canada.
So uranium is, A, reasonably inexpensive, B, there’s very little of it used when you build a nuclear power plant, very little used. The price is very, very stable and there’s plenty of it. So unlike oil, which goes up and down, uranium is part of the fuel process that we’re really not worried about.
GEN. WALD: You know, just real quickly on that point. I had a dinner with the governor of South Australia a few months ago. And in South Australia they have a uranium find. They’ve gone out 300 yards so far (diameter ?) and they’ve gone down as deep as they can go and they still haven’t found the end of this thing yet. So he’s kind of like – we’re rich. Now, part of the problem is they don’t export this stuff very much. But I think the sources they’re okay. It’s just a matter of getting –
LADY JUDGE: Just when you wanted to look for it.
MS. PALACIO: Once more, I agree with Barbara. Two other data that I think are interesting. First, uranium counts for 5 to 7 percent of the cost of the fuel. So it’s very different with oil. Even if uranium became very expensive to extract, the impact of the fuel for the reactor would be minimal.
Second, there are already fast breeders, new generation for reactors that are already functioning. They are not generalized but they will be generalized in 20 to 25 years. And they just – they are very efficient. They don’t really need – they need the first charge and then they almost recycle their fuel themselves. This on the issue of the recycling. I can tell you that in the end, uranium is found in sea water. And as I say, could be expensive to have it. So this idea that uranium is a scarce commodity really does not – is not correct.
Now, one issue on the recycling side. I think that what Gen. Wald has said is proven – not theoretically – it’s proven in France. In France, all the nuclear waste of all medical, military, everything is – I have been on top of it and it’s like there’s a space with some cylinders that are there. Why – because France, since the beginning, took this strategic decision to recycle.
And, of course, when it – because in nuclear there are two cultures: the American culture and the French culture. The American culture since Carter, since Carter and President Ford, by the way, since the ’70s, there was this decision to avoid that another technology that could be proliferated – the truth of the matter is that never, ever nobody has suspected that a country was going to proliferate through recycling because it’s easier to do it through enrichment. Through recycling theoretically it is.
So this was the origin: the origin of the American position was a dogmatic, strategic position. But in those days, in the ’70s, we did not recycle just paper or glass or anything. I think that our culture today is much more on the French waveband.
And frankly, as all this technology is becoming more and more competitive today, recycled fuel, if you compare it with fresh fuel – if you want – and the moment you take into account externalities because the storage of used fuel in the big water ponds or your project, Yucca Mountain, it’s extremely expensive. The moment you take into account these externalities, it’s competitive.
So I think that for me, the (signing ?) of this agreement between the United States and the Emirates is I think just the beginning of a change of a very dogmatic position of not to recycle when the United States says, no. The Emirates, we understand this, that the Emirates will recycle but not in the Emirates. There will be certain centers that will recycle.
Now, one comment on your issue. I fully agree with you. I have been working at the World Bank for a certain time. And I think that it’s shortsightedness. Barbara said it.
The problem is that in the middle of this big crisis people are concerned in the developed world about jobs and in the developing world about eating. And you cannot – there are certain issues that just do not pull traction.
I was reading – and by the way, it’s quite interesting for those of you that are interested in this issue – the last report that has been issued by the World Bank a couple of weeks ago on this issue. Well, they calculate in the hundreds of billions of dollars that the developed world should bring to the developing world. Frankly, I doubt it.
One last comment – when you see that China finances directly in Africa much more than all the lending that it has spending with the World Bank, you being to question yourself: so why is the West obliged to finance when one of the big developing, emerging countries is able to finance outside China? I think this is a very – all this is a very complex issue.
I think that we need a cultural revolution, all of us, that it is a common challenge, that unless – let’s just stop discussing what happened 100 years ago and let’s just in good agreement see that unless we face it – and on this I fully agree with what was said by Santiago – that unless we face it, we are in a very difficult position. But this is cultural more than anything else.
GEN. WALD: Do you have a follow up?
LADY JUDGE: I agree with everything that Ana said about Copenhagen and about climate change. I was going to go back to nuclear for a minute. One thing about this Abu Dhabi point. It is a bit difficult. Abu Dhabi has said they’ll never enrich ever and they’ll never recycle. And frankly, there are other countries in the world that are saying they won’t enrich now. The IEA says they won’t enrich now but they do not want to say it forever. And there’s a little issue there that’s going on in the countries that are thinking about nuclear.
I wanted to say one thing about nuclear energy because I think it’s important. I used to say that it was a lot easier to have nuclear energy in a country that wasn’t a democracy because if you look at the Abu Dhabi example, first of all, the politics is that the sheik says, we’ll have nuclear energy. Second of all, the price he says, well, it’s expensive. Have some money. Third of all, the place. Where are we going to put the power plant? Well, we’ll have one there and we’ll have one there. Fourth of all, the people – do we have enough people to run those power plants? Is there a skill shortage? Well, we’ll build a university. Next point – what about the press? Well, we own the press so they’re not going to be negative about us.
Life is a bit easier if you have an enlightened dictatorship, if you have some strong central government that says, we need to do this. People used to get mad at me when I said that. The French particularly said we’re a democracy. We are in Romania, where there’s a democracy.
I think it’s got down to democracy or not democracy. It’s down to what somebody said: leadership. The leadership has to have a part of the solution.
I was talking to some of the Turks outside. I don’t know if they’re here because Turkey has been trying to do nuclear for a number of years and they’re having trouble with it. It’s because like the U.K. We think the government has to set the framework but not invest.
My own opinion is it’s much easier to build a power plant if the government is behind you. That’s what’s going to happen, we hope, in Germany with the new elections. The government will be behind it.
The first part about nuclear – and the first part about climate change, because it was the same in the U.K. Once Tony Blair got on the belief that climate change was back on the agenda and nuclear was back on the agenda, Brown and the rest of the government went with it.
We need leaders that understand the problems. We can talk about the problems until we’re blue in the face. We need the leadership to understand what the problem is and to drive through the solution. And until we have the leadership doing that, we’re going to get in more conferences and probably more disappointments like Copenhagen.
GEN. WALD: That’s right. I think in America – so I could speak for a little bit – industry is going to have to be a big part of that as well. But the leadership issue, as far as I’m concerned is the bottom line. And you mentioned the Emirates. Personally, I think Mohammed bin Zayed, the crown prince, is probably the best leader, at least in the Arab world, potentially one of the best in the world.
LADY JUDGE: Absolutely.
GEN. WALD: They are the third largest producer of oil in the world today. And one of their major projects is they’re building a city outside Abu Dhabi called Masdar City. That’s going to be for 50,000 people, $16 billion by 2015. It’s going to be 100-percent carbon free.
Now, you say, are they doing that because it’s a fun hobby? They’re doing it because that’s where the money in the world is going to be in the future, in clean energy for example. So I think we have time for one real quick question and then we’ll just close up.
MS. PALACIO: May I – just one comment.
GEN. WALD: Sure. Please.
MS. PALACIO: They are also doing that because they want to show that there is an alternative model to the Iranian one. And I think that we have to support and encourage this because I think that this is a workable model.
GEN. WALD: Very good.
LADY JUDGE: I have one more comment on that, too.
GEN. WALD: Sure.
LADY JUDGE: The other reason they’re doing it is – look at us. We are sitting here in Romania and we’re talking about Abu Dhabi. And so many other places in the world that never heard about Abu Dhabi are talking about it now. Mohammed bin Zayed is right. He wants to set the pace for the world and he wants to bring Abu Dhabi up into the world’s consciousness and it wants to make Abu Dhabi a place that we understand and doing the right thing – doing the good thing is doing the right thing and they’re doing it right.
GEN. WALD: Okay. A question, please.
Q: Yes. My name is Eric Watkins and I’m from the Oil and Gas Journal. And I have one little quick question about proliferation which is really terrorists getting hold of recycled waste.
What sorts of safeguards are actually in place to prevent that happening? And I’m thinking in particular of these two ships – I think they’re from AREVA – that sail from roughly the English Channel, up through the Indian Ocean and then into Japan. And I remember when they were on route this time was also the same time where we have all the hijackings taking place off Somalia. What kind of thinking goes into protecting that waste?
MS. PALACIO: Well, I mean – what I can tell you is that waste fuel, per se, is contaminating, but you cannot – like this, you cannot put it in a warhead and use it. You have to process it. And the issue is that processing is potentially – I mean, there is a moment where you separate plutonium and this is the part that I would say is potentially proliferating.
These are not easy technologies. I mean, yes, terrorists can get hold of it and it’s more through a dirty bomb so than through the radiation that this waste fuel could just organize the radiation that they can harm. The proliferation per se you need a technology and this, as I say, it’s not an easy thing.
However, there is an issue, there is an issue. Proliferation is something that has to concern us.
But frankly, there are other areas where terrorists can harm us. It’s not just waste or – it’s not more waste than anything else. And with the correct safeguards, with the correct institutions and supervisory and in the end with the correct – and Barbara highlighted that – the correct multilateral approach, you can cope with it as you can cope with other. Is this risk zero? No. But frankly, risk zero is a – I would say is a mirage that sometimes it’s made that us, the developed world, believe that we can live a life of risk zero. This does not exist.
GEN. WALD: I’m just going to say that those ships are not unguarded.
MS. PALACIO: Of course.
GEN. WALD: Okay. We’re going to wrap up. This was a great panel. I appreciate all three of you.
I have just kind of – some of the thoughts I came up with. Obviously, we’ll have to look for clean alternatives. Everybody’s talked to that in a certain way. The West has the technology. There’s no excuse for us not to be able to solve this problem and we shouldn’t abrogate this capability to the Chinese, although I’m not an adversary of the Chinese, but for crying out loud, we can do it.
China’s going to compete. This is – I few talk about free markets – and people say, let the free market take care of it – then we need to get on with it. And we need some kind of climate protocol in the world, whatever that may be.
Okay. Real quickly, again, thank you Lady Judge, Madame Minister, and Santiago. I appreciate it. We missed one of our panelists.
Fred mentions that the breakout sessions will begin promptly at 4:30 p.m. You’ve got a 30-minute break. The staff will direct you to the rooms.
Dinner tonight will feature Sen. Hagel, Dinu Patriciu, and Emil Constantinescu – not bad – former president of Romania, at the historic and beautiful CEC Bank. Buses will leave the hotel at 6:45 p.m.
So any questions on that, you can ask one of the helpers. Thank you very much. I appreciate it. (Applause.)
Transcript by Federal News Service, Washington, D.C.