Money spent on fossil fuels creates significantly more climate, economic and security risks, and is unavailable for decarbonization. India seminar.
, the think tank founded as an umbrella organization over India’s 28 state utilities to provide thought leadership, share leading practices, and bring international insights to India, I’m delivering bi-weekly webinars framed by the. With the glories of online recordings and AI transcription tools, it’s relatively easy to share both the transcript and the slides that I used, so I’m making a habit of it.
And those are very significant as we consider it. We’ve been gaining benefits from fossil fuels for human health and longevity because they’ve been providing purification of water. They’ve been providing lights that enable greater productivity outside of sunlight hours. They’ve been providing power for automation, which enables us to do force leverage so that we have greater economic outcomes.
The United States, which purports to be a leader in this space, has significantly underpriced gasoline, which does contribute to their very significant car culture. It’s just dirt cheap to drive around in the United States, and they drive big gas guzzlers in part because they aren’t pricing gasoline efficiently. So similarly, as we consider road diesel, which is much more important for the trucking industry, China once again is not pricing efficiently. India is not pricing efficiently.
One of the dominant forms of enhanced oil recovery is pumping carbon dioxide into the well, frequently in supercritical form, to loosen the oil and increase pressure and turn into a flowable liquid again, then have the increased pressure and more liquid oil be pumped out the other end. This is not carbon capture and sequestration. This is increasing the output of petroleum with a strong negative impact for climate change.
But all the costs of maintaining the safety and delivery of the product, then they get to 70% and 80%, and they can’t afford to deliver gas for the rates that customers can afford to pay. That’s the utility death spiral. And so what we’re seeing now is organizations around the world, utilities around the world are starting to be forced, typically to sunset gas distribution solutions, gas distribution networks in an intelligent and strategic fashion over the next couple of decades.
Those types of things all drive up the cost of fossil fuels vastly more than they drive up the cost of renewably generated electricity. So avoiding that is a really sensible choice. Obviously, India is just as subject to extreme weather due to climate change, and possibly more so. Every country in the world is seeing radically different weather. Ravi in Toronto and myself in Montreal right now, lived through quite extreme heat last week, unusually high for the cities we’re currently in.
Energy security is an interesting one. As I said, renewables mostly get generated inside a country. India is big enough to generate all the energy it needs, mostly inside of its borders, but it’s also narrow enough that it can’t really take advantage of solar highs and lows. And so at that point, you start needing connections east and west and north. You start needing an HVDC grid to draw energy from the north to the south more efficiently.
But the pipeline, they tripled it in size, to deliver three times as much oil. But it’s going to be a stranded asset. My projection is it’s going to be running at a third of its capacity by 2035 and likely be bankrupt entirely by 2040, which is why the government had to buy it. Kinder Morgan, the firm that owned it, said there’s no real reason to actually triple this because there’s no market for this product. And that’s bearing out.
Italy’s done some great stuff. They’ve said, well, we’re not going to throw more money at fossil fuels or as much, but throw it at renewable energies instead. So once again, investing in the technology of the future instead of the technology of the past as much as possible. And so you do not have that stability, political stability around India to be able to say, okay, big brother, small brothers, small sister, big sister kind of approach that SAARC was supposed to create. So East Asia, perhaps, and he had two experiences. There is perhaps one such where there could be promise in forging this. And Reji, maybe in our visits later on, we should think of getting Eddie involved in this, because that’s the way to do it.
They were assumed that once you’ve fracked or done a shale oil effort, you’d have a 20 year lifespan or a 30 year lifespan for that asset. But it’s turning out to be two to three years. The heavy capital cost and the heavy upfront cost for those technologies was not paying for itself with the expected fiscal benefits. And that’s a strong lesson for India as it adopts these technologies.
But if we instead invest in the pipeline of the future, high voltage direct current transmission and the energy source of the future, wind, solar and water, and the energy strategic reserves of the futures batteries and pumped hydro, then that’s actually future proofing and that’s actually providing strategic energy reserves and energy security from that is not subject to volatile oil shocks.
And so they’re spending a lot of money by burning a lot of fossil fuels, but it’s hidden from the cost of that because they’re just burning stuff they have. As we start pricing those emissions, that cost goes up. And so once again we get to a point in the future where light, sweet oil close to water like Saudi Arabia’s, will continue to be extracted for the diminishing demand for oil.
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