The Four Steps That Are Necessary

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This book identifies four steps, that are necessary in order to transform global energy systems. These are the following:

1. Analysis of the overall situation and the contributions that different solutions could make to solving the problem will be necessary. Interrelationships between solutions and the implications of these need also be analyzed. The analysis must focus on change management, technology, financing and other important aspects of the change. This, on global, regional and sector scales, as we will see, is a massive, but necessary undertaking.

2. Strategy development globally and in each country is necessary for the transformation. We need a high-level map of the general direction of change, which also puts in place the role of market incentives and the level of government action in different areas. A strategy is also necessary for each of the sectors that are identified in the book as the key to transformation: transportation, utilities, industrial processes, buildings, agriculture and behavior and work life change.

3. A number of plans must be developed based on the strategies. Plans need to be available on different levels and they all need to correspond. There needs to be an overall plan for the transformation in each country and sector and more detailed plans for particular projects and programs within sectors.

4. Managed change shall be the key to successful transformation. The market forces could not be relied upon entirely to produce precise results at high speed. Governments need to manage change in their countries and in joint efforts on a global scale. Descriptions of large-scale US projects in the past serve as examples that support this argument.

Up until now the debate has centered on the idea that markets and financial incentives based on market economics need to determine which investments and activities should be undertaken. Some experts, however, such as Congressman Jay Inslee and Bracken Hendricks in their book (which has a foreword by former President Bill Clinton) Apollo's Fire, argue that a planned program similar to the American Apollo program that put a man on the Moon in 1969 needs to be put in place.

This book is based on a similar argument, arguing that markets are relatively slow and imprecise as tools to achieve rapid and focused action. We need a program of planned activities in combination with market-based action, in order to arrive at a successful outcome in the short period of time that we have at our disposal. Governments and companies need to become active in the high-level strategic analysis and planning on the overall level and it cannot be excluded that substantial financing and other types of intervention and incentives are needed from governments all over the world.

Box 1.1 A Very Simple Example That Illustrates the Situation

Energy systems are extremely complex. It makes sense to reduce this complexity by describing a relatively general situation, which could serve as an example of a typical situation for energy use and savings opportunities all over the world. It is relevant both for small businesses and for large companies. To work as an illustration of the latter the reader only needs to think of many users instead of one in the example below.

A person, let's call him Mike, runs a distribution business. Every morning he receives goods from four different producers, which he uses his small truck to distribute during the day. On a typical day he loads his truck 80 percent full in the morning, drives one round of customers and arrives back home at noon. After lunch he once more loads his truck 80 percent full and delivers to the other half of his customers. He leads a reasonably good life, having the opportunity to take his family on vacation in summer and eat good food at home.

Suddenly he finds that the price of diesel has gone up by 30 percent over the course of 3 months, which increases his cost of operations by 5 percent. This makes him a little worried, because his profits decrease. It has very little impact on his lifestyle however, since he manages to pass on some of the cost increase to his customers.

During the next 6 months the fuel prices continue to increase and Mike finds that he better improve the efficiency of his business. Having a small business he cannot afford to assign a consultant the job or buy a piece of computer software for optimizing routes, so he sits down himself with his map every evening trying to figure out the best route to drive the next day, given the orders at hand. This takes him one hour every evening, but he finds that the time is well spent, because it reduces his fuel cost by 10 percent and he manages to load the truck up to an average of 90 percent in the morning and do the extra 10 percent deliveries on the same amount of fuel that he has always used for the morning round.

Now he hears on the radio that the price increases are because of the reduced supplies of crude from oil-producing countries all over the world. All users of petroleum products are urged to find ways to reduce consumption. He thinks that he has already made significant savings on his own, but he knows that many of his neighbors and friends have not, so he hopes that they will now start to calculate in the same way that he has done. On the radio they also say that the price of electricity is related to the price of petroleum, so people with factories that use electricity for heating and for running machines are urged to try to find ways to save. He realizes that many factories could easily save certain amounts of energy simply through better planning.

Now, he starts to hear among his friends that they have started savings activities similar to his own and he sees that the price increases have started to taper off. That is a relief!

The result of this is only temporary, however. Mike hears on the radio that supplies continue to decrease and that there may be shortages at the pump. Now he starts every day by filling up, so as to have fuel for the next week, in case there may be shortfalls in delivery. He spends 30 minutes queuing, since other people have thought of the same. Now he realises that, in case the situation gets worse he will not have enough fuel to serve all his customers. Even with the well-planned routes that he is now doing every day, he needs to go 150 miles per day on his routes. In case he does not get enough fuel, he will need to cut down on his deliveries and serve fewer customers.

He decides to buy a hybrid truck, which reduces fuel consumption by 30 percent. This truck, just as his present truck, could also run on biodiesel, which increases his options when shortages occur. The dealer tells him that, although he has been planning well in advance, the production of hybrids is still so low that there is a 2-year waiting list for a new one. The truck producer is about to expand capacity however, and the increased capacity may come online in 18 months. This may reduce his waiting time to less than 2 years. The dealer warns him that it will become difficult to trade in the present vehicle, because of the very low demand for trucks with high fuel consumption. All customers are asking for trucks with low fuel consumption. This is a disappointment and a financial loss for our friend, since the truck is only 8 years old and, technically, has a number of years' use ahead of it.

Mike tells his friends and neighbors about this. Some have tried to buy new electricity-efficient machines to replace their existing ones and the waiting lists are between 2 and 4 years in all cases. He realizes that only a few percent have tried to order replacements. Many could not afford to replace their old trucks and machines and others have not started to work on the problem. The information that he has received says that only 12 percent of demand for trucks could be satisfied by hybrids and trucks that could run on renewable fuels. Production needs to be expanded rapidly in order to replace existing truck fleets. The same situation exists in most markets for machinery and vehicles. At the same time, production of biodiesel and electricity from renewable sources needs to expand in order to keep up with the rapidly increasing demand. And this is just to maintain the present levels of economic activity. In order to make economic growth possible, even larger amounts of renewable fuels need to be made available at short notice.

The two things that impact the progress of this development are broadly the level of oil reserves and the level of mitigation activities that have been in progress throughout the development. The people with access to better overall information need to help our friend and his neighbors in the example to forecast his future needs and to plan production in advance in order for business and society to be able to satisfy them. In order for enough hybrid trucks, cars and trucks using different biofuels and other energy-efficient and sustainable vehicles and machines to be available when people start to demand them in larger quantities, efforts to increase production of them need to be made well ahead of the expected increases in demand.

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Guide to Alternative Fuels

Guide to Alternative Fuels

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