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Melissa Lott: [00:00:00] Heil, Melissa. Here. Things have shifted dramatically since we aired our last episode. There’s now a crisis in Ukraine and sanctions on Russian oil and gas. And this is all on top of record demand for petroleum products and electricity as the world emerges from lockdowns. Suffice to say, it’s a shake up in the global energy industry. So we’re going to change up our show for today. And this week, we’re bringing you an episode from the other podcast that we have here at the Center on Global Energy Policy. It’s called the Columbia Energy Exchange. And this episode is about the energy security implications of Russia’s ongoing invasion of Ukraine, the Iran nuclear deal and the future of energy innovation around the world. The episode is hosted by my colleague Jason Bordoff and digs into the reasons for the energy crunch and what could happen next. We’ll be back soon with a two part series about chemicals, in particular those chemicals that are made of petroleum products like oil and gas. Petroleum products are everywhere in our lives, in places that we might not expect them to be. We’re talking about the fertilizer that grows our food, the nylon in our clothes, and even the plastic syringes that deliver vaccines. But how can we decarbonize these essential products? And if we look beyond carbon emissions, what are the health and environmental justice impacts that we should be aware of? It’s going to be a good show and it’s directly connected to the oil and gas conversation that we’re having today. So stay tuned. [00:01:16][76.7]
Speaker 2: [00:01:19] There are going to be these different stages of very deep decarbonization, and that is not giving up on deep decarbonization. It said we’ve got to hold that in to the plan. [00:01:31][11.4]
Jason Bordoff: [00:01:32] The world is facing a potentially severe energy supply crisis as already tight markets are being crunched still further by the loss of some Russian oil exports and by fears that those supply disruptions could worsen and spill over to natural gas and other fuels. In response, energy prices and commodity prices more broadly have soared in the last few weeks, with global energy markets experiencing historic turmoil. Policymakers face a challenging series of decisions how to keep energy sources secure and prices affordable for consumers, how to protect against risks of Russian supply disruptions, and then use energy as a source of economic leverage to end Russia’s war in Ukraine and how to accelerate a transition to clean energy in the midst of global upheaval. This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Last week, I attended Ceraweek, widely regarded as the most preeminent energy conference in the world. And what a week it was to be there in Houston. While at the conference, I had the privilege to sit down with Dr. Ernie Moniz for this podcast. Ernie was the 13th Secretary of Energy serving under the Obama administration in the second term from 2013 to 2017. Dr. Moniz also served in government in the 1990s as DOE Undersecretary and as the Associate Director for Science in OSTP, the Office of Science and Technology Policy. He was a physics and engineering systems professor at MIT and was the founding director of the MIT Energy Initiative. He’s now CEO of iGEM Associates and the Energy Futures Initiative, which advances solutions to the climate crisis through building coalitions, thought leadership and science based analysis. In this conversation, Ernie and I dug into his perception of the energy security threats caused by the Russia Ukraine crisis. Where things stand on the Iran deal and where the clean energy transition goes from here. I hope you enjoy the conversation. [00:03:38][126.6]
Jason Bordoff: [00:03:40] Secretary Ernie Moniz is thank you for being with us, making time to join us on Columbia Energy Exchange sitting here together in Houston at Ceraweek. I appreciate it. And how busy these few days are for you. [00:03:48][8.2]
Ernie Moniz: [00:03:48] Okay. Pleasure, Jason. [00:03:49][0.7]
Jason Bordoff: [00:03:50] So, obviously, this is the world’s largest energy conference, comes together right now at a pretty fascinating time, given what’s happening in global energy markets, commodity markets, with Russia’s barbaric aggression in Ukraine. Just can you talk about I just want you to reflect a little bit on what you have seen play out over the last two weeks, particularly with a focus on energy. It has far broader humanitarian implications, of course, but in historic context, when we think to the 1970s and the energy crises we face there or other since then, how do you think about what’s playing out right now? And let’s then talk about where we might go from here on what it means. [00:04:31][41.1]
Ernie Moniz: [00:04:31] Well, I think the the volatility obviously is quite, quite extraordinary as it was in the past at various times. I think the the the issue is right now the extent to which the is in some sense the customers for Russian oil, in effect, implement their own sanctions programs. And so with regard to oil, which is obviously a major revenue stream for for Russia, I think this school is still not out. In terms of where we are going, in terms of overall. [00:05:11][40.0]
Jason Bordoff: [00:05:12] How we’ll look back on this in terms of the severity of the oil crisis. It’s too soon. It’s too soon to know. [00:05:17][4.5]
Ernie Moniz: [00:05:17] Yeah, because the reality is it’s hard to see that there’s been major macro disruption in the market yet. But I don’t rule out that coming, particularly as, I mean, the United States sanctions on on Russian energy imports do not necessarily show much prospect of being, I think, the determinant of how this turns out. On the other hand, if this becomes the pattern, you know, most of the main customers, then then we can see that there are some there are a few things I’ll just say, like ironically, which can go in the opposite direction. For example, as we sit here today, we don’t know if there will be an Iran deal, but if there is, it will be more oil on the market, for example. Nothing like the amount that could come off the market with Russia. But again, I think we have to wait a little bit to see how that plays out. With regard to gas, I think there is no doubt that we’ve already seen it in Europe stimulating additional import capacity. The Germans have already announced building to import terminals for LNG, which they had resisted for a long time. And we know historically what that’s done. For example, in the Baltics, they built an import terminal with the main effect of lowering the price of Russian gas coming in. So it’ll it’ll be a very there will be a very peculiar market dynamic there. But gas is, I think, has every potential to be more volatile because a lot of it is point A to point B and you can’t then go, you know, market it on on a spot market, for example. So so again, I think we will see the extent of the other disruption, but I think the gas markets will continue to be very high priced in Asia and Europe. We are in a situation where I think we have skated through this reasonably well so far, but a lot of it has to do also with fortunate weather. You know, the weather can can. Go in many, many directions. We saw, for example, part of the initial pressure on the gas markets coming because the North Sea wasn’t wasn’t the wind wasn’t blowing, for example. So we have a lot of what I would say is that we have not managed the risks, even though we have not yet suffered dramatic consequences other than, of course, the the some volatility in the prices. [00:08:00][162.8]
Jason Bordoff: [00:08:00] And let me come back to each of those oil and gas. So just help people understand how to think about oil markets. It seems to me like we’ve gotten some conflicting signals. The Biden administration banned the import of Russian crude to United States. Not that much Russian crude comes to the United States, had diplomatic dialog with the Europeans to get the Europeans not to do that. All right. We don’t want didn’t want the Europeans to do the same because you’re talking about two and a half, 3 million barrels a day of Russian oil. Very hard to replace that. Oil prices would go through the roof. But to your point, maybe it doesn’t matter what government does, because the social stigma, the pressure, the uncertainty about other financial sanctions means whether government acts or not, Russian barrels are going to be lost to the market because companies across the board, energy and otherwise are just saying we’re not going have anything to do with Russia. Is that what you see happening? And then what happens to those Russian barrels? Is it easy for them for flows to shift around? Maybe state owned enterprises in India or China can buy them? They’re less susceptible to the kind of pressures a company like Shell are. And how does that impact the eventual oil price? [00:08:56][55.7]
Ernie Moniz: [00:08:57] I mean, I certainly think China is is going to take somewhat more oil from Russia and they’ll take it with a big haircut on the price. Russia will not even in the oil itself, it will not benefit from the excursion in price as we see it, because, again, I think they will have to sell at a at a big discount. But I still think that there is every prospect that the pressures coming from the private sector, from the financial institutions, from other companies, etc., may very well cut into their exports. And it’s a lot of exports. I mean, I think it’s it’s roughly 5 million barrels a day of crude plus a few million of the of products. And and, you know, it wouldn’t take much disruption of that flow to really have highly volatile prices unless someone like OPEC stepped in. But they have shown no no inclination to do so. [00:09:59][62.1]
Jason Bordoff: [00:10:01] And even there the capacity is is limited. They couldn’t offset all of that. [00:10:04][3.3]
Ernie Moniz: [00:10:04] They could not all of that. But if we if we’re talking on the margin of a couple of million barrels, while OPEC could do could do a lot, we could do some petroleum, so some some reserves for a while, you know, make up a million or maybe even 2 million globally. [00:10:17][13.3]
Jason Bordoff: [00:10:18] Strategic stocks that you have often told Congress they should not sell off for other. [00:10:22][3.8]
Ernie Moniz: [00:10:22] Reasons. Yes, stop using that as a piggybank. I can tell you the story about how there was a trade between health care and and petroleum reserves. But that’s that’s a different story. But also, you know, I think we don’t often connect all the dots well enough. For example, there is no doubt. That the Saudis and the Emirates are not very happy with United States foreign policy at the moment. Nothing to do with the energy markets directly, but for example, the missiles and drones that are pretty indiscriminately harming those societies coming from Yemen, presumably supplied by Iran. We have done essentially nothing to to address that. I bet we would have more cooperation on the oil front if we were so. In the end, we’ve we’ve got to talk about who are our friends or potential friends. And I don’t mean necessarily hugging friends, but just let’s say those who cooperate with us in various in a very intimate. [00:11:35][73.4]
Jason Bordoff: [00:11:36] Shared. [00:11:36][0.0]
Ernie Moniz: [00:11:36] Interests, regional shared interests, etc.. Exactly. So I think there are some levers to to help, but clearly not if there is a you know, if there was a total dislocation of Russian supplies. I, I see no way that that that could be that could be replaced. But I don’t expect it. [00:11:53][16.8]
Jason Bordoff: [00:11:54] One more question on where additional oil supply might come from. You mentioned earlier could come from Iran. Few people may be able to come in with more knowledge on how you see that playing out because you helped put the original Iran deal together. The Trump administration pulled out of it, and now this administration is trying to put it back together again. Russia is an important player in that, and the potential for Russia to scuttle the deal is real, I think. I’m curious what you think. Where do you see the Iran deal now? What are the prospects for it to come for that supply to come back to the market? [00:12:23][29.2]
Ernie Moniz: [00:12:23] Well, of course, as we take this, we still don’t know what the outcome will be of the negotiation with with Iran. But at the moment, I may regret these words, but I would say that I’m reasonably optimistic that the agreement will be restored. And I say optimistic because I think it would be a good thing to have it restored and maybe it’s worth it. A little aside on that, because clearly time has gone by. We’ve lost a few years. We we’ve seen Iran really advance substantially in their centrifuge technology. They’ve also produced a lot of enriched uranium, including some up to 60%. But, you know, the extra uranium that can be reversed pretty easily. You can’t reverse the knowledge they’ve gained in terms of the advanced centrifuges. But the the agreement, the JCPOA, the Iran agreement, I would say the two major elements are the verification regime, which would come back into force. And. The most important single nuclear restriction is that which constrains them to 300 kilograms of of enriched uranium with enrichments, no more than 3.67%. And that goes until 2031. So, you know, we still have nine years of runway on that, and that is the most significant nuclear constraint on their program. [00:14:05][102.2]
Jason Bordoff: [00:14:06] And for people who are in Congress, on both sides of the aisle might push back and say this deal is not a good deal, it’s not good enough. The breakout time is shorter. There are other concessions being made to Iran. That would be your response and also what the alternative might be, which is not that I mean. [00:14:20][14.2]
Ernie Moniz: [00:14:21] But we’ve we’ve seen what the alternative is and it’s not very good. It wasn’t very good in 2003 when we we the United States, the Bush administration at the time decided that, you know, the only deal would be one in which they gave up enrichment and reprocessing entirely and something they they wouldn’t do. So no deal resulted from a very, very small program to 19,000 centrifuges when we negotiated in 2015. Now, we’ve gone back again and with the Trump administration in 2018. And what’s happened is, okay, now it’s more centrifuges, more enriched uranium and more advanced centrifuges. So the best we can do is at least try to get back, get another decade, and hopefully use it reasonably wisely in terms of addressing regional issues. But we just got finished discussing the fact that we haven’t done anything with regard, for example, to Yemen, which is an enormously important problem to the Emirates and the and the Saudis, two of the major oil producers. So these things all kind of hang together. And clearly, if Iran if we go back into the deal, it is also the case Iran will have more resources, just as they did in 2015, 2016, technically, when the when the deal was implemented and some of those additional resources, there’s no doubt, as in any country, some went to the military, not an overwhelming amount, but but some. And I would argue it’s hard to see how that made any qualitative difference, because when they’re sanctioned or when they’re not sanctioned, they don’t seem to have any problem with the relatively inexpensive support for, you know, militias and other other groups that cause so much problem in the region. So anyway, which I think we should we should we should go forward. And I’m I’m guardedly optimistic that we will go forward with an agreement. Now, you mentioned the role of Russia. First of all, it is true that in 2015. When the first when the deal was originally negotiated, Russia and we already had, you know, some pretty serious a falling out, shall we say, over Crimea and the Donbass once again Ukraine. And yet they were by far, in my view, the most helpful of the other countries involved in getting the deal and especially in getting the deal implemented. We relied very heavily on Russia for the implementation. That’s where I would be more concerned now, because the level of sanction and the economic and the economic dislocation is enormously greater today than it was in 2015. I mean, as a result of of Crimea. So it’s very it’s very possibly the case that Russia will follow through as they have threatened to make the implementation extremely difficult if that happens. And we are going to need, especially France and the UK, to step up big time. As I said, the most important of the nuclear restrictions is that 300 kilogram low enrichment restriction. Well, that means many, many tonnes of enriched uranium have to once again leave Iran. They it all went to Russia the first time. If it can’t go to Russia, it better go to some other country, which presumably France and UK, because of their nuclear military establishment, would be the most logical places. The United States would need a legal change to be able to to take that material. Maybe that’s possible. I doubt it. So. So France and the UK would have a much bigger role, I would say, in the implementation this time around. [00:18:44][263.2]
Jason Bordoff: [00:18:45] Speaking of nuclear. Coming back to Russia’s invasion of Ukraine. Now, Russia, we know, is a huge oil exporter. Gas exporter, coal exporter. Also the fuel that runs many of the world’s nuclear power plants, including many here in the United States. Talk about how you think this Russia Ukraine invasion might play out in nuclear power, either for exported fuel for the nuclear power plants or because of an intentional or unintentional act that could cause an accident at a plant. And the outlook for nuclear, where Russia is building many of the world’s nuclear power plants right now, is there going to be a big shift where people no longer are willing to go that way with Russia as the supplier? [00:19:27][42.4]
Ernie Moniz: [00:19:28] Well, there’s a lot of questions in there. First of all, the United States imports roughly 20% on average, a little bit more than that of its enriched uranium for for fuel for our nuclear power plants. A disruption of 20% would be significant. It could be addressed for some time at least by borrowing, not borrowing, really using the reserves that the Department of Energy already has, including high enriched uranium that could get blended down to to reactor fuel. But, you know, that’s finite. And we’ve always been told that those reserves are being held for applications that are important to the to the military. Well, the problem is, if we use that up, we have actually in the United States zero capability of providing the necessary nuclear materials for the for the military, whether it’s nuclear propulsion in the Navy or tritium for the weapons stockpile. So I think that if Russia does disrupt the flow of that low enriched uranium, the response of the United States, I think, has to be the combination of down blending from the stockpile plus. Getting off the dime and starting to build the enrichment capacity. We need then to be able to service the. [00:21:12][104.3]
Jason Bordoff: [00:21:13] Networks on time. How long does it take to build that? [00:21:15][2.6]
Ernie Moniz: [00:21:17] I would say in 5 to 6 years you could probably get a a national security scale enrichment capability, which is what we need, because for commercial uses, we don’t we can use other technologies, including the technology that is deployed by your Renko in in New Mexico. So so I think there is a plan B, but the plan B is not simple. It requires us to do something that we have been delayed doing for a long time because it costs billions of dollars to build that capability. Now, another issue is, of course, the safety of the Ukrainian nuclear reactors. And they’re I’m certainly concerned. I mean, I don’t think I can’t imagine that anyone would really want to see a major accident with major radiation releases from one of the Ukrainian plants. But what I’m concerned about is not direct attacks on the reactor cores, but all of the unguarded systems that are required for operating the plants, especially if there is any kind of emergency, like the backup power generators, the fuel for those generators, a lot of fuel, liquid fuel sitting there on site that could go up by mistake or intentionally, for that matter. The spent fuel pools need to be cooled. Electricity has to flow or again, one will have major problems. So what I’m concerned about is kind of the fog of war. The Russian military is involved in military activity near these nuclear power plants that they don’t understand how a nuclear power plant operates. They don’t understand the sensitivity to some of these backup systems. For example, there’s no reliable command and control system to guide them in that. And in addition, having a trained nuclear reactor operating staff operating for days and days on end, sometimes at gunpoint, is not very encouraging for reacting to a possible stressful situation that that could arise. So there’s lots of reasons why we should be concerned. And and I think Russia should should have a clear plan. Don’t fight near the power power plants. If they are going to take over the power plants, they have to understand that they have to responsibly operate them and they have to they have to have their experts, you know, tell them where the sensitivities are. Like, you can’t cut off electricity to these plants. That’s what happened in Fukushima, basically, for example. So that’s a big issue. [00:24:23][186.2]
Jason Bordoff: [00:24:24] You lose a little more sleep tonight after hearing all of that. And then the point about building new nuclear power plants. Russia is building many of them around the world. [00:24:31][7.2]
Ernie Moniz: [00:24:31] Yeah. If I if I May 1st. No, not just to say in Ukraine, of course, the other extremely troubling nuclear development was the essentially explicit threats by by Putin to use nuclear weapons under duress, shall we say. You know, if the West is helping Ukraine, etc.. And there obviously, we all hope that a nuclear weapon is not used. But even if a nuclear weapon is not used, we have been harmed by the announcement that Putin made because it has cast nuclear weapons right to the center of security policy. And that’s exactly where we didn’t want to go, that, you know, this is a this is an invitation for proliferation. To me, it almost guarantees that China will follow through on building a thousand weapons in this in this decade, for example. It’s just again, as I say, I think you can’t put the genie back in the bottle in terms of the threats that that Putin already made then internationally. Well, you know, Russia already is building, I think, something like two thirds of the power plants outside of Russia in most cases, a lot of sunk costs. These are typically not in the wealthiest countries. And so. It’s hard for me to see them walking away. So I would expect to see Russia continue, at least with those plants. Their new order book might be might look a little bit thinner. But then you know what we probably by then is a lot more Chinese build plants. And so, you know, this is this is a difficult situation. But I think the what I mean, the ideal outcome would be that the new kinds of technology, small modular reactors, for example, that the United States is spending a lot of effort in developing those, I think would look very attractive to many to many countries. And that’s a chance for the United States to get back into the game in a serious way. But the only way back into the game. Is to deploy in the United States first. That that is what then, quote, sells reactors. So in the meantime, that means we’ve got to get across the finish line on some of these some of these new, new small modular reactors. For example, if all we do is sit here and complain about it and not permit them, for example, if not, perhaps use using governmental purchasing power to get across the finish line. Military bases could be could be an example use as has been discussed. Use of D.O.D. sites to have the first reactors put up. Create an order book so that manufacturing facilities can be built for the for the guts of these of these reactors. If we don’t do that, we will not gain that market because nobody’s going to buy that reactor. I think the first of a kind. Without having seen it licensed by the by the NRC in this country. [00:28:00][208.9]
Jason Bordoff: [00:28:01] Really interesting that outlook for nuclear power in the U.S.. We’ll have a whole separate podcast on because super important and there’s but sadly limited time and I want to come back to one or two things on the immediate crisis too. You mentioned earlier the role of natural gas in Europe is highly dependent on Russian natural gas. Lots of plans now in IEA ten point plan to dramatically reduce dependance, I think they said by one third the European Commission even a broader goal, two thirds or 80% reduction by this winter. It’s not that far away in use of Russian gas that was just aspirational. Or how much can Europe really do to be in a better position if we were to see a disruption in European gas? [00:28:40][38.6]
Ernie Moniz: [00:28:40] I don’t see how that can be accomplished in this kind of really, really short timeframe. Now, I think that, you know, they can they can build in a couple of years new regasification facilities for for LNG, for example. And and there’s no doubt that that has that could have a major impact and not only in the additional volumes of LNG, if those volumes are available, can can be imported, but it also, as was demonstrated in the Baltics, it can also put a lot of pressure on the market and the pricing in the market, including the pricing of Russian gas. So. So I think that we will be seeing that Germany clearly is already committed to building to two facilities which they had resisted for a long time doing. Of course, they were coming on Nord Stream two, which now is certainly tenuous at best. So so clearly, I think I think LNG volumes are a major, major play. But the reality is while the gas facilities, you know, is it’s not that complicated a construction, the exporting facilities are a bit more difficult, more expensive in the United States. We have now seen some new capabilities just coming online, in fact. But, you know, in the end, I think that’s going to be about a 10 to 15% increase in our export capacity, and it’ll be a few more years before yet additional facilities come online and increase our our export capacity maybe to 50 by 50%, let’s say in in in five or six years. So, I mean, there is some possibility there, but that, of course, means we also have to produce more gas. And by the way, going back to the earlier discussion, more oil, this in turn is going to require we have about half the number of rigs deployed that we we used to have about 500 versus a thousand more rigs have to be reborn online, as you know very well. Producing from shale is. Drill, drill, drill. And and the financial institutions got tired of. Drill, drill, drill. Borrow. Borrow, borrow. And and so they they have put a lot of pressure on the industry to focus more on the financials and the cash flows, on returns to investors, etc.. I think that has to change pretty quickly. First of all, with the prices so high, although until recently at least, the futures market was priced considerably lower than the current current market for for for oil let’s say so meaning that the the market expects the price to go back down. But I think that this is the place where, for example, government. Has to use its jawboning power and possibly get creative in terms of backstopping some some risk management. [00:32:04][203.6]
Jason Bordoff: [00:32:05] Because no one does that. [00:32:06][1.4]
Ernie Moniz: [00:32:07] Well, because the financial institutions, I think, have to be convinced to get back to providing the debt service to allow these companies to to to increase their their production. And certainly at the moment, that would entail, of course, very good for them, very attractive prices, very unattractive prices for the consumer. And as you know, I’m I’m particularly concerned about social equity issues in terms of these these these high prices. That’s another subject that we could come to. But but I think this is where the the federal government needs to work with the major financial and financial institutions as a security barrier to do this. But as you also know, without naming names in the political dialog, there are a lot of people who a, don’t want to support the oil and gas companies and B, don’t want to support the big banks. And it’s exactly that combination that one needs right now if. [00:33:16][69.3]
Jason Bordoff: [00:33:16] Meaning you see a role for government policy to remove some of the risk from financial institutions in terms of their returns in order to make sure enough capital is available to grow domestic oil and gas production. [00:33:26][9.5]
Ernie Moniz: [00:33:26] And I think how that’s done that can be done in a regulatory approach or, you know, etc.. But I think I think Treasury and the and and the banks can figure that out, I think pretty pretty easily about what it would take to go there. Because after all, there’s a very good prospect that that this is going to be a very profitable direction. It’s just that they were they were they were burned and they and they they really have made this the decision They had made the decision to really kind of hunker down and manage manage the financials as the as the primary business. [00:34:03][37.1]
Jason Bordoff: [00:34:04] In response to the security risk Europe faces from dependance on Russian gas, the loss of Russian oil supply. I hear you talking about investing in Europe in a more diversified set of infrastructure import terminals, storage pipelines for natural gas in Europe, and increasing domestic in the US oil and gas production. And I thought we were supposed to be moving to a net zero economy faster than we are. So is this crisis going to sort of undermine or are there do you see the way in which it could accelerate also the transition to net zero? [00:34:34][30.1]
Ernie Moniz: [00:34:34] Well, I mean, in terms of oil, what we’re talking about here is the potential to replace oil taken off the market. And the reality is there’s going to be significant oil use for for quite a while. Even the IEA’s sustainability scenario, climate scenario has substantial oil and gas still being used at 2050, even within a net zero economy, of course, because they have also moved towards assuming very, very significant negative carbon technology deployment. [00:35:13][38.5]
Jason Bordoff: [00:35:14] I would be overly optimistic in your view, carbon removal. [00:35:17][3.1]
Ernie Moniz: [00:35:19] So I think carbon removal definitely is going to be a significant player, but there may be a little bit of over enthusiasm at the moment in terms of the level at which that could that could that could occur. But of course that is that is part and parcel of having that ongoing oil and gas use with net zero. You need you need net negative, you need negative two to compensate, obviously. So so that’s important. But on the gas side, I think that gas I think we still have to keep looking at as part of the solution. The we understand the. The risk that, again, the financial institutions would be concerned about in terms of investments that could get stranded. But that’s where I think. We have to we have to, I think, face up to the issue that, look, we are going to have 20, 25, 30 years more of substantial use. We are going to need to export to our wealthy allies like Japan and South Korea. We are going to have to look at the gas developments in middle income and even poor countries, certainly in Africa, where they are discovering their own gas resources quite, quite aggressively. They have every intention in their strategic planning to be using those resources domestically. I mean, they will have the exports as well. But but but domestically to help with their development and their industrialization. But they also need access to capital to do that. And that’s where I have to be blunt. I think the the decision made in Glasgow in terms of cutting off finance for that is a mistake that we need to be able to take a more a more coherent overall view with a underlying understanding that deep decarbonization is not something that happens at the same pace and in countries at very different levels of development. I mean, one indicator of that is the United States and Europe have said net zero in 2050. China. And Russia actually have said net zero in 2060 and India has said net zero in 2070. Now, whether those are realistic dates or not, I think it makes the point that as you go down the wealth scale, you know, in the World Bank, India is in the lower middle income category versus the upper middle income category. And then of course, there’s the the the poor country category. And so poor, I mean, low income, low income category. And so, you know, we have to, I think, recognize. That there are going to be these different stages of very deep decarbonization, and that is not giving up on deep decarbonization. It said we’ve got to fold that into the plan If we want to plan like everybody goes to net zero in 2050. I have no idea what we’re talking about. It’s just not going to happen. And it even conflicts with the statements that have been made by a country like like India, for example, which is making enormous progress in many dimensions but has a giant problem to face. You know, we’re going to have one and a half billion people, many of whom still don’t have proper energy services, lots of rural people. All kinds of issues. I really I do admire much of what they are doing, but we have to be realistic about what all of this means. [00:39:21][242.0]
Jason Bordoff: [00:39:22] To the idea of gas as part of the solution and a transition fuel. This seems to be shrinking recognition or support of that in the climate movement. And I think what some might say in response to what you said is the carbon budget is we’re running out of time. We spent the last decade doing very little. And so we just the carbon budget is what it is. There’s no room for this anymore. Alternatives like renewables are cheaper than we might have thought a decade ago, and methane leaks are potentially a worse problem than we realized when people talked about gas as a transition fuel a decade ago. How would you respond to those concerns? [00:39:59][37.1]
Ernie Moniz: [00:40:00] Well, first of all, on the methane side, I mean, I think there is it’s it’s a I think it’s a no brainer that the industry should be working really hard to stop or dramatically reduce methane leakage, even recognizing that, you know, the the Glasgow pledge of 30% methane reduction in reality means virtually eliminating methane from the oil and gas industry and doing nothing about agriculture and and other areas that are actually two thirds of the of the of the emissions. So, you know, we also have we need a lot of innovation if we’re going to develop I mean, address the methane problem broadly. [00:40:42][42.4]
Jason Bordoff: [00:40:43] Inside oil and gas. [00:40:43][0.7]
Ernie Moniz: [00:40:44] Right. But anyway, I guess we start where we can because because it is a very a very important problem to to address now with with gas, first of all. Okay. Well, look, we all know that almost all of the reductions that we’ve had in the United States have come from coal to gas switching, and we’re only like halfway there. And so we still have a quite a ways to go. Many other countries are in a similar, similar situation. And China has done quite a bit of coal to gas switching. And not that they are coming down on the curve of of emissions, But but that’s the case. And, you know, I just think it’s it’s also very, very difficult for us to be lecturing, you know, developing countries in Africa about not using gas for their development when we are continuing to produce maybe produce more to serve the the export market, for example, and recognizing that those countries have such a small footprint that I believe. That they will be better stewards, if you like, of the environment, address climate more effectively. As they develop. And, you know, we all know that, for example, development really empowers women in that in those societies who currently are not part of the the economy, you know, in a meaningful way, because there’s no time for them to be part of the economy. Well, if we build that kind of society, it’s going to be, I think, a society that more, more aggressively faces up to these problems and doing doing doing their part. So, again, I just don’t I just I think we are too often just focused on one idea. It’s like we cannot accommodate several ideas and connect a few dots. And and until we are realistic about that, I think we’re just creating headwinds on the climate problem. [00:43:07][143.6]
Jason Bordoff: [00:43:08] And we’re only two weeks into this. It’s early to tell. But but how do you have a sense for how this Russia military invasion of Ukraine will affect the conversation about the clean energy transition? [00:43:19][10.9]
Ernie Moniz: [00:43:20] I think it’s really hard to know. I mean, I can I can make arguments for almost every outcome. But what I. What really confuses me. Putting aside the the energy sector is I just don’t understand the end game in Ukraine. For Russia, every option seems to be unpalatable. So I think until we see how that settles out, it’s very hard. I think, then to go on and speculate about things like like like the impact on the on the energy sector. But whatever the case, what’s already happened, I think, I hope is going to make the overall conversation linking climate and energy security more intelligent. And there’s a lot of headroom to make it more intelligent. So, yeah, so. [00:44:25][64.9]
Jason Bordoff: [00:44:26] We’re trying to do our small part. We were just about out of time. But before I let you go, I had the chance earlier today here at Ceraweek to interview you and Lord John Brown about innovation and technology outlook in energy. You follow this and as closely as anyone. So I’m curious what you see coming around the corner and where what kind of innovation and tech innovation and technology improvements you’re excited about? What technologies are we maybe not talking enough about that you think you’re more optimistic about? [00:44:53][27.2]
Ernie Moniz: [00:44:54] Well, I think, you know, it’s very important to me this is said often, but to consider various timescales, certainly in this decade, it’s really about deploying a lot of technologies. And so if we look at, let’s say, the administration’s 2030 goal of a 50 to 52% emissions reduction economy wide, it’s very clear that a lot of the lead horse is going to continue to be the electricity sector. I’m not sure about 80%. But in our scenarios we envision something like a 65% reduction in the electricity sector, accommodating the overall 50% reduction. [00:45:39][45.1]
Jason Bordoff: [00:45:40] That sorry, that’s where we’re headed or that’s what would happen if we had a new policy like build back better or something else. [00:45:45][4.6]
Ernie Moniz: [00:45:45] So, yeah, so these scenarios assume the Infrastructure Act is put in place and that there is that there’s hundreds of billions of dollars of extra policy support going forward, but all paid for. You’ve got to pay for it. And that comes through the tax code. So this is complicated to all to all get done. But what I want to say is that, you know, the the if you’re going to get that kind of a reduction, say, say two thirds in the power sector relative to 2005, that you’re going to need a huge additional deployment of renewables. 500 gigawatts maybe in this in this in this decade. So there it’s less a question of the technology innovation as it is the business model and policy innovation, because again. Those projects have to be investible and invest. Ability at that scale is probably going to require dramatic expansion of grid infrastructure. That’s where the that’s where the technology innovation as well as other innovation is going to have to come in. As you look further, there are other technologies where this decade is the one where we start to deploy them. But with the idea that they become material in the next decade. A couple of examples there. Carbon capture sequestration is one where we think one needs to have a, you know, a material not huge, but material impact in this decade with the idea that it can it can expand dramatically in the in the 2030s and probably be essential, particularly for industrial decarbonization. Another, of course, is hydrogen. We have a long way to go in terms of the cost reduction. There’s a lot of innovation, whether it’s Electrolyzers or other other other other approaches. The infrastructure is going to require a lot of innovation in hydrogen, etc. But that’s again a case where, you know, it’s clearly an agenda item to be addressed. A third area, which again, will not be dramatic in this decade, but we’ve got to get going on it is all of the negative carbon technologies, carbon dioxide removal. By which I don’t mean just direct air capture, but the whole suite of of of technological solutions, technology, enhanced natural solutions. And if we learn how to count properly, natural solutions as well coming in. So those are examples of areas where, you know, it’s not magical to think, think about it, but they’ll come in. And of course, I should have added nuclear. Nuclear reactors, fission reactors as well, where there’s there’s never been so much innovation. But but we still need to get across the finish line and demonstrate some of these with with the pilot the pilot projects. But then there is the the the the real long poles in the tent. And and here at Ceraweek, we had a session on fusion nuclear fusion. Now, a lot of people will still be saying the old joke of, you know, it’s 40 years away. We’ll all and always will be. Well, that joke doesn’t apply anymore, in my view. And once again, it’s a it’s an area where there has never been so much innovation. There has never been so much private capital going into it. More than $4 billion of private capital has has gone into this. We we heard here at Ceraweek, we heard from CEOs of two of these privately funded companies. One, an MIT spin out, which in September demonstrated the new magnet technology, high temperature superconducting magnet at 20 Tesla. This is a lot. And an MRI machine is the scale of a Tesla. Okay. Just to give you an idea. So take 20 or 20 times that they demonstrated that they didn’t have they don’t have a fusion machine yet. They’re building, but they they demonstrated the core technology and that unleashed $1.8 billion of private capital to actually build. [00:50:46][300.5]
Jason Bordoff: [00:50:46] And to invest in a. [00:50:47][1.4]
Ernie Moniz: [00:50:47] Company to invest in that company. Right. The other company that we had here today is a company that’s actually been around for more than two decades. And they’ve gone through five generations of machine. They say the next machine is going to demonstrate the conditions you need for doing deuterium, tritium, fusion. So bottom line is. There’s a significant. Possibility that in this decade the requirements for a fusion machine will be successfully demonstrated. That is not the same thing as having a power plant. You still have to do that, all of that engineering and get the costs to be manageable, etc., etc. But this is not where we were. And for me this has been a revelation. Just frankly, in the last in the last years, I have been amazed to see the progress that’s been made. And I think I mentioned the second company has a totally different technology from the first company and there are several other companies with each different technologies. And and if this works, I mean, if a fusion if fusion ends up being contributing in the power sector, it is a complete game changer for carbon free electricity with plentiful fuel and with no no public safety dangers, no high level waste, long term, high level waste, challenge, etc. It just changes the game and provides the foundation of firm power that I believe is essential in a reliable and resilient electricity system. So, you know, innovation remains my biggest hope. I do mean technology and business model and policy innovation. And my confidence in those innovations is in inverse order to what I just stated. Highest for technology, lowest for policy. But that comes from the scars of the last the last several decades. [00:53:03][135.5]
Jason Bordoff: [00:53:04] Well, you’ve seen the challenges firsthand of innovation in policy with several stints in government. And it’s we started with a little bit of a bleak and worrisome outlook for what might happen with Russia’s invasion of Ukraine. But good to end on an optimistic note with what might happen with innovation and technology. So Ceraweek is incredibly busy. I know your calendar is packed, so thanks for being so generous with your time and joining us today. And thanks for your service again for several stints in government and continuing today. [00:53:31][27.0]
Ernie Moniz: [00:53:32] Well, thank you. But I also want to say I also I’ll put in a plug for you as well, you and your colleague Megan O’Sullivan, because for another discussion, I think that trying to refocus the discussion from the endpoint of deep decarbonization to how you get there I think is exactly right. And so I think that’s maybe I’ll interview you next time. [00:53:54][21.8]
Jason Bordoff: [00:53:54] I would be honest on that, and I appreciate your saying that. It’s something we feel really passionate about and and she’s brilliant. And I love working with Megan, who you know well. So thank you for saying that. Good to be with you. Thank you. Okay. Ernie bunnies, thank you so much for being with us. And thanks to all of you, our listeners, for joining us on this episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by Bill Loveless and by me, Jason Bordoff. The show is produced by Stephen Lacy, Jamie Kiser, and Alexandria Herr from Post-Script Media. Additional support from Tori Lavelle, Kirstin Smith, Lilly Lee, Daniel Prop, Natalie Volk and Q Lee Sean Marquand engineered the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at Energy Policy dot Columbia dot edu or follow us on social media at Columbia U Energy. And please, if you feel inclined, give us a five star rating on Apple Podcasts. It really helps us out. Thanks again. We’ll see you next week. [00:53:54][0.0]
[3196.8]
Things have shifted dramatically since we aired our last episode. There’s now a crisis in Ukraine and sanctions on Russian oil and gas. This is all on top of record demand for petroleum products and electricity as the world emerges from lockdowns.
So this week, we’re bring you an episode about energy security from the other podcast that we have here at the Center on Global Energy Policy, the Columbia Energy Exchange. If you like the show, please head give it a rating and review.
An increased demand for energy following COVID-19 lockdowns created a severe energy supply crunch in Europe this winter. And now, decisions from corporate executives and government leaders to reduce or outright ban the purchase of Russian oil has forced energy prices even higher. For a look at how energy markets can be leveraged to end Russia’s war in Ukraine and accelerate the transition to clean energy– all while reducing the risks of nuclear proliferation– host Jason Bordoff spoke with former US Secretary of Energy Ernest Moniz.
A key architect of the Paris Agreement and Iran nuclear deal, Moniz is currently the CEO of the Energy Futures Initiative and the Nuclear Threat Initiative. Before joining the Obama administration as Secretary of Energy, Dr. Moniz served as Under Secretary of Energy and as Associate Director for Science in the Office of Science and Technology Policy at the Department of Energy. Prior to his appointment, Dr. Moniz was a Physics and Engineering Systems Systems Professor at the Massachusetts Institute of Technology, where he founded the MIT Energy Initiative.
In this conversation, Dr. Moniz sheds light on the energy security threats created by the Russia-Ukraine conflict, where things stand on the Iran deal and the future of energy innovation amid turbulent times for the markets.
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