Energy - The Bottomless Well

By : Jim Pinto,
San Diego, CA.

A new iconoclastic book by Peter Huber & Mark Mills explains why energy is not scarce - an infinite supply will continue to flow through human innovation and ingenuity. The things we think we know about energy are mostly myths - the demand for energy will never go down; more energy-efficient products simply raise demand. Across the board, energy isn't the problem - it is the solution.

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Check out, April 2005

For two centuries of industrial history the technologies used to find, extract, or capture energy from the environment have improved much faster than the estimates of supply has receded. New energy sources have always been developed to meet burgeoning demand. It is this– the belief in human ingenuity and progress – that generates the concept of "the bottomless well".

That is the title of one of the most significant technology books I've read recently. The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy, by Peter Huber and Mark Mills. This book has radically changed my own views on energy conservation and usage. It makes very good reading for technologists, engineers and marketers.

Peter Huber used to be an MIT engineering professor and is now a fellow at the Manhattan Institute, and a regular columnist for Forbes magazine; Mark Mills is a venture capitalist and former Reagan administration staffer. Their iconoclastic book twists many conventional assumptions around in a remarkable fashion.

No, this is not one of those books which discuss whether oil will run out, or not. Indeed, it is only tangentially about oil. Rather it emphasizes that, as humanity advances, more and more energy, not just oil, will come inevitably from the "bottomless well" of technology innovation. Energy supply will always outpace demand.

"Ordered" energy generates progress

More efficient cars, engines, and light-bulbs will never lower demand. Instead, they will increase it. The demand for energy can only go up. Why? Because cheaper and better products stimulate demand and increase total energy usage. It signals progress, and energy usage is simply a cheap byproduct.

Most of what we think of as "energy waste" is actually beneficial. As energy becomes more "ordered," more waste is inevitable and energy price really doesn't matter very much. For example, laser energy is precise, focused, or “ordered” energy, which is far more valuable than the energy that is used by the power-supply that produces it.

The more advanced energy usage becomes the more productive and useful it is and the cost of the energy involved in its production is irrelevant. Huber and Mills provide a plethora of convincing examples.

Electricity, not oil, is the dominant fuel

Today, oil is not the dominant fuel of our modern economy; it supplies about 40% of the raw energy we use and is used mainly for automobiles and transportation. Coal, uranium, gas, and hydroelectric power supply the other 60%. By far the most important use of this not-oil fuel is to produce electricity to power almost everything else.

It's clear that electricity, not oil, defines the fast-expanding center of the energy economy. About 60% percent of U.S. gross domestic product (GDP) now comes from industries and services that run on electricity. All the fastest growth sectors of the U.S. economy, like info-tech and telecom, depend totally on electricity.

Electricity has met more than 85% of the growth in U.S. energy demand over the past 25 years. And electrification is accelerating. Almost everywhere, electrically powered equipment is steadily displacing equipment powered by other forms of energy – because electrical equipment is far more precise and ultimately cheaper. Expanding energy supplies mean higher productivity, more jobs, and a growing GDP. Across the board, energy isn't the problem; energy is the solution.

Oil will steadily become less important

In the automotive sector, gas prices will matter less and less. Of course, this statement seems strange, even paradoxical, in the midst of recent escalating gas prices. But you may have noticed that hybrid vehicles are now in increasing demand. The latest news is that, because of high demand and the long wait for delivery, used hybrids are now selling at a premium over the new vehicle price. During the next decade, new designs of hybrid engines will likely lead increasingly to cars propelled by the coal-fired (and nuclear-generated) grid, with much less oil-based fuel consumption.

Today's hybrid automobiles are gasoline powered, with battery power as an adjunct – the battery gets charged by the gas-powered engine and by braking energy, and provides some auxiliary and acceleration power. Gas mileage is improved by some 30-35%, with estimated savings of about $ 500 a year (at today’s gas prices) with an automobile that costs some $ 4-5,000 more. (Source: Business Week, April 25, 2005). This is good, but not revolutionary. As gas prices increase, the demand will soar and improvements will follow.

It turns out that the vast majority of trips are less than 5 miles. Cars spend most of their day parked. And the grid – fired by efficient power plants burning fuels that are much cheaper than gasoline – can recharge a hybrid car's battery for far less than the cost of power generated by the car's gasoline-fired generator. But, more significantly, as technology advances, the automobile is transforming steadily into a sort of giant electrical appliance. Not just for their fuel efficiency, but because the new electrical drive trains offer much better performance, lower cost, and less weight. As more people begin to use electric cars, people will increasingly be topping off their batteries from the power grid, and filling up less frequently at the gas station. Within a decade, we will be shifting more and more of a typical driver's most fuel-hungry miles from the gas tank to the grid.

The upshot: We'll be far less sensitive to the cost of raw fuel than we used to be. Today fuel costs represent less than 20% of the typical cost of driving. And raw-fuel costs are not really considered with virtually all tools and equipment – because it is insignificant when related to the value of the tasks accomplished.

Although road transportation will steadily rely less and less on oil, the solution for air transportation is not yet on the horizon – battery-operated aircraft engines are clearly not practical - yet. Here again, one wonders what new technology surprise will yield a solution for that seemingly intractable problem in this new century.

Fuel - the economic twilight

We are witnessing the economic twilight of fuel. America burns enough fuel to release 100 quadrillion BTUs of raw thermal energy every year. That's a gargantuan amount, and it keeps rising geometrically. But, year by year, the cost of all those quads grows less and less important in the modern, technology-driven economy. The quality and cost of the engineered hardware – and the results delivered – matters far more. As energy becomes more “ordered” and more productive, its cost becomes less significant.

Charts & graphs

You know, I'd buy this book just for the abundance of clear charts and graphs. The authors have mentioned that that there are several dozen other directly related graphs & charts that they decided not to burden the book with but have posted on the web, with all the book graphics. All these are also available as free downloads. See web link below.

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