Massachusetts Leapfrogs to National Energy Policy Leadership: Strong public-private collaboration sets the standard for a national clean energy policy

In a whirlwind legislative session ending last Thursday, July 31, 2008, Massachusetts legislative leaders have launched the most comprehensive and forward thinking set of clean energy policies in the nation to move rapidly toward a low-cost, secure, environmentally friendly state energy industry.

Massachusetts' suite of policies creates the nation's first "energy efficiency first" electric utility program, accelerates the state's Renewable Portfolio Standard, puts in place strong incentives and mandates for home grown, non-food based biofuels for transportation and home heating, opens the door for clean energy development in Massachusetts' wind and ocean power rich shoreline, mandates steadily decreasing state greenhouse gas emissions, and establishes the necessary innovation and training infrastructure for the state to use these policies as a catalyst to develop a world leading clean energy industry cluster.

The state that created the model for the United States' public parks, libraries, high schools, and university system has now created the model for a comprehensive clean energy policy for the nation, critical now more than ever when both 2008 presidential candidates have made strong commitments to revamp the country's failing energy policies when they take office in January 2009.

Huge kudos are in order for the visionary state leaders who have worked in strong public-private partnership to make Massachusetts' new clean energy policy a reality: Governor Deval Patrick and State Energy and Environment Secretary Ian Bowles, House Speaker Salvatore Dimasi, and Senate President Therese Murray worked tirelessly in collaboration with stakeholders in the state's rapidly emerging clean energy private sector, in large part through the facilitation of the non-profit New England Clean Energy Council that is lead by my colleague at General Catalyst Partners, Hemant Taneja (Co-founder, Chairman of the Board, and MIT alumnus), and Nick d'Arbeloff (Executive Director). The Council's Board is composed of leaders from all of the state's key clean energy private sector stakeholders, including leaders from academia, startups, venture capital, industry, utilities, financial institutions, unions, and environmental groups.

The fact that Massachusetts new clean energy policy has been largely developed over the course of the little more than the year and a half that Governor Patrick's administration has been in office is a testament to the strength of Massachusetts' leaders' unique ability to work together in strong and efficient public-private partnership.
In concert with the ongoing mobilization of Massachusetts' substantial innovation assets toward clean energy, embodied in MIT's new $100M+ Energy Initiative and the exploding number of clean energy technology firms in the state, Massachusetts' new energy policy will drive the state to a national and global clean energy leadership position.


Here's a quick run down of the state's comprehensive suite of new clean energy policies:

"Energy Efficiency First"
The Green Communities Act of 2008 enacts a first-in-the nation "energy efficiency first" policy for the state's electric and gas utilities, requiring them to invest in all cost-effective energy efficiency measures before turning to building new energy supply infrastructure. This policy is designed to finally enable the state to harvest its as-of-yet untapped gold mine of energy efficiency (often referred to as "the lowest hanging fruit" of clean energy) to eliminate the need to build new fossil fuel power plants in Massachusetts, providing up to 25% of the projected 2020 state electricity load through efficiency. Massachusetts utilities will be required to identify and employ all cost-effective energy efficiency measures, including among among others efficient lighting, cooling, and industrial processes, and will be overseen by a 12 member public-private Energy Efficiency Council.

Furthermore, the Massachusetts Department of Public Utilities has enacted an electric utility "decoupling" policy that goes into effect in 2012, that will decouple utility profits from the amount of energy utilities deliver, zapping the long present perverse incentive for utilities to overlook energy efficiency investments in order to be able to sell more power.
Together, these policies will make the Commonwealth an energy efficiency power house and will foster the development of a world leading cluster of new companies in the state focused on providing energy efficiency technology solutions.

Strong, Stable Policy Support for Renewable Energy
The Green Communities Act also offers strong, stable, steadily growing support for renewable power in the Commonwealth, doubling the growth rate of the state's Renewable Portfolio Standard from 0.5%/year to 1.0%/year. This will steadily and predictably increase the required percentage of electricity supplied in the state by renewables, such as wind power, solar, and biomass power, from the required 2008 level of 4% up to 15% by 2020 and will foster the continued rapid growth of the state's emerging clean energy technology industry and bring jobs and dollars into the state while increasing Massachusetts' energy security and lowering the environmental impact of its energy use. Furthermore, the Act increases the maximum net metering cap on distributed renewable energy projects by almost a factor of 4, from 60kW to 2MW, enhancing the reliability of the state's grid through the increased development of a distributed power infrastructure. The act also provides long term support for clean energy power projects in the state by allowing Massachusetts utilities to for the first time engage in long-term power purchasing contracts from these projects, giving renewable project developers the long-term revenue certainty that is required for sustained growth of the state's renewable power sector.

In further support of renewable energy development in the state, the legislature has also passed the Massachusetts Oceans Act, which provides a clear regulatory framework for the exploration and development of Massachusetts' massive off-shore wind, wave, and tidal resources and will foster state leadership in these highly promising new emerging clean energy industries.
The Commonwealth's strong, stable, long-term policy support for renewable energy will serve as a model for the U.S. Federal government, which has until now significantly hampered the development of the U.S. renewable power industry by refusing to put in place the long-term, stable renewable energy policy support that will be required for the creation of a strong and growing domestic renewables industry and allow the U.S. to catch up to and surpass Japan and Europe in this critical rapidly growing strategic industry. (The current debacle over the extension of the Federal Renewable Production Tax Credit is seriously hampering stable investment in wind and solar in the U.S. Check out the erratic ups and downs of annual installed U.S. wind capacity for a case and point.)

Strong Support for Renewable Fuels to Displace Petroleum Imports
The Clean Energy Biofuels Act of 2008 provides strong and stable incentives to enable increasing displacement of expensive and insecure petroleum imports and to catalyze the creation of a market for the cellulosic biofuels currently under development by nearly a dozen leading Massachusetts-based companies. This policy will lay the foundation for the development of a state and national cellulosic ethanol industry by exempting cellulosic biofuels from the state's 21 cent/gallon state gasoline tax and by creating a state renewable fuels standard that mandates a steadily increasing biofuel content in diesel furel and home heating oil of 2% by 2010 up to 5% by 2013.

Capping Greenhouse Gas Emissions
The Global Warming Solutions Act of 2008 puts Massachusetts' right at the head of the pack in terms of policy leadership to address the spector of greenhouse gas driven climate change. As an active leader in the nation's first greenhouse gas cap and trade regime, the Regional Greenhouse Gas Initiative, Massachusetts' has mandated a 10-25% reduction in state greenhouse gas emissions below 1990 levels by 2020, and a long-term 80% reduction by 2050, representing the most stringent greenhouse gas cap in the nation. This policy not only serves as an example to the nation that the U.S. must take a leadership position in addressing climate change and institute a national greenhouse gas emissions price, but also will serve to spur the early development of a low-carbon energy technology industry sector in Massachusetts, setting it on a path to become a global leader in this rapidly growing multi billion dollar industry.

Fostering a Clean Energy Innovation Ecosystem
The Green Jobs Act of 2008, developed in close collaboration between the New England Clean Energy Council and the state government, lays the foundation for Massachusetts to rapidly repurpose its uniqely strong innovation ecosystem embodied in its world class universities, technologically skilled workforce, and entrepreneurial startup culture to the task of making Massachusetts' a global hub of clean energy innovation. The Green Jobs Act devotes $68 million to create the Massachusetts Clean Energy Technology Center to achieve this clean energy innovation ecosystem transformation and accelerate the region's clean energy economy.
The Massachusetts Clean Energy Technology Center will administer (1) a Clean Energy Seed Grant Program, (2) a Clean Energy Fellowship Program, and (3) a Green Jobs Initiative. The "Clean Energy Seed Grant Program" will provide seed funding to stimulate applications-focused clean energy research and development and new venture creation to deploy technologies developed at leading Massachusetts' universities, research institutions, and small businesses, filling a critical early stage funding gap and accelerating the development of technologies developed by the state's world class technical and entrepreneurial talent. The Clean Energy Fellowship Program, the pilot of which has been successfully developed and deployed this summer, addresses the critical shortage of experienced entrepreneurs in the state's clean energy startup industry by transforming successful entrepreneurs in other sectors into clean energy entrepreneurs through a 3 month clean energy entrepreneurship bootcamp. (Note: This is a very exciting program. I am a co-founder and have co-lead the development of the program's curriculum and expect a number of exciting new Massachusetts' based clean energy ventures to come out of the program in short order). The Green Jobs Initiative will focus on designing clean energy industry job training programs at area schools and training organizations to ensure the creation of a Massachusetts-wide workforce ready to take advantage of career opportunities in the state's rapidly growing clean energy industry.

Together, the Massachusetts Clean Energy Technology Center's three core programs will ready the state's world class innovation ecosystem for the massive opportunity presented by the state's rapidly emerging clean energy sector.

A State Clean Energy Policy Worthy of a Nation
Politics is often called "the art of the possible": from top to bottom, Massachusetts' new comprehensive clean energy policy shows what is possible when policies are developed through strong, productive public-private partnership. Massachusetts' new policy should serve as a beacon of what is possible for national clean energy policy and should serve as a model for whichever presidential candidate enters the Oval Office come January 2009.
In line with Massachusetts' visionary new clean energy policy, any comprehensive national clean energy policy must:

• Be the result of a strong public-private partnership
• Emphasize energy efficiency over new fossil fuel power
• Provide strong, stable, and steadily growing policy support for renewable power and fuels through national Renewable Portfolio and Fuels Standards
• Provide a transparent and fair regulatory process for the permitting, siting, and development of new forms of renewable energy
• Create a national greenhouse gas emissions cap and trade regime
• Provide the necessary financial and institutional support to our nation's universities, entrepreneurs, and workforce to transform the nation's world class innovation assets to tackle the challenge and opportunity coming with an impending clean energy revolution.
  

Massachusetts has done it. Now it's nation's turn.

On the Shoulders of Giants

The Mentorship Program has been with the Energy Club since its inception. In the early days, as alumni began to trickle out into engaging careers as entrepreneurs and consultants, policymakers and advisors, we quickly realized the need to stay connected with leading professionals moving out from MIT. One night, past-VP Kristian Bodek took matters into his own hands. After a few hours scouring MIT’s Infinite Connection he had a lengthy list of impressive alumni working in energy: the Mentorship Program was born.

From the beginning, the program was set up to intelligently pair emerging student leaders with alumni in the energy field. Over three years, the program has connected over 150 alumni and students. From the feedback I’ve received, mentorship has opened the eyes of students to professional opportunities—and it’s forged solid relationships between the next generation of leaders and those who have gone before us.

Last Tuesday evening, we celebrated the third anniversary of the program with a Reception in MIT’s Stata Center. Students and alumni mingled together, enjoying sushi and hors d’oeuvres in a relaxed environment. Discussions weaved through energy storage technologies, lingered in renewable power and electricity markets before moving on to entrepreneurship and next-generation solutions to energy challenges.

In the midst of the event, Arunas Chesonis (’84) delivered an entertaining address on his experiences in founding the leading business telecommunications company, PAETEC, and the role of the Chesonis Family Foundation in supporting clean technology research at MIT. “Follow your passion” was his closing advice to up-and-coming energy entrepreneurs.

The bar had closed and the tables were cleared long before participants finally trickled out the doors. It was clear that the conversations would continue informally between mentors and students as they meet one-on-one over the coming weeks.

I was struck by the excitement stirred up at the reception. One alum at the event put it to me succinctly: connecting emerging student leaders with professionals is “one of the most important things that the Energy Club does”. I felt the same way last year, when Club founder Dave Danielson hosted the second Mentorship Reception; this was the event that first got me excited about being involved with the Club.

I guess it should come as no surprise that it’s the people involved in the Club, both past and present, that make it the dynamic, creative group that it is. And I’m honored to be a part of that spirit. On behalf of all of us Clubbers at MIT: thank you mentors!

p.s. Thanks as well to Melissa Webster, Katherine Dykes, our fabulous host Beth Conlin, Therese Henderson and the MIT event staff for their help with Reception.

Thomas Friedman and the Energy Club on the Opportunities of "Green"

Friedman asks the Energy Club: What's it all About?
While meeting with a small group of MIT Energy Club representatives last week, Thomas Friedman, NY Times "Foreign Affairs" Columnist and author of "The World is Flat", was interested in what is truly at the core of the growing interest in energy, and asked: Green – “Is it all about energy?” And energy – “Is there anything deeper?”

Anup Bandivadekar, long-time Energy Club leader and Ph.D. candidate working on a hydrogen alternative to petroleum for transportation, quickly responded, articulating the underlying issues that motivate the activities carried out by the MIT Energy Club. Anup sited climate, economic growth, and development as issues that are deeply intertwined with energy, and stated that one can not separate any one of these issues from energy.

These sentiments resonated with Friedman, who sees “green” as a way to address all of these issues, and who also sees “green” and America as great opportunities for one another.

“Green: the new Red, White and Blue”
Friedman alluded to his upcoming book, and suggested that “Green” is taking on a new hue (or three). It is casting off debilitating labels that he described as “greenie-weenie”, is surpassing its most recent transformation as “the new black”, and is taking on the empowering and unifying shades of “red, white and blue.”

Surveying the new landscape of general acceptance of challenges including global warming, energy security, sustained economic growth, and global development; and equally surveying the strengths of the American economy including entrepreneurialism, innovation, and market mechanisms, Friedman sees the birth of an opportunity both for “green” and for “red, white, and blue”.

Who better to tackle the challenges that face our generation? What more worthy of causes than those that are encapsulated in the concept of “green”?

Leaders and Light Bulbs
“We are the people we have been waiting for,” proclaims MIT’s Vehicle Design Summit team. Friedman also met with the MIT students who launched the Vehicle Design Summit, and celebrated this empowered attitude in the recent edition of his column, "The People We Have Been Waiting For".

Before the end of our session with Friedman, however, he also made sure to impress upon us the importance of forward-thinking leadership. He suggested that the issue is so complex that strong leadership will be required to effectively tackle it, remarking that people can truly make an impact by changing their leaders, not their light bulbs.

I would argue that both are important. While innovative energy technologies will eventually emerge as the economic champions, the time scale on which they are deployed to a disruptive level may be too long relative to the time scale required to address the other issues at hand. Strong leadership and well-crafted policy will be required to reconcile the differences in time scales. On the other hand, proactive participation of individuals, communities, companies, and organizations will make and already are making a collective impact that can not be ignored, and should not be neglected.

At the Inaugural Energy Initiative Salon Reception this Tuesday, Dan Reicher, head of Google's Renewable Energy for less than Coal initiative will discuss the potential for businesses to provide leadership and make a big impact, while Ann Berwick, Undersecretary for Energy in Massachusetts will discuss the government role in supporting local production and providing energy infrastructure.

I concur that we are the people we have been waiting for, but can we do it alone? And, while "red, white, and blue" has the tools necessary to take on "green", does it have the vision and the leaders to recognize and shape its full opportunities and act on them?

MIT Energy Conference lands renowned clean energy investor John Doerr as keynote!

The directors of the MIT Energy Conference announced this week that John Doerr, Partner at Kleiner Perkins Caufield & Byers - one of the world's most famous and successful venture capital firms, has agreed to keynote this year's conference, to be held April 11-12, 2008. Congrats to the MIT Energy Conference Organizing Team on this huge win!

I couldn't be more excited about the Conference team's choice in having John Doerr as a keynote.

Doerr has emerged as a clean energy icon representing the new wave of capitalism-driven clean energy deployment that has taken the world by storm in the last few years. His impassioned plea for the need to deal with climate change at last year's TED conference in Monterey, CA (my home town) represented the mix of shrewd business acumen and emotional furvor that will be required to transform the global energy apparatus to a more sustainable one over the next 50-100 years to avoid political and/or environmental and/or economic catastrophe.

Kleiner Perkins has majorly committed to funding and supporting green technology development and currently has 10 publically-announced "clean energy" porfolio companies:

Local Firms in Their Portfolio:
- Great Point Energy - Coal-to-Gas
- Liluputian - Micro Fuel Cells (out of MIT)
- Mascoma - Cellulosic Ethanol (out of Dartmouth)

Also:
- Altarock: Geothermal (Seattle, WA)
- Altra Biofuels (Los Angeles) & Amyris Biotechnologies (Bay Area): Synthetic Biology for Biofuels
- Ausra: Solar Thermal (Bay Area)
- Bloom Energy: Regenerative Solid Oxide Fuel Cells (Bay Area)
- Miasole: CIGS Thin Film Solar (Bay Area)
- Verdiem: Software to Reduce "Vampire Loads" in PC usage (Seattle, WA)

Doerr will join Jim Rodgers, CEO of Duke Energy, to round out the MIT Energy Conference 2008 keynote line up. These two global clean energy leaders come from two opposite ends of the clean energy industry spectrum, with Rodgers being a progressive leader of one of the largest existing utilities in the U.S. and Doerr representing the nimble energy entrepreneurs and investors who hope to change the energy game. I believe they both will bring incredibly valuable perspectives to to the table: innovation and change will have to come from both the top-down and bottom-up in the energy industry to effect real progress toward reducing carbon emissions and environmental degradation associated with our energy usage.

9 MIT Energy Profs Granted Tenure.... 18% of Total

MIT Tech Talk announced this week that the MIT Corporation has recently granted tenure to 50 MIT professors.

By my count 9 out of the 50 can be considered "energy professors". This provides one data point indicating that ~20% of MIT profs can be considered to be working actively in energy. Note: Bolded profs have been involved with the MIT Energy Club.

Full Tenured Professors:

• Bill Green (Chemical Engineering) - leader in computer simulation of reactive chemical processes - active in understanding catalytic reactions for hydrocarbon refining/conversion/upgrading
• Jonas Peters (Chemistry) - design of new inorganic and organic nonmetallic transformations and the synthesis of novel ligands and transition metal complexes with applications in solar and solar-to-fuels
• John Brisson II (Mechanical Engineering) - work on carbon sequestration
• Rajeev Ram (EECS) - work on thermophotovoltaics

Other Energy Professors Receiving Tenure:

• Vladimir Bulovic (EECS) - leader in molecular, nanostructured, and organic semiconductor electronics and optoelectronics - active in organic and organic/nanocrystal hybrid solar
• Nicola Marzari (Materials Science) - leader in first-principles calculations of materials properties - active in hydrogen storage, catalysis, and other energy areas
• David Perreault (EECS) - leader in power electronics
• Senthil Todadri (Physics) - works on theory of high-temperature superconductors
• John Fernandez (Architecture) - leader in the field of sustainable and resource-efficient buildings

Nice diversity of expertise represented here. I'm curious if this ~20% number is accurate.....

Discussing Energy Infrastructure with MIT ESD PhD student Jim McFarland...

Jim McFarland (please note the glamour shot), MIT PhD student in ESD, lead a very interesting discussion on "Energy Infrastructure from the Vantage Point of Carbon Capture and Sequestration" this past Wed in the MIT Energy Club Discussion Series.

The discussion focused much more on energy infrastructure than CCS, but that was just fine. Jim started out the session by handing out copies of an incredibly thorough mind map categorizing the energy field. I highly encourage people to get copies of this. Hopefully, Jim won't charge. :)

The session began with a discussion about what we even mean by "energy infrastructure"? It was easy for us all to agree that transmission lines, distribution lines, and fuel pipelines clearly represent infrastructure, but through the discussion I believe most of us came to agree that energy infrastructure also includes power plants, gas stations, as well as the human and knowledge capital required to keep the industry going.

The discussion ranged about a bit, but here are a few other highlights....

David Danielson posed the question of whether energy infrastructure is truly underinvested in right now, as is widely claimed, or not. This led to the question of what it is that limits/determines the amount of investment that is made in infrastructure. Rich Sears, MIT visitng scientist from Shell, succinctly answered this question: profit-seeking companies determine their infrastructure investments by 1.) determining how much capital they have to invest and 2.) what are the most profitable ways to invest that capital. Pretty simple. :)

There was an interesting discussion on the difficulty of siting power lines/pipelines. The key difficulty is gaining rights to build/cross over privately owned land. Important solutions discussed included 1.) compensating private land owners for the right to cross their land (a la what we have seen with wind turbines - Rich Sears quoted a farmer he had seen interviewed who had a relatively loud wind turbine on his land saying "Sounds like money to me.".) and 2.) creating positive public perception of the benefits of the project to the general public in the region where transmission/pipeline rights are needed. One student from Kansas pointed out that the coal and natural gas lobbies have been fighting it out in the newspapers trying to change public opinion one way and the other in terms of siting new coal or gas power generation facilities. Although it sounded from what she said that these companies had unfortunately resorted to fear-mongering and xenophobia, students in the discussion realized that public relations campaigns are critical for any project requiring siting. Ideally, this is done in a more honest spirit, educating the public about the true benefits of the project.

The CCS portion of the discussion was very interesting. It was discussed that plenty of enhanced oil recovery projects have been done for many years by the big oil companies. BP's recent cancellation of the Carson City EOR project was highlighted as an example of the difficulties inherent in building new energy infrastructure. It was stated by one attendee that the project failed because of PR campaign in southern CA by some environmental groups telling the public that there was a danger that CO2 from the project could flood the entire LA basin, asphixiating the whole town. This is clearly silly, but it killed the project.

It was pointed out that CCS demo projects should be done with the explicity purpose of demonstrating the viability of CCS and that they should be performed in the locations with the most suitable geologies, not necessarily where existing energy infrastructure and human capital are concentrated. This would allow for demonstrations and careful measurement/validation while mitigating the risk of having a CCS project shut down by negative public opinion.

On a personal note, I have been thinking a lot about public perception about different sources of energy. It has become clear to me that the general public perception is that CCS is not green or clean, with perhaps a bit more of a yellowish hue. How can the CCS folks change this image? Perhaps by co-siting all CCS demo projects with wind and solar projects.... They better, if they want to have even the possibility of building out CCS at the scale that will be required to make a dent in CO2 emissions going forward in the next 5, 10, 15 years.....

Former Chairman and CEO of ExxonMobil, Lee Raymond, speaks in the MIT Energy Initiative Colloqium

The MIT Energy Initiative brought Lee Raymond, former CEO/Chairman of ExxonMobil, to come speak to the MIT energy community about the recently published National Petroleum Council report "Facing the Hard Truths about Energy".

The format of the event was a "fireside chat" with MIT Institute Professor John Deutch peppering Lee Raymond with questions and then open audience Q&A.

John Deutch opened the session by expressing his pleasure that Lee Raymond has a PhD in Chemical Engineering. Very much in the spirit of Deutch's excellent MIT class, with Prof. Richard Lester, on "Applications of Technology in Energy and Environment". Deutch pushes in this class for the need for technologists to push their knowledge set into the practical to allow them to be industry, political, and thought leaders going forward.

Raymond opened by describing the history of the National Petroleum Council. The uninterested observer would just assume that it is an industry group like the American Petroleum Council. However, the audience learned a bit more.... the NPC was formed during WWII as an industry/gov't partnership to work to solve the strategic problem of ensuring U.S. oil supply. Now, the NPC is officially a federal advisory council that reports to the DOE, specifically to the Secretary of Energy, MIT's own Samuel Bodman currently. The NPC has previously published a report on Natural Gas. The current report was commissioned by the Secretary of Energy himself.

Raymond made opening points about the importance of large/long scales when thinking about solving energy problems. He pointed out that large scales are needed to "move the needle" in energy and that massive capital outlays over long time-scales are required to effect change in the energy industry.

Deutch's first question revolved around the prediction by the report that the world will produce and consume 120 million barrels per day (mbd) by 2030, the current number being ~80 mbd. Raymond responded that the resource is there and that the key question is whether we will be able to get at it: meaning will the required capital be made available, will policy and environmental limitations allow for it, and will the human capital be available to make it happen. He also pointed at that the wells currently accounting for the global production of 80 mbd are in production decline, so to get to 120 mbd by 2030 will required the addition of more like 60-70 mbd of new capacity, nearly equal to what we currently have! To me, doing what we have done so far in the history of oil once again, but in 23 years this time, seems daunting.

Another of Deutch's questions related to the important role that national oil companies (NOCs) in politically fragile countries play on the global oil scene. Raymond said that if the past predicts the future, he didn't have a lot of confidence that a lot of good things would be happening here. However, he pointed out, the fact that many of these countries rely nearly completely on oil income for their GDP would indicate that they will continue pumping, even through politically turbulent times (as long as this is possible!). Raymond emphasized the importance of the rule of law and transparency for allowing for a more efficient global oil industry to operate.

Raymond/Deutch also pointed out that ExxonMobil controlled ~80% of both production and reserves in 1973, whereas NOC's have about the same position now. An important trend to be aware of. Deutch wondered what the role of the multinational oil companies will be going forward with the NOC's playing such a prominent and growing role. Raymond stated that he believes that "best-in-class" multinationals will always have a place in the global oil industry, as NOC's have the need for capital, technology, and project management expertise that will reside in the multinationals for the foreseeable future. He also pointed out that the revenue difference for an oil field run "averagely" well versus the best run field means differences of $1B's per year, illustrating the core value of project management expertise.

Raymond was asked by Deutch to think like a startup guy for a moment and consider which technologies/problems in the energy arena are most exciting to him now. He pointed out subsurface characterization, "the ability to see into the earth", as one key area. He also pointed to the importance of flexible refining of crude oil: the ability to quickly characterize crude oil and optimally process it into refined products, as a very important area.

When asked by an audience member about the strategic importance of Antarctica for "Western friendly" oil resources, Raymond went straight to discussing deep water resources. He pointed out that we now can produce at 5000ft of water and explore at 10000ft. I believe he was trying to point out that deep water is one critical strategic reserve area for the West, as well as to emphasize the importance of technology development to open up West friendly reserves (opening up environmentally sensitive areas with delicate technology approaches?, increasing the resource base by being able to hit ultra-deep water?)

When asked about the importance of a variety of oil alternatives, Raymond pointed out the existence of a "false choice", meaning there is no either/or here but simply a need for as many market-viable solutions as possible. One very interesting point he made is that natural gas should not be used for power generation. It is just too valuable for the creation of high value energy products. He emphasized the logic of focusing much more on clean coal, making a low value product that is better suited to power generation an environmentally acceptable choice. Very interesting as the role of natural gas in the power section has grown like crazy in recent years.

He emphasized that one big surprise that came across to him as the NPC worked on the report was how difficult the infrastructure issues around biomass-energy are, that collection and transport of biomass and bio-energy products look very difficult from an infrastructure.

Raymond also emphasized the importance of energy in foreign policy. He noted that the U.S. is no longer the center of the energy universe, that the demand center of the universe has become the Far East, while the supply center is the Middle East (there was a time when the U.S. was the center of supply as well!)

Raymond has his hands tied a little when it comes to controversial topics, because he does not want to reflect poorly on the company he essentially built, ExxonMobil, with off-hand comments that get published far and wide in the media.

However, MIT's beloved John Deutch is another story (thank goodness!), and was not slow to mention the key geopolitical energy issues that are on everyone's minds, mentioning Iran, Venezuela, and Chinese dealings with certain African countries as key examples.

Raymond was asked - perhaps more told - by an audience member (an MIT alum and retired GE employee who had attended the Peak Oil Conference, referenced in Ed Carlevale's post below) that the age of cheap oil is over. Raymond had a nice quote in response, saying that "the age of cheap oil is over is a cheap comment". He pointed out that traditionally oil production costs have been in the single digits, while they are just now into the double digits. Even a doubling from current costs would put us in the $20's/barrel. My thoughts here: So is it fair to say that the era of cheap oil is over?? There is a limited resource availability, but that resource can still be produced at pretty low cost. So is there limited but relatively low production cost supply and increased demand results in high prices. We should remember that in contrast to the 1970's, the current spike in oil prices is much more a demand-side driven phenomenon than a supply-side issue.....

As a closing fun note, I was impressed to find out that Raymond completed his PhD in Chemical Engineering with a global chem eng rockstar prof in 3 years. Having taken 6.5 years myself, I am duly impressed.

All in all a very engaging and interesting discussion with one of the men who has formed the modern global energy landscape. I was impressed by Lee Raymond's cordiality and frankness.