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A report from the M.I.T. Energy Conference: The future of clean energy is... coal?

CAMBRIDGE, MASS.—You could be forgiven for showing up to the M.I.T. Energy Conference here this past weekend looking forward to hearing how clean energy was going to take the world by storm. After all, Friday night, the exhibition hall was full of solar, small wind and cellulosic biofuel projects, sandwiched in between better batteries, fuel cells, nukes and algae. And the agenda was full of sessions on bioenergy, wind power, energy storage and smart grids.

But for a conference billed as "accelerating change in global energy," there was a consistent theme: Today's main sources of electricity—fossil fuels, particularly coal —are not going to stand aside for renewable sources without a significant shift in policy.

The day began with a great deal of enthusiasm about the gains the U.S. and the world can make by quickly building up renewable energy supplies, to beat back climate change, get the country off oil, and even end the economic crisis by creating scads of green jobs. Founders of innovative companies said they have the know-how and the technology to commercialize solar, wind, geothermal and hydroelectric supplies, as well as efficiency gains and a smart grid. (We live-Twittered the conference, so you can find the play-by-play, with additional input from our followers, here.)

But despite their readiness, and the excitement over President Obama’s stimulus package (which includes funding for renewable energy sources), the startup companies said they are trapped because they can’t get past small development into large economies of scale. With low oil prices and a bad economy, market demand has largely disappeared. Some other driver is needed. As Lars Josefsson, CEO of Vattenfall, the Swedish utility that is now the fifth largest power producer in all of Europe put it: Change “is not a question of money or technology. It requires a redesign of society.”

Until that redesign happens, it appears we'll be relying on some very old-fashioned sources of energy. On the other side of the makeshift partitions between conference rooms, Ian Copeland, president of new technology at Bechtel, which builds power plants for utilities, said the future of baseload power is: “coal, and natural gas, with some nuclear.” Later that day senior executives Atul Arya from British Petroleum, the global fuel company, and J. Wayne Leonard of Entergy, one the largest U.S. utilities, said the same thing.

By evening, the message was even more clear. “There is no shortage of fossil fuels," Arya said in the last session. "Demand is the issue, not supply.” And Leonard said, “The market has already picked the winning technology: coal.”

The conclusion from hearing the various speakers was evident: only an enlightened government policy -- not the free market -- will move us into a renewable energy future. Fossil fuel companies don't pay the full cost of producing their product--they don’t pay for its disposal, in the form of emissions, which creates an unfair advantage over renewable technologies. And consumers—from industries to individuals—must also change their behavior, given that lower-priced fossil fuels won’t be forcing them to change. Virtually every speaker acknowledged that government policy is the only way to fix the disconnect between large energy firms and startups.

Josefsson actually provided a roadmap for what that policy should be: He said four moves are needed: 1. Use coal, but much cleaner coal, which requires a policy that puts a price on carbon emissions, namely national cap and trade systems. 2. Reduce demand, by improving efficiency, which requires policies that allow utilities to earn a rate of return on those improvements (not possible under current regulations); 3. Force growth of renewable supplies, through federal Renewable Power Standards; and 4. International emission reduction agreements.

To be sure, these steps will cost money, certainly in the short term. Entergy CEO Leonard said Obama is doing the right thing by auctioning permits to emit carbon dioxide. But he also noted that fossil-fuel based electricity prices will go way up. One analysis presented at the conference suggested that electricity from coal would jump in price by more than 180 percent with a greenhouse gas law.

And given that many of these projects will cost money, perhaps the most worrisome comment, if you were still looking for an alternative energy future anytime soon, was a final thought from Barclay Bank's Theodore Roosevelt IV -- yes, that’s President Teddy Roosevelt's great-grandson: Who is going to pay for energy transformation now that banks are dead?

A CO2 storage tank is lifted into final position at a Vattenfall plant (courtesy Vattenfall)

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