INTRODUCTION, The Rise of the American Economy
Economic prosperity and energy use have gone hand in hand for most of history. This blog is about the importance of energy today so let’s just go back about 140 years or so. The first battery in the world was invented by Antonio Volta at the beginning of 19th century. In 1831, Michael Faraday devised a machine that generated electricity from rotary motion, but it took almost 50 years for the technology to reach a commercially viable stage. In 1878, Thomas Edison (U.S.A) developed the first stable and domestic light bulb which led to the first commercial power plant in 1882. Thomas Edison, George Westinghouse and Nikola Tesla all had parts in developing and commercializing the generation of electricity in America. Edison’s Pearl Street Station, is in my understanding, the first central station power plant in the world. It was started up about 1881. It was Direct Current. Then in 1897 George Westinghouse and Nikolai Tesla completed the first major Alternating Current Power Station at Niagara Falls. Here are excerpts of a speech by Nikola Tesla:
Nikola Tesla’s Speech at Niagara Falls Opening Ceremony
“We have many a monument of past ages; we have the palaces and pyramids, the temples of the Greek and the cathedrals of Christendom. In them is exemplified the power of men, the greatness of nations, the love of art and religious devotion. But the monument at Niagara has something of its own, more in accord with our present thoughts and tendencies. It is a monument worthy of our scientific age, a true monument of enlightenment and of peace. It signifies the subjugation of natural forces to the service of man, the discontinuance of barbarous methods, the relieving of millions from want and suffering”
– Nikola Tesla’s speech at the opening ceremony of the hydroelectric power station, January 12, 1897.
The Industrial Revolution had already began but now in the 20th Century the Developed World had electricity to drive economic progress forward. Tesla, Westinghouse and Edison had started an incredible Century of Industrial growth made possible by harnessing energy.
When I worked for Carolina Power and Light the CEO at the time, was Sharon Harris, (he, Bill Lee of Duke Power and other Electric Utility Executives) used to give speeches and proudly show a chart of electricity and energy use correlated with economic growth. In previous chapters I have discussed the importance of heat engines. Most electricity in the world is generated from thermal power plants. Large hydro-electric plants like Niagara Falls, Grand Coulee Dam or the Three Gorges Dam in China are huge. However, there are limited sites for hydro-electric power on the planet and most of the electricity is generated from thermal power stations. Vaclav Smil has written a book on the history of “Energy and Civilization”. One of the graphs included is the one below which shows the primary energy used from the year 1800 to 2019. Quality of life and as the investor owned electric utilities coined the phrase in the 1950’s “Living Better Electrically” was indeed true. Industrial output as well as air conditioning, heating and cooking became much improved after electricity became readily available.
In America, our manufacturing output dominated the world in with America’s immense productive capacity. Especially during and following WWll when America became the “Arsenal of Democracy” and ramped up steel, aluminum and war materiel production to provide the U.S. Military as well as our Allies with ships, planes and arms. After the war, America turned to manufacturing for building infra-structure, cars, trucks, airplanes and home appliances. Living Better Electrically became a reality.
The manufacturing increases in the U.S.A. 1940-1960 were the envy of the world. These were driven by energy and in particular, coal energy. Here below is a graph from the EIA which I used in a presentation to an ASME meeting in 2015 to discuss the “Importance of Coal” The parallel growth of GDP (Gross Domestic Product) and coal usage were very proportional.
America’s Major Fuels
Coal was the dominant fuel starting about the mid 19th Century until the last decade. Nuclear became important starting about 1960. Then natural gas became competitive and today is the dominant fuel for America’s electricity generation.
Admiral Hyman Rickover invented nuclear propulsion systems for the U.S. Navy at the end of WWll. Then about 1957 through President Eisenhower’s “Atoms for Peace” Initiative, Admiral Rickover was asked to work with the private sector to develop peaceful nuclear power plants. The first of these was Shippingport, near Pittsburgh, PA. Between 1960 and about 1980 over 100 nuclear power stations were built and commissioned in America. After the accident (No one was injured or killed) at Three Mile Island nuclear power plant, no more nuclear units were purchased until about thirty years later with the Southern Company Vogel nuclear plant expansion. (Still under construction, expected to startup in 2022). The nuclear plants are important too. Although today there are just under 100 operating nuclear plants, nuclear energy provides about 20% of America’s electricity. Before the Shale Gas Revolution, nuclear plants provided the lowest cost electric power generation.
A Few Words on Solar and Wind Power
My purpose in starting this Blog is to provide information related to energy and economic prosperity with a focus on Heat-Engines that provide most of our (and all of the Developed World’s power) motive force for driving transportation, industrial production and electricity.
Excessive renewable power has been forced onto the Grid because of Laws and Regulations. My friend Donn Dears has an excellent Blog “Power for the U.S.A.” where he addresses regulations and more advanced discussions of why renewable power has caused so many problems. In fact, his book “The Looming Energy Crisis, Are Blackouts Inevitable” covers much on this topic. Suffice it to say, wind and solar power is being forced onto the Grid by Rigged Auctions. If you wish further information on this, I recommend visiting Donn Dears Blog and buying his book mentioned above. Here is a link to Mr. Dear’s Blog: https://ddears.com/2020/09/22/ferc-ruling-underscores-the-looming-energy-crisis/
In 2019 the fuels used to generate America’s electricity were:
17.5% Renewables of which about 40% was from old hydroelectric generators
The great abundance of our electricity generation comes from Heat-Engines, to be precise about 82%. Now let’s review the shale gas revolution and the part it played in keeping electricity generation costs reasonable to power the American economy.
THE SHALE GAS REVOLUTION, Thanks to Hydraulic Fracturing (Fracking)
It was about 2009-2012 that natural gas became much more abundant in the U.S.A. due to the disruptive technology of Hydraulic Fracturing combined with Directional Drilling. As America progressed into becoming the world’s largest natural gas producer, natural gas power plants started replacing coal power ( and sadly, some nuclear units) generation.
The economics of selecting the fuel to use is based on the production cost of electricity. The cost to produce electricity includes a number of components: Amongst these cost factors are, the cost of the fuel, Capital cost to build the plant, operational labor costs, maintenance costs and environmental reagents and chemicals.
Natural gas plants with a high efficiency are hard to beat for producing the lowest cost electricity as long as gas prices are below $3.00/million Btu’s and providing the gas is abundant and available with operating pipelines. In western PA, gas is an easy solution. In northern Alaska or Hawaii, there are few, if any gas lines. Therefore the fuel choices and equipment choices to produce the lowest cost electricity can vary drastically by states and even within each state.
The correlation of electricity consumption and GDP is very much influenced by industrial production. Producing primary metals of aluminum, copper and steel for example use enormous amounts of electricity. A so called Steel “Mini Mill” will use about 175,000 kW of electricity. An aluminum smelter, depending on the size, about 400,000 kW. It takes about 5 kWh of electricity to produce one pound of aluminum ingot from aluminum oxide. So as more industrial output is built, so does the electricity demand increase. Conversely, as America became de-Industrialized in the late 1990’s after NAFTA and later when China entered the World Trade Organization, then much electricity capacity that was used for primary metals production and manufacturing became available for commercial and residential use. This shift from industrial consumption to residential and commercial consumption helped keep America’s electricity prices reasonable.
Energy Fuels the Rise of China’s Manufacturing and Economic Strength 2001-2020
The reader will likely be well informed on the Industrial Revolution and growth of American manufacturing during the 20th Century. The growth of China’s Manufacturing and Economy between the year 2001 and 2020 is startling. Unfortunately, the growth of China’s manufacturing came at the expense and loss or transfer of much of America’s heavy industry. Especially energy intensive manufacturing of steel and aluminum. China currently produces about 50% or more, of the world’s steel and aluminum. So, let’s explore the growth of China’s aluminum industry and how the energy production paralled that rise.
Another chart below shows how China’s Electric Production 1980 through 2019:
China built hundreds of large coal plants and also completed the Three Gorges Dam which is the largest Hydro-Electric plant in the world. Much of this electricity production was utilized for primary metals production and manufacturing. The figure below shows the comparison of China’s manufacturing output compared to America’s.
The aluminum ingots on a dock in China ready for export to the world. Production of all primary metals is energy intensive. However, aluminum requires enormous amounts of electricity to produce ingot metal from aluminum oxide. If you correlate the coal electricity prodution increases with aluminum production one can see where a lot of the electricity was utilized.
In July 2016, I prepared a presentation to “The Delaware County Bar Association”. This is in the suburbs of Philadelphia, PA. My presentation was to show the linkage of energy, electricity, jobs and Real-Estate and how energy impacted the Pennsylvania economy in 2016. Having worked with ALCOA ( a PA based company) as a consultant/contractor from 1977-2012, I had a “Fly on the Wall” viewpoint of how China was over-producing and dumping aluminum metal ingots on the world markets. The full text of my presentation is included in this Blog if the reader is interested. See “Energy and Economic Prosperity, July 15, 2016”. It is one of the first entries to this WordPress site.
Perhaps a stretch on the correlation to PA Real-Estate transactions , but World Competitiveness of primary metals and energy costs are a little more direct. The next graph is Chinese aluminum production during the period that they were accepted into the WTO (World Trade Organization). It is pretty drastic and from my personal experiences, had been working as a consultant/contractor for ALCOA Worldwide Alumina. My first assignemnt with ALCOA was in 1977 at the Mobile, AL Refinery. Now shut down. I worked for ALCOA almost every year since then up to about 2012. The plant shutdowns in the U.S.A. were sickening to observe. ALCOA went from a workforce of about 125,000 in about 2003 to about half that in a decade. Meanwhile, China’s aluminum production ramped up sharply as China exceeded all of the rest of the world’s production capacity. The metal was agressively traded on the Free Markets of the London Metal Exchange and eventually achieving more than 50% of the worlds production. The story for steel production is similar.
SUMMARY and CLOSING
It was my intention for this section to illustrate how Energy and Economic Prosperity are inextricably linked. The two main comparisons in the foregoing were the rise of the U.S.A. and China. The U.S.A. rise in world status began about 1890, the approximate time that electricity was commercialized, until present. China had the advantage of copying the electric producing equipment and electrification model used by America. When China’s rise began it was as a result of agressive manufacturing, powered mostly from coal fueled thermal power generation plants. The proceeds of exported manufactured products then fueled their economy. This incredible rise took only about twenty years. America’s rise had taken about 100 years. China had the advantage of using American technology and expertise’ with very little Regulations on air and water quality to build their enormous capacity in power generation. This accellerated following the admission of China to the WTO. Following 2001, China rapidly expanded their electricity production capacity. Unfortunately for the U.S.A., the rise of China manufacturing was largely at the expense of American manufacturing capacity and jobs.
My point in this section is to simply show the relationship of energy and economic prosperity. I hope you find it interesting.
Dick Storm, September 21, 2020