Book Review - Daniel Yergin: The Quest

Chris Varrone

In his new book, Daniel Yergin can't quite fully support wind, but tries hard.

TOUR DE force. There are no better words to capture Daniel Yergin's most recent effort to explain the world of energy and power politics to the public.

The Quest (2011, The Penguin Press) is not a work of pure history, nor a polemic that urges the reader to any particular course of action. In fact, other reviewers have criticised Yergin for a “some say this, others say that” approach in which he fails to portray his own point of view.

But this as a strength of the work: Yergin manages to explain complex, highly-charged topics in a balanced way that enlightens - without hitting the reader over the head with the “right” answer.

For example, his treatment of global warming and the politics of carbon stretch across 100 pages. At no time does he positively say that climate skeptics “are wrong”, nor does he say that the science of anthropogenic climate change is “settled.” But out of 100 pages of dense material, Yergin devotes but one brief paragraph to the skeptics, stating succinctly, “some scientists disagree…they are the minority.” Yergin manages to convey that the skeptics are of marginal importance, but handles the touchy subject in an elegant way.

Another strength of the work is its incredible breadth and depth. Many non-fiction books make a few points, and then fill them out to book length with hundreds of pages of illustration and repetition. Not this one. In The Quest, we get several book-length works in one.

Themes – several works in one

First, there is a detailed look at the geopolitics of oil & gas, including deep dives on the Middle East, Russia and the former Soviet states, and recent advances in shale gas, oil sands, and tight oil. This made for fascinating reading, and for the first time, I felt I got a real understanding of why oil reached US$140 per barrel in 2008: it was a combination of supply shocks in Venezuela, Iraq and Nigeria, a demand shock in China, and the “financialisation” of oil as an internationally-traded commodity.

But then we get a second book on the automobile, its history and future. Among other things, this section taught me that 25%, or 250 million of the world's one billion cars are in the U.S. today, but the Chinese annual market for cars surpassed the U.S. market back in 2009; it is expected to reach and stabilise at 30 million cars per year. What will power all these new cars? Gasoline; biofuels; electric power; natural gas; or fuel cells? Read The Quest to find out!

Then there is a third book in here (it is 719 pages for a reason!). This one looks at the electricity grid, deregulation, and the future of renewable energy on our grids. Yergin gives the best account of the California electricity crisis of a decade ago that I have read anywhere. Here we learn that Enron and other speculators certainly played a role, but he explains the mistakes that were made during quasi-deregulation. For example, reserve margins in the system were too low (they should be 20%, but fell to 1% at one point), and utilities were prohibited from entering into long-term contracts, which put them at the mercy of the spot market for 100% of their needs.

Finally, followers of renewable energy will be interested in the deep dives on topics like wind energy, solar PV and biomass. As a specialist in wind energy, I was impressed with the accuracy and depth of the coverage of the history of the wind industry. Indeed, Yergin and his team unearthed wonderful stories of how the industry evolved, and indeed, for a wind enthusiast like myself, Chapter 30 – the Mystery of Wind is worth the cover price all by itself, a worthy companion on my shelf next to Alexis Madrigal's Powering the Dream and Peter Asmus' Reaping the Wind.

Yergin does not advocate any particular energy mix or grid technology, though he goes out of his way to praise the virtues of natural gas, the “fuel of the future” – cleaner than coal, fully dispatchable, quick-ramping, and not site-dependent.

On wind, he writes brilliantly and quite positively about the history for nearly 20 pages. For example, “wind is the largest and fastest growing source of renewable energy in the world today. In the U.S., it has grown tenfold. In Germany, wind accounts for 60% of the total renewable capacity added over the past decade…hopes very high for…in the U.S., 20% by 2030…globally 22% by 2030.”

Winds of change

Then, rather abruptly on page 608, the voice changes, as if a mental editor kicked in imploring an exploration on the drawbacks of wind. When someone asks me what the limitations of wind are, I give three responses: first, wind doesn't work everywhere (not enough wind, local opposition, proximity to airports etc); second, even in prime sites, the wind does not always blow when you need the power; and third, moving parts (operations and maintenance costs). If Yergin had chosen any of these, I would have been right there with him. Instead, he picks scale and cost. This is a mistake.

In his section But How Big? Yergin focuses exclusively on whether the U.S. can reach 20% by 2030. This is odd because the book has been so global up to this point, yet all of a sudden, he ignores 80% of the world market for wind turbines and focuses on the U.S. market. It would have been interesting to ask whether Europe and China will be able to reach their goals (e.g., 17% wind energy in China by 2050).

Secondly, he goes astray when he says, “one problem is just getting the large turbine to the site. If a turbine is too big, it does not fit on a truck: it is not easy to move a 25-story tower, lying on its side, down the highway with a police escort.” As the reader will know, no one has ever tried to move a 25-story tower down a highway – towers come in sections.

Moreover, while logistics are certainly an important consideration, they are not really a major constraint on wind sector growth. More than a hundred thousand turbines have been erected, the vast majority on towers 50 metres – 100 metres in height. The industry gets that job done every day.

Typical wind power plants nowadays are 100 MW or more in size, and some exceed 500 MW. Offshore, plants well into the GW class are planned, the largest in British waters will be 7,000 MW. So scale is really not the issue [Ed – as we go to press Siemens has just launched a 6MW direct drive offshore wind turbine, see news, page 8].

Similarly, Yergin overstates the cost issue. Of course cost is always an issue, but given recent improvements to technology and a good dose of good old price competition, wind energy is cheap, dirt cheap. This year, 20-year Power Purchase Agreements (PPAs) have been running in the US$0.03 to US$0.04 per kWh range in the American Midwest. This is less than new coal, nuclear or natural gas – and provides an important hedge against future fuel price increases.

In Europe, the case is even stronger because shale gas has not (yet) been developed there, and existing sources of natural gas (e.g., Russia, Libya) are not domestic, and can be subject to political manipulation and instability.

Overall, Daniel Yergin, a “centrist” commentator in the context of the U.S., has moved a long way towards articulating why wind energy (as well as solar and biomass) deserves a seat at the table. Even as recently as April of this year, he wrote in the Wall Street Journal, “Wind power is still small-scale and relatively expensive.”

His treatment in The Quest is much more fair and balanced, and while he still tries (vainly, in my view) to make the “cost and scale” argument, he also recognises that renewables are coming (implicitly, due to the need to de-carbonise the grid and increase the domestic share of energy production) and that wind is the form of renewable energy that is most “ready for prime time.”

In summary, I highly recommend Daniel Yergin's book The Quest, for those of us in the energy business and for the general public.

Daniel Yergin,The Quest, 2011, The Penguin Press.

About: Chris Varrone is a former McKinsey consultant who specialises in wind energy technology. His firm, Riverview Consulting, advises on topics including product/market strategy and financing.

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