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Bill Gates On The High Cost Of Being Poor

Politics / Social Issues Jul 02, 2014 - 02:01 PM GMT

By: Andrew_McKillop


Energy Energy Energy
Bill Gates has rotated and swiveled 180-degrees from his former self-righteous stance on the Global Warming issue, or “threat”, and the instant no brainer elite solution of using a lot less energy. Fossil of course. Now he says poor countries must use more energy but we could take the “US paradigm”. The US is a very long way from being an oil exporter and is still a long way from being a natural gas exporter – but is a large and growing coal exporter. The US exports energy! Exporting coal along with Windows (whose constant “upgrades” are always more difficult to beat into usable shape) makes economic sense. This coal is cheap energy – very cheap energy.

Gates says he has discovered that energy is the Big Thing but if he wants to know about the role of coal in economic development, all he has to do is try China. Now the world's biggest industrial nation it also chokes on the urban smog produced by it burning 3 billion tons of coal a year – one half of the world's total consumption of coal. Coal was 100% essential to China's economic takeoff.

In his blog dated June 25, Gates said that the fight against poverty in low-income countries, moving them up to afford Windows, need energy. Energy and more energy. He said: “For years, I took energy for granted. There’s no telling how many times I walked into my office, flipped a light switch, and powered up a PC without thinking at all about the magic of getting electricity any time I wanted it”.

But after getting lucky with Windows he started traveling to poor countries and found, OMG!, that poor people tend to steal the Windows and the electricity that they can't afford to buy. Gates said: “I remember going to Buenos Aires and seeing where the government had run big wires to distribute electricity. But people couldn’t afford it, so they tapped their own power cables into the government’s and stole the electricity”.

Gates should think about another version of this problem – caused by sheer economic stupidity. Using IBRD, IEA and energy industry estimates, at least 2 million barrels a day, energy equivalent, of natural gas is either flared or vented into the sky, or lost in pipelines and LNG tankers. The gas is too cheap. Oil is worth more, like Windows is worth more than Linux! So the gas is very literally thrown away and we don't need to talk about how much CO2 that means.

The oil energy equivalent of this gas is close to 60% of the total oil consumption of all African nations combined.

Oil in the lowest-income countries (Gates repeatedly cites Ethiopia) is sold in half-liter doses, because it is rare and dear. Bottled gas simply isn't available outside city areas. Gates is shocked or depressed by the facts he singles out, that according to the UN, roughly 1.4 billion persons worldwide have no electricity at all, and in most poor countries electricity costs at least 25 US cents a kWh. That is way above two-times average domestic prices in the US (but certainly not in Europe).

Getting Real About Energy Economics

Bill Gates gets unreal about the subject, fast. He puts the cart way before the horse – saying that cheap electricity “powered the American economic miracle”. He says: “Think about what it has meant to America to have access to affordable, reliable energy.... [t]he American construction industry never would have taken off if we didn’t have lots of affordable energy for making cement and steel...[t]he historian Vaclav Smil found that in the 20th century the average American’s energy use jumped 60-fold and the [real] price we pay for electricity fell by 98%”.

Ask Europeans about that – now paying well above 25 US cents per kWh in several countries (pricing their domestic power at $450 per barrel equivalent), and paying pump prices for gasoline often above $8.50 per US gallon, proving at least one thing. Rich countries can pay more for energy even if its unpopular and not too good for the economy!

Gates needs to take out a history book and check how far behind, and how much slower electricity consumption grew – compared to coal, oil and gas. To be sure, he talks about oil lamps and oil (and wood) stoves in Africa causing cancer and blindness, but oil and gas lighting preceded electric lighting. Also, despite the first-ever private cars produced in any quantity being electric-powered, this didn't last long. Oil and gas lighting got replaced by electric lighting. Electric cars got replaced by oil-fueled cars.

All energy prices dropped, both in absolute and relative terms, but coal, oil and gas prices dropped further and more than electric power prices. Only in a very few special cases – due to hydropower resource endowments – did we have cheap electricity from the start. For example Norway and Iceland, and Nepal when or if its massive hydropower resources are developed in the face of stubborn non-cooperation from India. Several African countries also have huge undeveloped hydropower resources. Gates unfortunately prefers so-called micro solutions, where the “entre-pre-noorial urge”, as its called in American can get the right gimmick to market, fastest!

After making a pleas for more energy everywhere, Gates brings in that sombre two-word that seems to haunt him and other elites. He says: “And what about climate change?”

Low Carbon Low Income

So we move into the Low Carbon agenda lightning fast. We might guess Gates approves of biodegradable whale-oil lighting, because with no shame Gates recycles one of his TED talks from years back, 2010. At the time, with other Silicon Valley billionaires such as Vinod Khosla, Gates stampeded into any kind of miracle biomass energy e.g.“light low carbon bio-oils” ”

Gates' 2010 TED talk on energy crisis was trailered with this statement. “Bill Gates unveils his vision for the world's energy future, describing the need for "miracles" to avoid planetary catastrophe and explaining why he's backing a dramatically different type of nuclear reactor. The necessary goal? Zero carbon emissions globally by 2050”.

So Gates thinks nuke power is good for poor countries? A scary thought.

Some people say that however much things change, they stay the same! But not always. Taking only two low-income east African countries – Mozambique and Tanzania – their massive offshore resource discoveries of natural gas, made since 2009 with potentials for NGLs production from the gas, have transformed their economic outlook. Several west African countries, and other east African countries are also sharing this hydrocarbon resource bonanza. In totally classic fashion, the energy bonanza will precede national energy development, linked with economic development and using revenues from the resources to pay for costly new infrastructures.

Gates seems to think he has an “alternate model”. This is the shaky paradigm of micro-scale Low Carbon energy solutions which are shoehorned into an economic structure and system which isn't adapted to the fake Quick Fix. It will be expensive and it will be disappointing. Back in 2010, maybe, Bill Gates could play dumb about this reality, but it is hard to keep up that act, today. To be sure, he makes a predictable nod in favour of Barack Obama's “crusade for clean energy”, but has to admit that “Some places don’t get enough regular sunlight or reliable wind to depend heavily on these sources. In any case, these and other clean-energy technologies are still too expensive to be rolled out widely in poor countries”.

Rather incredibly, Gates bemoans the simple basic fact that low income countries aren't waiting for Low Carbon quick fixes. He says: “They’re building large numbers of coal plants and other fossil-fuel infrastructure now. That’s very unfortunate, but it’s understandable”. In fact, with any kind of large power plants – and especially if they run on intermittent renewable energy sources – there is no escaping the need for costly but unavoidable power infrastructures, and this is exactly what low income countries need.

Building the infrastructures sufficiently flexible, smart or intelligent to waste the minimum of input energy used to make the electricity, and able to avoid brownouts and – even worse – blackouts is the real challenge. Arbitrarily using Climate Diktat to eliminate anything but the renewables to produce power will make the challenge so huge it cannot be surmounted.

Do As I Say – Not As I Do

The real problem for Gates and other holier-than-thou billionaires who got lucky and got rich on the back of cheap energy is that nobody is interested in their whine. Transition away from fossil fuels, to renewables, is a century-long process and, like Gates admits, the low income countries really don't have the time to waste. The need energy right now, like he also admits.

Due to pompous billionaire grandstanding on Climate Correct - and we can cite plenty of other artistes working this act, such as Britain's Richard Branson - there has already been a hardening of political attitudes in emerging and low income non-Western countries on the subject. India is one good example. India doesn't want to know, anymore.

The Western countries' obsession with oil – shown by its somber tomfoolery in Iraq – is real. Western grandstanding on how poor nations must use expensive energy right now, “to save the planet” is unreal.

Gates can get real whenever he wants – if he wants. As already cited in this article, thrown away gas is a world problem today, and energy resource of tomorrow. World undeveloped hydropower resources – and hydropower can operate 24/24 and is not intermittent – are especially concentrated in low income developing countries, including Nepal and DR Congo. There is no way this power can be used inside these countries- it will have to be exported, meaning power transport infrastructures, and local/regional power intensive industries have to be developed.

More than 20 years ago, for OAPEC's then acting Secretary General, I produced studies and reports, published by OAPEC in its Official Journal on a North Africa-Middle East gas gathering initiative linked to power transport development, and power export to Europe. Much later on, we got Desertec, a nicely-intentioned but muddle-headed concept for spending around $400 billion on developing solar and windpower energy assets in the MENA region and expoting power to Europe.

What Gates doesn't want to know, nor the promoters of Desertec, is that the cart has to come after the horse. Start with easily-developed and abundant local energy resources, either fossil or renewable, develop the power infrastructures – and then you can start preaching Low Carbon! Not before.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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