ERMUSR MISC 01-10-2006 - Laserfiche WebLink

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technology opens. Although this carves great promise, it isn't likely to be a major factor in the utility sector until about 2030. Coal is not the energy panacea that some boosters claim. They note that proven reserves are equivalent to about 250 years of supply at current demand levels. But coal's expanded use, both as a feedstock for liquid fuels and as a fuel in its own right, will quickly whittle that time period down to as few as 50 years. Fuel cells will play a leading role in efforts to dramatically reduce depend- ence on petroleum products. The technol- ogy's efficiency in converting gases or gasified liquids into electricity must increase about 20-fold, and the cells must last about five times as long as they do now. Both goals should be achieved by about 2025, and by the latter half of the century, fuel cells will power as many as one-third of all vehicles worldwide. Hydrogen will share the limelight in the future energy equation. It has the potential to offset nearly all demand for motor vehicle and heating energy world- wide. But the U.S. alone will need several 3ozen more nuclear power plants to supply the heat to make the hydrogen needed. Plus distribution will require thousands of miles of new pipelines. The investments will be made, though, and hydrogen will be a star in the second half of this century. IMPACT ON THE U.S. ECONOMY Energy woes will slow growth in the next couple of decades from the post-World War II average of about 3.5% to azound 3%. Persistently high fuel prices, combined with increasingly uncer- tain energy supplies, are likely to sap con- sumer and business confidence and act as a drain on cash resources. Expect rising economic volatility as the risk of energy price spikes increas- es. The Federal Reserve will probably err more on the side of caution when it comes to controlling inflation, fearing that energy shocks could come more often and send prices skyrocketing. But the Fed will also have to take into account the need to off- set the economic drag from higher energy prices. As a result, the Fed will be con- ~tantly striving to balance these two opposing imperatives, bringing greater uncertainty to money markets. U.S. job growth is likely to suffer as businesses feel increasing pressure to move operations overseas in search of cheaper energy sources as well as lower- cost labor. The pace of hiring will also be slowed by accelerated consolidation in a broad swath of industries seeking better economies of scale in energy use. Chemical firms will decamp en masse to the Middle East, Indonesia and Russia, where oil and natural gas will be cheaper. Manufacturers of fertilizers and plastics simply won't be able to compete other- wise in their global, highly commoditized markets. Most challenged: auto manufacturers. They'll bear the burden of major invest- ments in new technologies to boost energy efficiency both in the vehicles produced and in their own production methods. At the same time, they'll have to grapple with fast-changing consumer tastes. Auto sales in general may also show declining rates of growth as consumers rely increasingly on public transportation or move closer to their places of work. Appliance makers will have to adjust to churn out products that use far less electricity. Big-ticket items such as wash- ing machines, dryers, televisions and PCs account for a large portion of household energy use and therefore will be under scrutiny by consumers and regulators. Airlines face a jet fuel curse that will extend to the travel sector in general. There are no substitutes for jet fuel on the horizon, although aircraft makers are planning models with greater fuel effi- ciency. Development and production of substitute synthetic fuels will be heavily skewed toward the automobile market. High shipping costs will deal a blow to industries for which transportation fig- ures large in their budgets. Among them: Retailers, whose merchandise comes from around the globe. Agricultural producers, whose crops move by train, truck and bazge to distant markets. Utilities that rely on coal. Steel and aluminum manufactur- ers, which buy heavy ores and unfinished slabs and ship out semifinished products to manufacturers. On the positive side, high shipping fees may lead U.S. firms to purchase more supplies domestically. Energy industry suppliers will win as they cash in on the investment rush. Investments in conserva- tion will pay off quickly as energy prices remain high. Here are some of the best options: Manufacturers, office parks, large office build- ings and retail centers can save as much as 20% on their fuel oil and natural gas bills by installing new, more efficient boilers that need less fuel. Biq manufacturers, such as makers of auto- mobiles, auto parts,. paper, plastics, appliances and furniture, can save 5% to 10% with combined heat and power systems that capture lost heat from machinery to use for space heating or for pow- ering equipment and assembly lines. Some of the waste heat can be recycled to make electricity for use in-house or for sale to the power grid. Within five years, most utilities will let such small power makers sell surplus power to the grid, providing a new source of revenue. Geothermal heat pumps can save up to 80% on heating and cooling bills. These pumps use very lit- tle electricity, virtually eliminating the need to burn fuel oil or natural gas to make heat or run air- conditioning. Super T8 lights can cut lighting bills as much as 15%. Within 10 years, a new generation of light- emitting diodes will be able to reduce lighting bills up to 80%. 3 THE KIPLINGER LETTER KIPLINGERFORECASTS