European Affairs

We Are Not Yet Dealing with the Energy Issues of the 21st Century     Print Email

R. James WoolseyA short time ago, many people would have thought that the most important energy issues were how to deregulate the U.S. electricity grid efficiently and what the future held for renewable and other fuels that would present fewer problems with respect to global warming. Those were the 20th Century issues. Unfortunately, however, we have not yet turned decisively to dealing with the energy issues of the 21st Century.

One of the new problems also concerns the electricity grid, though in a more serious form. The terrorist attacks of September 11 and the overloading of our energy systems have caught us half way along the deregulation track. The recent breakdowns in U.S. electricity supplies suggest that we are in a similar position to the Russians as they struggled to deregulate their communist economy in the early 1990s

They compared their efforts to changing from driving on the left-hand side of the road to the right, with motorcycles and bicycles changing over in the first year, cars in the second and trucks in the third. The halfway house where we are with the electricity grid bears a certain resemblance to that.

Another big 21st Century problem is dependence on overseas supplies of oil. A large number of the world's oilfields outside the Middle East are beginning to hit peak levels of production or have already done so. Their production costs are starting to rise and the Middle East is widening its advantage as the low-cost supplier.

As Chinese and Indian demand comes on stream, and the Chinese start to drive the Buicks that General Motors is building for them there, world oil demand will definitely increase. We are looking toward an ever-increasing reliance on the Middle East for at least standard grade oil.

We shall have to change our focus in addressing energy issues. Europe and North America, along with Japan, are the most technologically sophisticated societies the world has ever seen. And we are served by an extraordinary array of networks, many of them in the energy field.

In extremely complicated networks, a small event on one side of the world, such as a change in the weather, can have very large effects on the other side. And networks operations, when they are extraordinarily complex and interdependent, are highly unpredictable. A tree falls in Ohio and a huge chunk is taken out of the U.S. and Canadian energy grids.

Two types of problems can occur in such complex networks, one of which I would call "malignant;" the other "malevolent." The electricity blackout last summer on the U.S. East Coast and in Canada is an example of a malignant event. No one was trying to make it happen; it was caused by the complexity of the grid.

Americans are not trying to sink Bangladesh beneath the waves by buying sport utility vehicles (SUVs), but by putting more carbon into the atmosphere we may be helping to achieve that unhappy result. There are many of these unintended, malignant effects in the energy sector, particularly in the electricity grid. I think we shall also see more of them in the area of oil supplies.

But they are by no means limited to energy networks. Europeans are not trying to make AIDS worse in Africa by not having many children, but their aging populations mean that they need more people to take care of the elderly. So they hire largely African healthcare workers, which drains Africa of the healthcare workers it needs to deal with AIDS.

Malevolent effects, on the other hand, are intended - there was nothing accidental about September 11. Smart and very evil people realized that American airliners had flimsy cockpit doors. And that particular flaw, along with other security failings, made it possible for the hijackers to take over the aircraft and turn them into cruise missiles and kill thousands of people. Unfortunately, our electricity grid has some features that are equivalent to flimsy cockpit doors.

According to the U.S. National Academies of Science and Engineering, one of the two largest vulnerabilities is the failure to backstop power transformers. The second is the failure to protect supervisory control and data acquisition (SCDA) systems, which are the control mechanisms that operate generally across the Internet through unprotected computers over unencrypted links. In both the United States and Australia hackers have already gotten into the SCDA systems of water supplies and other parts of the utilities networks.

Transformers require two to three years to construct and very few are stockpiled as spares. A combination of taking them out, together with hacking into computerized control systems, could be a malevolent disaster waiting to happen for electricity supplies in a number of countries. The same could happen with oil.

Robert Bear's new book Sleeping with the Enemy imagines a particularly chilling scenario in which terrorists crash a fully loaded Boeing 747 into an oil facility in Northeastern Saudi Arabia, thereby taking out several million barrels a day of oil production for a number of months.

Some people say that we do not need to worry about depending on oil from the Middle East because whatever governments are in power will need to sell oil. That is nonsense. If, like Al Qaeda, you believe a proper society is that of the Saudi desert in the 6th Century, before even the liberal reforms of Islam took place, you do not need to sell your oil. You are perfectly capable of disrupting Saudi and Gulf oil production facilities for substantial periods of time and still maintain a 6th Century lifestyle.

I believe that we need to focus both on malignant effects on the electricity grid and oil supplies and on malevolent interference. And our policies require us to do several things. First of all, we need to gain control of decision-making with respect to the electricity grid. We must get out of this crazy intermediate position in which we suffer from the disadvantages of both the regulated market and the free market and enjoy very few of the advantages of either.

The issue of what fuel to burn to produce electricity is secondary. Although there is a lot to be said for renewable sources of energy, progress currently being made on techniques of coal gasification may make it possible to use abundant supplies of coal to produce electricity in an environmentally sound way.

With respect to oil, we need radically to increase the sizes of the strategic petroleum reserves in Europe and in North America. We need to explore and develop more oil fields outside the Middle East and Russia, and pursue the new technologies that appear to be making Canada's heavy oil more financially attractive for export.

Fuel efficiency is crucial. Fuel cells are some distance in the future and will require coordinated action by oil and automobile producing companies. That means that the time scale of 16 years, which President George W. Bush has mentioned seems rather optimistic.

Nevertheless, cars with hybrid gasoline and electric motors, which offer radical improvements in oil efficiency, can already be found in dealer showrooms. And there are already several million flexible fuel vehicles on the road, which can burn up to 85 percent ethanol, notably in Brazil.

If we combine development of alternative fuels, such as biomass ethanol and other fuels derived from waste products, as well as techniques like the production of liquid natural gas (LNG) from landfills, we may be able to produce energy far more cheaply than in the past.

The creation of incentives for the efficient generation and distribution of power is a very significant long-term undertaking. But the most important priority is to ensure that an outage of the sort that lasted for a few days in New York and Canada does not continue for months. The way to do that is to create incentives, urgently, for the stockpiling of transformers in particular.

We need modular transformers that are relatively inexpensive and can be stockpiled and added together to do the job adequately - rather like the little tire in your trunk that is not a full tire, but can carry the car for 100 miles or so while you get your flat tire fixed.

The same thing is true of the supervisory control and data acquisition systems that are a disaster waiting to happen. Fixing them is not that hard. It cannot be done with firewalls. It cannot be done the way a lot of things are done now. But there are technologies that can protect SCDA systems from hacking. The problem is that we are not creating the incentives that are urgently needed if these two crucial areas, transformers and SCDA systems, are to be protected.

R. James Woolsey is Vice President of Global Strategic Security at Booz Allen & Hamilton. He was previously a partner at the law firm of Shea & Gardner. He was Director of the Central Intelligence Agency from 1993 to 1995. He has served in the U.S. government as Ambassador to the Negotiation on Conventional Armed Forces in Europe in Vienna; Under Secretary of the Navy; and General Counsel to the U.S. Senate Committee on Armed Services.


This article was published in European Affairs: Volume number V, Issue number I in the Winter of 2004.

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