The Grand Carbon BargAIn: Energy Abundance + AI + Carbon Capture = Economic Prosperity and National Security

Two news items in the last 24 hours underscore the interconnectedness of energy and artificial intelligence (AI).  We can’t have one without the other—and we need both. 

AI is an unstoppable force.  Writing in Axios this morning, the buzzy Mike Allen observes of the billions pouring into AI, “This kind of investment tidal wave has come once every 15 years or so in Silicon Valley since the arrival of personal computing around 1980.  These waves have their own booms and busts. But none of them has ever been stymied.”

That’s surely correct.  AI is coming.  In fact, it’s already here; it’s just coming bigger and bigger and bigger. 

Yet there’s a complicating factor: energy.  However, it’s a complicating factor that will, in fact, soon enough be simplified. 

How so: The power of AI is going to force a solution to AI’s energy needs.  And the solution will not be turning off the machine. 

AI is going to need a lot of new energy.  Rep. Cathy McMorris Rodgers, chair of the House Energy and Commerce Committee, outlined the dimensions of this need at a Congressional hearing yesterday:

In states across the country, utility planners and regulators are confronting the hard truth that they need more reliable power to meet the needs of their communities and the growing demands from our digital economy. Some are projecting a ten-fold increase in the growth rate of new power demand, compared with the past decade. 

Just across the river in Northern Virginia, power demand is projected to increase from 2,500 megawatts in 2020 to over 8,000 megawatts by 2028. 

In Georgia, utility companies had to quickly update their plans to reflect a jump from 400 megawatts of future demand to 6,600 megawatts. 

To put that in perspective, Georgia would need about five more new Vogtle nuclear power plants to meet that level of demand. 

Driving this demand, in many cases, are the industries that process digital information, the data centers that process cloud services, AI, and the digital transactions that are increasingly essential to modern life. 

These services are critical to advancing our nation’s prosperity and will need more, not less, reliable baseload power—the kind of power that can be generated 24 hours a day, seven days a week, 365 days a year.” 

So there you have it: AI needs lots of energy.  McMorris added, it’s this tandem, AI and abundant energy, that we need to compete with China. 

Where will it get this energy?  Most likely, from the “all of the above” approach favored, loudly, by most Republican, and favored, more quietly, by many Democrats.  That is, energy from everything, from solar to nuclear. 

Yet predominantly, we’re going to be burning a lot of carbon fuels.  It’s where the energy is most easily found and distributed, because the infrastructure is in place; it’s been powering the world’s industrial economy for the past two centuries. 

But are we running out of what are often called fossil fuels?  No. Decidedly not.  In the recent words of mining engineer John Lee Pettimore,

In the U.S., the number of technically recoverable oil resources was estimated to be around 143.5 billion barrels of oil at the end of 1990, according to the EIA. That number has more than doubled despite rising production. So are we running out of oil? No we are not.

And he sources his assertion to the U.S. Department of Energy's Energy Information Administration, which tells us that as of 2020, oil resources in the U.S. totaled 373.1 billion barrels. By the way, if we were to assume an oil price of $80 a barrel, these are assets totaling nearly $30 trillion.  (Other estimates of oil resources, such as from the Institute for Energy Research, are much higher.)  

We can immediately note that this is just oil.  Natural gas, coal, and other carbon products are in addition. 

We might further note Pettimore undercuts the idea that carbon fuels are fossil fuels, which helps explain why we keep finding more carbon fuel.  He cites the work of Robin Menotti, who is among the many (going back, in fact, to the 16th century metallurgist Agricola) who argue that the earth is, in fact, making more carbon energy. That is, through volcanic action, originating in the earth’s molten core.   So carbon fuels are not fossil fuels at all—they could be called, in a way, geothermal fuels.  But why not keep it simple and just call them carbon fuels? 

Pettimore writes, “The truth is oil is actually the second most prevalent liquid on earth next to water, and regenerates within the earth faster than it can be depleted.” 

Okay, so even if we have a never-ending supply of carbon fuels, what about carbon dioxide in the atmosphere?  What about climate change?

Well, there’s an answer to that: If there’s too much CO2 in the atmosphere, take it out.  The science of carbon capture is zooming, although the pioneering work was accomplished eons ago, by the humble tree. 

But every day bring news items of new processes for carbon capture, often involving cheap and abundance raw materials.  So it’s easy to see a national and international strategy for reducing CO2, as I have been writing about since 2017.  And we can point to myriad other ideas in carbon capture; for instance, Aramco is finding new ways to capture capture in cement.  In fact, it's obvious that buildings and construction materials could serve as permanent carbon sinks.  

This is the Grand Carbon BargAIn, synthesizing energy production, consumption, and carbon capture into a pleasing green circularity.  And it means we'll have all the energy we need for AI. 

Directional Investment Is Coming to K-12 Public Education

Big money is moving around in K-12 education, and that means big investment opportunity.  Yet most media commentary is still looking at this flow of funds through a political lens.  For instance, this June 4 Washington Post article, headlined, “Billions in taxpayer dollars now go to religious schools via vouchers.”  The subhead reads, “The rapid expansion of state voucher programs follows court decisions that have eroded the separation between church and state.”   That’s the angle the MSM is fixated on.  

As the article details, vouchers of up to $16,000 are now available in some places.  From the Post: 

In just five states with expansive programs, more than 700,000 students benefited from vouchers this school year. (Those same states had a total of about 935,000 private school students in 2021, the most recent year for which data are available.) An additional 200,000 were subsidized in the rest of the country, according to tracking by EdChoice, a voucher advocacy group. That suggests a substantial share of about 4.7 million students attending private school nationwide are benefiting from vouchers—a number that is expected to grow.

More: 

The programs, popular with conservatives, are rapidly growing in GOP-run states, with a total of 29 states plus D.C. operating some sort of voucher system. Eight states created or expanded voucher programs last year, and this year, Alabama, Georgia and Missouri have approved or expanded voucher-type programs. Some recently enacted plans are just starting to take effect or will be phased in over the next few years.

The Post then runs through the familiar liberal critique of vouchers: that they unconstitutionally aid religion, and that they enable racial segregation.  Both of these critiques are debatable, and maybe even wrong-headed, and yet they are energetically rehashed by the Post readership in more than 11,000 comments.  

However, there’s another way to think about this flux, this disruption, in education.  According to Skillademia, “The landscape of U.S. Public Education Spending Statistics is shifting dramatically. In 2021, the spending per student surged by 6.3%, marking the largest year-to-year increase in over a decade.” 

In fact, total expenditures for public elementary and secondary schools in that year totaled $870 billion.  In the meantime, as this map from the Post suggests, voucherization is spreading.  

Notably, Texas is not highlighted.  But that could well change in the wake of the recent Republican primary elections, in which pro-school-choice Governor Greg Abbott purged many anti-school Republicans from the state legislature.  So it’s likely that the Lone Star State, the second largest in the country, will soon join the pro-voucher roster. 

One of the central arguments of my new book, The Secret of Directional Investing: Making Money Amidst the Red-Blue Rumble, is that the Republican-Democrat divide means that just about every policy issue will be cleaved into two: a red approach and a blue approach.  In public K-12 education, the red approach is choice or vouchers, while the blue approach is the status quo, including, of course, a heavy dose of DEI and transgenderism.  This blue policy mix is actually rather popular in blue states, so there’s no reason to expect education in those places to change much. 

However, as we have seen, the red states are in motion. Most Republicans look forward to abolishing DEI, and quite possibly also the teachers’ unions and the associated administrative state.   That further energizes voucher supporters—the thought of disempowering the institutional left and its favored party, the Democratic Party.

So that will be the split on education: roughly half the states, blue or purple, will likely stand pat, while the other half forge into new realms.  It’s the Brandeisian “laboratories of democracy” point.  So out of that $870 billion in K-12 spending, the red-state allotment is very much in play. 

And it’s also, potentially, laboratories of prosperity, because when money moves, there’s money to be made in the inflection points and new trends. 

Meanwhile, in the background, private investment and private equity.   There have been plenty of efforts at for-profit investment in K-12 schools, everything from the Edison Schools (now Edison Learning) to Amplify.  Some of these have been successful, carving out some share of the education pie.  Yet on the whole, their impact has been small.  

However, the full voucherization of K-12 really opens the door to a flood of investment and innovation. 

Perhaps most obviously, there’s AI.   We’ve had distance- and video learning for a long time, and we had the massive experiment in Zoom education during Covid, and once again, these experiments, always controversial, have not been all that successful.  Yet the technology keeps getting better, and investors and visionaries never stop thinking.  

So the destiny is disclosed, and the light of investment shines the path ahead.