Archive for December, 2006

Top Ten Technologies for an Alternative Energy Future

Note: These are just my favorites… if your favorite isn’t on the list, leave a comment… 

10. Combined Heat and Power

The muscle car of energy efficiency.  Combined heat and power isn’t sexy… it’s just using the “waste” heat from your powerplant for some useful purpose.  Like cooking your lunch on you car radiator, but using every bit of waste heat you can…  Combined heat and power can use 90% of the power in your fuel source for useful work.  And now you can have it in your home.

9. Solar Chimneys

They’re tall, they’re low-tech, and they’re baseload power.  They don’t pollute, and the fuel is free.  What’s not to like?

8. Molten salt thermal storage

It’s cheaper to store heat than electricity, and molten salts can store a ton of BTu’s very cheaply.  And concentrating solar power can produce a ton of heat… without pollution or fuel.

7. Light Emitting Diodes (LEDs)

More lumens per watt… now that’s energy efficiency. 

6. Vehicle to Grid

Our energy efficient cars can make the electric grid work better.

5 & 4.  Cellulosic Ethanol and Biodiesel from Algae

The two technologies that have real hope of replacing gasoline and diesel as liquid fuel for our cars…  We’ll still need massive efficiency gains and Plug-in-Hybrids to reduce our total fuel use, but even with those, corn ethanol and biodiesel from traditional oil crops just can’t produce enough volume. 

3. Time of Use pricing and Demand Side Management.

Sometimes the best ideas are the simplest.  To make the best use of wind power, we can store power until it is needed, or we can give people incentives to use it when it is available. 

Time of use pricing is also a great boon for solar, because solar energy tends to be available near times of peak demand.

Finally, time of use pricing shaves peak demand, which means that we can delay building new fossil fired generation, while renewables get cheaper by the year.

2. Terra Preta

Discovered by aboriginals in Brazil, thousands of years before Columbus, mixing carbon into unproductive soils can make them much more productive… and the carbon stays there for thousands of years.  Using charcoal dust as a fertilizer not only holds the hope of a replacement for fertilizer based on fossil fuels, but it is also an easy way to sequester carbon.

1. Compact Fluorescent Lightbulbs

Where else can you get a 1000% payback with little or no risk?

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Energy’s Place in Economic Theory

I recently started studying for the second (in a series of three) CFA® examinations (I passed the first one last June.)  The CFA charter is a credential often used by stock analysts and money managers.  In addition to an industry work requirement, there are 3 tests, which are administered once a year, covering a curriculum including Statistics, Economics, Financial Theory, Ethical standards, markets and the like.    

I expect to study about 200 hours for the exam, which is in June. By the way, if there is anyone reading this in Denver who also is studying for the Level II exam, I’d be interested in getting together to work through some of the problems and share study materials.

I just finished a reading on theories of economic growth, a chapter from Economics by Michael Parkin, which is probably one of the best basic Economics text books out there.  It’s been a long time since I took an Economics course, and so I had forgotten how economic growth theory is taught.   

I was disappointed. 

Why?  Because the role of energy use in labor productivity is almost completely ignored. (Labor productivity is simply the sum of all economic activity divided by the number of hours worked.  Since the number of hours worked is relatively easy to measure, growth in labor productivity is the key factor which needs to be understood in order to understand economic growth.)  All three theories covered attempt to explain labor productivity through the interaction of two factors: the ratio of capital to labor employed, and technological change.  As a short aside, the role of energy use is given a slight nod, because the drop in productivity growth in the United States in the 1970s is attributed to the Energy Price Shocks of ’73-4 and ’79-80, in addition to a diversion of effort for coping with environmental problems.  To me, that sounds eerily familiar.  Those are precisely the same problems I expect the world will be trying to cope with for the next decade and beyond.   It’s not that economists as a whole fail to recognize the role of energy use in keeping our economy going.  For example, the effects of the recent rise in energy prices have been widely discussed, and many pessimists (myself among them) have been surprised at how little effect rising energy prices have had on the economy.   The explanation for the lesser effect on economic growth is that our economy has become (partly as the result of the ‘70s price shocks) much more efficient, requiring less energy per unit of GDP. What bothers me is that energy is dealt with as an aside, not as one of the major factors in determining economic growth.  For most of the 20th century, we were blessed with energy supplies which we could increase at will to meet increasing demand, so supply constraints were seldom a factor in determining the growth rate.  In a sense, economist theory is like military strategy: there is too much emphasis on figuring out how to win yesterday’s battles, not tomorrow’s.  Tomorrow’s economic battles, as I see them, will be learning to cope with diminishing supplies of fossil fuels.  Economists, who are the ones who will be helping society plan those battles, should be taught the role of energy in economic growth as part of their framework of understanding, not as an aside or afterthought.  This brings to mind the other aside in the chapter: The other cause given for the slowing of productivity growth in the 1970s was due to the expansion of laws and resources devoted to protecting the environment.  This is perhaps a graver weakness of economic dogma than the minor role for energy.  Because we measure only economic growth, and do not count natural resources like clean air and water among our assets, destruction of those assets is much more likely to be overlooked or minimized by policy makers than it would be otherwise.   This concept is known as Green GDP, and is still very much a fringe theory in economics, in large part because it is fiendishly tricky to measure accurately.  Unfortunately, what isn’t measured is usually ignored, and, like the unmeasured risk of terrorists flying airplanes in to skyscrapers, is likely to come back to haunt us in time.

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Social ETFs and Clean Energy ETFs

Forbes ETFZone had an article today by Wil McClachy about socially conscious ETFs, with some comparison between iShare’s two social index ETFs, KLD and DSI, contrasted with PowerShares Cleantech and Clean Energy ETFs, PZD, and PBW.   This ties in well with my entry Green ETFs- How to Choose from last month by expanding the field to consider general social investing as well as just clean/alternative energy.  

I also discuss the new Clean Energy Index fund, CELS, in that blog entry; it is scheduled to launch next month.

Holding a broad portfolio is well worth doing, because the basic principle of diversification implies that most investors would be crazy to focus the entire stock portion of their portfolio into such a volatile sector as energy, let alone clean energy.  Even though I’m a strong believer in peak oil, and I feel that the peak may even have already passed, and economic recession in any large part of the world could lead to a fall in oil prices, which would hurt the biofuels sector.  In addition, there is a lot more to energy than just oil prices, and while peak gas and peak uranium may be near at hand, I don’t think anyone is arguing that we’re going to see peak coal soon. 

I agree with McClachy’s point that the extra expense of the Social index ETFs may not justify the additional expense (0.5% vs 0.1% for SPY)… the extra .4% might be better used (and better targeted) by a donation to your favorite charitable cause, but for many investors, it is deeply troubling to own firms that treat the environment, society, or their workers badly, and a donation to charity does not serve as sufficient absolution.  When working with clients, I try to find out the approach that suits them best; it is often a little of both.   Even though choosing SPY and a donation to charity might be the best financial move, it’s more important to do what makes you able to sleep at night, especially when we are talking about fractions of one percent. 

On the other hand, fractions of a percent should not be minimized.  If you had $100,000 to invest in either SPY or KLD, and choose to put the money in SPY, while keeping half of the savings in your account, and to donate the other half to a charity every year, and SPY were to increase 8% every year for 30 years, you would have donated over $25 thousand to charity in the interim, while and end up with over $57 thousand extra in your account after that time.

This is the real advantage of investments in alternative energy: the chance to have your cake and eat it, too.  Both rising energy prices due to peak oil/gas/uranium and the actions our governments take to combat global warming should increase the returns for alternative energy.  To some extent, this is already recognized by the investment community, and already priced in.  However, I feel that the effects of both have been grossly underestimated by most market participants, despite the recent surge of interest.  Over the long term, the seriousness of the situation we are in will become clear, and that will allow ethical investors in alternative to also be successful investors.  When it comes to social investing, I feel there is often a trade-off between loss of diversification and increased cost.  With investment in alternative energy, the trade-off is between increased risk and increased returns.   The increased risks of alternative energy arise from the small size and speculative nature of many (although not all) of the companies involved, and the concentration of ones’ assets in a sector.  But managing risk is what portfolio theory and asset selection are about; as is making wise trade-offs between risk and return.  To me, the case for alternative energy is compelling, the only real question is how much exposure (and volatility) the particular investor is prepared for, emotionally and financially.

 Another Social/Clean Energy ETF article: ETF Guide.

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A Solar Business Model that Makes Sense

Joel Makower wrote today about Wal-Mart’s RFP (Request for Proposals) for solar panels on their roofs.  This got me thinking about two things:

  1. I’ve sure been writing a lot about Wal-Mart’s sustainability push recently. (see July 30, Dec 3 entries) 
  2. Third party ownership in photovoltaics seems to be the wave of the future.

Wal-Mart is asking suppliers to build, own, and maintain the PV systems, and sell the electricity to WalMart, allowing them to avoid the large up-front cost, and having to branch out from what they are good at: selling products to consumers.  I say that this is the model of the future for the same reason I like CitizenRE’s model: a business focused on installing and maintaining systems will be able to do it much more cheaply and efficiently than a building owner, who may not know anything about solar.  In the residential space, there is the added advantage that the federal tax credit is not capped at $2000, and the ability to take advantage of accelerated depreciation.

Update: 5/7/07 Wal-Mart has completed the RFP. According to the press release the winning bidders are SunEdison (as I predicted below), BP Solar, and PowerLight. Thanks to Marc Gunther for tipping me off to this.

Separate ownership is nothing new on the utility scale: electricity generation is often built and operated by a third party, who receives payment for electricity produced.  For instance, the new solar farm to be built by SunEdison for Xcel Energy in Colorado’s San Luis Valley.

Speaking of SunEdison, I will be very surprised if they do not bid on  the Wal-Mart RFP.   I heard their CEO Jiggar Shah talk about their model at Solar 2006, and he wasn’t talking about installing solar one residential rooftop at a time.  I admit I was somewhat skeptical at the time… I thought solar installations would take much longer to ramp up than he was saying.  I’ve changed my mind since then.

Solar power is still a business totally reliant on government policy.  If the customer had to pay the current $6-$9 a watt of installed DC power, the only locations where it would make sense would be off-grid, but with companies able to capture a combination of rebates and tax credits worth up to 80-90% of that price in states with good incentives (the same states, incidentally, in which Wal-Mart is issuing its RFP: California, Colorado, Connecticut, Hawaii, and New Jersey) it’s a whole different ball game.  And, with the Democrats taking power in Washington and many states, the outlook for renewable energy incentives is definitely bullish.

 What does this mean for the investor?  Buying solar electricity will have a negligible effect on Wal-Mart’s bottom line, except if they manage to use the publicity to brighten their public image, which could have some indirect benefits for the bottom line.  However, so long as federal and state support for solar remain strong or increase, it’s good news for PV manufacturers and suppliers.  But don’t just buy anything on the list: do your homework, and look for companies that already have a working technology, and are ready to rapidly increase volumes within 1-2 years.

Update 1/18/07:  It turns out that there is a company in South Africa called NuRa using this same model.  When it comes down to it, people want electricity, not solar panels.

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The Danger of Impatience

This week’s Peak Oil Review has an excellent commentary by Debbie Cook, Mayor ProTem of the City of Huntington Beach.  She uses her impatience with an unripe avocado as a metaphor for her (and our) impatience waiting for the signs of peak oil to become clear to the world as a whole.

I like her metaphor because it is also a good way to think about the stock market.  John Maynard Keynes once commented, “Markets can remain irrational longer than you can remain solvent.”  As Robert Shiller points out in his excellent book, Irrational Exuberence, part of the reason that the late ’90s dot-com bubble got so high was that many people who had initially been skeptical were worn down by the continued rise of the market.  Emotionally, it is extremely difficult to go on, day after day, year after year, remembering that valuations are based on so much hype and hot air, when everyone around you is making money hand over fist from that very same hype and hot air.

I started managing money in 1999, and so I only had to endure that emotional strain of being out of sync with the world for about a year before the market peaked, and the reality of the market began to confirm my convictions.  However, I became skeptical about the housing market in 2001, and actively bearish in 2003.  Because of this, when I moved to Tucson in 2003, I chose to rent a house rather than buy one,  and I continued to rent when I moved to Denver in the spring of 2005. 

Renting is a lot less fun than buying, and when house prices are going up 15% a year, the gains you might have made by owning add to the emotional burden.  In retrospect, while I was right not to buy dot-coms in 1999, I was “wrong” to choose to rent in Tucson from 2003 to 2005.  The Tucson market rose considerably during that period, and while the rent I was paying was considerably less than I was earning with the investments I would have had to sell to buy and maintain a house (no, I would not have used a mortgage), the capital gains on the house would have been a nice windfall.

What lesson was there to be learned from my Tucson renting experience?  The wrong lesson would be that you should always buy a house.  House prices in Denver have been basically flat since I moved here (data from Zillow), and rental prices are currently about 5% of house prices.   Considering that many money market accounts are now paying over 5%, and taxes, HOA fees, and maintenance costs are added when you own a home, renting is a better financial deal.  In addition, my time renting has given me the opportunity to learn what part of the city I want to live in, and the current glut of inventory means that when I buy, I will be in a much stronger bargaining position than I would have been a year and a half ago.

The right lesson to be learned from my Tucson renting experience is the lesson of the avocado: patience.  Opinion does not change, oil does not peak, and markets don’t move when you want them to… they do it in their own time.  As Richard Russell says, “The market always does what it is supposed to, but never when.”  

Markets are the economic manifestation of investors’ optimism or pessimism.  In the housing market, pessimism is beginning to set in.  In the oil market, we have a way to go.

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Conversation with a wind skeptic

I’ve been having a long conversation with a wind skeptic who responded to my Gust Ceiling entry.    While the rest of us are thinking about ways to overcome the intermittentcy problem with wind, this Rucio is dismissing it out of hand because of that problem. 

 See the comments for our conversation.  We RE enthusiasts need people like this Rucio/Eric Rosenbloom to make sure that we’re not the ones in la-la land.  To paraphrase Paul Newman, if you look around and can’t tell who the lunatic fringe is, you’re it.

I’d like to point out that I jumped to a couple of conclusions myself, which he points out… I left these comments in, even though they do not make me look great.  They are there because I want people who are trying to make up their mind to know that I have not just invented myself a straw man in order to look good.

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The Gust Ceiling: How much wind is too much?

On Dec 13, the Midwest Wind Integration Study, (see article) which was required by the Minnesota legislature in 2005 to evaluate reliability and other impacts of higher levels of wind generation and carried out independently by EnerNex Corporation and WindLogics, found that the total integration cost for up to 25% wind energy delivered to all Minnesota customers is less than one-half cent ($0.0045 cents) per kWh of wind generation.  Great news, but it’s a little bit anticlimactic (as well as “anti-climatic change”) compared to the announcement on Dec 5 that Denmark plans to increase wind powerfrom 20% today to over 50% by 2025.  (All penetration rates are given as percentage of power supplied, as opposed to nameplate capacity, a measure which would make wind penetration rates seem even higher.)

That’s not to say this report is a total yawn.  First, Europe has a much more robust electric grid than the US (as the Northeast found out in 2003), and the fact that the study was sanctioned by a government body, rather than a renewable energy or environmental group gives it added weight.  Finally, by using extensive simulation, they came up with some relatively hard numbers on what it would cost to reach various levels of penetration.

 The study concludes that the total integration operating cost for up to 25%wind energy delivered to Minnesota customers is less than $4.50 per MWh of wind generation, or less than 1/2 of 1 cent per kWh.  Put another way, this is less than 10% of the average cost per kWh of wind energy.

As I alluded to before, when talking about Europe, we need to be careful when we generalize from one utility grid to another as to the costs of integration: Europe’s grid is not the same as America’s, and Colorado’s grid is not the same as Minnesota’s.  Costs for integrating wind into Colorado’s grid are likely to be higher than in Minnesota, because we are behind the rest of the country in terms of how robust and well integrated our grid is to the rest of the country.  Because of the limitations of out grid, all of the major wind farms now in Colorado or under construction have had to be scaled back.

 Nevertheless, the study is great ground for hope.  Colorado desperately needs to upgrade our transmission anyway, and the Minnesota study only takes advantage of one of the many possibile strategies that helps firm up the capacity factor of wind: geographical diversification: “the wind is always blowing somewhere.”

Other strategies not considered:

  • Time of use pricing, which can be used to shift demand to times when the wind is blowing.
  • Plug in Hybrids, which can be programmed to be charged when power is cheap, or even supply peaking capacity to the grid.
  • Energy storage, such as the Wind-to-Hydrogen project recently unveiled at NREL’s Wind Technology Center (in partnership with Xcel Energy.)  One interesting aspect of this project that did not make most of the articles on the center is that they are experimenting with directly connecting the wind turbine to the electrolyzer, without the intermediate step of a transformer which has to be used to convert the wild AC power from a wind turbine the regulated AC power used by the grid. 

In short, I see 25% as a good start, but given that wind power has already shown itself to be cheap, safe for the environment (despite claims to the contrary, wind kills far fewer birds than coal; just ask the Audobon society), and is proving much easier to integrate into the grid than skeptics imagine, we need to start thinking like Denmark, and aim for numbers much higher than 25%.  It will take creative thinking, and serious investment not only in wind farms, but also in our grid, and even behavioral changes on the part of consumers. 

The small sacrifices we will need to make in terms of our behavior to get large penetrations of wind onto the grid, such as checking our time of use meter before we start the dishwasher or dryer, are much smaller, in my mind, than the giant sacrifices we are currently making to coal fired generation in terms of the effects of pollution and global warming on ourselves and our children.  We just don’t see the current sacrifices, because we have become used to the death from a thousand cuts in the form of mercury and other pollutants, and the incremental year on year warming of our planet, lost in the noise of large local and seasonal variations.

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LED lamps still need work

A study from the Department of Energy compared the claims of LED downlights from four undisclosed manufacturers.  (See article in EERE Network News)  Although there is no question that individual LEDs perform better in terms of light emitted per watt, these downlights which incorporated them actually performed worse than fluorescents.

 LEDs are one aspect of energy efficiency that I think has a ton of potential, mainly because people aren’t nearly as excited about them as they are about renewable energy.  I think LEDs are much closer to being truly economic without subsidies than is PV, and the fact that they don’t get nearly as many subsidies, and have to stand on their own makes for much healthier companies.

In combination with photovoltaics, they are already economic in off grid outdoor lighting applications such as those solar garden lights we started seeing a few years ago.  They are also in use in many bus and train shelters… as well as flashlights, traffic signs, and stoplights(which are on so much they don’t have to be off-grid.  They also take advantage of the fact that LEDs are much better for color than white light.) 

 And, ‘Tis the season, so we shouldn’t forget about LED Christmas lights!

 But even in the most economic sectors, there are always hiccups when developing new technology, and it’s often the problems no one thought to anticipate.  That’s why it’s important to diversify, and only invest cautiously in new technology.   There are at least ten public companies I know of working on LEDs in one form or another… and some will inevitably fail, either in commercialization, or in cut-throat competition.  China is producing a lot of cheap LEDs now, which has caused problems for a lot of domestic LED companies.

In short, while I’m as bullish about LEDs as any other clean energy technology I can think of, it’s worth using the opportunity of studies like this one out of DOE to remind ourselves that there will be inevitable bumps along the way.

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1/4/7: I just ran across a very interesting survey on Treehugger (via EcoGeek) on the lumens/watt of all sorts of electrical lighting.   Turns out that the best light depends on your application, and neither CFLs nor LEDs are the most energy efficient forms of lighting out there… they’re not even second.  I won’t  spoil it, take the quiz, and read some intersting comments after.

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Diversification: Nature Knows Best

A study  in Science (see article in Renewable Energy Access) from David Tilman, an ecologist at the University of Minnesota shows what we should have known all along:  When energy crops are grown sustainably in poor soil (i.e. most of our available land) without fertiliser, a diverse mix of native prairie plants yeilds more than twice (238%) as much harvestable energy than any monoculture (including the much-hyped switchgrass) grown on the same land.

At some point, humans are going to have to realize that our production-line mentality, which seems so efficient to us, is not really the best way to do things.  We like farming just one species in neat rows because it’s easier for us to comprehend.  But easier to comprehend is not the same as more effective.  In money management, we know that there is no one perfect security for an investor: diversification allows higher returns with lower risk.  Farmers have yet to (re)learn that lesson: growing just one crop puts strains on the particular resources that crop needs most, and allows specialized pests an environment of limitless growth.

Monocultures are sub-optimal, both in your fields and your portfolio.   Enron employees with their retirement fund in 100% Enron stock learned that the hard way.  As we transition to a new energy economy, I hope that David Tillman, and researchers like him will help us realize that the places we grow out energy crops don’t have to be like an Enron employee’s 401(k).

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Solar panels for the price of the electricity

Many of us would like to have put solar photovoltaic (PV) panels on our home, and generate our own Citizenre Corporationelectricity.  Until now, I’ve always told people that they have better uses for their money.  Even with the recent extension of the federal tax credit until the end of  2008, and (in Colorado) the rebates being offered by Xcel Energy in order to meet their Amendment 37 requirements for customer sited solar electric, the return on investment for the electricity generated at current prices (about $8 per watt for the panels & system; $4.50 per watt rebates from Xcel, and a $2000 federal energy credit), a 4 kW system only returns 1.4% per year in electricity savings.  (I got these numbers from a workshop presented by Jeff Lyng, who will be vice-chair of The American Solar Energy Society next year, and calculated the return from those.  Jeff was speaking as a consultant for Xcel on their solar rebates program.)   To me, it makes more sense to invest in renewable energy or energy efficiency companies, which are likely to yield a higher return (or put the money in a CD and use the interest to buy RECs or give away CFLs).

Until now.  CitizenRE is offering to install photovoltaic panels on you house, and charge you only for the electricity.  Better yet, the price you will pay is equal to the same price (or less) than your utility charges.   If you like, you can lock in your current price for electricity for up to 25 years (although 5 is standard.)

You do still have to get power from your utility company… there is no provision for battery backup, and they require a $500 deposit which you don’t get back until the end of the contract.  Also, you are only renting the panels from CitizenRE, but you are responsible for damage to them from other than normal wear (as you would be for any other rental), so they suggest that you include them in your homeowner’s policy.

Still sounds pretty good, doesn’t it?  Here’s the big catch: they are signing people up now, but they plan to manufacture the panels at their own plant, which will not start operation until at least September 2007 (and, being a cynic, I’d expect further delays.)  Realistically, don’t be surprised if you don’t have your panels until mid-2008.  But for people who don’t have an extra $10,000 burning a hole in their pocket, you probably weren’t going to get a system until 2008 or later anyway.

This is probably not the only place you’ve heard about them… I’ve read several other blogs (here, here, here, and here. ) about them so far, and part of the reason for that is they are using a multi-level marketing scheme (MLM) (although they don’t like to call it that).  I don’t think any of the blogs I linked to back there are MLM-ers… I also came across several blogs like that (most of which had clearly been started for the sole purpose of selling CitizenRE), and decided not to do them the favor.  I’m not generally a fan of MLM, but I have to admit that it’s probably the best way to reach a lot of homeowners quickly.   As part of my research for this blog, I decided to sign up (it was incredibly easy… I did have to get 4/5 on a quiz, but three of the questions were general ones about solar and electricity, so I only had to guess right on one out of two, which I managed on the first try (but I could have tried again after 2 hours)… they have tutorials for people who are serious about this stuff, but who has time for that?)

Instead, I spent my research time reading the Forward Rent Agreement (FRA) contract their customers have to sign, which is where I got some of the above caveats (also note that they do reporting through a land telephone line, so if you sign up, you have to maintain telephone service for the duration of the contract.  That might be a problem for me, since I use Voice over IP.)

I also browsed through their marketing material, which was available after I took their little test.  After all, if putting solar on your own home is not a good financial proposition, why are they paying their associates $150 for each sale, plus 4% or more of the electricity sold in order to put panels on your house for you?  Here’s what I concluded:

  1. They will have lower costs than an individual homeowner.  Most of us have to pay contractors around $8 a watt for our systems.  Since they will be hiring their own dedicated installers, and install only equipment that they manufacture themselves, they think they can do it for around $4.50 per watt, a price which (In Colorado Xcel territory) would be covered completely by Xcel’s Solar*Rewardsprogram referenced above.
  2. As a business, they can deduct 30% of the full amount of the installation cost under the production tax credit, and it is not capped at $2000, as it is for homeowers.
  3. Also as a business, they are eligible for accelerated depreciation, which basically amounts to an added massive tax deduction.
  4. They get interest on your $500 deposit.  Not much, but if you have 1000 deposits, it starts adding up to real money.   1/15/07: Via PeakEnergy and The WorldWatch Institute I read that interest on the deposit is credited to the consumer.  Checking the associates’ website, it says: “Deposits are invested into 1 year treasury notes. Interest is compounded for the benefit of the customer.”

Starting to come clear?  By my ballpark estimate, if it costs them as much as $6 a watt to install a system in Colorado, they will be able to collect at least that much back under the various tax programs and rebates, and any money they collect from you, the customer, will be pure profit.

So it sounds like a legit business model to me.  In fact, when you look at the above, it’s somewhat surprising that no one has done it before.  If you still want to sign up (and if you want solar on your roof, this seems like the best financial deal currently on offer).

I don’t want to sign up anyone myself… I already have two full time jobs as an investment advisor and environmental activist, but if you use this link, for Frank Knight, who has agreed to make a donation to an environmental charity for any referrals (but not untl you get panels and he gets paid.  Contact me if you have a particular charity you would like to see the money go to.

If you want to become an associate, here’s the link for that.

If you think this whole thing is a scam, and want a random associate, go directly to CitizenRE (there will still be as sales commission paid to some associate, but it will be someone assigned at random.)

I never thought I’d be telling people they could put solar on their roof (in an economical way) so soon.  Keep in mind, this does cost more than your normal electricity bill, because you pay for insurance for the panels, as well as losing the interest on your security deposit, but if you don’t plan on moving, and expect electricity prices to go up a lot, you may come out ahead anyway, because they let you lock in your electricity rate for the duration of the contract (up to 25 years, at your option.)

By the way, I think I read an article recently about a company that’s doing the same thing with solar hot water in Canada (only charging for the price of natural gas not used), but I can’t seem to Google it.  If you saw it too, please let me know.

(Note: apparently you can avoid the deposit if you sign a 25 year contract.  I’m not sure  if that’s a better deal or not… how many of us stay in one house (or even two) for 25-years?  Also, five to ten years from now, the technology will probably reach the point where it does make sense to borrow the money and put up your own panels.  I guess I’m just not a big fan of 25 year contracts for anything.  Mortgages, for instance.)

12/14 I’ve been thinking about this some more, and here are a couple other things to be wary of:

  1. They say they’ll start production of panels in September 2007.   But these things always take longer than expected.  If you sign a contract with them, you’re basically saying that you’re not going to use your roof for anything else while you wait.  At best, you’ll have your panels a year from now, but at worst, they might end up stringing you along for years, when you could have gotten solar from some newer outfit that came along in the meantime… if this model really works, it won’t bee too long before they have competition.
  2. Don’t expect to make money as an associate (salesperson) before 2009, or even later.  A lot of associates are already paying (out of their own pockets) for classified ads, but they don’t start earning any money until systems are installed on homes.  And who is to say that your sales are going to be the first in line… as far as I can tell, they can install systems in whatever order they choose, which means that the location with the highest rebates will probably get all the first panels produced.  Basically, the better a financial deal this is for the customer, the later they are likely to get their systems.  If you are considering signing up as an associate, treat it like a hobby, and don’t pour a lot of money into it.  Frank may be kicking in $75 to charity for each referral I give him, but at least he’s not putting a lot of money in up front… he does not pay unless he is paid.

You may also hear about the CitizenRE offering under the product name ReNu, as well as a couple of thier marketing websites www.jointhesolution.com, and www.powur.com.  The /xxxx at the end of the url is the associate’s ID which they use to track which associate brought in that particular customer.

2/14/07: Given the recent growth in controversy about CitizenRE, I’ve written a followup article here. 

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The Green 50

Inc. Magazine  just did a series of profiles of businesses working to solve our environmental problems.  There’s not much here for investors… almost all of the companies profiled are private.  (Interface, Inc. being one notable exception), but it always give me hope to see all the people out there working to solve the immense problems we face… it’s nice to remind ourselves that we are not alone; we’re all doing out part in our own way.

 Thanks to Nancy LaPlaca for sending me this.

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Other Peoples’ Clean Tech Investment Ideas

Just ran across this article on investing in renewable energy in the New York Times.  The author Norm Alster thinks that the new Democratic Congress will be good for renewable energy (I agree.)  For instance, I think there’s an excellent chance that the Dems will renew the Production Tax Credit before it expires at the end of 2007, and most renewable technologies, especially wind an geothermal will see big boosts when that happens.

He interviews several asset managers, and their picks are Sun Power in for solar, Zoltekfor carbon fiber used in wind turbines (no mention of the fact that Zoltek is currently embroiled in a nasty lawsuit with Structural Polymer Group over breach of contract), corn ethanol producers (too much overbuilding for my taste), Headwaters(more of a emissions reduction company), Herman Miller (I hadn’t realized they were big into recycled plastics) and Interface (one of my faves, but I wish it were cheaper) for the green building angle.

 Just looking at the list of companies above, I can think fo good reasons to buy, as well as good reasons to sell every company mentioned (except Herman Miller & Headwaters, which I have not researched.)  I won’t do anything just because I saw them mentioned in the NYT, but that doesn’t mean that it’s not interesting.

I like to look at other people’s ideas about how to invest in renewable energy, because it tells me what other people are thinking about.  I look for ways to invest in renewable energy that not a lot of others are thinking about… that way, when they do start thinking about (and buying) the ones I have bought, the price rises.   That’s the theory anyway.

 Another way to use others’ research without getting caught in the stampede it to start watching the ones other people like, and wait for them to get bored.   If a company does not produce any good news for several months, people who got in on a rush of excitement will get impatient and sell… that’s the time to get in… unless the company really is boring.

Nobody said investing was easy. 

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Clean Coal?

Coal powered utilities have a “solution” to global warming caused by carbon dioxide, and they call it “Clean Coal” and “Carbon Sequestration.”  To many environmentalists, clean coal is simply an oxymoron.

 Also known by its technical name, Integrated Gasification Combined Cycle or IGCC, this new type of electric generator heats coal in the presence of oxygen, producing carbon dioxide and hydrogen gas, and leaving a bunch of the nasty stuff found in coal (mercury, sulfur, etc.) which would be released into the air in ordinary coal combustion plants stays (mostly) put.  The hydrogen is separated off by absorbing the carbon dioxide with an amine solution (other methods are in the works, but this is the only one in use now), and the hydrogen is burnt in a modified turbine to produce electricity.

Compared to conventional pulverized coal plants, this is an elegant solution.  There is much less of a problem with the traditional pollutants associated with coal (mercury, particulates, etc.), the whole process is slightly more efficient than pulverized coal, producing slightly more electricity per ton of coal burned (and carbon dioxide produced), and there is the theoretical possibility of capturing the carbon dioxide and putting it somewhere where it won’t enter the atmosphere and heat our planet (i.e. “sequester” it.)

On the downside, in the three IGCC plants currently in existence, there has been no attempt to capture CO2, for the simple reason that we don’t have any place good to put it, and any attempt to do so would require a significant portion of the energy output of the plant (I’ve heard numbers ranging from 10% to 30%), meaning that a lot more coal would have to be burnt just to deal with the carbon dioxide emissions.

FutureGen proposed design renderingXcel Energy, is with grants from the federal govenrment and other partners, is planning a 300 to 350 MW IGCC plant in Colorado, which will be the first in  the United States, as well as the first anywhere in the world to attempt carbon sequestration (most likely by taking some of the carbon dioxide and injecting it down old oil wells, a practicepioneered at the Wyburn oil field in Canada.  Some other methods of sequestering carbon dioxide, such as injecting it in brine formations, have shown the potential to form acid, leading to worries that the acid will breach the geologic formation, leading the carbon dioxide to escape.

In addition, according to an interesting article Can Coal be Clean? in the Nov 30 Economist, IGCC plants are also much higher maintenance than the old pulverized coal plants.  So is it any surprise that among the 150 new coal plants now being planned, only one or two are IGCC, and of those, only FutureGen is actually planning to test all the technologies that the utilities are holding up as the “solution” to carbon dioxide emissions, while the rest are just more business as usual.

Should we hold out much hope for IGCC with carbon sequestration?  Maybe in 30 years, after all the kinks have been worked out.  Carbon sequestration today is at a similar level of technological maturity as wind was in 1980.  Now that wind and solar have been generating electricity for 30 years, and are proven to work well, that’s where we should be focusing our efforts. 

I applaud FutureGen as a research project, but if we’re looking for a carbon neutral place to get our electricity today, IGCC with sequestration is a distraction.  However, if it can be made to work, I hope to be around when we have IGCC with carbon sequestration, fuelled by biomass, for a net carbon-negative power source.

Some numbers:

According to this testimony before the US house of Represnetatives, cost of electricity from IGCC without sequestration is $46 to $49 per MWh, and cost to sequester CO2 is estimated at $3-$10 a ton, depending on method an geology.  At treehugger, I found an article which implied that IGCC produces about 1 ton of CO2 per 5 MWh, which would make the cost of sequestration between $.60 and $2.00 per MWh, or .6 to 2 cents per kWh.   We do need to consider the fact that some of that $3-$10 per ton cost comes in the form of cost of electricity, so the calculation of cost of energy becomes depends on the source of electricity for sequestration, and how much of that carbon is sequestered.  None of this includes the cost of carbon capture, which would likely be low if only a fraction of the CO2 were captured, but become more expensive as the 90% or so theoretical limit is approached.  60% capture seems to be a number that the people who study this think would not be onerous in terms of cost.

 There is an incredible pile of information to sort through at Gasification.org.

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They do it with Mirrors: Concentrating Solar Power

Note 5/3/09 Some more recent CSP articles are here.

I’ve just spent some time reviewing a pile of reports on concentrating solar power (CSP) technologies for Ratepayers United Colorado (RUC), so here is a summary of the various types.

 

Technology descriptions

        Concentrating Photovoltaic

o       This technology uses mirrors or lenses to focus sunlight on high-efficiency photovoltaic chips.  The extra sunlight makes it worth the expense of making a more efficient higher complexity chip because each chip can convert more sunlight to electricity, with conversion efficiencies often twice as high as the efficiencies of conventional soar panels.  This also has the advantage of saving silicon (which is in short supply) for making chips.  Problems are that they do not work as well as conventional panels in diffuse light through clouds (because the light cannot be focused) so they are only appropriate for areas with very little cloud cover, and the extra light heats the chips more, which lowers their efficiency, and so may require some sort of additional cooling loop.

o       Article links:

o       http://thefraserdomain.typepad.com/energy/2006/03/concentrix_conc.html

o       http://thefraserdomain.typepad.com/energy/2005/11/stellaris_conce.html

        Parabolic trough

o       The oldest CSP technology, parabolic trough plants, known as SEGS 1 through 9, have been operating reliably in theParabolic solar trough technology  -  such as this SEGS plant - will be reborn in Red Rocks, California.
California and Nevada deserts since the 1970.  Parabolic trough plants work by focusing sunlight on pipes by means of parabolic mirrors.  These pipes contain a working fluid (several have been used, from water and superheated steam to molten nitrate salts.)

o       Parabolic trough technology is currently experiencing a revival, with several new plants being built.  The using of Organinc Rankine Cycle generators allows solar trough plants as small as 1 MW to be built (such as the new Saguaro plant north of
Tucson, AZ.

o       Parabolic trough technology allows energy to be stored as heat, which is much less expensive than storing electricity.  This allows the energy from these plants to be available at times of peak demand, making the electricity much more valuable.

o       Steve Raabe recently wrote an article for the Denver Post providing a good overview of the prospects of this technology in
Colorado.  The only point that he missed is the potential for hybridization with existing coal and gas plants.  By preheating steam for an existing fossil fuel fired turbine, CSP can make an old power plant operate much more efficiently.  Arnold Leitner of SkyFuel (
www.skyfuel.com) tells me “Our preliminary engineering estimates, satellite imagery of the locations and solar data show that SkyFuel could supply 50-100 MW-electric solar steam to the Comanche power plants generating an estimated 65,700-131,400 MWh of pure solar power at the facility via the existing steam turbine. SkyFuel could deliver this solar-generated steam to the power plant at an effective fuel cost commensurate to the fuel cost of burning natural gas at a modern combined cycle power plant at fuel price of 7-8 cents/mmBtu. In other words, through a FuelSaverTM at a coal-fired power plant SkyFuel could provide solar energy at the price of natural gas generation.”

o       Considering that solar power is available during peak demand, gas ifered generation is the appropriate cost comparison (as opposed to wind power, which does not deserve (or need) a price premium due to its unpredictable timing.

o       A variant on this called Concentrating Linear Fresnel Reflector (CLFR) uses many thin mirror strips instead of parabolic

troughs to concentrate sunlight from a large field onto just two tubes of working fluid.  This has the advantage that flat mirrors are much cheaper to produce that parabolic mirrors, and also allows for a greater density of reflectors in the array, allowing more of the sunlight to be used.

        Power Tower

o       Power Tower technology is similar to solar trough technology in that it uses mirrors to concentrate sunlight on a working fluid which is then used to superheat steam to run a turbine.  The difference is that the mirrors concentrate all the sunlight onto a single receiver at the top of a tower.  This allows for higher temperatures, but leads to engineering problems because of the high temperature at the receiver.

o       Lower price per watt is theoretically possible compared to trough technology because of the higher temperatures.

o       So far, only two pilot plants have been built and operated, called Solar One and Solar Two (actually the same facility as Solar One, but converted to use nitrate salts as the working fluid rather than superheated steam).    Both Solar One and Two incorporated thermal energy storage.  Due to the success in demonstrating the technology of Solar Two, a commercial 15MW plant Solar Tres is in the planning stations.  This station will incorporate enough thermal storage in molten salt tanks for 24h operation.

        Solar Chimney

o       A Solar chimney consists of a large greenhouse (multiple square miles of area covered by a transparent roof) which is sloped gently up to a central hollow tower or chimney.  The sun heats the air in the greenhouse which then rises up the chimney driving an air turbine (similar to the hydroelectric turbines used to generate power at dams) in the chimney as it rises.  Water filled tubes on the floor of the greenhouse serve as heat storage which allows the chimney to operate even at night and on cloudy days.  The amount of water in the tubes can be changed to alter the profile of power production and match it closely to the power demand the chimney serves.

o       The edges of the greenhouse can actually be used for agribusiness to grow plants, so not all the space taken up is solely devoted to electric production. 

o       The beauty of solar chimneys is that they are extremely low tech, and can be built without heavy equipment using simple materials.  The only exception to this is the turbine, and even that is much less complex than turbines used to generate power from wind, because the wind in a solar chimney is much more regular than naturally occurring winds and storms that wind turbines have to deal with. 

o       The first solar chimney was built in
Manzanares, Spain and ran continuously for 32 months in the late 1980s with 95% availability (considerably better than most coal and nuclear plants.)   See a video tour of this chimney I ran across on EcoGeek.

o       A 200MW chimney is planned by EnviroMission of Melbourne Austrailia for the Austrailian Outback.

o       It may be possible to build solar chimneys on south-facing slopes or simply as an extra layer of glazing on tall buildings with a turbine at the top which would make them even cheaper by avoiding the necessity of building the tall chimney (my idea).

 

        Dish Stirling

o       A Dish Stirling system is a parabolic mirror which focuses heat directly on a Stirling engine, a simple closed-cycle engine which operates simply using any heat source.  Sometimes hybridized with a fossil fuel source to provide heat when the sun is not shining. 

o       Dish
Sterling systems have the advantage of small size and scalability, because each individual mirror-engine system produces only around 25kW, but many can by linked together.

o       Because the suns rays are focused directly on the engine, there is little opportunity for thermal storage, a great advantage of several other thermal concentrating technologies.

o       Stirling Energy Systems currently has a few demonstration systems in operation.  They have signed purchase agreements with two
California utilities to build a total of around 1 GW of electric generation, but both projects are still in early testing phases.

o       According to Sandia National labs, this is the most efficient technology for converting sunlight into electricity.

CSP Technology comparisons

Technology Scale Levelized cost per MWh Pros/Cons Complexity/ deployment

Concentrating PV

Any

$15-$20

No storage option; does not work well on cloudy days

High.  Beginning to be deployed in last couple years.

Dish
Sterling

25 kW per dish

Unknown

High efficiency, modular.  No thermal storage.

Just beginning to be deploy

Parabolic Trough

Most: >50 MW for economies of scale;

Organic Rankine Cycle 1MW+

$8-$18 current

$6 potential

Can hybridize with existing fossil plants.

Storage, well understood technology, needs water for efficient cooling.

Plants operating consistently for 30 years in CA.

Solar Tower

>30 MW

$18+ current,

$5 potential,

can hybridize with existing fossil plants.

Storage.  Potentially cheaper than solar trough. Needs water for efficient cooling.

2 pilot plants with operational history.  First commercial plant now operational.

Solar Chimney

100-200MW

Not yet known.

Baseload power, low maintenance.

Low complexity, great potential for 3rd world.

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Wal-Mart pushes CFLs

A few months ago I blogged about Wal-Mart‘s energy efficiency push.  I predicted that Wal-Mart would be one of the first mass distributors of E85 ethanol, and I have since noted that compact fluorescent lightbulbs (CFLs) have been given increasingly prominent displays in their stores, and that they have an excellent selection of styles.  (When I moved into an new office a couple months ago, one of the first things I did was tell my landlord about how much money he could save by switching to CFLs (about $25 a month for a $70 investment in this case.)  He later asked me where he could find the candelabra bulbs (the ones with the tiny bases shaped like a flame,) and I immediately told him: Wal-Mart.  He’s an employment lawyer, and does not shop at Wal-Mart as a matter of principle… He still has not replaced the candelabra bulbs, so I’m going to give him a pack for Christmas (bought somewhere else.)

 Since I wrote the blog, Wal-Mart has announced that they’re exploring selling E85 (admittedly not the greenest renewable fuel, when made from corn, but rolling out distribution for E85 will make cellulosic ethanol easier to introduce.)

Now they’ve annouced that they are going to try to sell 100 Million CFLs in 2007.  Considering that replacing wasteful incandescent lightbulbs with CFLs is the best financial investment I know (the money saved on electricity pays for the bulbs many (as much as 25) times over), as well as being the most effective way most people can reduce pollution and greenhouse gas emissions (#2 is using energy efficient transport), I sincerely hope they beat their goal.

I’m particularly pleased by the fact that they will be introducing interactive displays and educating employees about how to choose.  The number of types and wattages (as well as color temperatures) of CFLs can be baffling to the unitiated, and people should be guided towards buying Energy Star bulbs for their greater reliability (If you have ever had anyone tell you that they tried CFLs but then switched them out because they stopped working, you can be almost certain that they weren’t using Energy Star bulbs.)

So it sounds like great news.  How great?  It’s hard to know because they’re not saying how many CFLs they were selling before.

 Thanks to Phil van Hake for sending me this article.

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Vision of a sustainable energy future

I’ve been meaning to write an article outlining a vision of a sustainable energy future, where biomass is converted into fuel and electricity through pyrolysis and the waste product, carbon is used as a fertilizer a-la terra preta to produce more biomass.  The good news is I don’t have to.  The Engineer Poet did, and it’s just part of a much broader vision you’ll find here.   He also goes into a great discussion of transportation technologies and efficiency which would never have made it into the article I’d write.  I like it when other people crunch numbers, so I don’t have to.

Give yourself a half hour to read the whole article.  It’s worth it.

( Terra Preta: I got a comment from Erich J Knight on terra preta here that went into a lot of depth, but I deleted it by mistake.  Forturnately, he says pretty much the same thing in his blog.  I first heard about terra preta from Ron Larson, chair of the American Solar Energy Society, who is very active in the local (Denver) renewable energy scene.  If you haven’t heard about terra preta, and are concerned about globabl warming or soil fertility without fertilizers from fossil fuels, it’s worth looking into.)

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