Archive for January, 2007

The Economist on America’s Green Shift: The States Lead

The greening of America

I’m compelled to share the cover image of this week’s Economist magazine.   The cover story is on the shift of the US’s shift towards greenery.   It’s an overview article, covering many of the recent political developments.  Their main point is that the current greenery is bottom-up, not top-down imposed by the federal government.

They feel that the drivers of the political shift are:

  1. Voter reaction to increasingly frequent intense weather events, especially hurricane Katrina.  Climate researchers expect violent and erratic weather due to global warming.
  2. Self preservation on the part of Republicans.  The only Republican who weathered the November elections well was the quite green Governator.
  3. Energy security worries (a two edged sword.)
  4. Businesses, who recognize the inevitability of climate controls, and so want to be part of the process of designing them.

They seem to expect rapid change due to this state-driven momentum.  Here’s hoping. 

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Canadian RE picks

There’s a good rundown of public Candian Renewable energy companies in the Globe and Mail today by Richard Blackwell.  They mention all of my favorite Canadian companies, and even one I had not yet heard about.logo

One note, there are several Canadian Income Trusts listed.  These are currently very volatile because of changes in thier tax status.  The extra volatility will undoubtedly lead to some excellent buying opportunities, but they are much more volatile than your standard income investor is probably ready for.  Where once I might have bought them for my more conservative clients, now I’m looking at them for my more aggressive clients.

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Win-Win Auto Insurance

On Thursday, I attended NREL’s Energy Analysis seminar, which this week featured Todd Littmann of Canada’s Victoria Transport Policy Institute, on Win-Win Transportation Solutions.

As an economist focused on policy, Todd Littman Photo of Todd Littmanhas done a lot fo thinking about what are the costs to society of transport, and what sorts of perverse incentives are there that are making these costs much higher than they would be otherwise.  He has a ton of extremely interesting ideas which will be useful to reduce transportation energy use for little or no cost, by simply removing perverse incentives.  I’m only going to go into a couple that I thought were most surprising or innovative here, so I urge you to read the whole paper on which his talk was based on VTPI.org.

One surprising result for me was that the greatest costs to from driving may not be the costs of gas, pollution, or global warming, but the cost of accidents, which are infrequent, but can be extremely expensive.  Even before adding in additional costs of congestion, wear on roads, etc., you do not need to be concerned at all about global warming to want to reduce vehicle miles traveled.

 And reducing vehicle miles a is far more effective and quick way of reducing transportation energy use (as well as vehicle accidents) than improving vehicle efficiency.

He has many ideas on cost neutral ways to reduce vehicle mileage, from broadly discussed ones such as smart growth, price shifting fuel taxes, and road and congestion pricing, and he does analysis on how cost effective all of these are.

What really got me to sit up and pay attention was an I dea I had heard no where else, which was all the more interesting because he feels it is the most cost effective (in fact, cost-negative: it pays more than it costs) method of reducing vehicle use: Pay-As-You-Drive pricing.  The idea is simple: instead of paying vehicle registration and auto insurance based on how long we have the car, we should pay based on how far we drive it.  

Since the safest place for out vehicle is in our garage (including theft and hail damage) this makes more economic sense than the current monthly payments for auto insurance, and since the costs we place on the transport system also increase the more we drive, it also makes sense for vehicle registration fees.   Because rich people with fancy cars not only tend to drive more than the poor, but because their registration fees are also already higher than those for inexpensive cars, this may even make the fees more progressive than they currently are, but some fine-tuning may be needed.

Since this is a purely regulatory reform, costs of implementation are minimal, consisting of only an annual odometer audit after the system is set up; an audit which could easily be combined with other scheduled service to minimize the cost.

According to his numbers, pay as you drive insurance and registration would average about 21 cents a mile for most people (about twice the cost of gasoline,) which I can easily see as enough to make most people think harder about how to maximize how efficiently they drive, or even consider public transport where it is an option… most public transport would become much more cost effective for people, without adding to their financial burden.

You might worry that people with long commutes and no public transportation might be unduly burdened by this shift, but we need to remember that they already pay more for auto insurance, because these are questions the auto insurance company asks.  The big difference is that there would be an increased marginal cost of driving, and it is the marginal cost of an activity that has the greatest effect on behavior, not the average or total cost.

The Vattenfall Institute recently found that the cost of stabilizing the United States’s share of CO2 concentrations at 450 ppm by 2030 would actually be negative, and it’s innovative solutions like those coming out of VTPI that let us get paid to cut emissions.

What are we waiting for?

Links: Victoria Transport Planning Institute: www.vtpi.org

Win-Win Transportation Solutions

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Board position: Promote clean energy and get paid.

If you know anyone who lives in or around Castle Rock and is willing to do a little paid work for clean energy, read on.

 I’ve written before about IREA Voices, (here and here.)   They are a group of dedicated volunteers who are trying to change the way their electric co-ops, Intermountain Rural Electric Association is run. 

In Colorado, Rural Electric Co-ops (RECs) are exempt from the requirements of Amendment 37, which mandates that our public utilities get a certain percentage of their power from renewables.  Ostensibly, this is because they are owned and controlled by their members (the people served by the utility.)   In reality, very few members vote in the elections (often as little as 10%) and so the boards can often end up being very unrepresentative. 

 In the case of IREA, this manifested itself with IREA’s general manager, Stan Lewandowski, contributing $100,000 of ratepayer’s money to a prominent global warming skeptic, and soliciting other RECs to do the same.

While the low turnout in REC board elections can be a big problem, it is also an opportunity.  While IREA is out funding global warming skeptics, perhaps the most progressive electric utility in Colorado is Delta-Montrose Electric Association (DMEA), and it’s all due to who is on the board. 

IREA Voices is working to change the IREA board, and they have a real chance of doing so.  Due to low turnout, board elections of RECs often hinge on only a handful of votes.  IREA Voices is fielding candidates in three of the four districts up for election, but they are still looking for someone to run in district 4, around Castle Rock. 

Being a board member is a paid position ($300 a day), so if you know anyone who might be willing to run for the IREA board in Castle Rock, please send me an email  and I’ll hook them up with the right people.

(Or they can do it themselves on the IREA Voices website.)

 An email from the IREA Voices follows the break… Read the rest of this entry »

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No Fun at Solarfun (except for the insiders)

Here’s an excellent aritcle on TheStreet.com by Kevin Kelleher comparing two recent Chinese solar IPOs: Trina Solar and Solarfun Holdings.  The only investors having fun at SolarFun were the insiders who managed to allocate themselves a pile of below market cost stock right before the IPO.

Not only does management seem more interested in packing away loot for themselves, but they also haven’t spent too much time looking for ways to deal with a well known problem for solar manufacturers: securing silicon.

 This just re-emphasizes the point that doing your homework when trying to pick stocks can pay large dividends (and help avoid losses.)  Honest and competent management can make the difference between a wildly profitbale company and a real dog.

 Thanks to Phil van Hake for the link.

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Vestas coming to Northern Colorado

It now looks likely that Vestas, the world’s largest wind turbine manufacturer will build a blade manufacturing plant in Nortern Colorado, near Windsor.  I’d guess that some of the factors that made Danish Vestas consider locating here are:

  1. The proximity to NREL’s Wind Technology Center for turbine testing.
  2. Amendment 37, which will require large investments in wind farms in Colorado.
  3. The State’s central location, making it easy to ship blades anywhere in North America.
  4. Political support for wind, especially from newly elected Bill Ritter and the Democratically controlled state legislature.
  5. Colorado’s excellent wind resource.

The 500 high-paying jobs will be ones wind advocates can point to when talking about the benefits of renewable resources over fossil fuels.

UPDATE:

It’s official. According to this follow-up article in the Rocky Mountian News, transport was indeed crucial to winning the bid. In particular, they wanted a site with rail service.

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Xcel Fighting Merchant Coal Plant

On January 18, Xcel Energy filed a motion with the Colorado Public Utilites Commission to reject a merchant coal power plant bid for 2014.   Xcel has been under intense pressure from the Colorado Commission to sign a contract with the project.   The Company also filed a motion for extraordinary protection  for critical parts of the bid report, which means we can’t see the underlying bid info or economic analysis.  While this is unfortunate but expected, the parts of the motion we can see make very interesting reading.

 This docket is a continuation of the competitive bidding process from the company’s 2003 resource plan and the settlement agreement.   

Xcel’s main ground to reject this bid is because it is “not economic.”  Unfortunately, we do not have access to the specific numbers, so we should not use this to say that coal plants are never economic.  I simply want to highlight the fact that this coal plant, according to Xcel, is uneconomic.  If the true cost of externalities of pollution and CO2 emissions were taken into account, the case for any coal plant’s economics becomes much worse.

Some arguments Xcel uses:

  • Electricity demand has not kept up with the demand they assumed in the 2003 LCP.  (Most likely due to increasing prices of fossil-fuel generated power, and a heightened awareness of the problems associated with global warming, both of which spur efforts for conservation.   It is also worth pointing out that our personal efforts to conserve electricity have contributed to the drop in demand, and that drop in demand makes this coal plant less likely to be built.  In this way, everyone can make a difference when it comes to fighting global warming.)
  • Xcel has successfully negotiated with bidders to provide natural gas fired power to lower their prices (p.5), while the coal bidders want to modify the terms of the contracts in a way that may shift environmental risks to Xcel (p.6) (which would then try to shift the environmental risks to ratepayers.).  
  • Coal is very capital intensive, so in order to make coal economically effective, the plant must be running as near constantly as possible.   (The inflexibility of coal and the need to keep the plants running all the time make coal as difficult to integrate into a system faced with variable demand.  In my mind, there is a certain irony in this, because the main argument against wind power is similar: the power supply is not well matched to demand.)
  • (p.27) “Far and away the most influential factor contributing to the reduced value of coal bid is the fact that the bidders increased their bid prices from what they initially offered in May 2005.”  (These increased bids are probably due to higher estimated construction costs, which coal plants are particularly vulnerable to due to the large amount of steel and concrete used in construction, as well as much higher prices for coal.  One of the best arguments for solar and wind generation is the fact that they are immune to escalating fuel costs.)
  • While Coal plants require years to construct, Demand Side Management (DSM aka Energy Efficiency), gas and wind can all be on-line in less than 16 months, making it much easier to match supply with demand.
  • (p.27) The PUC told Xcel to use their 2006 gas forecast prices in this analysis, at the same time as they were told to use their 2005 coal price forecasts.  Even though this artificial imbalance skews the results in favor of coal, it is not sufficient to make the coal bids seem economic.
  • There are substantial costs of added transmission to incorporate these coal bids.  (pp.47-50)  I point this out because wind naysayers often point to the transmission costs of new wind facilities, without taking into account the transmission costs for coal.  I infer from the text that this bid may be a mine mouth coal plant in Wyoming, which would require upgrades along transmission lines from Wyoming to Colorado.  Considering the Wyoming/Colorado border is an area with excellent wind resource, many sites for extensive wind generation would require the upgrades to the same or shorter sections of transmission lines.

I have uploaded Xcel’s filing here.   It will eventually be avialable on the Colorado PUC’s website, under Docket No. 05A-543E.
I’m happy that environmental advocates have this opportunity to build a more constructive relationship with Xcel by joining them in this. 

I also believe that these same arguments that Xcel is using here might be effectively used against some of the 150-odd other coal plants currently being planned in the US by utilites which are less progressive than Xcel (and there are many… TXU in Texas and many Rural Electric Co-ops come to mind.)

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