Archive for Politics

Colorado News: Doubling of Colorado’s RPS

Colorado House Bill 1281, which doubles Colorado’s Renewable Portfolio standard (RPS) (as well as the solar set-aside) passed the state Senate on Friday, and is certain to be signed into law by state lawmakers.

Here’s how the new requirements stack up against the old Amendment 37 requirements (passed by a popular vote in 2004.)

rps.GIF
Not exactly a “doubling,” but is there a better way to describe it?

“A37″ are the old requirements for investor owned utilities (affectionately known as IOUs,) “HB 1281″ are the new requirements for IOUs, and “Co-ops” are the new requirements for Rural Electric Co-ops (which previously had an opt-out, although a few decided not to opt out.)
The opt-out contained a provision that each Co-op’s members (i.e. customers) vote to opt out, which most of them proceeded to do (one exception is Holy Cross, which chose not to opt out, however, this has led to some contention with Xcel as to whether or not their existing power purchase agreement with Xcel included the renewable energy credits (RECs) associated with Xcel’s generation of electricity from renewables… since both utilities use these RECs to meet their requirements.)

While the opt-out elections all seem fair and democratic, that is before you realize that all the information most members were getting was coming from their co-op’s management. This is fine with progressive co-ops like Delta-Montrose and Holy Cross, but when it comes to troglodytes such as the management of the Intermountain Rural Electric Association (IREA), it’s a little more Orwellian.

In the recent House and Senate hearings, IREA was arguing for another opt-out from HB 1281, arguing that IREA’s members had voted against it in the first election, and that it would force IREA to raise rates (despite the fact that the bill specifically states that rural co-ops only have to meet its requirements if they can do so with less than a 1% rate increase (the more stringent requirements for IOUs can be met with an up to 2% rate increase.) In some ways IREA’s failure to get their opt-out into HB 1281 was due to their own maneuverings. In response to IREA’s funding of a global warming skeptic this summer led many of IREA’s members to wonder what else Stan Lewandowski was doing with their money that they did not know about. They founded IREA Voices to try to get a greater say in how their customer-owned utility is run. (If you know anyone who lives in IREA territory (just south of the metro Denver area, make sure they know to vote for the IREA Voices candidate in their district. (Mike Kempe, Mike Daniels, or Jake Meffley, if one appears on the ballot that came with their last IREA bill.) If you don’t live in thier districts, they are funding their campaigns out of their own pocket, plus any donations. Help out if you can!

It’s ironic that co-ops, which supposedly exist to serve the best interests of their members (as opposed to shareholders) are often the laggards (and in IREA’s case, even deniers) of the environmental effects of our reliance on coal for electricity. I believe that Stan Lewandowski believes he is doing the right thing by trying to keep rates down, and damn everything else, but in the end, the farmers he feels he is serving will be the ones who suffer some of the worst effects of global warming.

Anyway, it looks like momentum is finally on the side of those of us that realize the magnitude of the disaster facing us, but time is also of the essence, and the faster groups like IREA Voices can catalyze change, the better for all of us.

So let’s cheer Colorado’s doubling of the Renewable Portfolio Standard, but let that one victory inspire us for the struggles ahead. We’re a long way from the time when we can declare victory and go home.

Comments (1)

Holistic Approaches to Energy Problems

H. L. Mencken said, “For every human problem, there is a neat, simple solution; and it is always wrong.”  When it comes to solving the problems of peak oil and global warming, I also think that the loudest barking is up the wrong tree.  We look for the quick fix, trying to find a substitute energy source that allows us to change the way we do things little as possible, when the real problem is actually what we’re doing, not how we’re doing it.   We need holistic solutions, not quick fixes.

Too abstract?  Here are some concrete examples:

 Problem: Peak Oil

Quick fixes: Ethanol and slight increases in vehicle efficiency standards.

Holistic solutions: Change our driving culture and infrastructure, by changing the way car use is priced from fixed charges to a per mile basis (“Pay as you drive”).   Removing subsidies to use cars when other forms of transport are available, and redesigning our cities to make them easier to get around on foot, bike, and public transport.  Like other holistic solution, all these steps increase safety and reduce congestion, reduce obesity and associated health problems, as well as reducing the use of gasoline.

Problem: Wind and Solar are intermittent resources, but coal produces too much CO2 and natural gas prices are rising rapidly.

Quick Fixes: Nuclear power and “Clean” Coal.

Holistic Solutions: Shift our demand for electricity to times when it is available, by using time of use pricing, energy storage and demand alignment, and distributed energy storage such as plug in hybrid vehicles.

Investing opportunities:On thing that’s striking about these examples is it’s much easier to find investment opportunities in the quick fixes than in the holitistic solutions.  To invest in ethanol, you can just buy ADM or one of the multitude of ethanol stocks that have been going public recently, but I have yet to come up with a satisfactory way to invest in better urban planning (except buy a house in a walkable community, which is something I’m planning on doing this summer.   Stapleton is the community.  I currently live there, but I’ve been renting and waiting for the end of the housing bubble.  I actually don’t think that housing is going to go up again any time soon, but I’m tired of waiting.) 

The investment landscape is a little better when it comes to energy management.  Itron and Siemens both have divisions that help utilities manage their grids better, and there are many battery and other energy storage companies to choose from.  Still, it’s a lot harder to pick through battery companies than to just buy a nuclear powered utility or uranium miner.

Holistic solutions, by their nature, have weak boundaries… the benefits tend to be diffuse, and spread over society as a whole, so it is difficult to charge fairly for them.  This, I think, is why there are so few companies pursuing them when they can pursue a quick fix that they can charge for up front.  

Companies have an obligation to their shareholders to make money.  It’s our job, as human beings, to work towards regulations that make it easier for companies to make money with holistic solutions that actually solve the problem than it is to make money with quick fixes that just cover the problem up.

Comments (3)

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. 

Comments (2)

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 »

Comments (2)

Bill Ritter Inaugural address

Colorado’s new Democratic Governor, Bill Ritter was sworn in today.  For environmentalists, it is a moment of rejoicing.  Sticking to his themes from the campaign, Ritter outlined his agenda, and the very first item was:

“Let’s start by being bolder than any other state when it comes to renewable energy. Let’s commit right now to making Colorado a national leader … a world leader … in renewable energy. Let’s create a New Energy Economy right here in Colorado.”

I couldn’t ask for anything more. 

He also had some other quite sensible agenda items, such as health care for all Coloradans, something that I think is worth paying for, but which I simply hope does not end up exhausting his political capital.

Here’s to a breath of fresh air (in more ways than one!)   

The full text of his inaugural address follows the break.

Read the rest of this entry »

Comments off

Secrets of the Utility Mind

I feel that many of us renewable energy activists do not understand how utility planners think.  To us, we see wind as cheap electricity, but to them it is the Predator (of movie fame), something that looks benign and friendly, but at any moment will wreak havoc on their grid by turning off unpredictably.

In order to have a constructive conversation with utility planners, I think it is important to understand their point of view.  This is my attempt to do that, with the hope by doing so, we will be able to engage with them more productively.

These are what I see as the underlying principles that shape the utility planning process:

There is no God but Reliability, and Least-Cost is his prophet.

Or, put another way,

The Holy Trinity of electric resource planning: The Baseload, The Cost, and the Holy Reliability.

I use the religious references to make a point: reliability is a religion for utility planners, and people become defensive and angry when you threaten their religion.   If we want to work with the utilities, we need to address their real concerns about intermittent renewable resources such as wind and solar.  And we have to work with utilities if we are going to modernize the way we get and use electricity. 

How do we deal with people committed to this religion?  By taking their concerns seriously, and helping them find solutions.   In short, when we hear “Wind is so unreliable,” we should say “That’s true.   Here are some ways we can take advantage of the benefits of wind without compromising the integrity of the grid.  We can be allies in getting regulators to approve rates that allow utilities to get a fair rate of return on these measures that improve reliability, while also allowing more wind onto the grid without impacting reliability.”

Why do we expect them to listen?  Because they already have and have to work to deal with a problem that is very similar to unpredictable generation from wind: unpredictable loads.  People and companies turn appliances and whole factories on and off unpredictably, and never once do they think about calling up the utility first to let them know that they should have the necessary capacity ready at the appropriate time.  Instead, we as consumers just flip a switch, and never expect that the lights won’t come on because there is not enough capacity.  If they don’t we get angry.

How do utilities accomplish this seemingly impossible feat of matching supply to capricious demand?  They do it with extensive load modelling, so that they can predict approximately how much  load will be on the system at any given time with a fair degree of accuracy, and by maintaining “Spinning reserves,” which are basically generators which are already up an running under very low power (hence “spinning”) and turning in synchronization with the current of the grid, like a non-hybrid car sitting at idle.

When there is a sudden increase in the necessary load, they can then increase the power produced from the spinning reserves almost instantaneously, like the motorist of our metaphor starting up when a light turns green.

There are many types of generation that can be used as spinning reserves, not only gas turbines.  Hydroelectric dams can work well this way, and can agreements with neighboring utilities to supply power when it is needed, on the theory that two different utilities will not have the same load patterns, and so both utilities can gain by trading power back and forth as needed.

There are many proposals circulating to increase grid reliability and ability to accept more intermittent resources.   As is usual in complex problems, there is no one solution, and in this case it will always be a combination of many of these (and some I don’t know about… please leave comments if you have ideas I’ve left out), and the mix will vary widely depending on the unique situation of any particular utility.

  1. More transmission.  Wind not only needs massive new transmission capacity to get the electricity from windy rural areas to the places that need power, but a more robust grid means that widely dispersed wind farms can all provide power to a single utility.  Since the weather varies in different places, this has the benefit of making the system as a whole a lot less variable.  Denmark sells power to Germany, Norway, and Sweden when their wind farms produce more power than they can use. 
  2. Moving to a national electricity system from the current system of regional grids would also ease the flow of wind power from one region to another.
  3. Time of Use/ time-based pricing.  Time of use pricing allows a utility to charge less or more for power depending on how much power is available at any given time.  Time of use pricing is currently a hodge-podge consisting of none at all for some utilities, and others that offer it (or even mandate it) for/to all customer classes.  Often time of use pricing simply consists of two prices: on- and off-peak, but the ideal goal for this is to actually have real time pricing, which will even depend on that day’s weather forecast (on windy days, electricity should be cheaper than otherwise.)  The ideal goal would be to eventually move all electricity customers to real-time or near real-time electricity pricing, so that customers who are willing to adjust their usage patterns are compensated for the service that they are providing to the system as a whole.
  4. Demand side management goes hand in hand with time of use pricing.  Demand side management involves giving customers incentives to keep their load from peaking too much at any one time.
  5. Dispatchable/Interruptible loads involve allowing the utility a certain amount of control over their customer’s energy use.  The classic example is installing a remote switch on an air conditioner, so that on a hot day, the utility can regulate it so that they don’t all come on a the same time, but rather take turns, lowering the peak demand on the grid.   Utilities typically pay their customers for this right for remote control.
  6. Large scale electricity storage: Pumped hydroelectric, flow batteries, hydrogen and stationary fuel cells, and compressed air energy storage are all ways to store large amounts of power when it is plentiful and cheap (on windy nights, for instance) until it is scarce and expensive (late afternoon and early evening.)
  7. Distributed energy storage, such as plug in hybrid or electric vehicles with vehicle to grid.  Vehicles which charge from the grid can be beneficial even if they are not capale of sending power back to the grid, simply because their owners can charge them only at non-peak times, a practice which is easy to incentivize with time of use pricing.
  8. New forms of generation that can serve as backup power.  Concentrating Solar with thermal storage, landfill gas turbines, and biomass gasification are all possibilities.  One often overlooked advantage of IGCC(“Clean Coal”) is that electric power from IGCC is generated by a gas turbine which burns the syngas product of the gasification step.  While it is quite possible that carbon capture and sequestration may never be made to work with IGCC, this is one reason (along with lower emissions of traditional pollutants and higher efficiency, which reduces carbon emissions for MWh generated) that renewable energy activists should prefer IGCC to old style pulverized coal plants.
  9. Increase energy efficiency, especially in appliances that are often used during peak times.  In most of the United States, peak load usually occurs on hot afternoons and evenings when air conditioners are running, so replacing an air conditioner with a more efficient one not only reduces overall energy use, it also reduced peak demand.  Once again, the institution of time of use pricing would give customers the incentive to upgrade the right appliances for energy efficiency first.   Here are two advances in efficient air conditioning I’m particularly excited about the Delphi HMX (formerly known as Coolerado), and thermally driven dessicant cooling.

For another well thought out perspective on energy storage, hop on over the the Ergosphere for the Engineer-Poet’s thoughts.

Comments (2)

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.

Comments off

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. 

Comments off

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.

Comments (1)

Biodiesel vacation

What do Willie Nelson, An evangelical with poor grammar in Wichita, a sustainable-everything store in Austin, and a pump and drilling supply company in Golden CO have in common? Read the rest of this entry »

Comments off

Five minutes with Xcel’s Dick Kelley

Richard C. Kelly

Dick Kelley, the President, CEO, and Chairman of the Board of Xcel Energy spoke to the board and invited guests of Western Resource Advocates last Friday.  I was invited as a supporter of WRA.

 

His speech was widely reported in the press because he called for national regulation of greenhouse gas emissions.  The AP story emphasized Kelly’s shift from being an environmental skeptic to calling for national Carbon emissions regulation.  This is a big shift, and a giant step for a utility, but Kelly is not so much of an environmental advocate as he might sound.

 

I had a short conversation with him before dinner.  After we introduced ourselves, I told him I’d been making his life harder recently at the Colorado PUC.  Like anyone who’s been successful in business, he didn’t miss a beat, and told me that it was great, and the more people’s input we had, the better.

 

He said that Xcel had been opposed to Amendment 37 because of the cost of the solar set-aside, a position I’m actually sympathetic with.   After all, is it better to have 1 MW of solar photovoltaics on people’s roofs, or 20 MW of Wind?  When you look at the subsidies needed to get people to install PV (which is an Amendment 37 requirement), we could probably get 20x as much wind energy onto the grid for the same cost.   It’s not that wind cost 1/20 as much as solar, but since the price of electricity from wind is comparable to the price of coal, it does not take much to get a lot of wind, while solar needs to be heavily subsidized.

 

What I really would have liked in A37 was an allocation for Demand Side Management (DSM) and energy efficiency.  If the same incentives could have gotten us 20 MW of wind or 1 MW of solar, it could also have gotten us 40 MW of DSM and energy efficiency.  (none of these numbers are precise… it’s hard to tell what an incentive will accomplish until it is implemented, but we do know that DSM is cheaper than wind is cheaper than solar.)  But energy efficiency was not on the table when A37 was being written… polling data said that adding “energy efficiency” to the bill dropped popular support by so much that we couldn’t have gotten it passed.

 

Dick Kelley also told me that Comanche 3 (a new 750 MW coal plant) would be the last conventional coal plant that Xcel would build.  I told him Comanche 3 would be fine with me, if they’d just shut down Comanche 1 and 2 (a couple old, less efficient plants at the same site.)  That was an option that’s clearly off the table, but he did say Xcel needed to find a way to clean up the emissions of those plants.  I suggested wood chips, like Aquila is doing at their  Clark Generating Station in Canon City.  By co-firing wood and pine needles from necessary forest thinning, Aquila is able to reduce net CO2 emissions, as wel as NOx, SOx, and Mercury.

I mentioned the option of hybridizing concentrating solar thermal power (CSP) with existing coal plants.  He didn’t really understand the concept, and thought I was talking about photovoltaics.  I’m not sure I was able to explain myself well.  Put simply, when heat is available from the sun, it can be used to displace heat from coal (or natural gas) in an existing generator.

Kelly also said he’d like to raise wind to 20-25% of generation, but after that they’d have to see what the effect on reliability of the grid would be.  I brought up the idea of Pumped hydro or CAES.  He didn’t seem familiar with the fact that Colorado’s Big Thompson Project could be adapted for pumped hydro fairly easily.  As he said, new big hydro is not going to happen.  Which is all the more reason for adapting out existing reservoirs for energy storage with pumped hydro.

I was encouraged that he has recognized that Carbon Emissions are a massive problem, and that the utilites, who are the biggest emitters of carbon, are going to have a big part in the solution, but discouraged that he knew so little about several pieces of the solution that have great potential to be quickly viable.

Xcel likes wind, but is not looking at new ways to increase how much they can put on their system… they’ll just go to 20-25% and see what happens.  They’re pursuing IGCC (Internal Gasification Combined Cycle a.ka. “Clean Coal”) with carbon sequestration in a pilot plant, which many environmentalists feel is just a distraction from renewable energy, pointing out that no one has ever done any sort of sequestration on a large scale.  To me, that is an argument for IGCC with Carbon Sequestration, on a small scale: let’s give it a try and see if we can make it work or not.

IGCC is a lot better than one of the other ideas that Kelly brought up in his speech: he thinks that part of the solution will be nuclear power.  Nuclear power is indeed carbon neutral, but it requires diminishing uranium supplies, or the use of breeder reactors which make plutonium, an element which is not only extrememly toxic, but also an excellent material for making nuclear bombs.  We still haven’t figured out what we’re going to do with the waste from our existing reactors… until we do that, I think it’s crazy to look into building more.  And considering the real threat of terrorism, a nuclear reactor or wastepile makes a much better target than a solar array or wind farm.

When it comes to Kelly’s call for national regulation of carbon emissions, it’s a great step in the right direction, but it was a far cry from calling for a carbon tax (which economists think would be the most effective method of carbon regulation.)  Kelly knows global warming is real, and he knows that our politicians are going to do something about it.  By calling for national mandatory regualtion (but not a tax) he’s trying to shape the debate to come out in a way that Xcel will find easier to deal with. 

With a little more education about alternatives such as CSP, and ways to make the grid able to accept more intermentent resources (Time of use pricing, DSM, and energy storage), he may come to realize that Xcel has lots of ways to live in a carbon taxed or carbon limited world.  And he seems willing to listen; so if you get his ear for five minutes, try to make the most of it.

Comments (1)

Down at the Public Utilities Commission

I just testified on Friday in the Colorado Public Utilities Commission rate case for Xcel Energy.  The case has been going on since April, and is in its last stages.  I only recently got involved (Who pays attention to rate case hearings, anyway?)
To be clear, a rate case is not a Least Cost Planning (LCP) process, which is when the regulators decide if the utilities plans to meet future needs of consumers are prudent.  That is, when they decide what sort of generation they need.  This is somewhat relevant because much of the opposition to this rate case is really opposition to the new coal plant being built by Xcel in
Pueblo, Comanche 3.  

Given the reality of global warming (which many people are just now starting to realize is a real and immanent threat), the fact that coal is our most carbon-intensive fossil fuel (not to mention all the other emissions associated with coal), and the fact that the planned life of a coal plant is 50 years, the opposition is understandable.  Unfortunately, this rate case is not the proper forum to oppose construction of new generation.

A rate case, is about how Xcel is allowed to charge for their electricity, and how much they are allowed to charge.  When it comes to how much they are allowed to charge, this is determined by setting an allowable Return on Equity (ROE) for shareholders, as well as a Debt/Equity mix.  Because debt is cheaper for a company to raise, a higher ratio of debt to equity will be cheaper for ratepayers, but the more debt to equity there is, the less stable a company will be, and the higher return both debt holders and equity holders will demand in order to take the risk of owning the debt or stock.

I made three basic arguments. 

  1. In order to avoid perverse incentives, it is best that in any situation, the parties should share risk in proportion to their ability to take action to reduce that risk. 
  2. The return on equity allowed under the settlement agreement was higher than is necessary to induce shareholders to own the stock under current market conditions,
  3. The rate mechanism, as envisioned in the settlement, contained several perverse incentives which would lead to behavior by Xcel that will likely place costs on ratepayers which would likely be prudently avoided if Xcel has an incentive to do so.

The first point about perverse incentives is important mainly for future planning.  If Xcel bears the risk that costs will exceed their projections, they will be much more conservative about their cost projections.  In this case, that means that cost projections will be higher, and take more of the unpredictability of fuel costs into account.  In addition, holding Xcel accountable for unexpected environmental costs will lead them to be much more conservative about their assessments of future environmental costs. This better information both of these effects will lead renewables to be seen in future least cost planning cases much more favorably, because many have zero fuel cost (and hence zero fuel cost risk), while their lower environmental impacts will lead to lower future environmental costs.

Energy efficiency measures, demand side management, time of use pricing, and investments in large scale energy storage, all of which lower fuel costs by reducing or shifting fuel use will also be more likely to be pursued by a company that bears modeling risks, because these measures all reduce risk by reducing fuel use or shifting it to lower cost times.

Widespread adoption of demand side management, time of use pricing, and energy storage also all favor intermittent renewables such as wind and solar by shifting usage to times when these resources are available.

Basically, energy efficiency and renewables are excellent way of addressing both the price and environmental risks that are currently borne by ratepayers for utilities.  Shifting some of these risks to the utility will lead the utility to take more proactive action to address these risks, both through renewables and through other mechanisms we may not yet have thought of.  That is the beauty of incentives rather than mandates: they inspire creative thinking, and usually come up with cheaper and more effective solutions to the same problem.

I’d like to be clear here that I don’t think that Xcel is the problem; I see Xcel as the solution.  What I hope to accomplish is to provide carrots and sticks will induce Xcel to be much more responsive to environmental and energy cost concerns.  With those properly designed incentives, I expect that Xcel will be able to accomplish more than many environmentalists could ever hope to win in mandates.  And Xcel shareholders should be well compensated for the risks of these investments; I want them to be able to do well by doing good. My second point, that the return on equity (ROE) allowed under the settlement agreement hinges on weaknesses on the various methods of calculating appropriate ROE.  ROE is the compensation that shareholders demand and are entitled to for taking on the risks involved in operating a public utility.  These calculations are inherently tricky: the formulae are fairly simple, but actually getting good numbers to put into the calculations can be very tricky.  The essence of the problem is that financial markets, and the formulas are all forward looking.  To really know what ROE is appropriate, we would have to know about future growth and risks of the company.  This information is unknowable, and in practice, the calculations are based on past information, and stock prices.

There were three calculation methods used, two of which depend on estimating the risk premium (Risk premium and Capital Asset Pricing model or CAPM) that shareholders demand in order to hold the stock, and the other (Discounted Cash Flow model, or DCF) of which depends on analyst predictions of future growth rates.  The Risk premium and CAPM use historical market data to derive those risk premiums, and the results of those calculations from those methods led to almost uniformly higher estimates of ROE than the DCF method.  I believe this is because the markets are currently demanding much lower risk premiums than they have in recent years.  These lower risk premiums are partly a function of the market run-up since 2002, and partly a function of the run-up of the late 1990s, which, in my opinion and in the opinion of many other market analysts whom I respect.  I bring up Alan Greenspan, the former fed chairman in my testimony, but I also include Richard Russell, Nouriel Roubini, Pimco’s Bill Gross, and Yale’s Robert J. Shiller in that.  I chose Alan Greenspan because he has the most kudos and is most likely a recognizable name.  I note that when Xcel’s witnesses were trying to trash my testimony, they convieniently chose not to mention Greenspan.

 However, if I’d been able to travel a week into the future, I would have probably tried to include Bill Gross’ November Investment Outlook  column in my testimony as an exhibit.  As allways, Bill leaves me in awe with his depth of research and clear reasoning. 

The DCF method is also flawed in its reliance on analyst estimates, since analysts can easily be caught up in the market mood as well, but they are often a much more sober lot, and so based my recommended ROE on the low range of the DCF calculations of other analysts.  If you look at the confidence index graphs at the International Centerfor finance at Yale, you will note that institutional and individual confidence tend to follow the same long term ternds.           

Finally, in reference to the perverse incentives in the Electric Commodity Adjustment (ECA) primarily concern two parts of the ECA: the Baseload Energy Benefit (BLEB) and time of use (TOU) pricing.           

With regard to the BLEB, this is an incentive for Xcel to keep their coal plants running as much as possible, under the assumption that coal is the cheapest form of electricity generation that is dispatchable (i.e. that they can turn on and off at will.)  I have serious problems with a lot of the assumptions that go into the BLEB.  I had problems with the form of the equation they used, given that it was based on annual average prices for natural gas, as opposed to real time prices, but that was a minor point compared to the things which the BLEB left out. Carbon Intensity of various fossil fuels, lb Carbon/MBtu.

Source: Treepower.org           

The BLEB left out of the costs of coal all the environmental costs of its use, thereby giving coal a great incentive than it deserves.  Also, only natural gas an coal were had reference at al.  Xcel’s explanation of this is that only gas and coal are dipatchable, yet part of what they say the BLEB is designed to encourage is improved maintenance of their coal plants to ensure that they are always available.  All forms of generation can benefit from improved maintenance.  Using their logic that the form or generation with the cheapest fuel cost should be incentified, there should clearly be strong incentives for improved maintenance of renewable resources such as wind and solar.            Finally, while wind and solar power are not now dispatchable, with the addition of energy storage such as pumped hydro or CAES, they can be made dispachable.  Incentives for coal will only delay investments which improved the dispatchability of other forms of generation. 

Here are links to my testimony, as well as all the testimony in the case, and the settlement agreement. 

Xcel did me the honor of spending several hours of the hearing trying, with various degrees of success, to tear apart my arguments.  I almost didn’t get any chance at all, but Ratepayers United Colorado’s attorney Gina Hardin managed to get me about 5 minutes to respond to multiple comments from several other witnesses.  Thank you, Gina!

             Here is my take on what they had to say (from my notes.) Frederic Stoffel – Testifying in his former capacity as VP Energy Policy development for Xcel. Stoffel totally misinterpreted my testimony, by saying that he felt that I wanted Xcel to take on all environmental risks, and the price risk of any deviation from projections.  Note that while this blog makes it clear, I’m not sure if he didn’t get it because I was unclear, or because he simply chose to misinterpret what I was saying to make it easier to defend against.  I feel I managed to counter this argument effectively in my five minutes on the stand the next day. 

I did not fare so well at the hands of George Tyson, Xcel VP and Treasurer.  In my analysis of appropriate ROE, I glossed over a major salient point, saying Public Service of Colorado had a “high” bond rating from S&P.  I had gotten this impression reading other testimony in the case, but in fact, PSCo’s senior unsecured debt rating is BBB-, one tiny notch over junk status.  Oops!   This makes a lot of my arguments about risk premiums irrelevant, because a debt downgrade (which might indeed follow if the commission were to assign my recommended ROE of 8.9%) would seriously impinge on PSCo’s ability to operatate, even if shareholders at the moment are not worried about such an event.  (In fact, shareholders shouldn’t be worried about this case, because the realistic chances of this settlement being thrown out are nil.  The main reason we were doing what we were doing is to demonstrate that there is real ratepayer unhappiness, so, when we have a more sympathetic PUC with one or two new appointments from Bill Ritter, who we hope and expect to win the election Tuesday – If you have not voted yet, do it! – then we can go back and appeal this.)   

But Xcel did feel that they needed to counter what I had to say, since for both Tyson and Robert B. Hervert spent much more time attacking my testimony against the settlement than they did on any aspect of the settlement itself.  Considering how little they said about the settlement agreement, I get the feeling that they probably would not have even taken the stand under other circumstances. Hervert is a CFA charterholder, and economic and financial consultant for Xcel.  He took me to task for my conclusions about risk premiums.  His points were basically that he sees no indication that investors are currently asking lower risk premiums, and that analysts are not being swept along with that sort of mood, either.  I really can’t argue with that: it’s impossible to judge if valuations are currently high now because the current outlook really is good, or because people are too exuberant.  All I can say is, “Time will tell.” 

He also took more to task for saying that the VIX is at historically low levels.  If you will note from the graph, it has currently only been this low once before (the index did not exist prior to 1990,) and, he noted that it is currently within “one standard deviation” of its mean.  This is bad analysis, which I would not expect from a Charterholder, and it really gets me steamed because I wasn’t able to dissect his mistake fast enough to pass a good question to Gina Hardin to allow her to challenge it by crossing him. 

(Skip this paragraph if math makes your eyes glaze.)  Hervert’s mathematical sin is that the VIX does not conform even roughly to a normal (or even symmetrical) distribution, and so talking about “standard deviation” in reference to a lopsided distribution such as the VIX really is not relevant.   

Anyway, I wish I’d had time to bring that point up in the few minutes I actually got on the stand.  Not that anyone would have understood it, which is why I stuck to my main points about incentives and Stoffel’s misinterpretation of my testimony. 

I really don’t care that much what ROE Xcel is authorized.  I’m much more concerned about the incentives that they are given. With the right incentives, Xcel would stop trying to build coal plants and instead invest heavily in energy efficiency, demand side management, time of use pricing, energy storage, transmission, and renewable energy generation, and make a lot of money doing it.  That’s what I would hope to come out of a rate case.  Maybe under our next governor, we’ll get something like that.

So go vote Tuesday (even if you don’t live in Colorado.)   It really does matter who wins even the small races.  If you had the time to read through this multipage diatribe, surely you have enough time to make it to the polls.

Comments (1)

Should there be a tariff on foreign biofuel?

Apparently, the consensus of the 25x’25 biofuels working goup I spoke of over the weekend was an illusion based on the fact that the opponents had not spoken up and we had moved on to other subjects.  We’re currently discussing the subject over email, and I thought my rationale for opposing a tariff was worth posting here:

1. Why a tariff on foreign biofuel would not be effective at raising the price for domestic biofuel:
The primary competition for domestic biofuels is not foreign biofuels: it is petroleum.  Petroleum will remain the primary competitor in a 25x’25 world (after all, it will have around a 75% market share.)  The price of both foreign and domestic biofuels will be set in competition with gas and diesel, the most commonly available substitutes.  To raise the price of domestic biofuels, a tariff would have to be placed on foreign oil, not just foreign biofuels.

2. Why a tariff on foreign biofuel would be counter to the 25x’25 goal:
Potential builders of distribution infrastructure for biofuels (pipelines, retail pumps, Flex Fuel Vehicles, etc) want to know that there will be a reliable supply before they build distribution.  While some might argue that a tariff would not impact supply (an argument which, if true, would re-enforce point #1), it is very difficult to argue that it would not negatively impact the perception of the availability of reliable supply.  It is the perception of reliable supply that will help get the distribution infrastructure we need built.

Comments off

25x’25

I spent much of the last week at the 25x’25 “Twenty-Five by Twenty-Five” second implementation planning meeting.  25x’25 is a coalition advocating the vision that “By 2025,
America’s farms, forests and ranches will provide 25 percent of the total energy consumed in the
United States, while continuing to produce safe, abundant, and affordable food, feed and fiber.”   That’s at least 25% of our energy from renewable sources.

            25x’25 is an open alliance; the participants are the organizations who have endorsedthe 25x’25 vision outlined above.  These include 18
US Senators, 91 Congressmen, 18 state governors, 4 state Legislatures (including
Colorado).  I attended the conference as the representative of the
Colorado Renewable Energy Society. 

            I highly encourage my readers to endorse 25x’25 (you can endorse as an individual, or as an organization, or both.)  Your endorsement helps them demonstrate that a broad swath of Americans support the 25x’25 vision, and will help convince the US House and Senate to pass the concurrent resolutions for 25% of the nation’s energy supply to come from renewable sources.

We are currently in the process of coming up with our vision of how
America can achieve 25x’25.  Any endorsing individual or organization can participate.  The goal is agree on a series of recommendations (the Implementation Plan) as to how we can achieve the 25x’25 vision.  When the Implementation Plan is complete, which we plan to achieve by January, in time for the next congressional session, all partners will have a chance to endorse the plan.

Since the whole process is by consensus, and the 25x’25 goal is an ambitious one, it would be easy to believe that the Implementation Plan will turn out to either be watered down to the point where it does not say anything, or end up endorsing so many points of view that it would be ludicrous to call it a plan at all.

Having now participated in two conference calls and two days of face-to-face meetings, I’m happy (and somewhat surprised) to report that we’re actually managing to form a consensus among a large group of people and organizations you would not expect to get along under ordinary circumstances.  For this, I can only shake my head in wonder at the diplomacy and perseverance of the Steering Committee.  They managed, though two days of what could have turned into a verbal free-for-all, to keep us all focused on the need to work together to reach the very ambitious goal we’ve all agreed upon.  (In that same spirit, and understanding that many of the participants have been willing to voice their true opinions and step away from the party line, I will not name any names here.  This also has the advantage of covering for my lousy memory for names.)

How do they do it?  By keeping us focused on the fact that we all agree on the goal: 25% of our nation’s energy from renewable sources by 2025, and reminding us that we’re never going to get there by half measures.   The second thing they did was keeping the discussion focused on “Yes, if…”: continually reminding people to stay in the mode of working together, and instead of thinking about all the reasons that something was impossible to accept, to instead say “I could accept that if it were this were also to happen.”

So my kudos to the people I met on the steering committee.  I was impressed.

Read the rest of this entry »

Comments (3)

You Can’t Hide from Peak Oil in Big Oil

Last week, Russian Natural Resources Minister Yuri Trutnev signed an order to cancel part of Shell’s Sakhalin-2 license on environmental grounds.  Russia is also pressuring Exxon about cost overruns in a related project.  A triumph for environmentalists over Big Oil?  Hardly.

shell.jpgMost analysts agree that this is an attempt by the Russian government to renegotiate an oil and gas deal struck when prices were low.  Thinking back on what Russia did to Yukos, and Chavez forcing foreign oil firms to renegotiate contracts in Venezuela, the trend is clear:  Countries rich in fossil fuels are increasingly re-writing the rules to their liking, with little regard to the desires of foreign capital.

Given that 90% of the world’s oil and gas is controlled by state owned firms, private companies have little bargaining power, yet desperately need access to new reserves. 

Big Oil needs Russia more than Russia needs big oil: they’re going to have to settle for a much smaller take than they negotiated 10 years ago.  As oil prices rise in response to the peaking of world oil output, realpolitik will continue to trump contracts.  Western, publicly held oil firms will be the losers, as will their investors.

How can we invest to protect ourselves from rising energy prices, if Big Oil is at the mercy of every oil-rich dictator around the world?   I see two choices: fossil fuel reserves in western countries: coal mining companies and tar sands, or renewable energy sources.

Tar sands and coal both have the problem of causing high greenhouse gas emissions.  The process of extracting oil from tar sands releases 80kg of greenhouse gasses per barrel of oil extracted (and that is before the oil is used.)  The extraction of tar sands has caused Canada’s greenhouse gas emissions to increase 24% since 1990, despite the fact that they are obligated under the Kyoto protocol to reduce emissions by 6%. 

Coal is also carbon intense.  So while both coal and tar sands are relatively safe from political risk due to opportunistic regimes, both are likely to become relatively less economic in the face of possible restrictions on greenhouse gas emissions. 

Oil Shale is a boondoggle, and requires even more energy to extract than tar sands. 

This brings us back to investing in renewable energy and energy efficiency companies, both of which will benefit from rising energy prices and restrictions on greenhouse gas emissions.  The problem here is that many of them are start-ups with little or no revenues, let alone earnings.  Right now, I like energy efficiency best, since many renewable technologies have been the subject of a feeding frenzy over the last year.  Although things have calmed down over the last couple months, energy efficiency is still more economic than most renewables, and subject to a lot less hype.

Comments off

Watts and Revolts- more Intermountain Rural Electric controversy

 

In the September issue  of Watts & Volts, IREA management attempts to make three arguments:

  1. They say the investment in Comanche 3 will save their customers money relative to gas generation.
  2. “There is no way to produce large amounts of reliable power without CO2.”
  3. They attempt to brand members who oppose their actions as extreme environmentalists who want to ruin our economy and send us back to the Stone Age by imposing gigantic taxes on CO2 emissions.

None of these arguments hold water.  I will deal with each in the order I’ve listed them above. Read the rest of this entry »

Comments (2)

That “Free” set-top box isn’t free

Here’s an article from Reuters about the hidden costs of set top boxes… up to $76 a year in electricity bills for a cable set-top box.

This is one of those opportunities for energy conservation that I really like to push: you not only can save energy, but money as well, and it does not require sacrificing quality of life.  CFLs and Passive Solar architecture also come to mind… there are so many energy saving opportunities that pay for themselves, it breaks my heart.

Most consumers don’t see the money or electricity they’re wasting here, and so they don’t know that they need to be more discriminating.  These hidden cost provide a great opportunity for useful government regulation.  Requiring that A/V equipment have a sleep mode that uses 1 watt instead of 30 watts would only add marginally to the cost of most equipment (See this great Economist in-depth article on the subject from this spring)  Oops- it’s only available to subscribers.   Some highlights:

 STRANGE though it seems, a typical microwave oven consumes more electricity powering its digital clock than it does heating food. For while heatictq237.gifng food requires more than 100 times as much power as running the clock, most microwave ovens stand idle—in “standby” mode—more than 99% of the time. And they are not alone: many other devices, such as televisions, DVD players, stereos and computers also spend much of their lives in standby mode, collectively consuming a huge amount of energy. Moves are being made around the world to reduce this unnecessary power consumption, called “standby power”.

In 1998 … standby power accounted for approximately 5% of total residential electricity consumption in America, “adding up to more than $3 billion in annual energy costs”…. results, published in 2000, revealed that standby power accounted for as much as 10% of household power-consumption in some cases.

…In 1999 the International Energy Agency, based in Paris, adopted Dr Meier’s proposed “one-watt” standard as a target for standby consumption. In 2000 Australia became the only country to adopt this standard nationally, in the form of a voluntary scheme that began in 2002. The aim is for most new products to meet the one-watt standard by 2012.

In addition to these various voluntary schemes, there have been some mandatory measures. Perhaps surprisingly, one of them was introduced by President George Bush, as a result of the California energy crisis of 2001. That year, Mr Bush issued Executive Order 13221, which states that every government agency, “when it purchases commercially available, off-the-shelf products that use external standby power devices, or that contain an internal standby power function, shall purchase products that use no more than one watt in their standby power consuming mode.” Given that Mr Bush is not renowned for his environmental credentials, this came as quite a surprise to those in the industry.

That law does not apply to consumers, and there are a ton of energy hog products out there.

What can you do?  Buy Energy Star  rated products.   I also have a tester called a Kill-a-Watt from P3, to see which of the gadgets I already have are energy hogs.  Some nonprofits have these available for loan, and if you live in Denver, I’ll loan you mine.  The Center for Resource Conservation in Boulder has a nice little calculator you can use with it, too.

If you find you already have products that use a lot of power on standby (and you probably will,) consider plugging them into a power strip, and turning them off that way.  That’s not always an option, though.  I found that my VCR/DVD combo uses 30 watts all the time, and it would lose it’s programming if I turned it off with a power strip.   I’m thinking about replacement.

I also think this is a great argument for laptops over desktop computers… laptops are designed to conserve power, because they have to make the battery last… most desktops are not.  If you want a big screen and a keyboard, you can always use a docking station. 

Comments off

Over the limit on ethanol?

What are the limits on ethanol production? 

According to NREL’s John Sheehan, at this months Energy Analysis Brown Bag, ethanol production from corn is set to reach 4 billion gallons this year, and 7.4 billion gallons per year by 2011, based on current and planned production capacity.  (As an aside, on August 10, the Douglas County News-Press published a very pointed editorial from him on the travesty of IREA funding disinformation about global warming.)   Given that a bushel of corn will produce 2.8 gallons of ethanol, that will make ethanol demand for corn in the
US 1.4 billion bushels in 2006, and 2.6 billion bushels in 2011.  Since the annual corn production in the
US is around
11 billion bushels, ethanol production is already having a significant impact on the price of corn for food.

As Lester Brown, President of the Earth Policy Institute pointed out in the Aug 21 issue of Fortune(the particular article I’m referring to does not seem to be available online), the market is already setting the price of agricultural commodities at their oil equivalent value.

Unlike Lester Brown and John Sheehan, I think this will be a good thing for the world’s poor.  Yes, food prices will go up, but the poor are not only consumers of food; they are also producers and potential producers.  In the
US, the percentage of poor rural residents has been
consistently higher than the percentage of poor urban residents throughout the last 50 years.   In
Africa, the world’s poorest continent, farmers can often not make a living because they
cannot compete with subsidized first-world farmers.

If world food prices rise because of demand for biofuels, this may at last reverse a great injustice, where subsidies for first world farmers have prevented third world development.  Allowing myself to get wildly optimistic for a moment, if fuel demand permanently boosts agricultural commodity prices (which seems very likely), that might even open the way to removing subsidies for European and North American farmers.  The Doha round of world trade talks failed in large part because of rich world unwillingness to cut agricultural subsidies, which is a great shame, because cutting subsidies would be a great boon to first world taxpayers, as well as third world farmers.

I think the best way to play the biofuels boom as an investor is by betting on the trend of rising agricultural prices.  While large agricultural companies like ADM have already seen the benefits of this trend, the currencies of third world agricultural based economies should benefit, as well as the price of agricultural land in the US.  Much US farmland may benefit twice from renewable energy, since land in windy areas also has the opportunity to gain income from wind leases.  This was a large part of the theme of the Intermontain Harvesting Energy Summit I attended this spring.

On the downside, stimulating agricultural production can lead to deforestation.  Greenpeace can push for all the moratoriums it wants on soy from deforested areas, but that won’t keep soy oil or ethanol from deforested areas going into our tree-hugging gas tanks.  Global commodities, such as soy, corn, soy oil, and ethanol will just go to countries and companies who don’t participate in the boycott, removing their demand from the world market, and lowering the world price for everyone else.  This is the same principle we use in our favor when we buy Green Power: the actual electrons running my laptop are probably from a coal fired plant, no matter if I pay for green power or not.  What I’m actually purchasing with green power (in theory… may green power markets still have kinks that need to be worked out) is the fact that I’m stimulating green power production as much as I would if all my power actually did come from green sources.

Another worry about the rapidly rising biofuels capacity is distribution.  John Sheehan’s estimate of 7.4 billion gallons of ethanol in 2011, and 700 million gallons per year of biodiesel would amount to a around 5% of gasoline consumption and less than 2% of diesel consumption.  Since the current fleet of engines can run with no problem on 10% ethanol (in
Brazil “gas” typically contains
25% ethanol.), we would not need to use any E85 to use all the planned ethanol production.  Similarly, B20 can be used in all but the coldest parts of the country year round, so converting just 2% of diesel consumption to biodiesel could also be accomplished through existing distribution.

I find it likely that the constraints on biofuel production will come in the form of the price of the feedstock, which will be driven by oil prices.

While ethanol and biodiesel will be necessary parts of weaning us off our dependence on oil, current technologies cannot go very far to getting us there without a much greater push towards more efficient automobiles.  Raising average fuel economy by just 10% would reduce fuel use and greenhouse gas emissions over twice the amount the flat-out biofuels production we’re seeing will. 

We can easily double the fuel efficiency of our current fleet with a combination of plug in hybrids (powered by cheap wind) and more efficient engines.  Only when we’ve done that can we hope that cellulostic ethanol and biodiesel can start to supply our remaining fuel needs. 

Comments (1)

Wave power squatters

According to Verdant Power, Oceana Energy Co is blocking wave power development at as many as 12 prime sites in US waters.   An article in Cape Cod Online also makes this accusation.

 This is an example of teething problems in regulation for an new industry.  The Federal Energy Regulatory Commission’s (FERC) procedures allow anyone to apply for a preliminary permit, which effectively ties up a site for 3 years while the applicant studies the feasibility of using the site.  If this process is being used, like late-90s Cyber Squatting to effectively hold prime sites for ransom with no real intention of ever developing them, the regulatory system needs fixing.

 The good news is that now is the time to be fixing the regulatory system for ocean power, where the technology is still in its infancy.  Imagine if all the prime sites were taken up not by squatters, but by real ocean power farm using poor technology.  If the best sites have to wait 5 years to be developed, and the regulatory system gets fixed in the meantime, that will probably end up being a good thing: all the best sites will then be available for much better, more resilient, higher power producing technology.

According to a lawyer and family friend who did legal work for early wind farms, there are still wind turbines in Tehachapi Pass from the early 80’s which are no longer functional, never produced much electricity, but can’t be taken down, because the original investors would be hit with gigantic back taxes if they were decommissioned.  Maybe a little wave squatting will keep much of that from happening for wave power.

Comments off

Getting Steamed about Global Warming

I need to rant.  A local co-op utility, IREA, just south of the
Denver metro area, just came up with $100,000 of their rate payer’s money to a
global warming apologist.  See an article about it at the Denver Post.  Fortunately, the reporter had the good sense to go to my friend and associate Phil van Hake, who was very clear about how idiotic this is.

Just to set the record straight:

  1. Global warming is not longer controversial in scientific circles.  Just read any relevant publications from the National Center for Atmospheric Research.   I chose them simply because they are government funded, and considering the stance of our government, they’d probably pooh-pooh global warming, too, if it were possible to do so and still maintain some shred of scientific integrity.  If that’s not a good enough source, I was just reading the latest issue of the Economist, (hardly an environmentalist rag), and where they discuss the continuing heat wave in much of the US.  No, we can’t absolutely attribute this particular heat wave to global warming, but the pattern of erratic and hotter weather is completely consistent with climate change models.
  2. Suppose you’re playing dice, and your opponent keeps on getting lucky rolls.  You might assume his luck is due to chance, but if someone later tells you that he was caught with loaded dice, do you then think to yourself, “He seemed like a really nice guy.  I’m sure he was unjustly accused.”?   That’s the game we’ve been playing with climate change: luck has not been going our way, and most reputable scientists are telling us the dice are loaded.  Isn’t it time to get up from the table and cut our losses?
  3. IREA is a CO-OP.  It should be spending money trying to increase the welfare of its members.  Instead, it’s spending their money lying to them.  When Exxon lies to us, at least I understand their management is doing it because they believe that those lies will lead to greater profits for their shareholders. 
    I think they (the Exxons of the world) are wrong, because when public opinion catches up with scientific reality, we will start enforcing strict carbon emissions standards, and companies that are not prepared for that eventuality will be hurt.  But IREA has no such excuse: they exist to serve their members.
  4. IREA is not alone in giving Pat Michaels moneyin his attempts to debunk climate change.  He’s an industry apologist, and does bad science.  Michaels has a history of threatening to sue people who say this sort of thing about him.  I’d love to have this discussion with him in a public forum such as a court of law.
  5. Here are some other sites having discussions about this: http://www.realclimate.org/index.php/archives/2006/07/disinformation-you-want-it-ireas-got-it/; http://mountainpower.blogspot.com/

8/7/06– Colorado is far from alone in having to deal with obstructive government.  I just read a scathing editorial by RENEW Wisconsin  Executive Director Michael Vickerman on a so-called planning report from the Wisconsin PUC.  Wall Street has woken up to the need for renewable energy and energy efficiency, and main street is not far behind, but that does not mean that the bureaucrats are are going to wake up and smell the coffee any time soon.  What we have here are people who made up their minds long ago about coal-fired power generation, have supported coal as the “least cost” alternative for decades, and now that the facts have changed, they are fighting a furious rear-guard action to justify their past mistakes. 

To quote Stan Lewandowski, IREA General Manager, “A carbon tax or a mandatory market-based greenhouse regulation system would erode most, if not all, of the benefits of the coal filed generation.”   That is absolutely true.  If the true costs of coal fired generation were taken into account (which is what a carbon trading system, tax, or regulations should be designed to do), coal would have no price advantage.  Only someone wedded to coal as a generation technology would think this was a bad thing.

To quote John Maynard Keynes, “When the facts change, I change.  What do you do, Sir?”

Comments (2)

« Newer Posts · Older Posts »
Follow

Get every new post delivered to your Inbox.

Join 150 other followers