Sunday, December 30, 2007

Evolution of Thought or Spin?

There's a rather interesting article on the front page of the Washington Post that quite a few are talking about. It leads with the possibility that President Bush is ceding ground in the climate change legislation front, and looking for non-Kyoto-based alternatives as solutions:

For years, Bush bristled privately at what he considered sky-is-falling alarmism by the liberal, elitist Hollywood crowd. The clatter over climate change, according to friends and advisers, seemed to him more like a political agenda than a rational response to known facts. But ever so gradually, they say, Bush's views have evolved. He has found the science increasingly persuasive and believes more needs to be done, especially after a set of secret briefings last winter. A former aide said Bush's staff even developed models for a market-based cap on greenhouse emissions.

Now Bush bristles not at the Hollywood types but at the notion that he does not care. At an end-of-the-year news conference, he spent more time answering a question on climate change than on any other inquiry, outlining his approach in detail to dispel the notion that he does not have one. "I take the issue seriously," he said, later repeating the phrase. "And we're developing a strategy that will deal with it, and an effective strategy."
Typically, I find it difficult trying to separate the partisanship and the spin from genuine political developments. This article feels no different. But rather than get embroiled into any kind of debate, I'm just going to follow this article with what I believe are a few countering sentiments. I have a specific viewpoint on the matter (which is why I chose the articles that I did), but others may believe there's more to this article, than I.

Hard Choices on Climate Can Wait for Next President, Aides Indicate

Bush Faces a Long Legal Battle With California

Bush and Global Warming in 2008

Saturday, December 29, 2007

Oil limits

Last month, I posted on an interesting WSJ article that discussed a plateau in oil production. In it, I said:

The idea of oil production reaching a "constant" level of output that it can't push through sounds suspiciously like a natural limit to me. The article references 100 million bpd as that limit several times. I'm not implying there's a natural law from which we can't deviate, but given the plethora of challenges currently found in oil discovery, drilling and funding, I wonder what happens north of 100 million bpd. Does each marginal barrel have an increasing incremental cost of extraction? Does it cost $150 per barrel to go from 100 million to 105 million bpd say?
Returning to this topic, I came across a great post a few days ago (yes, I know, but the holidays area time consuming endeavor) with a more in-depth look at the fact that "forecasters are converging on 100 million b/d" (h/t The Cost of Energy):
While the latest mainstream energy forecasts don't predict a peak or plateau, they do see little more than 100 million b/d of conventional oil output by 2030 -- the end of the forecast period. Both Exxon Mobil's new long-term outlook and the latest World Energy Outlook from the International Energy Agency (IEA) project conventional oil production of 105 million-106 million b/d against total liquids supply of 116 million b/d.
Both links are worth a read.

Friday, December 28, 2007

Carbon capture and storage

Just wanted to highlight something that I saw in Greentech's weekly email. Filed as a "something to watch":

Meantime, Shell and StatoilHydro said Thursday they would scrap plans to build a gas-fired plant with technology to capture and store greenhouse gases in Norway (see stories from Reuters and The Times). The companies said the project was too costly to be economical. The news came after BP cancelled plans to build a carbon-capture center in Scotland in May, after a government decision on subsidies was delayed.

PV solar data in 2006 and 2007 - (less than meets the eye?)

According to some reports, there has been some impressive 2006 and 2007 growth in the PV solar space. The actual report is here. Diving into the numbers however leads me to some more conservative conclusions.

  • Annual PV production increased to 3,800 megawatts globally in 2007, up an estimated 50 percent over 2006. Cumulative global production is now at 12,400 MW. Since 2002, production growth has increased 48 percent each year.
The usual caveat is that the production capacity base has been so low for so long, that 12.4 GW (non-peak) is an infinitesimally small amount of energy capacity globally. While these are good numbers that the media and investor community can publicize, I’m more interested in installation than production. Unfortunately, annual installation numbers aren’t as impressive, except in the US.
  • According to the 2007 estimates, annual worldwide installation increased to 2,287 megawatts, up 31% from 2006 when 1,740 megawatts installed.
Breaking down the numbers on a region-specific basis adds some additional color:
  • In 2006, Germany added 1,050 megawatts, and another 1,260 megawatts in 2007 (estimate). There are now more than 300,000 buildings with PV systems in Germany.
  • Japan, the United States, and Spain round out the top four markets with 350, 141, and 70 megawatts installed in 2006, respectively. Japan’s growth slowed considerably, while Spain tripled its PV installations in 2006.
  • The growth in U.S. installations increased from 20% in 2005 to 31% in 2006, primarily driven by California and New Jersey. Initial estimates for the United States as a whole indicate that PV incentives helped to achieve an incredible 83% growth in installations in 2007.
In that Germany has accounted for at least half of all global installation since 2003, its phenomenal growth has pushed overall global growth rates higher. Removing Germany from worldwide numbers reduces previous annual growth rates in PV installation from 2003-2006, but increases this year’s growth to 48%.

[Click picture for larger image]

While these are positive numbers, I always keep in mind that consumer adoption rates have been much higher for other technologies. While perhaps a bit apples to oranges, consider the following:

Several years of 40%-50% annual growth are very positive, but given that PV solar is on less than 1% of all American roofs, there will need to be many more years of 75% growth (and higher) to reach 10% and 50% adoption.

The top five PV-producing countries are also interesting.
  • Ranked in order, they are Japan, China, Germany, Taiwan, and the United States, with China expected to be number one by 2008. China almost tripled its PV production in 2006, and is estimated to have doubled it again in 2007.
Finally, unfortunately costs still don't appear to be coming down. While everyone is aware of the impact of the polysilicon shortage, looking at the past few years isn’t especially heartening. Although spun in this report as an overall decline, and 2007 numbers aren’t included, one can see the impact of supply constraints and strong demand.

Overall, the first set of numbers looking at the 2007 solar industry are positive. While these are good numbers (and if you’re a PV solar advocate, credit to the Earth Policy Institute for spinning them so strongly), 2007 and 2008 actual results may need to be much higher to justify the positive press and investor interest.

Making ethanol production cheaper and less carbon-intensive

Interesting new study by the EPA: “The Impact of Combined Heat and Power on Energy Use and Carbon Emissions in the Dry Mill Ethanol Process.” (h/t The Energy Blog).

While this may seem like a wonky and arcane study, energy usage is actually an important variable in the production of ethanol. Next to the price of corn, energy costs are the second biggest variable cost component of ethanol production and account for 15-20% of cost per gallon of ethanol. As almost all plants currently use natural gas for energy, the volatility of natural gas prices has increased the economic complexity of producing ethanol.

As seen in this chart, in the past five years, the monthly industrial spot price for natural gas has ranged from $3 to $12. While much of this risk can be hedged out, the overall trend has been an increase in natural gas prices - which has not gone unnoticed in the ethanol space.

In addition, the energy source (coal, natural gas, biomass, methane, etc.) will have a significant impact on the total carbon emissions of the ethanol production facility. Therefore, if considering a future where carbon has a price per ton, the choice of energy input could significantly increase/decrease the operating costs per gallon.

For example, Richard Plevin and Steffen Mueller conducted a study comparing the ethanol production costs in five dry-grind configurations – coal, natural gas and biomass (looking at CHP and non-CHP systems). They arrived at the conclusions that once $13/ton for CO2 emissions is reached, biomass is cheaper than coal with CHP, and after $37/ton CO2 emissions, natural gas is cheaper than coal (w/o CHP), but coal with CHP is still cheaper than natural gas.

Therefore, this research from the US EPA can have a good deal of relevance and impact. [a quick refresher on CHP might be useful...was for me]. Among conclusions of the study:

By efficiently providing electricity and thermal energy from the same fuel source at the point of use, CHP significantly reduces the total fuel used by a business or industrial plant, along with the corresponding emissions of carbon dioxide (CO2) and other pollutants….

...The analysis examines the impact of CHP on total energy consumption, including the impact on reductions in central station power fuel use and CO2 emissions caused by displacing power purchases with CHP. The analysis shows that the use of CHP can result in reductions in total energy use of almost 55 percent...

...[Among several natural gas CHP configurations] In Case 1, CO2 emissions are reduced by 21 percent on a pound-per-gallon basis...In Case 3, CO2 emission reductions from displacing central station power exceed the CO2 emissions at the plant itself, resulting in negative net CO2 emissions for the CHP system compared with base case conditions.

CHP reduces overall fuel use by 9 percent and CO2 emissions by approximately 5.6 percent in the case of coal. CHP provides a total fuel reduction of 8 percent in the case of biomass-fueled ethanol production and results in CO2 reductions of 91 percent.
A couple additional points about this study:
  • Measuring energy use MMBtu is certainly valuable, but I wish the authors had taken this to the next level, looking at the cost/gallon of CHP. There are different variables impacting “total energy cost” between the energy sources. For example, plant maintenance cost, transportation costs and time offline all increase for coal-fired and biomass systems, and capital costs vary among each type of plant. While cost per gallon adds an additional layer of complexity, I think this is a more relevant analysis for decision-makers.
  • There is little real discussion about the potential for biomass as an energy input. Although most ethanol plants run on natural gas, given the current political debate, and future environmental concerns, corn (and cellulosic) ethanol should really be produced in as sustainable a fashion as possible (ie using biomass-derived energy). In only using one potential biomass CHP system, they ignored a number of other methods to include biomass as a feedstock.
Still, I applaud the inclusion of a biomass CHP case study and the focus on emissions as a good first step. Overall, an interesting study and relevant to anyone modeling ethanol production costs.

Thursday, December 27, 2007

EIA Outlook - continuing frustration

I quickly linked to this article a few days ago, but I wanted to return to it as it points out a continuing source of frustration.

Two weeks ago, I wrote:

The unfortunate thing about the Energy Information Administration's (EIA) Annual Energy Outlooks is that reporters tend not to understand (or at least write about) the assumptions underlying these forecasts. Most articles I've seen on this topic over the past few years tend to highlight the very low levels of growth forecast in future renewable generation capacity. As the EIA is touted as "Official Energy Statistics from the US Government" I've always been troubled by this.
Just to offer one more example, this US News & World Report article makes the same mistake (ruining what is otherwise a solid piece).
[in discussing the potential of renewable energy supplanting fossil fuel-derived energy] This grand goal is not remotely in sight, even with wind and solar energy and ethanol growing at a breakneck clip. These renewables now provide just 3.6 percent of the nation's energy, and the government predicts their share will grow to a grand total of 4.2 percent by 2030. By those calculations, it sure looks like a fossil fuel future for America.
As a result, the meme continues: a fossil-fuel-based energy future is inevitable, and renewables will amount to nothing more than a drop in the bucket. Some restated version of the EIA assumptions wouldn't be that difficult to include, would it? From the EIA Outlook:
As in previous editions of the Annual Energy Outlook (AEO), the reference case assumes that current policies affecting the energy sector remain unchanged throughout the projection period. Some possible policy changes—notably, the adoption of policies to limit or reduce greenhouse gas emissions—could change the reference case projections significantly.

Nanosolar Update

As usual I'm late to the party, but I wanted to post a few thoughts about Nanosolar. On December 18, NanoSolar CEO posted the following on his company's blog (tangent: now that's message control):

After five years of product development – including aggressively pipelined science, research and development, manufacturing process development, product testing, manufacturing engineering and tool development, and factory construction – we now have shipped first product and received our first check of product revenue.
There was a great deal of press, both mainstream and non-traditional, around this announcement.

The thin-film technology and industry isn't particularly new (given the lightning fast evolutions in the solar segment), and a great overview of the industry is available from Earth2Tech. What is unique about Nanosolar is that it has figured out how to manufacture and mass produce this thin-film technology. Two strong overviews of the Nanosolar technology are available from Popular Science magazine (where it was Innovation of the Year) and Celsias:

Ultimately, the reason for this excitement is understandable:
[Nanosolar has] successfully created a solar coating that is the most cost-efficient solar energy source ever. Their PowerSheet cells contrast the current solar technology systems by reducing the cost of production from $3 a watt to a mere 30 cents per watt. This makes, for the first time in history, solar power cheaper than burning coal.
The one topic lacking from most of these articles, however, has been a discussion of the sunlight-to-energy efficiency concern. Traditional crystalline-silicon PV panels have an efficiency ratio of anywhere from 15%-17% (with some claiming up to 19%). Thin-film solar achieves half of that energy conversion. Thus while installation costs drop, the necessary installation size and area necessary (and thus overall system costs) rise significantly. Information from Nanosolar is difficult to find, but Celsias does some great research in this post:
Wikipedia has an updated snippet that adds to the mystery: "The company uses Copper Indium Gallium Diselenide—which can achieve up to 19.5% efficiency—to build their thin film solar cells."

Just because the material can achieve 19.5% efficiency, doesn’t necessarily mean that they are in practice. A little digging and I found a PDF in German... the document indicates they have an efficiency rating of 13.95%. This is pretty standard.
However, a commenter on the same post, Tom Rust, had an interesting follow-on, which I wanted to pass on:
Although I applaud Nanosolars efforts to bring low cost PV to market, users should be clear about modules cost vs installed cost vs long term power output cost. I read the same article mentioned, and the 13.95% is for a 0.5 square cm test cell - NOT production. They hint at 10% modules in production. Miasole has had trouble achieving production volumes in CIGS and has only a few 9% modules - most are 6% or less.

CIGS also has relatively poor lifetime - NREL reports of past efforts have shown 1-2% degradation per year, vs 0.1-0.4% per year for silicon. So modules will likely have only a ten year warranteed lifetime.

My guess is when production finally stabilizes they will be around 6-8% efficiency.
Ultimately, this is a great year-end development for Nanosolar and the solar industry in general, justifying some of the tremendous excitement and run-up in solar company valuations, and demonstrating why solar experts and some renewable energy thought-leaders have been so bullish on the space in the past few years.

Individual Empowerment and the Consumption of Energy

This is a longish lead-in to the first post (of many) on how consumers are growing increasingly empowered in their ability to directly manage their individual energy usage and consumption. As always, I welcome any thoughts/feedback in the comments section.

The tremendous advances of the telecommunications, computing and Internet industries have wrought far-reaching economic, political, societal and behavioral changes, many of which we’re only just beginning to see. To list all of them would take a lifetime and is far beyond the scope and expertise of this blog.

However, there is one development which I believe directly relevant to what I discuss here daily. I’ve long been fascinated by how in many industries (e.g media, retail, communications, entertainment) “the Individual” has been empowered at the expense of the larger corporate entity, but to the benefit of the industry. One recent example I came across yesterday:

People once believed that the Net was going to transform where we shopped—that it was going to make physical stores obsolete. It hasn’t…What it has changed is how we shop…

…The results of this shift are obvious. First, consumers know a lot more about prices than they once did... It’s harder to create a sense of urgency around short-term sales…And the wealth of online product reviews and commentary has made the cues that stores use to shape shoppers’ perception of quality and value far less effective.

This doesn’t mean that consumers are impervious to retailers’ tricks…Still, there’s no disguising the fact that power has shifted from sellers to shoppers.
For other examples, think TiVo, NetFlix, open-source software, blog aggregators, eBay, Wikipedia, etc. Each allows its users to enhance and reshape their consumption experience while increasing the utility and efficacy of the products/services in question. More importantly, consumers, especially younger generations now anticipate and expect this capability to become available in a much broader swath of industries.

I know I’m generalizing excessively, but moving forward, I will be extending this concept of “individual empowerment” to energy generation, distribution and consumption as a key theme of this blog. Ultimately, this idea of individual empowerment is where I believe many of the most important opportunities in renewable energy lie.

To this end, I'm extremely interested in the policy, research and business models that reshape the Individual’s experience with energy – giving people demand-response technology so they can monitor their consumption, providing affordable and effective distributed technologies so they can generate their own power and sell the rest back to the grid via net-metering, powering their hybrid vehicle directly from this distributed generation rather than going to the gas station and recycling their garbage and waste for both power and profit.

Ultimately, the Individual is empowered, actively engaged in their own power consumption and generation, to their profit and the profit of the industry (and society and our environment) as a whole.

Research is beginning to bear this out. Consider this recent report from IBM:
Historically, the relationship between utilities and consumers has been rather lopsided – utilities had the power, both literally and figuratively. But the confluence of climate change concerns, rising energy costs and technology advances leading to greater consumer involvement is now radically redefining that relationship. Our recent surveys of 1,900 energy consumers and nearly 100 industry executives across the globe reveal major changes underway – a more heterogeneous consumer base, evolving industry models and a stark departure from a decades-old value chain. We believe companies need to prepare now for a participatory network that enables customers to choose from a wide variety of suppliers, actively manage their consumption and even sell back surplus power they generate. ..

….We anticipate a steady progression toward a Participatory Network, a technology ecosystem comprising a wide variety of intelligent network-connected devices, distributed generation and consumer energy management tools….

…Within five years…we believe sufficient supplier choice will allow meaningful consumer switching to emerge in most major competitive markets. Also…we expect utility demand management initiatives to expand dramatically and electric power generation by consumers to make tremendous inroads within ten years.
If you buy the concepts underlying this post, then this report is a must read. The accompanying survey is also insightful, although it makes me feel as though I’m putting a little too much faith in the typical energy consumer.

Other surveys point to similar findings. In one recent poll of 1,004 U.S. adults:
49 percent said they plan to make an eco-friendly New Year's resolution. Out of those making green pledges, 75 percent said they would most likely reduce energy use in their homes, 74 percent plan to recycle more, and 66 percent will cut their use of harmful chemicals.
A recent study by SmartPower on how best to motivate consumers to conserve energy draws some very similar conclusions:
Like any typical consumer, the participants in SmartPower’s study want to know what is in it for them. They yearn to be inspired. They do not want to be preached to. They want to feel that they are a part of a “we” approach. They want to understand and feel the real-world ramifications of their actions. They’re busy. They’re over worked. They want quick, simple tasks they can do that will make a difference. They want to feel smart and cool. They want to feel empowered and knowledgeable about saving money and saving energy.
The actual study, although qualitative, is an interesting read.

Moreover, building on this study’s conclusions, there are a number of interesting products and services that I’ve come across recently that directly tie-in to both the study and the concepts underlying this post.

While it’s older than the rest, I was fascinated by an article in this past July’s WIRED Magazine, discussing a very simple way to engage consumers in reducing their energy consumption:
Mark Martinez couldn't get Southern California Edison customers to conserve energy…Then he saw an Ambient Orb. It's a groovy little ball that changes color in sync with incoming data…Martinez realized he could use Orbs to signal changes in electrical rates, programming them to glow green when the grid was underused — and, thus, electricity cheaper — and red during peak hours when customers were paying more for power. He bought 120 of them, handed them out to customers, and sat back to see what would happen. Within weeks, Orb users reduced their peak-period energy use by 40 percent.
The article goes on to cover a number of technologies and ideas that could make energy usage “visible”. Nathanael Greene goes into greater depth on one of them - the Wattson.

I’ve also come across a number of other technologies and ventures pursuing the same objectives (of course, the ones listed here represent a tiny portion of what must be thousands of opportunities):
  • Get a Kit, Cut Your Home’s Carbon Footprint. “Earth Aid Enterprises…is offering…customizable Earth Aid Kits come with a variety of products to help you reduce the carbon footprint of your house, apartment or dorm room: appliance timers, oxygenating showerheads, compact fluorescent lightbulbs, LED nightlights that turn on and off automatically, faucet aerators, programmable thermostats, Smart Power strips and more.”
  • Hooking up a greenhouse gas meter. [previously written about here] “[IBM] has collaborated with Evergreen Energy to create what they call the GreenCert greenhouse gas meter…an Internet-based software program designed to collect real-time emissions data from sensors and other sources. It calculates the volume of greenhouse gases being released into the atmosphere by a company and certifies any reductions as credits that can be traded on carbon markets."
  • Kill A WATT – Watts Killing You? "Connect your appliances into the Kill A Watt™, and assess how efficient they are. A large LCD display counts consumption by the Kilowatt-hour just like utility companies. You can figure out your electrical expenses by the hour, day, week, month, even an entire year."

Ultimately, this idea of "empowering" the individual, so that they are cognizant of the impact of their energy usage and the value that they can create, is where I believe many of the most important opportunities in renewable energy and environmental sustainability lie. As I stated above, I plan on making these topics, and the many issues that surround them, a key focus of this blog moving forward.

UPDATE: It's a couple months old, but this is another great example: Gadgets to Spur Energy Conservation, about glowing lamps that manage and inform on energy consumption and conservation.

Monday, December 24, 2007


Given time constraints, only passing on a few stories and links I've enjoyed recently:

Who has the oil? Picture = 1000 words

The success of solar depends on storage. Will the technology underlying various energy storage solutions become the new "latest, greatest" technology in 2008?

There are innumerable barriers preventing the large-scale implementation and adoption of renewable energy technology. Certainly the past few years have knocked down the obvious easy barriers, such as "no one will invest in unproven renewables", "grid parity of renewables will never match traditional energy", "supporting green policy is political suicide". [and by 'knocked down', I don't mean to imply discussion has ended. Just that the impossible has been made possible]

Now the more complicated barriers are next. One, the challenge of overcoming "intermittency", could become a bigger topic of debate in 2008. I covered it partially here, but developing efficient and cost-effective storage solutions is going to be a key. Which is a horrendously long-winded way of describing the relevancy of this article.

Questions about biofuels, for the records. Pay attention to #1 and #7.

Power revolution. Good overview of some key renewable technologies. You'll be seeing a lot of discussion and writing around each of these in 2008 and 2009.

UPDATE: Corrected a few typos and a sentence that was really bothering me.

A couple welcomes

Wanted to welcome readers from Gristmill, (as David Roberts gave a link to this post), and the readers of Get Venture, one of the best blogs out there on venturing and entrepreneurialism.

Saturday, December 22, 2007

Ethanol Infrastructure

Something to keep your eye on is the build-out of ethanol infrastructure now that the Energy Act has been signed into law, with an RFS requiring 36 billion gallons of renewable fuel by 2022. [if you're keeping score at home 36 billion gallons would be almost 8 times the amount produced in 2007 (4.7 billion).]

Developing the ethanol supply chain at a pace matching the considerable growth in ethanol production and demand has been an issue in the ethanol industry for a while. This article in Ethanol Producer Magazine a few months back highlights many of these concerns:

Is the infrastructure and equipment in place to handle the production, loading, unloading, shipping, transporting, storing and delivery of ethanol and its derivative products—with all of their unique properties and compatibility issues—to the consumer's gasoline tank or store shelf?
One major concern has been the difficulty in using pipelines to transport ethanol. Pipelines would be the cheapest way to move ethanol from the middle of the country to the coasts, but ethanol producers are limited to far more expensive truck and rail transportation. Why? A number of reasons:
Due to its unique properties, ethanol-blended fuel generally can’t be shipped by petroleum product pipelines... This is mainly related to ethanol's affinity for water, which is a byproduct found at some level in all of the world's major petroleum pipeline systems. The ability to ship by pipeline is also limited because there are currently no pipeline networks near the majority of ethanol production facilities. Therefore, a separate distribution system is needed to get ethanol to the point where it is blended into petroleum-based fuel and loaded into tank trucks or railcars for delivery to retail and fleet operators. The costs of building a new pipeline in the United States are also extremely prohibitive with estimates as high as $1.1 million to $1.3 million per mile.
The American Petroleum Institute has a great backgrounder on the issue here (document download) while the Association of Oil Pipe Lines has a great presentation available here.

This topic certainly requires much greater analysis and coverage than one post, but I wanted to highlight one example I came across this week. Despite the challenges, the ethanol and oil industries are feeling optimistic that they can solve the issue:
The burgeoning U.S. ethanol industry is looking longingly at existing oil product pipelines for transporting the alternative fuel, an idea almost unthinkable a few years ago because of contamination fears...

..."We have been engaged in research on this," Steve Baker, a spokesman for the Colonial Pipeline, the country's largest oil products pipeline, said in an interview. "Early results are encouraging, but there is a lot more research required on our end." He said Colonial has worked with several major ethanol producers on studying ways to send the alternative fuel up existing pipelines or along new dedicated pipelines that could be built on the existing right-of-ways...

...Oil companies are cautiously optimistic that breakthroughs could be made. "The problems with water contamination are technical issues that need to be addressed; it's not that they can't be addressed," said Peter Lidiak, the pipeline director for industry group the American Petroleum Institute. He said the industry is researching whether sending pure ethanol, or fuel blends, via pipeline can be done without corroding the ducts. "The hope is that some of the first bit of this research will yield some good results within the next year or so, and then it will be a matter of time before the companies move it -- if the results look good," said Lidiak.
Again, there are not a lot of specifics in the article (although separately the AOPL is expanding its R&D efforts, and some companies are considering building pipelines). Still, I believe this is a topic and issue that will grow in prominence. And, given the mandate put forth by our government, it will likely become an area that receives increasing attention (and capital investments) over the next several years.

Friday, December 21, 2007

Extension of incentives and tax credits

Having covered this topic recently, as well as the importance underlying these policies here, I'll only point out some recent discussion on the topic. First, from Reuters (h/t Gristmill):

Leaders in both the Senate and House of Representatives vow to revisit the tax incentives next year, but so far have advanced no definite plans. "We're going to be back and we're going to get that vote more quickly than you think," Senate Majority Leader Harry Reid said on Tuesday.
Meanwhile, the president of the solar lobby group (the Solar Energy Industries Association), Rhone Resch, gave an optimistic interview to Cleantech:
"Although this bill didn't include an extension of the tax credits, we're optimistic that we will see another tax title move early in 2008 that'll include a long-term extension and expansion of tax credits both for solar and for wind," Rhone Resch, president of the Solar Energy Industries Association, told

..."There's no opposition from the White House or Republicans to extending the tax credits for solar, it's just a matter of finding the best way to pay for it,"
Resch's counterparts at the American Wind Energy Association have created a link for you to contact your elected officials. A slightly more detailed article is here from a couple days ago.

The Climate Group

In recent years, numerous business groups have sprung up, organized around tackling climate change (e.g. CERES, The Carbon Trust, Carbon Disclosure Project, US Climate Action Partnership, World Business Council for Sustainable Development, etc).

Having worked for CEO-driven social change non-profits in the past, I know these groups can be hit-or-miss affairs. Sometimes they serve solely as industry-boosting PR platforms, or old boy networks and are a waste of time. But if these groups can engage relevant and committed employees below the C-level at the member companies (while encouraging at least some CEO participation), I’ve found that they can accomplish a great deal – sharing ideas and best practices, building and fostering industry-wide networks and leaders, publicizing important industry-related milestones, etc. These business groups can have an especially significant impact if they address and help solve the lack of industry-standard “metrics” and/or industry-wide measurement platforms that are commonly missing in new or emerging industries.

So I wanted to quickly highlight a small bit of news from one of the good ones:

Four prominent corporations joined the ranks of The Climate Group this week to promote pragmatic climate change policy and demonstrate that companies can slash emissions but still make money. Goldman Sachs, Dow Chemical, Bloomberg L.P. and Florida Power and Light bring the organization's total membership to 44. The group was formed in 2004.
A press release with additional information can be found here.

I read The Climate Group’s report “In The Black” this summer, and found it insightful and useful. They've recently posted an executive summary that's a little more friendly. Their “Carbon Down Profits Up” series is also effective, especially as it focuses on the measurement challenge for companies involved in climate change. Finally, you may want to check out their “Viewpoint” section, which has a number of interviews with CEOs and thought-leaders in this space.

Thursday, December 20, 2007

Coal power - more plant cancellations than anticipated? - UPDATED

Great post regarding 17 distinct coal plant proposals that have been canceled in the past fourteen months. A few things stand out to me - the growing momentum in the last few months, the breadth of states involved, and the variety of stakeholders that are influencing or making these decisions.

I took the liberty of aggregating this information into a table, and did some additional digging. In addition to the 17 coal-plant rejections referenced above, I located an additional five cancellations or postponements:

[click on picture for larger image]
All told, I count 14GW in projected capacity additions that have been canceled or significantly postponed in the past year (not including the 8 proposed plants canceled in the TXU deal). It is also important to point out that a number of these rejected coal proposals included new IGCC projects (as opposed to your traditional coal-fired facilities).

This seems to be to be a significant trend on which I have seen only limited reporting (here and here for example).

Overall, in 15 separate states, the decision has been made to reject thousands of MW in coal-based future capacity additions, and to use some other energy technology. At least 20 separate utilities and power generators have been affected. Moreover, I don't see this trend of coal-plant cancellations slowing, given that since July, there have been 16 cancellations or postponements alone.

Yet if this is the case, why do we still continue to see articles such as this from the Economist, only a month ago ("Coal Power - Still Going Strong"):
In America, more coal-fired generation is being built than at any time in the past seven years, despite the threat of emissions caps, according to the Department of Energy.
I suspect that this specific statement of optimism stemmed from the DOE's May release of its report: "Tracking New Coal-Fired Power Plants" (out of the Office of Fossil Energy's National Energy Technology Laboratory), which stated that 90 GW in new coal-fired power plant additions was on the way:
A newly released Department of Energy report shows that many power producers are turning to coal as the most economic and abundant national resource for electricity generation....Ninety (90) gigawatts of new coal-fired power plants are under consideration or have recently become operational.
Contrast this statement with an updated version of the "Tracking New Coal-Fired Power Plants" (this one released two months ago), which was a decidedly more downcast affair, and made a far different claim [quotes taken from various sections of report]:
Historically, new coal-fired power plant development announcements are not valid indicators of actual new capacity installations. Current power plant development status indicates that approximately 1/3 of announced megawatts have progressed through permitting and/or into construction.

Actual plant capacity, commissioned since 2000, has been far less than new capacity announced. Year 2002 report of announcements reflected a schedule of nearly 12,000 MW to be installed by 2005, whereas only 329 MW were achieved.
At some point, this capacity has to be made up, either on the demand side through energy efficiency and demand response, or on the supply side - natural gas, nuclear, or renewable energy additions. Given the unabated growth in U.S. demand for electricity, coupled with the billions in forecast ed revenues that could be lost by energy companies (AES, AEP, Duke, Entergy), this is a trend that will be watched.

UPDATE: a couple months after I first wrote this post, I wanted to add a link to the most exhaustive list I've come across to date - Sourcewatch which describes 51 separate coal plant cancellations in 2007 (excluding the TXU deal)

Cost and performance assumptions for energy modeling

If you've ever had to model out costs and performance in renewable and traditional energy power generation, you know that finding data can be difficult - especially for the newer technologies.

To this end, I highly recommend this Technical Appendix from the Union of Concerned Scientists' recent analysis on the impact of potential national RPS ("Cashing in on Clean Energy"). The UCS report has made a number of modifications to EIA assumptions, and is far more aggressive (positively) in its treatment of renewable technologies' capital costs, capacity factors and learning curves and much less so for the traditional tech (coal, nuclear, natural gas).

Given my own concerns with some EIA assumptions and reports, I welcome the approach. Happy forecasting!

Growing interest in Ocean and Wave Energy

One of the things I noticed in the recently signed energy bill was the boost given ocean and tidal energy, under Sec. 291 – 293, entitled “Marine and Hydrokinetic Renewable Energy Promotion”. Overall $500 million was appropriated ($50m/yr for 10 years) exclusively in research and development, including the creation of several national ocean research centers. In the summer I got to sit in on some of the House testimony around ocean/wave technology, and was excited to see it make the bill.

Therefore, I expect to see more stories like this over the next few years:

Pacific Gas and Electric Company recently announced that it has entered into a long-term, two megawatt (MW) commercial wave energy power purchasing agreement with Finavera Renewables Inc. Located off the Northern California coast, the Humboldt County Offshore Wave Energy Power Plant will be developed by Finavera Renewables. The project is expected to begin delivering renewable, clean electricity in 2012.
A more in-depth look on the PG&E and Finavera deal, and other wave energy developments can be found here at Green Wombat.

At 2MW, the amount of deliverable energy is tiny, although , although according to the release, the technology is easily scalable, and according to the Green Wombat article, the expectation is for a 100MW “wave park”. More information on the technology can be found on Finavera's website here. I couldn't confirm this this could serve as baseload power, but my assumption is that it must be theoretically possible.

According to its website, Finavera recently closed a $2million private offering, and has a number of other wave projects in development. Meanwhile, PG&E is looking to develop other wave energy projects:
PG&E independently filed permit applications with the Federal Energy Regulatory Commission in February 2007 to develop generation projects that could convert the abundant wave energy off the coast of Mendocino and Humboldt Counties into electricity. Named "WaveConnect," these projects are currently undergoing initial resource, environmental, and ocean use assessments.
Additional projects are being developed around the world, especially in the "Saudi Arabia of tidal power" (Pentland Firth, a strait between North Scotland and the Orkney Islands). Even locally, Verdant Energy is trying to pull power out of the East River.

For a good overview of the current state of wave energy technology and the industry spring up around it, I recommend either of these two articles.

Wednesday, December 19, 2007

Recent perspectives on Ethanol - policy, prices and trading

Given the emphasis placed on renewable fuels in the new Energy Act (signed today by President Bush, albeit with great concern for proper credit allocation), I thought it might be useful to cover some recent biofuels-specific reading I’ve done in the past few days. The past year has seen an increasingly polarized and political debate (although not necessarily along party lines) between ethanol advocates and critics, and sometimes it can be difficult to wade through the morass.

Typically I find some of the most insightful postings coming from my old boss Nathanael Greene, a biofuels expert at the NRDC (see for example here, here and here). His most recent post, describing some of the behind-the-scenes efforts in developing a sustainable renewable fuels standard, is no exception:

My main area of involvement was the renewable fuel standard, which increased and extends the existing standard from requiring 7.5 billion gallons of renewable fuel by 2012 to requiring 36 billion gallons by 2022. As importantly as the number, the bill adopts the first ever global warming performance requirements and strict protections for sensitive lands… …On the bill specifics, the 36 billion gallon requirement includes 21 billion gallons of advanced biofuels, which are defined as renewable fuels other than ethanol produced from corn starch. 16 billion gallons of the advanced biofuels requirement comes from cellulosic biofuels, which are produced from plant material such as switchgrass or wood chips.

The bill requires all of the biofuels to h
ave lifecycle greenhouse gas emissions at least 20 percent less than gasoline. The advanced biofuels must all have emissions at least 50 percent less, and the cellulosic biofuels must have emissions at least 60 percent less. Importantly, we won wording changes that make the definition of lifecycle emissions broad enough to capture both the direct and indirect emissions caused by land-use change. …we also won clear parameters for sustainable sourcing of biofuels feedstocks that guard against the loss of native forests and prairie. These provisions also protect threatened, imperiled, and endangered species and public lands.
Well-planned and intelligent climate policy requires multi-stakeholder engagement (i.e. industry lobbyists and environmental groups, and all parties in between). At the risk of sinking into Dr. Phil territory, future climate and energy legislation must include the lessons of the past, needs of the presents and goals of the future. As Nathanael puts it:
So a small, but important step for Congress and the US towards real climate policy, a big step on biofuels policy, but still just the first steps in what will be a long march

Unfortunately, the debate over ethanol referenced above won’t be helped by articles such as one found in yesterday’s NYT, with the attention-grabbing (and simplistic) headline “Food and Fuel Compete for Land”:
For years, cheap food and feed were taken for granted in the United States. But now the price of some foods is rising sharply, and from the corridors of Washington to the aisles of neighborhood supermarkets, a blame alert is under way.

Among the favorite targets is ethanol, especially for food manufacturers and livestock farmers who seethe at government mandates for ethanol production. The ethanol boom, they contend, is raising corn prices, driving up the cost of producing dairy products and meat, and causing farmers to plant so much corn as to crowd out other crops.

The results are working their way through the marketplace, in this view, with overall consumer grocery costs up roughly 5 percent in a year and feed costs up more than 20 percent.
While I don’t want to blame the reporter for the editor’s choice of headline, it essentially becomes a “he said/she said” piece, with no clarity or counter beyond the talking points.

I contrast that with a WSJ piece I kept from over the weekend. While this article focuses on the fact that price of rice is at a 20 year high, it also provides a solid economic framework to explain the extremely high prices of all staple foods around the world. More importantly, the reporter doesn’t assume that corn-derived ethanol should receive most of the blame. Instead a more nuanced view emerges: (bullets added by me)
  • The global commodities boom that has lifted prices of everything from gasoline to gold is now elevating rice -- a staple food for half of the world -- to its highest level in nearly 20 years.
  • Rice's surge has complex consequences for the global economy….the ubiquitous grain is suffering poor harvests and tight supplies in some of the biggest rice-exporting and rice-consuming nations, just as demand grows in places like India and the Philippines.
  • The higher price is a boon for some farmers and investors. But at the same time, it is expected to contribute to a protracted bout of food-price inflation for the foreseeable future…
  • …Soaring prices are drawing myriad investors into the market. On the Chicago Board of Trade, the number of bets outstanding on rice futures contracts recently reached a high -- a basic sign that more traders see a chance to make money on rising prices...
  • … The story of rice echoes that of nearly all commodities, whether petroleum, copper or wheat. Prices for many commodities are surging thanks to booming demand from emerging economies like China…
  • ...Rising oil prices also make it costlier to grow and ship rice and other grains -- which, in turn, drives up food prices...
  • …Grains have been trading at or near historic highs partly because of a combination of growing demand for biofuels -- such as ethanol made from grain -- as well as a rising global population, which means more mouths to feed in the developing world.
  • In addition, the weaker dollar has helped to boost global rice prices, as most rice is traded in dollars. In Thailand, the world's largest rice exporter, the price of long-grain rice has increased nearly 20% since last year, according to Nathan Childs, senior economist at the Department of Agriculture.
I’m not ignoring the fact that using corn for ethanol can have some impact on global food prices, but it is important to keep in mind that high oil prices, changing developing world food consumption habits, an increasing population, a weaker dollar, low harvest yields and speculative commodity trading are all impacting both the demand and supply of staple foods (and thus their price).

Another good article on the boom in price of another staple (wheat) is here:

Finally, I’ll close on what I found an interesting footnote, showing that either the US Department of Agriculture isn't immune to the same simplifications. Despite describing multiple fundamental reasons underlying record high farm incomes, only one seems to matter – “Biofuels lead to all-time record farm income in the United States”: (actual report here)
The United States Department of Agriculture's Economic Research Service (ERS) has released its annual Agricultural Income and Finance Outlook, showing that the biofuels revolution that has swept the US has led to net farm incomes reaching an all-time high. ERS is forecasting net farm income to reach $87.5 billion, up $28.5 billion from 2006 and exceeding the 2004 record…. …The value of crop production is expected to increase by $30.5 billion in 2007, the largest annual increase since 1984.

Direct government payments in 2007 are expected to decline by $3.7 billion from 2006. Farm production expenses are forecast to rise to a record-level $254.2 billion in 2007. Average net cash income for U.S. farm businesses is projected to be $66,100 in 2007. This represents a 21-percent increase from 2006 and would be 23 percent higher than its most recent 5-year average.
Of course, much of this revenue will pass to large agribusiness, as opposed to smaller family farms.
While rural residential farms made up more than 6 out of every 10 U.S. farm operations in 2006, they are expected to account for less than 10 percent of U.S. net value added in 2007....Farm operations with $1 million or more in gross sales are few in number yet are expected to be the source almost half of U.S. agriculture’s net value added in 2007. While these farm operations represented less than 2 percent of farm operations in 2006, they are expected to account for more than half of U.S. livestock value of production and almost 43 percent of crop value of production in 2007.
Still, from an investment perspective, the U.S. farming industry is booming. Just one example – the Market Vectors Agribusiness ETF (AMEX: MOO) is the first ETF composed of companies that are primarily involved in the agricultural business and looks to track the performance of the DAXglobal Agribusiness Index (DXAG) Launching this August, it’s risen 25% in the past three months:

With the recent energy legislation, and macro-forces showing few signs of retreat, the U.S. agriculture business may prove a vibrant and growing industry over the next decade.

Tuesday, December 18, 2007

Iberdrola update, groSolar funding, energy trends, green collar jobs and oil watch

A few items of note today:

EDP to decide on sale of renewables business: the Iberdrola Renovables IPO isn't making much noise (although it is a huge traffic draw to this site for some reason), but Portuguese power company EDP is considering a similar path:

EDP will decide on the sale of 20 to 25 percent of its renewables business in the first quarter of 2008, EDP's chief financial officer Nuno Alves was cited as saying. Alves said in an interview...that some banks had shown interest in carrying out the sale of its renewables business, which includes NEO in Europe and recently acquired U.S. wind-farm company Horizon Energy. He said EDP's renewables business could be worth around 10 billion euros.

EDP plans to invest 7.6 billion euros until 2010 in NEO, which has wind farms in Portugal, Spain, France and Belgium. Portugal's biggest industrial group recently bought U.S. wind-farm company Horizon Energy for $2.2 billion.
We should see continued consolidation in the wind power industry over the next few years, and those companies with the capacity to go public or raise private capital will do so soon. As onshore wind nears approximate grid parity with traditional energy sources, wind finance becomes as much a real estate, scale and turbine sourcing play as anything else. Those companies with available capital and market leadership should be best positioned to take advantage of this maturing sector.

Meanwhile, a quick update on Iberdrola Renovables (IBR) – it saw a second day bump of almost 7%, before falling back and is now trading about 5% higher than its first day opening price.

groSolar Raises $10 million in Growth Equity Financing:
groSolar, a national solar energy firm, announced today that it has secured $10 million in a Series B financing…NGP Energy Technology Partners…led the investment round. Each of the company’s original investors (SJF Ventures, Calvert Social Funds, and Allco Financial Group) also participated in this latest round of funding. groSolar closed its $2.25 million Series A financing in September 2006.
While usually I’d leave this up to various cleantech investment blogs, there are couple things I wanted to note. First, there are several positive signs for groSolar in this news: solid but not excessive second round valuations, follow-on investments from all original investors, quick close for new funding round. Second, groSolar isn’t a pure technology play in the solar space, so much as a distributor and installer, in both the commercial and residential sectors. This is one small example of the growing maturity of the solar industry – that traditional business models (grafted onto high-tech plays) are seeing significant interest, funding and growth.

The World of Energy in 2007: just wanted to highlight this excellent post, which discussed 11 highlights and trends in energy this year. It also serves as a good demonstration of the diversity and breadth of opportunity in this space, but also the challenges in keeping it all straight. To really play in renewable energy, the perceived expertise necessary can sometimes feel overwhelming. Fluency in innumerable unique technologies, mastery of global, regional and domestic policy, familiarity with entrepreneurship, capacity to understand a variety of finance and investment strategies (project finance, VC/PE, debt, public offerings). The list is endless. Or you could just be a blogger and opine ad naseum, no skill set necessary...

Green Collar Jobs Could Fill Many Needs: I came across a similar report a year ago, when I read the Apollo Alliance’s New Energy for America report, detailing how U.S. clean energy investment could lead to 3 million ‘green collar” jobs, especially in inner-city neighborhoods, the manufacturing sector, and rural communities. The new report referenced above came out of the Ella Baker Center, and focuses on the Bay Area in particular, and how green business:
[has the] ability to provide green collar jobs to those lacking high school diplomas or work experience, or who were formerly incarcerated. These jobs -- which are blue collar jobs within the green economy -- can be found in non-profits, social enterprises and the public sector.

Oilwatch Monthly - December 2007:
1) Plateau production - Both the International Energy Agency (IEA) and Energy Information Administration (EIA) figures show that the plateau of global liquids production that began in 2005 recently ended due to a large production increase of 1.4 million b/d in September/October. This production increase has been sustained during October/November.

2) Total liquids - In November world production of total liquids increased by 55,000 barrels per day from October according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.55 million b/d, which is the all time maximum liquids production.

Where this gets interesting is in the actual report:
For the second consecutive month the International Energy Agency (IEA) has published figures showing a new all time high in world liquids production. As oil production increased from 85 million barrels per day in September to 86.5 million barrels per day in November, some breathing space has been created….

This new all time high brings to question whether those who called the peak in conventional crude in at may 2005 have been proven wrong. Called peak because that has so far been the month of all time high conventional crude production at 74.30 million b/d. If proven wrong by reality due to higher production, the case for a nearby peak in all liquids production is much less defensible.
Again, feel free to review the actual report here, for Oil Drum’s detailed monthly analysis of the present state of oil and other global fuels production.

Monday, December 17, 2007


Just a quick note welcoming readers of two insightful bloggers. Charles Morand, who linked to my one of my postings on Iberdrola (my more recent post on Iberdrola is here) from his great site You can also find the same article at Seeking Alpha. And also to Rob Day, of Cleantech Investing, who referenced my energy act overview in his excellent post on a proposed carbon policy.

Diversification in renewable energy

Most individuals operating in the renewable energy sector are aware of the challenge of “intermittency” found in wind, solar, and other renewable sources - i.e. wind/solar electricity output is variable by nature and thus cannot serve as a guaranteed, baseload power source.

Below, I discuss some of the concerns that scientists have raised regarding PV solar intermittency specifically, and then cover new studies indicating the broad potential of wind power to mitigate these concerns.

One issue with distributed photovoltaic solar involves the “waste” of solar PV-generated electricity, which theoretically occurs if PV reaches large US penetration levels. According to two studies from Paul Denholm and Robert Margolis out of NREL (unfortunately only one is available publicly):

The intermittency of solar PV...presents a set of critical challenges with respect to integrating PV on a very large scale into the electricity grid. Ultimately, this intermittency may limit the potential contribution of PV to the electricity sector.
Once PV provides 10%-15% of the overall electricity portfolio of a traditionally structured grid, the inflexibility of the current baseload system ensures that any additional PV generation will mostly be wasted.

This is due to the nature of the current U.S. electricity grid system and the difficulty for PV solar to match volatile demand due to its intermittency. Large baseload plants are limited in how far and fast they can drop or boost capacity to match demand (due to various costs, efficiency and timing reasons) According to these studies, past a certain level of penetration (10%-15%) PV solar can only augment existing capacity, and not replace it. On moderate or low demand days, PV electricity would be wasted in order to avoid interfering with baseload plant operations.
The two researchers found that under high penetration levels and existing grid-operation procedures and rules, the [utility] system had excess PV generation during certain periods of the year that increased PV costs—that is, the PV electricity had to be dumped. The limited flexibility of baseload generators, which cannot respond to rapid changes in load, produces more unusable PV generation when PV provides more than approximately 10%-20% of a system’s energy. [source]
However, two wonderful posts at The Energy Blog pointed me to new studies that may challenge this conventional wisdom.

The first study, out of Stanford, makes the claim that connecting multiple wind farms with some amount of geographic diversity creates a large and diversified wind power resource with enough reliability to serve as a baseload power source.
Interconnecting wind farms with a transmission grid reduces the power swings caused by wind variability and makes a significant portion of it just as consistent a power source as a coal power plant. This study implies that, if interconnected wind is used on a large scale, a third or more of its energy can be used for reliable electric power….

…The researchers used hourly wind data, collected and quality-controlled by the National Weather Service, for the entire year of 2000 from the 19 sites. They found that an average of 33 percent and a maximum of 47 percent of yearly-averaged wind power from interconnected farms can be used as reliable baseload electric power. These percentages would hold true for any array of 10 or more wind farms, provided it met the minimum wind speed and turbine height criteria used in the study.
I’m reminded of both diversification theories in finance, and aspects of the Central Limit Theorem, in looking at these explanation. Is there a statistical theory involving variance in systems, and being able to mitigate that variance with diversification of inputs? If so, could one of my much smarter readers please fill me in?

The Stanford study also discusses the concept of interconnecting wind farms to a common point, which improves efficiency and cost. Essentially, this strategy recreates the centralized power generation and distribution model which comprises much of the current U.S. electricity system. Those seeking to rebuild American electricity grid infrastructure around distributed power models may be disappointed. But power generators, utilities, and the various government entities that oversee/collaborate with these groups, may be more comfortable with centralized energy concepts. Equating a portfolio of interconnected wind farms to a large 1GW coal plant (in terms of T&D issues, etc.) could improve understanding and acceptance in these circles.

However, I was even more fascinated by a recent study from the Cambridge-MIT Institute (again h/t The Energy Blog), which focused on the potential outcomes for strategic energy security from developing a diversified electricity production system. This highly readable study posited some insightful results:
  • in order to explore the potential for geographic diversity, the study reviewed the correlation between wind speed and distance, and found that “sites far apart exhibit very low cross-correlation”. At 600km distance, correlation (r) was about 0.30, while at 800km, it dropped to 0.20.
  • in exploring “the percentage of UK sites that have simultaneously experienced calm conditions for one hour” from 1982-2000, it found that “there has not been a single hour in the last 15-20 years when conditions of total calm were experienced right across the UK”. Meanwhile, calm conditions lasting one day, “affect less than 2% of the UK with the remaining 98% of the UK experiencing wind at these times.”
By taking a planned approach to the development of wind power, the impact of distance on correlated output can be fully exploited within the UK, improving the reliability of wind power and minimising the additional backup capacity required due to the presence of wind power on the network. The additional backup required to support 20% electricity generation from wind is estimated at around 4GW.
However, perhaps most interesting to me was the attempt by the study to model the impact of various climate policy scenarios on electricity diversity.
Where no emissions target is imposed, there is a decline in diversity in all three scenarios. This decline is driven by an increase in the proportion of generation accounted for by natural gas. The implication of this fall in diversity is an increase in insecurity, as the electricity system becomes more exposed to one fuel source. By contrast, under an emission target of 60% there is a substantial increase in diversity under all three scenarios as the dominance of natural gas goes into decline.

These basic results prompt two observations. First, low carbon scenarios appear to be associated with higher diversity. Second, these results are largely driven by changes in the share of generation accounted for by gas.
Ensuring smart and strategic policy, and incentivizing markets appropriately can aid in the pursuit of energy independence and large levels of penetration for renewable energy.

Denholm and Margolis’ solutions for the PV solar penetration challenge include increasing the “flexibility” of the conventional system, meaning that base load plants can cycle down to lower levels, “dispatching” load more efficiently with smarter appliances or developing more effective energy storage system.

The Cambridge/MIT study suggests a “concentration charge” which could either “levy a surcharge on [energy supply companies] in proportion to the diversity index of their overall portfolio” or levy the charge “source by source to reflect the concentration of each source to the system.

So is the intermittency issue no longer a problem if you diversify your renewable energy “portfolio” across a geographically broad enough environment? Great news if so...

Saturday, December 15, 2007

Progress at Bali

Just wanted to highlight the progress at Bali. Most reports seem to be taking the "cautiously optimistic" approach.

The U.S. is joining almost 200 nations in a pact that lays the initial groundwork for a new global treaty to combat climate change. But the agreement offers few specifics and doesn't require the countries to make binding emissions cuts...

...Still, the four-page document produced during the talks included few details on how the international community will fight climate change, and is merely a first step in the process of creating a new treaty. Most language regarding specific targets for emission reductions was relegated to a footnote, due to U.S. objections....

...The agreement that was reached called on industrialized nations, including the U.S., to take "actions or commitments" to reduce emissions. But the term "action" allowed the U.S. to avoid the question of whether it will agree to binding emissions cuts as part of a new climate deal. Still, the pact created a framework that would leave the door open to the idea of making binding cuts down the road, which environmentalists hailed as progress.
Also, China and India are apparently making noises about joining the party:
Some say the most noteworthy advance from the meetings was a vow by developing nations, including China and India, to take "actions" to mitigate climate change "in a reportable and verifiable manner" for the first time.

Friday, December 14, 2007

Follow up on Energy Bill - more to come?

There are a number of concerns with the energy bill passed yesterday. The 15% Renewable Portfolio Standard was a nice to have, but the extension of various renewable energy tax credits and incentives is vital. I've written about this before, while others have covered the same topic as well.

However, I do want to point out this bit buried in the NYT coverage:

Separately, Congress reached a tentative agreement on a major energy package that it plans to enact outside the energy bill, according to a Senate Democratic staff member. The agreement, to be included in a broad government spending bill, would authorize the Energy Department to guarantee loans for various energy projects, making financing far easier.

The agreement would guarantee loans of up to $25 billion for new nuclear plants and $2 billion for a uranium enrichment plant, something those industries had been avidly seeking. It would also provide guarantees of up to $10 billion for renewable energy projects, $10 billion for plants to turn coal into liquid vehicle fuel and $2 billion to turn coal into natural gas.
[stepping on to my soap box] One hopes that Congressional Democrats, having achieved some success in pushing their clean energy agenda forward, and having gained positive press for the first time in months, don't fall back on this victory. The PTCs, loan guarantees and other credits and incentives are imperative if the U.S. renewable energy industry is to maintain its momentum. Already several years behind their European competitors, US companies need Congress to continue pushing this legislation forward until some kind of compromise can be reached and new legislation is passed.

EIA 2008 Annual Energy Outlook

The unfortunate thing about the Energy Information Administration's (EIA) Annual Energy Outlooks is that reporters tend not to understand (or at least write about) the assumptions underlying these forecasts. Most articles I've seen on this topic over the past few years tend to highlight the very low levels of growth forecast in future renewable generation capacity. As the EIA is touted as "Official Energy Statistics from the US Government" I've always been troubled by this.

As in previous editions of the Annual Energy Outlook (AEO), the reference case assumes that current policies affecting the energy sector remain unchanged throughout the projection period. Some possible policy changes—notably, the adoption of policies to limit or reduce greenhouse gas emissions—could change the reference case projections significantly.
In addition, the EIA AEOs have been rather...well...volatile in their predictions for renewable energy, as demonstrated by the change in the predicted annual growth rate for non-hydro renewables going back over the past 9 years of the Annual Energy Outlooks.

Again, given the assumptions above, one would certainly expect forecasts for US energy generation and consumption to change considerably in some years with the expiration of old policies and implementation of new ones. Just not every year. Thus, I've don't find AEOs useful in a predictive sense, but more as interesting indicators of the current government perspective on energy.

With this in mind the new 2008 EIA Outlook (an early release is available here) carries a few important changes in its assumptions:
As noted in AEO2007, energy markets are changing in response to readily observable factors such as the higher energy prices experienced since about 2000, the greater influence of developing countries on worldwide energy requirements, recently enacted legislation and regulations in the United States, and changing public perceptions on issues related to the use of alternative fuels, emissions of air pollutants and greenhouse gases, and the acceptability of various energy technologies, among others.

The AEO2008 reference case makes several important changes from earlier AEOs to better reflect trends that are expected to persist in the economy and energy markets. Key energy market changes identified by EIA analysts and reflected in AEO2008 include:
  • Higher prices for crude oil and natural gas
  • Higher delivered energy prices, reflecting both higher wellhead and minemouth prices and higher costs to transport, distribute, and refine fuels per unit supplied
  • Slower projected growth in energy demand (particularly for natural gas but also for liquid fuels and coal)
  • Faster projected growth in the use of nonhydroelectric renewable energy
  • Higher domestic oil production, particularly in the near term
  • Slower projected growth in energy imports, both natural gas and liquid fuels
  • Slower projected growth in energy-related emissions of carbon dioxide (CO2), which increase by 25 percent in the AEO2008 reference case from 2006 to 2030, as compared with a projected 35-percent increase over the same period in the AEO2007 reference case.
Most of the headlines on this year's report went to the considerable increase in projected oil pricing - as the EIA upped its 2010 oil price forecast by 13% and its 2030 price by 18%. But I did want to point out the stunningly large (relative) predictions for renewable energy capacity:
Excluding hydroelectric power, renewable energy consumption grows from 3.4 quadrillion Btu in 2006 to 6.7 quadrillion Btu in 2030, compared with 5.5 quadrillion Btu in 2030 in the AEO2007 reference case.
As shown above, excluding hydro, renewable energy generation (using kilowatthours instead of Btu) is now projected to grow at 5.5% annually through 2030. Compare this to last year's growth rate in renewable generation of 3.3% through 2030 and 2001's 0.70%. A significant change indeed.

Energy Act Overview

H.R.6 (a.k.a the "Renewable Fuels, Consumer Protection, and Energy Efficiency Act") passed in the Senate yesterday by an 86-8 margin. Nancy Pelosi and other House members say they will pass this bill shortly. President Bush today said he would sign this bill into law.

This morning, I spent some time delving into the specifics of the new Energy act to look at the key focus areas.

It seems the domestic automobile industry will be receiving a great deal of financial support for the pain of boosting fuel economy standards. Also of interest to me – the ocean and tidal research program, the interest in smart grids and renewable fuels infrastructure, the focus on energy efficiency (albeit with limited funding), the worker training program, and the targeted efforts on national energy security. The “abrupt climate change” bit killed me for some reason. More on what’s not in this bill (but what may be coming) later.

My summary of key aspects of the new energy act:

  • Increasing the production of clean renewable fuels (via a 36 billion gallon mandate by 2022, of which 21 billion needs to come from non-corn-based advanced biofuels)
  • Building renewable fuels infrastructure via research grants and a variety of studies, loan guarantees for renewable fuel facilities, and consumer-demand building activities with $200 million in total appropriations
  • Promoting energy efficiency via EE lighting, developing efficiency standards for a variety of products, EE labeling for consumer electronics products, boosting industrial efficiency with an annual $200 million appropriation.
  • Increasing the efficiency of products, buildings, and vehicles via R&D, grants and guarantees, focused on light-weight and plug-in vehicles (with $60 million annual appropriations for next six years), energy storage (with varying appropriations for different projects, totaling $230 million annually for next ten years) and advanced transportation technology (total $390 million annually for next five or six years)
  • Modernizing the electricity grid and boosting smart-grid initiatives via R&D and assorted directives ($100 million annually for five years specific to smart-grid)
  • Improving the energy performance of the Federal Government by essentially adopting all of the national policies that were cut from the original CLEAN Energy Act passed by the House
  • Assisting state and local governments in boosting energy efficiency by increasing funding and appropriations and providing various directives
  • Developing an energy efficiency and renewable energy worker training program, via state grants, research, training assistance and $100 million in funding
  • Funding ocean and tidal energy program R&D with $50 million funding for each of next 10 years
  • Promoting research on and deploying greenhouse gas capture and storage options, including technology demonstration and assessing national carbon storage capacity with $900 million appropriated over 5 years
  • Further studies on GHG emissions from natural ecosystems
  • Researching “abrupt climate change” including understanding indicators and mechanisms in order to improve climate models. Abrupt climate change in this context “means a change in the climate that occurs so rapidly or unexpectedly that human or natural systems have difficulty adapting to the climate as changed”. $10 million is appropriated for the research [Seriously? Let’s call this “The Day After Tomorrow” amendment.]
  • Improving the performance of green buildings, including establishing the Office of High-Performance Green Buildings, coordinating R&D, developing standards and public outreach. $20 million over five years is allocated.
  • Boosting fuel-economy standards (CAFE) to fleetwide average of 35 miles per gallon by 2020, establishes a corporate average fuel economy credit trading program and creates a “Fuel-star” program for cars similar to Energy-Star, R&D for advanced batteries and consumer awareness building programs. $125 million appropriated over 5 years
  • Prohibiting price gouging
  • Enhancing U.S. energy security including creation of global energy crisis response mechanisms, a regional Hemisphere Energy Cooperation Forum, adding Secretary of Energy to National Security Council and reporting on US energy security strategy
  • Studying laws affecting the siting of privately owned electric distribution wires on and across public rights of way.