As we all saw in the last class lecture, efficiency and losses play an intricate role in energy. However, we can all agree that increasing efficiency and limiting energy losses is imperative for energy conservation.
Before hybrid technology, the last drastic change to fuel economy was due to fuel management systems. Fuel injectors increase combustion efficiency by producing smaller droplets for the combustion process. Some of us may remember our parents’ old cars with carburetors and only remember fuel injection systems really making an appearance in the 1980’s. In reality they appeared on the racing scene as early as the 1950’s. In America, we’re fairly limited in our exposure to automotive racing technology and most of us would think it’s just a weekend where some guys get together and drive fast in circles. In reality, racing actually influences the roads on the highway.
Beginning in 2009, Formula One teams are planning to introduce hybrid racecars onto the circuit. Toyota introduced the Prius in Japan in 1997, so what’s so special about these racecars? Well, any amateur racer would tell you that you want the lightest car possible for racing and anybody can tell you batteries are heavy. So the race engineers opted to forgo the batteries for their racecars and store energy mechanically via a flywheel system called the Kinetic Energy Recovery System (KERS). These systems are projected to add only 55 pounds of extra weight to the vehicles. By being lightweight, it won’t add too much unnecessary load to the engine of an automobile (therefore not wasting extra fuel indirectly).
For the public market removing the batteries from hybrids is a huge concern. By eliminating the batteries, the environmental concerns with battery disposal are gone. Even if car manufacturers choose to keep the batteries and implement the system on a current regenerative braking vehicle like the Prius, the system would still reduce the act of draining and recharging of the batteries. As we may notice from our day to day activities, battery life of various electronics diminish with constant use.
With or with batteries, this system would be ideal for those drivers with a heavy foot at intersections. Since it’s mechanically based, the system is projected to be able to provide about 80 HP over approximately six seconds so that you can beat that pesky looking Jetta next to you. Unbeknownst to many drivers, it’s not your RPM that influences your fuel consumption the most; it’s the throttle position and the load on the car. One way I can think of implementing the system on automobiles on the road is to activate the KERS from a stop (when the load on the car would be the highest) to reach a coasting speed and then shift the load to the engine when the load would be lower.
Although this would definitely take some time to implement on automobiles, the concept is interesting and may work really well for those that have to floor their cars at every intersection. With the energy dilemma we face today, I personally won’t be surprised if KERS appears on the streets soon.
The following is a Youtube video of a similar system for those that would like to see the components of the system. Keep in mind that the KERS system implemented by the Formula One teams would be using flywheels for energy storage rather than springs and would be more complex than this system:
With the recent influx of Democrats into Washington, there has been much talk about the change in the United States energy policy. However, there is beginning to be a divide within the Democrats on what the policies behind the new energy policy need to be. The problem behind this is “most of the policy makers on Capitol Hill and in the administration charged with creating the legislation come from either California or the East Coast.” These congressman are the main proponents of pushing for renewable energy sources. This is a catastrophic problem for those who live in the Midwest. The congressman from the Midwest states are banding together to fight the strict regulations that are being proposed by the committee. If new regulations are passed based on California's legislation, then the Midwest will collapse because their entire economy is dependent on coal. The committee are against coal as a fuel source, but cutting that straight from new policy would cause an already crumbling economy to collapse.
The Midwest relies on coal for its use in manufacturing. For example, in 2005, “California derived only 21% of its electricity from coal; whereas, Ohio drew 86% of its electricity from coal.” Based on those figures, how can the policy makers from California expect Ohio and other Midwest states to be able to function without the ability to burn coal for electricity. It can be inferred from the graph that the states that rely the most on coal are where the centers for manufacturing are located. The representatives from these states agree that there needs to be restrictions against the amount of carbon dioxide that is allowed to be emitted it into the atmosphere, but they cannot have any new regulations that almost destroy their economies. They believe that a system like cap-and-trade would be able to work because their economies would still be able to function, but they would have to be more careful on how the coal is burned. The main question behind this new energy policy if it is enacted would it create jobs or destroy jobs. That is the main question because at this turbulent time in our economy it is important to make sure new jobs are created without the expense of eliminating current jobs. It will be very interesting to see how this all pans out, but it could possibly be the end of the automotive industry and other manufacturing industries that rely on coal.
There is much uncertainty surrounding the future of global energy supply but the fact remains that crude oil is a finite natural resource and continued consumption will eventually lead to a reduction in the total proven oil reserves on this planet. Reduction in proven reserves will likely lead to a point where global oil production begins to permanently decline. This point is commonly referred to as “Peak Oil.” There is much debate over when peak oil will occur and many analysts believe that it has already happened.
One of the main factors in determining when Peak Oil occurs and how fast the subsequent decline will be is the amount of proven reserves. As shown below, around 80% of the world’s proven oil reserves are controlled by OPEC.
The control of the world’s oil reserves by OPEC means that most of the future oil supply will come from these countries. OPEC has traditionally tried to control prices by supposedly regulating the supply side of the supply/demand equation. However, over the last year we saw oil reach record highs followed by a steep drop in prices. OPEC’s attempts to stabilize prices by varying production were pretty much useless and it was clear that demand had a far greater influence on price during the price decline.
Does OPEC have the ability to produce more during periods of high demand??? Based on the amount of proven reserves, you would think that OPEC would have the ability to produce large amounts of oil and would do so during periods of high commodity prices such as we have seen in the last 5 years. The following graph depicts the ratio of reserves to production for several countries.
(BP Statistical Review of World Energy 2008)
You can see that the Middle East is producing relatively little oil compared to its total reserves. There are several potential reasons for this:
1) They treat there oil as a “national trust fund” and want to save some for the next generation (how thoughtful) 2) It takes a long time to bring new wells online (possible but some of these fields are over 50 years old and a 10,000’ well can be drilled in about 40 days) 3) They think that prices will increase further in coming decades (likely, but there is significant risk of demand destruction due to new technologies replacing oil) 4) The OPEC countries are inflating there reported reserves
It is likely that the first three points do play some role in the low production by OPEC. However, I think that it is very likely that OPEC is overstating their reserves and that this will become a huge problem as we get further past the peak. In the late 1980’s, many of the OPEC countries made huge step ups in their reserve bases. This was likely due to changes in the cartels production policy which allows countries with more reserves to produce more. This causes incentives for the members of OPEC to overstate their reserves in order to gain more power within the cartel. In addition, there is further motivation to overstate reserves to assuage global fears of about oil supply which may force nations to consider alternatives to oil.
Whatever the case may be, if OPEC countries are in fact overstating their reserves, we will likely see negative effects as this resource is continually depleted.
In June of 1979, President Jimmy Carter made a dedication speech honoring the scientific achievement and proactive governmental involvement in the construction of solar thermal panels on the top of the White House. The 32 panel, $28,000 solar thermal energy system was anemic from an engineering standpoint, boasting the capability to supply hot water to the White House only during meteorologically favorable conditions, but paramount from a symbolic point of view. The press conference was a portentous occasion being the first (and last) on the roof of the West Wing, and more importantly because it marked a categorical shift in the environmental attitude of the United States Executive Branch. Carter was launching a "sweeping drive" to restructure America's energy portfolio - 20% of US energy consumption to be supplied by renewable sources of energy by 2000.
In a moment of idealogical clairvoyance, Carter admonished:
This dependence on foreign sources of oil is of great concern to all of us. In the year 2000, this solar water heater behind me, which is being dedicated today, will still be here supplying cheap, efficient energy. A generation from now, this solar heater can either be a curiosity, a museum piece, an example of a road not taken, or it can be just a small part of one of the greatest and most exciting adventures ever undertaken by the American people.
In a move no less symbolic, and sharpened by its irony, Reagan removed the system in 1981.
We've happened upon the proverbial fork in the Road, and not taken it.
Today, the US energy portfolio is comprised of 0.07% solar thermal and photovoltaic energy, but the industry shows signs of promise, especially compared to other renewable technologies (see below).
Thin-film technology, the next generation of PV cells, have the potential to reduce production costs by a factor of 10 or more without major efficiency losses. With the volatility of the crude oil market and continued "quick-learn" solar market characteristics due to technological breakthroughs, there may very well be Another Dawn for Solar Power. Currently, the PV market grows by roughly 30% per annum with an associated 0.8 experience factor (a doubling in PV market activity corresponds to an 80% price reduction per peak Watt). With even limited government incentives for PV installations in the form of tax rebates, feed-in tariffs, etc. the market can be catalyzed forward. The Japanese and German governments have been stellar performers in solar energy policy enactments - in Germany, a 350% increase in installed PV Wattage has occurred since 1995. Austin Energy already has such an incentive program: "Austin Energy offers customers one of the country's best solar photovoltaic rebates, at $4.50 per watt. This pays between 45% and 75% of the cost of installing a system."
Carter's words hold all of the relevance of their contextual climate even now and speak to the Baby-Boomer Generation's failure to heed the careful cautiousness of his undertones. The rhetoric found in Carter's Malaise Speech and in Obama's Inaugural Address has brought these issues to the forefront of the public discourse. Now we find ourselves in the midst of another energy crisis, one which is not simply a foreign policy predicament - as perhaps Carter's was, but one of society, environment, and human survival.
Across the cleantech industry in 2008, the pain was evident. Commercial-scale renewable energy developers suffered as most tax equity players suffered financial losses, thereby losing their “tax appetite”. Seed-stage cleantech suffered as Venture Capitalist’s tightened their purse strings and shifted focus to keeping existing portfolio companies alive. Public equity, both IPOs and follow-on offerings also dried up, forcing many cleantech firms to delay much needed manufacturing scale-up strategies. The nail in the coffin was a massive sell-off in energy commodities due to the downturn in global consumption. Lower demand for coal and natural gas used for electricity generation caused a sell-off to ripple through power markets and the global carbon and emissions markets - dropping carbon allowance prices in the EU-ETS, RGGI, and offset credit prices in the CCX, CCAR, and CDM markets. Renewable Energy Credits (RECs) also sold-off in many U.S. states making electricity produced from renewable energy generation assets less competitive in the market.
According to New Energy Finance, the newly elected Obama administration is looking to appropriate about $78 billion of the still-in-the-works $825 billion economic stimulus package to clean energy, energy efficiency, and smart grid technologies. This impressive amount of funding illustrates the new administrations long-term commitment to energy security and desire to rejuvenate the clean energy industry after a very challenging 2008.
The remaining challenge is to see how effectively new policy out of the House and Senate can deploy this capital. Unfortunately, a critical element to the bill given the current economic conditions has already been tossed out of the Senate’s version.
In the House version, project developers may forgo the benefit of the Production Tax Credit (PTC/ITC) altogether and instead receive the equivalent benefit in the form of a cash grant from a program administered by the US Department of Energy. This component was aggressively lobbied by the wind and solar industry just before Obama’s inauguration.
But in the Senate version, these DOE grants were tossed out. “Appropriating $78 billion dollars to clean energy without the DOE grants is the equivalent of turning the water tap on but not unkinking the hose”, industry lobbyists argue (New Energy Finance, Week in Review, 1/27/2009). This is because the economic downturn has dried up the tax equity that developers need to complete the bottom layers of the capital structure in renewable energy projects. Without sufficient equity capital, the project financing stalls before debt capital can be raised. The option to receive the DOE grants instead of federal tax credits is a quick-thinking patch to the bill that solves for the lack of tax appetite in the market today.
Many industry fingers are crossed that the Senate will recognize the current and foreseeable tax equity shortfall and agree to an alternative incentive structure.
In the investigation I performed for my post this week, I stumbled upon an interesting data set from EIA. They have tracked gas prices in several European countries and the United States weekly since 1/1/1996 and made that data available on their website.
The plot I've attached to this post shows all but one data series (Italy). All prices are tracked in USD/gal, as indicated on the plot. The scale on the bottom of the graph is supposed to be in 2 year segments but is instead 730 days, which works except on leap years, hence the odd date shift. I've chosen to show only data for the past 10 years, as it illustrates the same point. Gas prices both in the United States and in Europe follow roughly the same up and down trends. Both regions saw a meteoric rise in prices during 2007 and 2008 and an even more rapid decline with recent economic troubles. The huge gap between gas prices is largely associated with taxation. I did not want to fish around for primary sources for tax rates in each of these countries, but to illustrate the difference, I'll use US tax rates and UK tax rates.
I found gas prices in the UK using petrolprices.com and today's currency conversion from xe.com. At their suggested postcode (since I'm unfamiliar with locales in the UK) RG1 8EG, the average petrol price was 0.877 £/l (4.71 $/gal). In the UK, a duty of 0.5235 £/l is applied to unleaded petrol and VAT (value added tax) of 15% is applied to both the duty and the fuel itself. Stripping away these taxes leaves a base fuel cost of 0.24 £/l or 1.28 $/gal. In the US, the average tax rate is 0.45 $/gal. The average pump price, as cited in my last post, is 1.84 $/gal. That leaves a base unleaded gas cost of 1.39 $/gal. To compare taxation directly, US consumers pay 0.45 $/gal and those in the UK pay 3.43 $/gal.
In the UK and US, we pay about the same for a gallon of unleaded gas before taxes. After taxes, consumers in the UK (and other European countries with similar levels of taxation) pay significantly more than we do, despite having slightly lower per capita GDP. While many of these countries have used income from fuel taxation over the past century to build robust public transport infrastructure, providing mobility to lower-income persons and shielding them from high fuel taxation, I'm not convinced that now is not the time to begin moving our own taxation and development in the same direction. It is a shame that all the political capital in the world is undoubtedly insufficient to overcome the unpopularity that is sure to meet the idea of increasing federal gas taxes.
Newly elected President Obama just unveiled his 'American Reinvestment and Recovery Plan'. Part of this plan is a push for renewable energy, including a promise to double it in three years. Possibly more telling and exciting is the inclusion of a commitment for “3,000 miles of new or modernized transmission lines and 40 million 'Smart Meters' in American homes.” The reason this is important is because the current system cannot handle significant increases in renewable energy.
Our nation's industrialization and subsequent use of fossil fuels has given our society access to a switchable utility system. That is, when steam engine train conductors or coal plant operators wished to alter a supply of energy, they could simply add fuels to burn and convert to energy at any time they wished. Because of this, our electric grid is designed to simply deliver peak-load supply, i.e. the grid is built to have the necessary capacity for the maximum energy use on a hot day in the summer. If users are pulling more Watts from the system, grid operators can just switch the system to deliver more Amperes.
Renewable generation technologies including photovoltaic (PV) modules and wind turbines do not follow this model. These sources of energy cannot be controlled such as those provided by fossil fuels. These sources require the sun to shine and the wind to blow, respectively. For grid operators, increasing the use of these sources adds undesirable fluctuations of available energy. This is especially true for localized distributed generation sources such as solar panels on residential homes. Connecting these sources to the grid changes the makeup of the grid in unpredictable ways that make grid operators unable to properly evaluate system load requirements and locate system faults. Additionally, energy consumers cannot be expected to utilize renewable generation at the instant it is most abundant. Consumers are unlikely to dim their lights until the sun is bright or to complete their most power intensive computing when an impeding storm causes high wind speeds. Clearly, our electric grid will need to be updated in order to use more renewable energy.
Vehicle-to-Grid (V2G) technology is one possible way researchers hope to improve the stability and reliability of our grid when incorporating renewable generation. The idea, originating from University of Delaware Professor Willett Kempton, is that the electrification of our transportation fleet goes hand-in-hand with the inclusion of renewable energy in our grid. He and other researchers argue that the Lithium-ion batteries on fully electric and partially electric vehicles can be used to temporarily store and redistribute energy to and from the grid. This means that your future Prius may come with a two-way connection to the grid. Professor Kempton argues that because 95% of vehicles are parked at any given time, a significant number of electric vehicles could potentially end reliable concerns of variable energy supplies.
An analogy with a different technology that you are using as you read this post may help illustrate how this works. Imagine that our information superhighway was changed to where there was no storage involved. Each bit and byte had to be available at all times so it could be delivered instantaneously upon request by the consumer. This is how our energy system works today. However, due to Internet protocols and storage technology, we do not have those requirements. As you access this post you are utilizing storage components within the Internet structure, and as you read this post you are utilizing storage on your personal computer. In fact, one crucial component of a V2G system is information technology that tells the grid when and where to pull and deliver energy.
The city of Newark, Delaware, is now testing a demo V2G system. Professor Kempton envisions a situation where consumers will be compensated by energy companies to enable V2G to pull from their vehicles. The Smart Meters necessary for V2G could also be used to give energy prices that correspond to the demand. This would encourage the public to buy into V2G systems because they could opt to sell energy when the price was highest.
Of course, problems still need to be clarified and researched further including the impact of V2G on the life-cycle on the Lithium-Ion batteries currently installed on electric vehicles. However, hope is increasing for V2G as politicians accept the need to modernize our electric grid as we increase our use of renewable energy.
Remember the day when a cup of a Starbucks coffee is equal to a gallon of gas?
On July 17, 2008, the national average price for regular unleaded gas was recorded high $4.11 (www.fuelgaugereport.com). Today, the national average is $1.845, which is less than half of the highest price. Now the question is: will the price of a gas come back to a level of $4/gallon again? or will it still be the same as today?
According to an article in The Wall Street Journal, World News: Slowdown Depresses China's Fuel demand, the slowdown of China economy has resulted in the sharp drop of world fuel demand. China is ranked number 2 after U.S. for the world's largest oil consumer. The global economy crisis has resulted in downturn of energy demand especially in industrial sector not only in U.S. but also around the world.
The data from EIA (Energy Information Administration) Shows that U.S. motor gasoline consumption in 2007 is 390 million gallon/day. Analyst projects that oil consumption will be doubled in 2030. What is this mean? Oil price at some point will jump back up to a high level again. Crude oil was traded at $45.64/barrel earlier today but Analyst predicts that it will easily jump up to level of $70/barrel once the economy recovered.
Having recently traveled to Eastern Europe over this past Christmas break, I was able to experience first hand the natural gas crisis between Russia and the Ukraine. During my short internship for Hungarian Horizon Energy (HHE), I was able to observe first hand how such a large energy dispute could affect so many professionally and personally. Experiencing this energy crisis during my internship/ vacation gave me new perspectives of how energy is perceived elsewhere in the world.
Personally, it was interesting to see how the local economy and habitants of Budapest responded to the shortage of natural gas. During one of Europe’s coldest periods in the last decade (around 5-10 degrees Celsius), heat for all of Europe’s citizens was a very serious concern. Everyday on television I was bombarded with images of less prepared countries’ citizens inside their homes shivering in their fur coats and huddled by a wood burning furnace, while a cloud of their breath appeared as they spoke to the news reporter. Some smaller countries such as neighboring Slovakia suffered greatly from their lack of federal gas reserves. Budapest residents responded to Slovakia’s need when local and federal government asked home-owners to lower their thermostats by 2-3 degrees Celsius in order to preserve federal gas reserves and aid other countries. After understanding the greater affect of the gas shortage around Europe, it was hard to complain about the colder than usual hotel room I was staying in, or the discontinued use of our heated pool.
Professionally, I learned of the long time governmental contracts Hungary has with Russian energy sources. Because of these long-term contracts many other energy sources in Hungary suffer from a lack of need or interest. Over 60% of Hungary’s energy needs are serviced from Russia. Most Hungarians don’t even know the abundance of natural energy resources their own country could provide them. Hungarian energy companies such as HHE are forced to find other markets for their natural gas because of the lack of homeland needs. This often leads to a higher cost of HHE’s products because of added transportation costs and makes them less competitive in other markets.
I was surprised to learn in last Thursday’s lecture that only three percent of the United States (US) consumption of energy is attributed to non-hydroelectric renewable energy sources.With little prior knowledge about energy usage in the US I found this to be an astonishing statistic.I was previously under the impression that several US states, particularly California, were spending a considerable amount of time and money on developing the renewable energy sector.This startling statistic demonstrates that the US is still far away from utilizing renewable energy sources at a level that can help solve the mounting potential crises related to our energy consumption habits in the US.Unfortunately, the current economic situation facing the US may further delay investments in renewable sources of energy. After reading through some of the initial blog posts I recognized that this appears to be a common concern for many of the students in our class.
After searching around the web for news articles related to this topic I stumbled upon an article that addresses the affects the economic recession is having upon the solar industry.
According to an article published in the Los Angeles Times a few weeks ago the recession is having some immediate negative effects on the renewable energy sector, particularly for solar companies.The private start-up company, OptiSolar, Inc., which builds utility-scale solar farms, is now facing difficulties in receiving funding, forcing them to lay off nearly 280 out of 600 employees in their California offices.[1]Specifically, OptiSolar, Inc. has been unsuccessful in securing project funding to extend one of their photovoltaic (PV) panel assembly facilities, causing further job losses.The article notes that potential investors appear to be moving away from the solar industry towards companies with a more established history of profits and sales.To help alleviate this issue, OptiSolar, Inc. is now applying to receive loans from the US Department of Energy to continue building its PV facility and possible rehire some of its laid-off employees.
Additionally, economic woes have delayed the construction of a 550 megawatt solar farm in San Luis Obispo, the largest known proposed solar farm in North America. This promising project had already received support from the San Francisco based Power, Gas, and Electric Company who had agreed to purchase renewable energy in a long-term contract.Under California Law, utility companies need to comply with new state regulations set by the California Energy Action Plan (EAP) which require utility companies to meet 20 percent of their electricity needs from renewable energy sources by 2010 and 33 percent of their electricity needs by 2020.[2]
The EAP, amended in 2008, recognizes solar energy to be the most important source of renewable energy for California due to the state’s “abundance of powerful sunlight.”The EAP predicts that its renewable energy goals could be accomplished because California has received full permission and support from the California Energy Commission and the Federal Bureau of Land Management to build utility-scale solar facilities in the state.Some government funding for solar projects also appeared to be promising thanks to the California Solar Initiative, according to the EAP report.
Unfortunately, the economic recession does appear to be putting a halt on renewable energy investments. It’s a shame that at the height of such excitement over clean forms of energy unexpected economic constraints may control the future direction of energy projects.
[1] Maria Dickerson, "future cloudy for California solar farm," The Los Angeles Times, January 13, 2009. Available at: http://www.latimes.com/news/science/environment/la-fi-optisolar13-2009jan13,0,3613875.story
[2] State of California, "2008 Energy Action Plan Update," http://www.energy.ca.gov/2008publications/CEC-100-2008-001/CEC-100-2008-001.PDF
Where did the popular conception that Americans are afraid of nuclear power come from?
Are we actually reluctant to support nuclear power, or is it just that we've been told that we are supposed to be wary of it? Nuclear power is a "clean" technology, it's inexpensive for the return possible, it's safer than ever... and we're already using it across the country. There are 104 commercial nuclear generating units that are fully licensed by the U.S. Nuclear Regulatory Commission (NRC) to operate in the United States - and four of them are in Texas, two each in Matagorda County and Somervell County.
We just learned in class that nuclear energy comprises eight percent of the U.S. energy portfolio (2004 data). Worldwide, nuclear is used even less (6.33% overall in 2004). Certain countries have it figured out a bit better - France, for instance, has nearly 77% of its electricity generated by nuclear power, according to the Nuclear Energy Institute (NEI). And the French nuclear program is based on U.S. technology. If other countries were to promote nuclear energy technology as a major component of their energy portfolio, they would likely see a dramatic drop in CO2 emissions as well. Still, any country that has nuclear power capability also has nuclear weapons capability.
Looking at the homepage for the Nuclear Energy Institute, which features a happy family running across a green field and touts nuclear as "Nuclear: Clean Air Energy", I couldn't help but recall the infamous 1964 "Daisy" ad which scaremongered voters into supporting LBJ instead of Barry Goldwater, who had commented on the possibility of using nuclear weapons in Vietnam. This ad (and others like it) were meant to evoke fears of nuclear weapon use. Coupled with those "duck and cover" drills my parents' generation experienced as schoolchildren, the end result was the same: a whole generation of Americans grew up fearing nukes - and thus anything nuclear. Then President Carter banned reprocessing of commercial reactor fuel in 1977 to avoid the risks inherent in recycling uranium's fissionable waste products into new fuel and thereby separating out plutonium. That kind of killed the U.S. nuclear power industry for a while.
While those my age and younger (essentially, the Millennials) may have other irrational fears created by the media, for the most part we don't seem to share older generations' reluctance to use nuclear power, and in fact may support it more because of the "clean technology" associations. We have no generational memory of Chernobyl, of Three Mile Island, or any other near-disasters. We know (or should know) that it is more dangerous to drive behind a tanker truck carrying gasoline than a truckload of spent nuclear fuel - no one's ever been injured by the latter, according to a PBS Frontline special examining our nuclear phobias. I'd rather have a nuclear plant in my neighborhood than a coal-burning plant, and that's not entirely because I'm a renter - I'm more freaked out by particulates in my lungs, and acknowledge that I'm already exposed to radon gas from naturally occurring radon in my home.
I'm very interested to see what President Barack Obama will propose regarding investment in nuclear technology - he said while campaigning that he "[doesn't] think that nuclear power is a panacea" for U.S. reliance on non-renewable energy sources, but that it is worth investigating its further development. (His opponent John McCain's energy plan proposed building 45 new nuclear reactors by 2030.) The new White House homepage doesn't outline anything relating to nuclear power in its "Energy and the Environment" section, but stated goals are to"create millions of new green jobs", "reduce greenhouse gas emissions 80 percent by 2050" and "Make the U.S. a Leader on Climate Change". Investment in a U.S. nuclear energy future would nicely accomplish several of these agenda items.
And as for the waste storage problem? The NEI thinks they've got it figured out:
Components of an Integrated Management System:
interim storage of used fuel at a government-operated storage facility
advanced fuel reprocessing and recycling of used fuel to reduce the volume, heat and toxicity of nuclear waste and recover useful materials
permanent disposal of the byproducts of recycling and used nuclear fuel at a deep geologic repository at Yucca Mountain, Nev.
Reprocessing is key to this waste storage plan, so the U.S. would likely need a pretty good PR campaign to make that sound less dangerous. Nuclear energy - from generation to use to waste storage - definitely has its risks, but with today's technology and capability, the potential for nuclear to fill many of our energy needs seems like a better energy solution than some of the other types of technology we depend on daily.
Over the winter break, I traveled to South America to visit my relatives in Colombia for three weeks. Though I have visited many times, I am always stunned by the differences between life in developing world and the extravagance I enjoy as a middleclass American. Colombia has the 28th largest economy in the world according to the IMF, but its population is so large that it ranks 82nd in GDP per capita, which is roughly at median of all the world’s countries.
My perspective of Colombia is naturally limited because my aunts and uncles are fortunate to be either a part of the wealthy upper-class or the growing middle-class. However, the comforts they enjoy are markedly different from what is often taken for granted in the US. While it is impossible to explain all of the differences in this short post, I would briefly like to compare our household energy consumption. Comparing households is difficult because it energy usage depends on a variety of factors including the number of people, the size of the house, and the prevailing climate, so I will try my best to present all the relevant data.
Table 1: Comparison of Apartments in Warm Climates
Although my grandmother’s apartment in Barranquilla is much larger than my own apartment in Austin, she uses less electricity because she does not have central air-conditioning. Instead, she has a wall unit in every room and only runs the air-conditioning when she is in a room. If she is cooking or cleaning, the windows are always open and the apartment was designed to maximize air flowing through the windows. In contrast, central air-conditioning maintains my apartment in Austin at a constant temperature throughout the day. Considering my grandmother also has a washer and dryer in her apartment and I use the laundromat in Austin, she consumes significantly less electricity overall.
Table 2: Comparison of Family Households in Mild Climates
My dad has a brother and a sister living in Bogota who each has a family with three children. As Table 2 shows, their families use significantly less energy than my family in Houston. Although Bogota has cold nights, neither apartment has any form of heating unlike my family’s home in Houston. One family uses a significant amount of gas to heat their hot water heater and dryer. The other family uses approximately 8 ccf equivalent because they do not have natural gas tubing and rely on a propane tank to power the stove and electricity to heat the bath water. They also do not have a dryer, so they must wait two days for their clothes to dry.
Some relevant facts worth noting is that there is little variation between the electricity consumption from month-to-month in Colombia because the weather remains more-or-less constant given its proximity to the equator. In contrast, my family’s electric bill in Houston varies between 1400 and 600 kwh, while our gas consumption varies between 1 and 88 ccf depending on the season. According to the EIA, the average monthly household electricity consumption in the US is 936 kwh, which far exceeds the consumption of my middle to upper-class Colombian relatives. The average per-capita electricity consumption in Colombia is 828 kwh per year according to the Ministry of Mines and Energy, and this average includes electricity consumed across the industrial, commercial, and residential sectors.
This data is only a narrow snapshot of differences in energy consumption, but it gives me a greater appreciation for the amount of energy my family consumes in the US. I want to conclude by mentioning that in my four trips to Colombia over the past five years, I have seen many signs of remarkable growth and improvement. Colombia is only one of many rapidly developing countries that are aspiring to enjoy our standard of living, and a comprehensive strategy will have to be developed to supply this growing demand.
After reading Steve’s post and seeing I chose a related topic to discuss, I kind of feel like Kenny Bania following Jerry Seinfeld. Honestly, that was gold, Steve. Gold.
Anyway, during our class discussion regarding business models for utilities, the use of “decoupling” was mentioned and I realized that I have a somewhat limited understanding of how it actually works. What I do know is that decoupling is considered one of the best ways to promote energy efficiency. Like many, I believe the first step towards meeting our growing energy needs is by grabbing the low hanging fruit by pursuing energy efficiency. Therefore understanding the framework behind decoupling is important. More importantly, given the energy challenges we face today, it seems that any future utility model has to include something that promotes energy efficiency. The argument for this position can be made simply by looking at the success of decoupling in California.
California has the lowest per capita energy consumption of any state in the country despite being the second highest energy consumer overall (behind Texas, of course). Part of the low per capita consumption is likely due to the moderate weather that occurs throughout most of the state, however much of it must also be attributed to the success of California’s energy efficiency programs stimulated by decoupling. There is a great illustration of this in the California Energy Commission’s 2007 Integrated Energy Policy Report. The graph shows California’s per capita energy consumption compared to the rest of the U.S. from 1960 through 2004. What is interesting is that while the rest of the nation’s per capita consumption has steadily increased, California’s has stayed flat since the late 70’s. This timeframe roughly corresponds to the same period when decoupling was introduced (1979 for gas and 1982 for electric). Meanwhile, the utilities have enjoyed steady profits and have succeeded in working within the system.
If you are anything like me, decoupling is a challenging concept to get your head around because it runs counter to traditional capitalism. In the case of decoupling, governments break the link between sales and profits with the intent of creating an incentive for utilities to focus on efficiency rather than selling more energy. According the California Public Utilities Commission (CPUC), the mechanics of the initial decoupling legislation were as follows:
Utilities submit their revenue requirements and estimated sales to regulators.
The CPUC sets the rates by regularly applying adjustments to ensure that utilities collect no more and no less than is necessary to run the business and provide a fair return to investors.
Any excess revenue gets credited back to customers.
Any shortfall gets recovered later from customers (CPUC, 2007).
This system works because it aligns the incentives of the shareholder and the customer, and encourages energy efficiency. It is this framework that can be given the credit for the flat per capita consumption mentioned before.
In 2007, California took the system a step further by implementing “decoupling plus” which not only provides the set profits as before, but also pays utilities based on how much energy they actually conserve. At the same time, the new system provides an estimated return to rate payers of greater than 100% (CPUC, 2007). By economically benefitting both the consumers and utilities, and by helping governments meet energy demands while reducing CO2 emissions, the system is designed to be a win-win-win.
The long-term effects of “decoupling plus” remain to be seen. I am unaware of any preliminary findings on the overall per capita energy consumption of California since 2007, but given the success of the original decoupling initiative, I expect this plan to further the cause. The biggest pitfall of the system will of course be if the efficiency programs don’t save enough energy to reach the milestones that allow the utility to realize extra profits from the program. Along these lines, I would suspect that the primary challenges of implementing “decoupling plus” are: benchmarking initial energy usage; and determining how much energy efficiency measures have actually reduced consumption when accounting for confounding variables like consumer behavior and changes in weather patterns. I have no doubt this is very difficult and therefore it’s important for state and local governments to allocate adequate resources to ensure accurate measurements are obtained. Likewise, it’s imperative that a third party be responsible for conducting the studies as any participation by the utility or government would create a conflict of interest.
Regardless, it is programs like these that other states are starting to consider as they face increasing energy and climate challenges. As was mentioned in class and in Steve’s post, Duke Energy is proposing an even more aggressive form of decoupling plus called Save-a-Watt in which they would be paid 90% of the cost of each watt saved. Although opponents feel this figure is too high, I think it is this kind of compensation that will lead to innovation and accelerate the move towards energy efficiency.
In class Professor Webber mentioned that an issue he has with business models of this type is that they may not be sustainable. That very well may be true, but given the success of California utilities over the last 25 years, and the forecast of a 1/3 increase in energy consumption over the next 20 years (EIA, AEO 2008), the model has to be considered. If the utility business model must again adapt in the future, then so be it. The costs to society of not increasing our energy efficiency are too great to worry about that now.
Last class session, Professor Webber asked the following question: “What percentage of gasoline used in the U.S. would be replaced by ethanol, using current corn-based production technology, if every acre of corn was used for ethanol production exclusively” And the answer was “B. 11-25%” which we know is not sufficient in meeting the demands of the American public. But why turn to corn when there exist an alternative crop that is “estimated [to have] 25,000 plus uses, for producing food, fuel, medicine, paper, plastics, and even dynamite” (Bower, 46, 2003). This alternative crop can grow in approximately any habitat and it does not cut into the demand for food. This crop is Cannabis sativa L ( Grotenhermen, xxix, 2002), or better know was hemp. But the cultivation of hemp in the U.S. is currently banned. So my question is as follows: Why the ban on a plant that could potentially provide relief to the U.S. dependence on foreign oil? An answer that might be given is that hemp is considered to be marijuana, but in actually hemp and marijuana can be consider to different breeds. There are two main chemical components present in hemp and marijuana, THC is the “psychoactive ingredient” and CBD is the “anti-psychoactive ingredient” (Grotenhermen, 63, 2002). CBD is the main component in hemp; thus blocking any “high” effect that one might experience when smoking marijuana. Another concern is the possibility of individuals growing marijuana instead of hemp. This dilemma can be contained because there is a distant difference between the plants. And it’s not like the U.S. hasn’t taking advantage of the many uses of hemp. Hemp provided many usages during the colony time and even after the Marijuana Tax Act of 1938, the U.S. government endorsed the growth of hemp for WWII with the “Hemp for Victory” campaign. The video can be view at http://www.youtube.com/watch?v=Ne9UF-pFhJY. There’s also a video that demonstrates a car made from hemp fibers at http://www.youtube.com/watch?v=bxlj6fgQ-ZU&feature=related. There are plenty of more examples and reasons for the cultivation and production of hemp in the U.S., but that’s what my paper is going to be about. In my opinion if there’s that much potentially in a particular commodity then why ban it? References Bower, J. (2003, May). Seed of hope. Ecologist, 33(4), 46. Retrieved February 14, 2008, from Academic Search Complete (EBSCO) database: http://web.ebscohost.com//?vid=1&hid=4&sid=dd9b29b3-fd28-4e40-9206-43677ba901c1%40sessionmgr2
Grotenhermen, F., MD, & Russo, E., MD (Eds.). (2002). Cannabis and cannabinoids. Binghamton, NY: Haworth Integrative Healling Press.
As a follow-up to the initial post about Russia/Georgia by Becky, and the comments by clarita, Toby and combustible, I thought it might be useful to look at the sources of post-Soviet Russian foreign policy not just in the Caucasus but also in Ukraine. The August war in Georgia and the seemingly annual cutoff of Russian gas to Europe show the importance of these areas to energy, and thus national, security of the United States.
At the heart of Russian foreign policy after the dissolution of the Soviet Union is the attitude of Russia towards the former Soviet republics. To wit, the former Soviet republics are not thought of as foreign countries, but rather as areas comprising the 'Near Abroad' -- lands of non-Russians that have been under Russian control and domination since the Mongol hordes were booted out in medieval times and Russian tsars from Ivan the Terrible, Peter the Great and Catherine II steadily expanded the realm across 1/6 of the earth's area. To a typical Russian nationalist, of which Vladimir Putin and his associates are (along with wanting to restore the foreign and domestic might of the Soviet Union, but more on that below), Georgia is not a foreign country, but a lost province. Ukraine is not an independent country, but the origins of the Russian people (the Russian state and Orthodox Church began in Kiev, capital of Ukraine), so they have no natural ability to claim sovereignty over anything that belongs 'by rights' to Russia.
So after 1991, the Soviet Union fell apart, leaving behind the constituent republics to claim sovereignty over their own borders and largely to claim whatever (good, bad, ugly) Soviet infrastructure was in their territory. For the newly-independent countries around the Caspian Sea (particularly Azerbaijan and Kazakhstan), this was the golden opportunity to sell prospecting and drilling rights, leases and concessions to foreign oil companies for big money (the best book on this subject is probablyThe Oil and the Glory by Steve LeVine, who also runs a blog by the same name). Yet for Russia this was a period of great calamity as law and order broke down and insiders were able to exploit connections to claim much of public natural resource sectors as private prizes. Enter Vladimir Putin in 2000 who—very long story short—used state coercion to consolidate his own position and bring the private owners of natural resources to heel; he did this by brokering a deal that allowed these 'oligarchs' to keep their assets so long as inter alia they helped the national gas company (Gazprom) and the national oil company (Lukoil) become the dominant companies in their respective commodity sectors.
As commodity prices rebounded at the beginning of this decade, Putin took a view towards revising the 1990s: at a time of weakness, outsiders (particularly the US and American oil companies) exploited Russia, while former Soviet republics took advantage of decades of Soviet infrastructure and investment without adequate compensation or including Russia in future plans. Specifically, constructing the Baku-Tbilisi-Ceyhan pipeline (as Becky rightfully pointed out) was an affront to Russia because it cut them out, and Ukraine charging Gazprom transit rates to move gas to Europe while still paying Soviet-era subsidized prices to purchase gas was totally ungrateful. And as these two countries had the temerity to move towards NATO membership, that was the final straw: Putin began moving to reverse the foreign policy losses of the 1990s and reassert control over oil and gas transit resources (as the main source of revenue).
In Georgia, Russia had been acting as a peacekeeping force in Abkhazia and South Ossetia to protect those areas against the Georgian central government, but had a stake in the outcome as they began issuing Russian citizenships in those areas. This allowed them to intercede in any conflict by claiming the defense of Russian citizens abroad. As for Ukraine, they claimed that cutting off gas in the middle of winter was the result of Ukrainian inability to compromise on the price of gas; the ‘commercial dispute’ leaving Eastern Europe shivering. This was a commercial dispute in the way that the Palestine/Israel issue is about property values in southern and central Israel. The intent of both actions was to destabilize the Georgian and Ukrainian governments and warn them away from doing anything further to displease Russia and its interests. The message to the rest of the world was that the BTC pipeline was not a safe bet for Caspian oil, and the Ukrainian gas network was also unreliable at best; Russia’s proposed North Stream pipeline (under the Baltic Sea to Germany) and South Stream pipeline (through the Balkans to Italy) were the only sure bets.
I respectfully disagree with Becky and her colleagues’ recommendation of a lower U.S. profile in the Caucasus region. U.S. foreign policy objectives regarding Russia and energy should be to support alternative pipelines (such as BTC and the proposed natural gas pipeline Nabucco) more openly and vigorously for the purpose of balancing Russia in the Caucasus region. These countries in the region (Central Asia, Caucasus, and southeastern Europe) have no other foreign policy levers to protect themselves against Russia. Russia will and has signed individual deals with these countries to their collective detriment. While the volumes of oil and gas reaching the United States is relatively low, the importance of this region is that its exports are critical to Russia, a prime strategic competitor to the U.S., and can provide enough capacity to reduce the bargaining power of OPEC. As combustible noted, this is the matter of US prestige and diplomatic capacity in the entire region.
As Barack Obama assumes power in the White House amidst much uncertainty, it is still unclear how he will handle the country's energy affairs. It is certain that he will make changes, but the more important question is how he can fulfill all of his campaign promises while boosting the lagging economy and continuing to sustain a robust national defense. During the presidential campaign, President Obama was largely against opening up new oil resources(ANWR, offshore) and never committed to expanding the grid with new nuclear power. Both of these were referenced by the opposition as evidence that President Obama is among those who wish to do too much, too fast with respect to reversing the effects of climate change. His solution after assuming power will probably look something like the plan proposed by The Center for American Progress. This plan, authored by John Podesta, touts a new "green recovery" that will work to reverse the effects of climate change while reducing our dependence on fossil fuels and strengthening our economy. With the promise of 2 million new jobs within two years and a 13% decrease in spending on imports, the plan seems to be the right way to go. The conservative Heritage Foundation counters with a scathing policy paper stating that the costs of such a program far outweigh the benefits. Quoting "fuzzy math" and technology that is promising but not yet efficient enough, the Foundation references the failed Leiberman-Warner bill of last year to reinforce its claim that there must be a balance between conservation and the progress of our nation. Both sides of the argument make valid claims. We as stewards of our environment have a responsibility to take our role seriously and therefore finally get serious about making meaningful changes. The "green recovery" plan and other options currently being weighed by the new Obama administration are just that, serious and meaningful steps. On the other hand, any measure must not completely interfere with our need to create long-lasting jobs, provide an affordable way of life, and continue to ensure our nation's security. The conservative approach makes valid criticisms of a leftist plan that is maybe a little too aggressive and naive about it's claims of green job growth and the promise of green technology. President Obama will serve his country well by proposing a plan that incorporates all types of energy(For some reason he continues to leave out natural gas) infrastructure while simultaneously deriving a smart plan to slowly phase out fuels that are harmful to the environment or increase our dependence on foreign sources. At the risk of being indecisive, I am proposing a compromise because I believe that both sides have it right and wrong. The fate of a good energy policy depends on a compromise between the two idealogical camps; Our new president must bridge the idealogical gap. I believe that President Obama is capable of seeing this and forcing the lawmakers to do what is right for the country while being a good steward of the environment.
How this recession has affected green energy start-ups
During our last class session, Prof. Webber mentioned that one of the reasons AEP has a footprint into alternative energy is because their clean energy project was funded prior to the downturn. That made me ask the question – how are green energy start-ups faring in this economy? Do they still have the funds they need in order to grow, or are their projects on a standstill due to a lack of money coming in?
On doing some very basic research, I have come across an article that partly provides an answer to the aforementioned questions. This article, “Could The Credit Crunch Kill Green Energy?” by William Pentland for Forbes.com (http://www.forbes.com/2008/10/01/energy-credit-solar-biz-energy-cx_wp_1001energy08_credit.html), is summarized below.
What Pentland has found is that the green energy companies and start-ups received a little over two million dollars in funding during 2007. (Note: no source is cited, and the green energy industry is not broken down or defined in the article.) In particular, companies delving in solar energy technology received approximately $600 million in funding from venture capitalists and other investors. Many of these solar energy companies are currently working on projects that will enable their technologies to be commercialized through scale production.
The issue, however, is that these companies still need cash to continue operations. And the present market situation is of little help to that end. For example, Lehman Brothers acted as an underwriter for many solar energy companies in their quests to raise funding – but Lehman exists no more, and any company shares loaned to Lehman may not be recoverable. This has led to company devaluations. Additionally, several solar energy companies have had to shelve their IPO plans because they feel that the current market situation will not be conducive to funding. Thus, many companies could close operations due to current market conditions. To avoid this fate, some green energy companies are partnering with or consolidating operations with Fortune 100 companies such as Chevron. Others are holding out hope for renewable tax credits.
In any case, the one glaring question to students aiming to work in this industry in the very near future is – what value will you bring to such companies that will enable them to weather this recession?
Decisions related to investments in the general energy industry are complicated by the large capital requirements, volatile operating expenses, varying time-scales, uncertain technologies, uncertain (or absent) values for externalities, and a web of non-aligned decision-makers.As we discussed on Thursday, it’s no surprise, then, that the electric utility industry is going through a process of deciding exactly what business they want to be in.
This is not a new discussion and many different revenue models have been explored.Thomas Edison’s original 1882 power plant on Pearl Street in New York was built not to sell electrons, but rather sell the service of light, and thus benefit from the ever-improving technologies that convert electrons to lumens (i.e. light).Over the past two decades, electric utilities (which often have a monopoly to sell electricity within a given service territory) and the regulatory bodies (typically state public utility commissions) that govern these potentially dangerous monopolies have explored various “decoupling” models where the revenues (or profit) of the utility are not simply “coupled” to either the amount of electricity they produce or power plants they build.After all, as Edison astutely noticed, nobody really wants electrons or power plants, but rather the services that they enable.
Organizations like The Regulatory Assistance Project have done a great job in teaching various decoupling “tools” and regulatory structures to both utility companies and their regulating bodies.Only six states currently have decoupled electric utilities, but presentations like this by Wayne Shirley help spread the benefits of these more aligned structures.Progressive utilities such as PG&E (CA) and Duke Energy (NC) have embraced this change (see appendix here). PG&E will receive a regulated return of 9% or of 12% on all capital spent on saving energy if they achieve 85%-100% or >100% (respectively) of the targeted energy savings goal set by their regulatory body (the CPUC).They receive zero return on these funds if they meet less than 85% of this savings target.Duke has proposed their “Save-a-Watt” incentive mechanism that allows them to recover 90% of the customer’s avoided costs (levelized over the life of the investments) on money they spend on saving energy.
These business models have not been limited to regulated utility industry.A $3.6 billion industry exists in the US where firms install energy-efficient equipment for customer at no cost (See Chuck Goldman’s regular over view of the ESCO industry).A “performance contract” allows these firms to recoup their capital plus profit over time based on the savings generated.During the late 90’s, I worked at Enron Energy Services where we invested over $250 million dollars in energy-efficiency projects because their levelized costs (as well as the associated option value based on volatile commodity prices) was less than the Enron’s forward commodity curves that showed the “market value” buying energy.To my knowledge, this was the first time the supply-side and the demand-side were valued as economic substitutes based on real-time markets.
But let’s return to this post’s opening statement.The primary concept expressed is clearly that our energy future is rooted with uncertainty.In a highly uncertain environment, one may best achieve robustness (i.e. an ability to survive frequent perturbations) by focusing on core capabilities rather than a clearly defined business model.Metaphorically, the craftsman may not know what type of house is required nor how he’ll be paid, but proficiency in hammering, sawing, bricklaying, and painting will serve him well.Therefore, I therefore pose the question, “What core capabilities will best position an existing electric utility for the future?”
Traditionally, a utility may have stated their mission as “bringing safe, reliable, and low-cost electricity to our customers.”These mission statements have evolved to include broader ideas around environmental externalities, trade-offs, economic development, and even quality of life.To fulfill such ambitious missions amidst the uncertainty of our energy future, the electric utility must excel at four primary capabilities.Electric utilities must be experts at:
Energy Conversion:Traditionally a utility may have included “energy generation”.I broaden this capability to an expertise in all energy conversion.This more abstract expertise includes understating the broad portfolio of energy decisions and knowing when and how to substitute a demand-side solution for a supply-side solution.From a supply and demand perspective, improving the energy conversion of lighting equipment from 50 lumens/watt to 100 lumens/watt should be given equal (arguably more) attention than improving the conversion efficiency (or heat rate) of a natural gas generator.
Energy Delivery:The logistics of delivering energy (be it natural gas, liquid fuels, or power) is a substantial task.In addition to the traditional delivery model, the broader energy delivery capabilities of the future include distributed generation and demand response as well.Sometimes the lowest-cost solution to delivering power behind an overloaded substation would be to add distributed generation such as solar photovoltaics.Energy delivery will include securing and delivering intermittent wind power to customers at distance load centers or may include remotely dimming lights, shutting off pool pumps, and raising set-points on air conditioners to match supply resources and demand loads over a “smart grid”.Energy delivery also means an ability to deliver energy efficiency.During California’s energy crisis of 2000, they leveraged their existing infrastructure for delivering energy efficiency to allow them to reduce their peak load even further.
Risk Management:Originally, risk management focused on safety and reliability.These aspects hold true today without doubt.However, electric utilities are managing a portfolio of highly uncertain solutions over long time periods.The price paths of oil and natural gas over the last six months are proof of this challenge.Risk management should broaden to include the value of externalities (e.g. carbon).Finance theory must quantify the impact of correlated risks (i.e. covariance) in a portfolio of energy systems as well as the true option values of perpetual rights to turn-off loads or use stored power from plug-in hybrids to “firm-up” intermittent wind.Of course, in an environment post 9/11 and post Katrina, systems with concentrated points of failure will simply appear silly.
Stakeholder Service:Since traditional utilities were regulated monopolies, their primary “customers” were not the real customers (i.e. end-users), but rather their regulators.Going forward, utilities will need to be increasingly responsive to customer needs and understand the needs of a diverse and growing set of stakeholders who include state/federal regulators, environmentalists, technologists, suppliers, R&D groups, and employees.
Over the next decades, the electric utility industry will undergo substantial change matched only, perhaps, by that when Westinghouse’s AC model beat out Edison’s DC model in the late 1800’s during the “War of Currents”.Regulators will likely experiment with various business models and the costs of generating CO2 will likely change the traditional competitive landscape.However, if utilities can excel at the four capabilities discussed above, they will be well positioned to provide a fundamental enabler to our safety, prosperity, and society.
