electricity security and markets

I read an article in RFF's (Resources For the Future) magazine titled, "Electricity Markets and Energy Security: Friends or Foes?" by Timothy Brennan, an RFF fellow. The article discussed the relationship between energy security and electricity market deregulation. Brennan discussed how electricity markets may affect different types of energy security including short term security, long term security, environmental security and national security. For short term security, Brennan considers two risks: blackouts and price. He says,

Blackouts are harmful, but so are high energy prices, particularly for those with low incomes for whom utility bills constitute a significant fraction of their monthly spending. Importantly, and unfortunately, mitigating one of these security interests can exacerbate the other. The cost of preventing blackouts is quite high.

He didn't conclude with a recommendation for minimizing short term security risks, but rather indicated the importance of weighing the relative importance of the two concerns noted above.

Second he considered the security in the long term, the issue being overall expansion of generation and transmission capacity. One of the main barriers to creating a secure network for transmission and generation is NIMBYism and he noted that recently the secretary of energy was granted the authority to order states to allow the construction of transmission lines, even lines that may not power the state. These long term security issues will be difficult to deal with in a deregulated electricity market.

Brennan also considered the environment as part of security. Fortunately in the electricity sector, there are fewer "actors" than in the transportation sector, so GHG regulation should be easier to implement than say regulation of auto fumes. His main point was that deregulation should be a positive in regards to environmental security because a carbon tax or cap and trade system would operate more effectively.

Lastly, Brennan discussed the implications of electricity markets on national security. Terrorists may target our electricity transmission grid, but contended that market regulation would not affect national security: "Because the system is so interconnected, it would remain regulated even if wholesale and retail markets for electricity became open." He did note, however, that deregulation would cause even more interconnectedness in the electricity grid, possibly making an attack on the grid even more destructive.

His general message is that markets, in general, improve security. This opinion falls out of basic free market concepts: innovation will reduce prices and improved security measures will be developed as demand rises for these measures. He also predicts that free markets will result in redundancy and that security will be improved because the country isn't relying on a single supplier, a single point of failure. He qualified his recommendation, though, discussing the role of electricity as a "collective good." The reliability and security of the electricity must not be left solely to independent sellers and buyers because blackouts and price spikes won't just affect single customers or single sellers. He ended with a useful illustration of our options:

At one extreme,we might need no more central planning than air-traffic controllers exercise in the airline industry. Air space can be policed to avoid collisions without precluding competition among carriers to transport passengers and freight. At the other extreme, a central controller may need to control dispatch of generators in the short run and investment in generation over the long run to ensure reliability as well as efficiency.

I generally agreed with Brennan's analysis, although I wouldn't have had he ommited his consideration of the "collective good" aspect of electricity. Markets can and often do produce benefits to all consumers, but they don't necessarily care for those who can't afford to pay premiums for security or who can't afford to lose a refrigerator full of food. For Americans, electricity has become nearly a basic need on par with food and shelter. Everyone (except maybe for the few who have a generator and a big gasoline tank at their houses) would be affected by brownouts and blackouts, but not everyone would be affected by a rise in electricity costs. For some, electricity represents a significant fraction of their income, so care must be taken in all considerations of electricity regulation and policy to avoid taking this vital resource from those who can barely afford it.

Thoughts from My Trip to China

As I mentioned in class last week, I recently returned from a two week trip to China which was part of a global business class in the McCombs School of Business. The goal of the trip was to understand how business is conducted in China as well as to get a better understanding of market/economic/environmental/etc dynamics that are currently happening in China. I had meant to put this posting up last week (I missed the deadline) - however, I still wanted to post my thoughts on issues related to topics we have covered in class.

One of the issues that you can’t help but notice in any major city in China is air pollution. We got lucky in our first days in both Beijing and Shanghai – it was windy both days which did a relatively decent job at clearing smog out of the sky. However, our other days in both cities were very smoggy – much worse than anything I’ve ever experienced in either LA or Houston. It wasn’t uncommon at all to see people walking around with masks on. It was pretty incredible to see the number and location of coal generating facilities – they were everywhere, even in residential areas. China’s air pollution isn’t going to get better anytime soon – it’s estimated that 1000 new cars are sold in Beijing each day. The answer of shutting down coal plants and taking cars off the road seems simple to help solve the environmental problems. However, both of these actions would directly impact the growth of the Chinese economy which the government values highly – growth and jobs/economic prosperity help social stability.

China is taking some drastic steps to improve air quality for the Olympics (temporarily shutting down coal plants and restricting driving). Some of these steps were in place when we visited and the air pollution is still horrible. These steps aren’t having the impact that is needed for Olympic events that will be held outdoors. The IOC president recently stated that pollution could delay or cancel some of the Olympic events.

While the situation seems grim, there may some reason for optimism. By hosting the Olympics, China, and more specifically the Chinese government, will be under a microscope of the global media. We have already seen some of the effects of this with the recent demonstrations in Tibet and surrounding areas. With the Olympics increasing the world’s awareness of the pollution issues in China, the Chinese government may be more inclined to make dramatic changes. One of the advantages of having a communist style government is that once the Chinese government decides to make a change, it doesn’t have to go through the normal time consuming political process that we have in the US. China, however, has a long way to go to even start thinking in green/renewable terms. After experiencing the environmental issues first hand, I can only hope that action is taken before irreparable damage is caused.

Syriana, Exxon & Robert Baer

Saw "Syriana" in the theatre when it came out three or so years ago. Saw it twice actually. Not exactly "feel-good-movie-of-the-year" material, but then again, precious little about US energy policy inspires feelings of mirth and merriment.

Perhaps the most damning commentary about the movie pertained to oil companies' influence on energy policy. If only this were your run-of-the-mill Hollywood bleeding-heart, holier-than-thou sensationalism. OK, sensational perhaps, but hardly fictional. As we now know, Dick Cheney gathered a secret meeting with oil executives to formulate US energy policy in 2001. President Bush and Energy Secretary Samuel Bodman, meanwhile, anointed former Exxon CEO Lee Raymond to head an important energy crisis study several years back. The same Exxon that has opposed renewable energy investments and tried to debunk climate change science. Gotta love this country.

Back to Syriana: like many of you, I've read "See No Evil," the marvelous autobiographical account of former CIA operative Robert Baer, who inspired George Clooney's character. Having seen the movie and read the movie, it's extremely disheartening to learn how political agendas can trump policy and hang good guys like Clooney/Baer out to dry. Another of Baer's books, "Sleeping with the Devil," is in my reading queue and focuses on the long-standing (for how much longer?) relationship between the US (namely Exxon) and Saudi Arabia.



P.S. - Never did figure out what the title of "Syriana" actually stood for. I don't believe Syria has anything to do with it. Anyone know?

Federal Energy Regulatory Commission okays first floating LNG terminal in US

The Federal Energy Regulatory Commission, on Thursday, approved construction of the first floating liquefied natural gas terminal in Long Island Sound. The Broadwater Energy LLC terminal, a dual venture with Shell and TransCanada Corp, will deliver LNG to feed electric plants and heat homes in New York and Connecticut and would be stationed about 10 miles from the coasts of each state. The $700 million project will consist of a 1200 feet by 200 feet floating storage and regasification unit, rising 80 feet out of the water and delivering one-and-a-quarter billion cubic feet of natural gas per day. The regasified LNG will be brought onshore by a 22-mile pipeline extension run underwater to the Iroquois Gas Transmission System.

Immediately, Connecticut governor M. Jodi Rell bashed the decision, calling it “an insult” to the people of Connecticut and “an assault” on the area, while Connecticut Attorney General Richard Blumenthal blasted the project as an “environmental atrocity” and an “unneeded abomination.” The latter fellow has committed to reversing the decision, claiming “I will fight this project at every agency and in every court up to the U.S. Supreme Court, if necessary.”

Why is there such strong opposition? For one, Long Island Sound is a natural estuary, apparently cherished by the community, with many groups and alliances formed over the years to encourage its preservation. Addition of an industrial facility will be an eyesore to many. Another reason for opposition is necessity – or lack thereof; Governor Rell said “there is no need for this project from an energy policy standpoint and no need for this project from a market standpoint.”

According to the FERC, there are 5 existing LNG terminals in the country: Kenai, AK, Everett, MA, Cove Point, MD, Elba Island, GA, and Lake Charles, LA, with an additional facility in Puerto Rico. There are over 150 LNG ships worldwide, with 50 more under construction. Public concerns with the technology, among others, include ships-as-terrorist-targets and dangerous vapor clouds. In 2006, the US imported about 1.6 billion cubic feet of LNG a day. According to the Center for Liquefied Natural Gas, LNG currently produces nearly about 3% of the nation’s natural gas, but the DOE predicts that number to increase to 16% by 2030.

Sources:
Reuters
Connecticut Post

blueberries

There may be innumerable effects of global warming, but one I hadn't really considered was described in the following article in the Boston Globe:

http://www.boston.com/news/local/maine/articles/2007/10/01/as_frost_fades_berry_rivalry_heats/

The article describes the shifting balance of power in the blueberry economy. Maybe Texans don't know that Maine is, and always has been, the unofficial wild blueberry capital of the world. But, according to the article, Quebec is catching up in blueberry production and many Mainers blame global warming while Canadians credit it.

Blueberries are native to only specific parts of North America, including Maine, but as the climate goes, so does the blueberry. This is what's happening in Quebec:

Every four years or so, killing spring frosts hit Quebec, nearly obliterating the year's harvest around St.-Jean Lake, while Down East Maine, some 350 miles southeast, reliably produced millions of pounds a year for use in jams, pie fillings, and muffins.

...

Frosts can be very localized, and historical temperature records are not available for the entire St.-Jean Lake region. But limited data back up what farmers say: Frosts have declined during May and June, especially in the last several decades, a period when the rise in world temperatures became more pronounced. For example, the community of Roberval had 33 killing frosts in the 10 Mays and Junes between 1948 and 1957, the oldest records available. It had 22 between 1968 and 1977. In the last decade, it had 11. Two other communities with long-term records showed similar declines.

The last time a killer spring frost wiped out virtually all the St.-Jean Lake region's blueberry harvest was in 1998. Other climate factors can still influence yield - this year the harvest was down because of a lack of insulating snow and an August frost in some places. But the spring freezes happen so much less that some growers are considering expanding into even more northern regions.

"Global warming is giving us opportunity," said Jean-Eudes Senneville, one of Quebec's largest blueberry growers.

This type of story may not be as important as the droughts and famines that may be caused by global warming, but it is important nonetheless. Regions and states are partly defined by their geographies and the flora and fauna that inhabit those geographies. The same things that help define a region also contribute to peoples identities and culture. Think of how we identify ourselves as Texas Longhorns. Everyone knows about Maine lobster and Florida oranges.

What happens if, due to a changing climate, grapes for champagne can't be grown in France, lobsters can't be harvested off the coast of Maine and climate becomes unsuitable for gators in Florida? Not only will economies be affected, but significant parts of people's cultures and identities may be washed away as parts of their environment move or are extinguished.

All over the globe, shifting weather patterns are causing changes similar to what's being seen in Maine and Quebec. Neither the economic changes or the identity changes are necessarily a bad thing; Jean-Eudes Senneville will certainly benefit and maybe lobstermen in Maine would rather blueberries didn't diminish the cultural prominence of their trade. But it would be weird to call ourselves Longhorns if global warming turned Texas into a desert where no Longhorn could survive. I guess we could call ourselves the Texas Camels, but it might be more appropriate to tag ourselves with the icon that got us into this mess. We could resurrect the name "Oilers."

Finally, I was pleasantly surprised to find this article on the new "Green" section of the boston.com webpage. It's a new space devoted to news and analysis about green topics. It's nice to see continuing increase in attention devoted to energy and the environment.

Exxon Emblazed on Easter

The Venezuelan tradition of burning a Judas effigy during the Easter holiday took a strange twist, as one of the ceremonial burned effigies was donned in a two piece suit and labeled "Mr. Exxon" in Caracas. The ceremony which was attended by hundreds of spectators was organized by the mayor of the city, who is a political ally of Hugo Chavez.

The Venezuelans have much to celebrate, as PDVSA had $12billion of their assets unfrozen earlier this week. The money had been frozen through international courts by ExxonMobil, who is suing the Venezuelan oil company over assets lost when Hugo Chavez nationalized the Cerro Negro project, a venture that had been worked on with Exxon prior to being taken over.

I think it's interesting that even Easter in a nation whose people are strongly Roman Catholic can be so easily spun with political overtones without much opposition. While Easter doesn't necessarily have the strong humanitarian associations that Christmas does, I would still think that people would want to keep it as a day of good will.

china as a world energy leader ... nah

Many experts predict the coal and petro hungry country of China will soon become the new energy leader in the world.

China is calling to have almost sixty percent of their total energy production coming from nuclear and hydro by the year 2050.

http://www.chinadaily.com.cn/bizchina/2008-03/24/content_6560010.htm

http://afp.google.com/article/ALeqM5hUyQ6EbxQxKRH0Bx5m0W5EwPwwZg

However I just don't see this happening no even with some of the expert predictions. China is already the world's second greatest emitter of carbon. They account for sixteen percent of the total world carbon production. This takes second place only to the United States which supplies twenty percent of total carbon output.

http://www.dailytimes.com.pk/default.asp?page=2008%5C03%5C24%5Cstory_24-3-2008_pg6_22

China will continue to grow and continue on it's ten percent coal production slash consumption per year increase. Coal accounts for thirty nine percent of total carbon production in the world. Also, China has already began to allow production to lag behind demand. This means they are turning to more dirty coals which produce even more carbon.

http://www.iol.co.za/index.php?set_id=1&click_id=143&art_id=vn20080323083649164C697632

Tradeoffs in Air Quality Policy

What do you think American policy should be regarding air quality? The EPA currently develops cost-benefit analysis of the Clean Air Act. This involves assessing the current state of our air quality, making assumptions about its impact on citizens, and then considering the options for improving the air. Various options are analyzed which consider the cost of implementation, and the total benefit achieved. This benefit requires placing a value on a human life.

A decade or so previous, the value of human life in an area was determined by taking the value (think “earnings potential”) of a human being and factoring in age demographics. In this system, older people (who had less future earnings potential that would be lost) were worth a lot less than young people. This arithmetic was not politically acceptable, so nowadays regardless of age we all have the same human value (~6 M$).

When assessing possible actions and their health benefits in various parts of the country, higher population areas will yield greater benefit than lower population areas. From a utilitarian point of view in a country with limited resources, it makes sense to spend our money in ways that benefit the most possible people. This choice means that urban areas will tend to benefit more than rural areas.

While this decision may be more efficient, is it moral to spend money to improve the air in a big city and ignore the air in rural areas? From a political standpoint, it seems to me that policies should be developed in which there results an equivalent risk to all citizens. There seems no other way to justify actions to the public.

Consider that the EPA sets concentration targets, such that if a National Ambient Air Quality Standard (NAAQS) is violated then the county is placed in nonattainment status and must develop methods to improve its area. It is always very urban/industrial areas that are in nonattainment status, so in some ways we are avoided the dilemma illustrated above. But then again, we tend to place the limited number of air quality monitoring stations in the major metropolitan areas. So we may be missing rural areas with similar problems.

Of course, we have certainly made reasonably sufficient gains in improving our air quality over the past 30+ years. But it is worth questioning the limitations of cost-benefit analyses when applied to immeasurable quantities, and being aware of the tradeoff between equity and resource efficiency. Such problems highlight the difficulties of developing sound policies based on a limited resource base, given insufficient information.

Imagine then why it is so difficult to develop a sound international policy on climate change…

Airforce Makes Jet Fuel from Coal...Yeaayyyy!!!

I've been crossing my fingers for the day that the millitary figures out a new, awesome way to kill people with next generation solar technology, or better yet, finds a new millitary reason why they need to develop giant, cheap, utility scale batteries...and my dream has just come true....sort of...not really:

It turns out that the Air Force will soon become a giant coal customer...large enough to give coal a new life in states like KY and TN.

The culprit is technology that allows coal to be turned into jet fuel.

Hallelujah! It will take billions of dollars to create the technology and market large enough, and the millitary's got the means and the money.

Now if we can just find a way to use jets to solve global warming...

Click here for the full article.

The case of the busted fuel oil tank may be cracked...

So according to a recent article in the Statesman, the city has finally discovered the owner of the underground oil tank that spilled sludge into Waller Creek (see article here). As you all may recall, we talked about this issue a bit in class earlier this semester.

After much "digging" through archives city officials determined that the city council granted permission to George W. Littlefield in 1910 to place a fuel storage tank "under the ground in the alley at the rear of his building." This discovery could have major implications for payment/liability of the fuel oil spill cleanup. The debate has been between The Driskol and the Littlefield Building as to who is the responsible party. The cost for cleanup was estimated at $220k

" 'We have not decided how to give the bill to the Littlefield, but we know they'll be responsible for some of it,' said Thomas Bashara, a senior environmental compliance specialist with the city."

Eat away CO2 emissions

A lot of my life choices have changed since beginning this class. I have curbed my driving, unplugged all unused appliances and replaced all the light bulbs in my apartment. One of our readings touched me even more than others, it stated that 25,000 people die of starvation daily, and that the majority of those are under age 5. Because of this, I have returned to eating vegetarian and choose only organic foods at the grocery store. I bought organic yogurt from Stonyfield Farms, and was surprised when I peeled back my foil top to read that Stonyfield Farms was the first business to offset all CO2 emissions from the production of their products. I read the back of the container while eating and was impressed that they have the largest solar array in New Hampshire on their rooftop, and use all of their waste product to create renewable energy. Through further research, I learned that their founder, Gary Hirshberg, began learning about global climate change in the 1970's and has been actively making a difference since then to do his part in reducing the carbon footprint. His sense of personal responsibility has led to a 50 kW solar array system that spans 120,000 square feet. I often get frustrated thinking that I can't make a difference, as an individual, by the choices I make. Reading about this helps reaffirm that small choices can indeed make a big difference.

Soaring Fuel Prices; Grounded Planes

Looks like environmentalists and airline executives have something in common: they’re both reducing what’s in the air.

While those working to reduce air pollution may be motivated by a number of things including climate change, health, and the economy, airlines are essentially responding to soaring fuel prices. USA Today reported that a number of American airlines are cutting the size of their fleets. Rising oil and ticket prices, along with increased concern over the environmental impacts of planes, have left the industry in a tough spot. (See last month’s ire-inducing “eco-scandal” where a Boeing 777-- typically able to carry anywhere between 283 and 368 passengers—flew from Chicago to London with only five.) The airline companies referenced in the article are selling and dumping some of their older, less efficient models; but depending on who they’re selling to and where they’re dumping, they may just be shifting, and not really reducing, the cost and environmental impact.

First Commercial Tidal Stream Turbine Installed

I just read an article from greenenergynews.com which caught my attention immediately. Bristol-based Marine Current Turbines (MCT) is ready to install its 1.2MW SeaGen Tidal System in Strangford Narrows, Northern Ireland on Easter Monday. This tidal stream turbine will produce enough clean energy for 1000 homes (when fully operational). According to Green Energy News, "this will be the first, commercial scale, tidal stream turbine installed and operating anywhere in the world. It will generate one of the most environmentally-friendly forms of energy - it makes no noise, is almost completely below the surface, never runs out and has zero emissions." Additionally, the turbine will have the ability to be lifted out of the water for maintenance, which would be very useful during strong currents.

I remember on of Dr. Webber's slides he showed a figure that displayed high tidal energy locations throughout the world. Ireland and surrounding countries were included in one of several high tidal energy locations. What I find intriguing about this technology are the many possibilities that underwater turbines possess. Even though tidal energy is intermittent, it is predictable and the U.S. does have many costal resources, such as in Alaska and along upper New England. Since areas such as Alaska and upper New England don't have very good solar producing capacities, tidal energy in those locations would provide a significant clean sustainable energy. Just think of all those crab fishing shows that are on The Discovery Channel these days (which are all shot in the Bering Sea, Gulf of Alaska, and Atlantic Ocean near New Foundland). Those powerful waves that crab fishermen fight off could potentially provide usefulness trough underwater tidal stream turbines.

On the news tonight...

While I've already blogged this week, I saw this on the news and had to share.

On the KVUE news tonight at 10, they interviewed Fred Singer, who said that global warming is "bunk."  I thought it was funny that they guy doing the interview said that all of these organizations (then he listed some) disagree with you.  While he listed some of the organizations, the names of organizations scrolled across the screen... and it was a very long list.  

I met someone the other day who didn't "believe in global warming."  That combined with this guy makes me want to say "seriously?"!  It boggles me that we're still "debating" this... even though there is no debate.  Crazy.

Finally, whales are good for something

Scientists have been studying the incredible agility displayed by humpback whales, and now researchers at Harvard believe that agility is due to tubercles – the odd grouping of bumps on the leading edge of the whale’s flipper. A Canadian company called WhalePower is now producing several designs for wind turbine blades and air circulation fans based simply on this study. Researchers believe that their findings could be applied to airplane wings and helicopter rotors in the future. This combination of biology and engineering is known as biomimetics, and many argue that it’s the key to making current technologies more efficient.

The secret to the tubercles success has been discovered in wind tunnels. The tubercles allow for the surface (wing, flipper, etc.) to achieve a higher angle of attack before stalling. Specifically, a tubercle-lined flipper has a 40% higher angle of attack compared to a smooth flipper. An article recently published in Nature goes further, saying the tubercles change the pressure distribution across the surface, causing different parts of the flipper to stall before others and delaying the inevitable stall. Stalling is similar to a car spinning its wheels in that all the power generated by the surface is lost.

What I found to be the most promising outcome of this research concerned the potential improvement in wind turbine blade design. Prototypes of the whale-inspired blades have shown that the tubercles double the performance of the blades at wind speeds of 17 mph. They have also been able to capture the same amount of energy out of 10 mph winds that older designs can only get out of 17 mph winds, making wind generation much more efficient and profitable. The new blades are advertised as being more stable, quiet, and durable than conventional blades. Some have withstood hurricane force winds. The first commercial applications are being made in ventilation fans. They are due on the market in Canada in late April.

Biomimetics and renewable energy sources sounds like a match made in heaven...literally.