The Buzz Grows Louder: The Call to Arms is Coming

Sometimes I think it might be just me, since I'm pretty focused on alternative energies and alternative consumption, but I feel as though the "cleantech" buzz is growing into a dull roar all around me. This is from May 9:
Senator Poses 'Grand Challenges' for Energy Independence. [UPDATE: Full transcript of speech here.]

Senator Lamar Alexander is proposing a bipartisan effort "with the goal of making our nation independent within a generation." Here are the seven grand challenges he outlines:

• Supporting plug-in electric vehicle development, including "smart metering" by utilities that would allow cheaper rates for overnight battery charging.
• Making solar power cost competitive with fossil fuels, with the promise of solar thermal power plants.
• Making biofuels cost competitive with gasoline, particularly ethanol from cellulosic materials.
• Making more new buildings energy efficient
• Developing systems to capture and store carbon emissions from coal-fired power plants.
• Developing ways to safely reprocess and store nuclear waste — the "most important breakthrough" needed to support more nuclear plants.
• Continuing research on nuclear fusion.

I've discussed several of these initiatives in my blog before. As you know, I'm a big believer in letting market forces and entrepreneurial energies solve these problems, but as Lester Brown points out in his book Plan B 3.0, the market is not recognizing huge chunks of costs associated with fossil fuels (climate change costs, pollution costs, national security costs, total-system-breakdown-from-rising-oil-prices costs, etc). If the market's pricing system is broken, free market forces don't work. That's the problem.

So I've always though that government action would be needed, as much as I'm loathe to depend on it. But the people seem to be demanding it... that's the dull roar I'm hearing.

Why not make this our generation's Manhattan project (although the metaphor I prefer is the moon landing)? Why not invest billions if not hundreds of billions of government dollars into this field? It's still much better than the trillions we'll hand out to governments around the world for oil over the coming years if we don't change.

Any of the three candidates will have a better chance of making alt energy/alt consumption more of a priority than Bush did. But our job is to make sure this is a major campaign issue. After all, whether your hot button is Iraq or the economy, alt energy/alt consumption plays a vital role.

Update: New Job!

Well I'm back after a little hiatus. Sorry I've been gone so long! I just took a new job at Go Green Solutions in Pasadena in mid-March. I've thrown myself headlong into the new position and as a result have let my blog posting responsibilities slide a bit. But not to worry, my new job dovetails well with what I've been talking about here in Energy Crunch (did the company's name give it away?) so I'll be able to continue to bring my insights to this column, as my throngs of readers will no doubt be assured to hear.

For today I just wanted to point out this article which gives further hope that soon solar power will be cheaper than fossil fuels, and the stampede to renewables will begin in earnest.

Enjoy the article, and check back now that I've got my schedule back under control a little bit.

Finding the True Cost of Coal and Oil - The Feed-In Tariff

When it comes to renewable energy, the U.S. is a follower, not a leader. Our solar markets lag behind Germany, Japan, and other countries. We're addicted to cheap energy, primarily because the free market’s invisible hand is not just invisible, it’s also sometimes blind. Sometimes the cheapest option isn’t really the cheapest, which is especially true with polluting forms of energy such as coal and oil. They contain hidden costs, such as damage to the environment as well as dependence on unreliable foreign governments. These are the classic 'externality' case studies from Economics 101. And the classic solution to the classic externality case is that government steps in and 'moves the supply curve' over to reflect the true costs of the supply.

While many states in the U.S. have implemented net metering (which would allow customers to get refunds for providing their own clean energy), the Federal government just missed the chance to do more to encourage utility-scale renewable energy by failing to extend the tax credit for solar energy, which expires at the end of 2008. Meanwhile, European and other governments have been taking gigantic steps forward by implementing feed-in tariffs. A feed-in tariff essentially means that you get paid more than the going rate of electricity for each kWh of clean energy that you (or a utility-scale renewable plant) feed in to the grid.

Germany is the leader, having begun feed-in tariffs in the 90s. In Spain, the generator of solar or wind energy gets paid 5x the base rate of fossil-generated electricity for up to 25 years, after which the rate drops by 20% for the life of the system. And in Ontario Canada, the utility is obligated to pay 42 Canadian cents per kWh for solar electricity, roughly four times the price of retail electricity rates. And Italy has just passed feed-in tariff legislation that should spur huge market growth there for solar and other renewables.

So why hasn’t the U.S. government implemented feed-in tariffs? The answer may be lack of political will, or it may be the sheer strength of the Coal and Oil lobbies. Another reason may be that we rarely look to our government to solve our problems. Here in the U.S. we often bristle when someone suggests that government should solve our problems instead of the free market. We're too independent.

But in this case we may be wrong… I would argue that government action is needed. To demonstrate the point, what if instead of the government stepping in we brought in the lawyers (after all, what could be more American than that?)?

Imagine plaintiff attorneys across the U.S. banding together for the largest class-action lawsuit in history. Forget Big Tobacco, I’m talking about a multi-trillion dollar suit against Big Oil and Big Coal for global warming, and Big Oil for funding terrorism (I know, a bit sensationalist, but then again this is a lawsuit we’re talking about). Think about the trillions of dollars of damage that have been done to resources we all share, such as the earth, such as the air and the water, such as our lungs and our health. If we factored the price of that settlement into the price of oil and coal, maybe the gallon of gas would cost $10 or more, and the kWh of energy from coal would cost $0.40, not ten cents. Then our free market would wake up and build solar, wind, and even nuclear power plants by the hundreds. Then we’d ditch our 15 MPG SUVs and demand and buy the electric cars and plug-in hybrids by the millions.

But this is, for now, just a fun case study. A sturdy feed-in tariff enacted by the federal government, or by states individually, could accomplish the same results as that class-action lawsuit and help us avoid the future hidden costs of coal and oil.

The Energy Bill Passes - A Great Step in the Right Direction

Good news. The energy bill that included the biofuel mandate I talked about last week passed the House today, 314 to 100. This is an excellent step in the right direction, partially because of the biofuels, but also because it includes the first big boost in fuel economy in 32 years, from 25 MPG to 35 by 2020. Obviously, if your chief issue is the environment you're pretty happy about this.

But if your chief issue is the economy or homeland security, you should also be ecstatic. Here's why:
We use 9.2 million barrels of oil a day for transportation, which equals roughly 65 billion gallons of gas a year. If the average MPG is 25, that gas gets us 1.6 trillion miles. But with a MPG of 35, we can travel the same distance for only 47 billion gallons of gas, saving us $56 billion per year, not to mention the 374 billion pounds of CO2 we won't pump into the air each year.



So one way to think of this is as a $56 billion per year TAX CUT. That's a ton of money that the average Joe and Jane will cycle back into other goods in our economy, and not into the hands of governments that hate us.

NanoSolar Hits a Milestone

I blogged before about NanoSolar's exciting prospects, and today they announced that they've shipped their first product and received their first check of product revenue.

In their announcement they make the claim that they'll be able to produce at $0.99/watt, which is on the way to the $0.30 they predicted before. If you'll recall, my calculations used a more conservative $0.60 and showed that they were on track for utility-scale power generation competitive with coal. So their claim today of $0.99 is a big milestone.

Funny enough, you can buy one of their first commercial panels on eBay. It's up to $7,350 right now. If they could just get that much for each panel, that'd be a pretty profitable model...

Nanosolar Goes Macro

Nanosolar has been getting a lot of press recently, and the reports are certainly encouraging. This article mentions "30 cents a watt" production costs and a production facility that can crank out 430 MW worth of cells per year. Impressive numbers.

A quick check of the math shows that these are some saliva-inducing figures, even if you assume that it costs double the quoted price to get the panels configured in power-plant-size arrays. Another key assumption is the longevity of the panels... do they last a year, 25 years, 100 years?



As you can see, if they last just 15 years they're beating out coal, which would mean Nanosolar has a [come on Mark, fight it, FIGHT IT... ah to heck with it] very bright future. I'd have to think that becoming a power-plant producer that uses this technology would be extremely lucrative, which is probably why a lot of people are drooling on the sidelines waiting to see if Nanosolar can deliver on these big promises. I know I am.

Fun With Balloons - Correction

Correction. My last blog post was quite excited about Cool Earth's new inflatable solar concentration technology, which lowered the cost per Watt for solar to $0.20, and I found the idea too good to be true. Well, I did some further research and found a CNET article with the following quote:

"Cummings [Cool Earth's founder and CTO] envisions that these balloons will be cabled together above farmland and would be replaced every year"

Darn. I was hoping the balloons could stick around for at least a few years. If they have to be replaced every year, the cost per kWh becomes a bit higher. But what's interesting is that it's still cheaper than oil, getting close to natural gas, while still quite a bit more pricey than coal. But if they could make those balloons last four years, the price per kWh is about what coal costs!

Here are my rough calculations (I'm not a commodities trader, so I apologize if the prices aren't up to the minute):



I, for one, am rooting for them to make those balloons a little more durable.

Fun With Balloons!

As I say in my introduction above, I'm interested in solutions that will be real, achievable, and market-driven. So with that last part in mind, let's see if we can have some fun with balloons and make some money in the process.

Cool Earth claims to have technology, called Inflatable Solar Concentration, that will reduce the price for solar energy to roughly $0.20 per Watt within three years (for comparison purposes, check out my posts below for the solar stations that are producing it at $2 to $3.20 per Watt). Wow.

So let's say you had a really big back yard and you wanted to buy some balloons and create your own power plant. Could you make money? Let's run the numbers:



So we raised $200k, bought 2,000 balloons, strung them together, and we're cranking out a Megawatt. Assuming they capture energy 9 hours a day, we're selling 3.3 M kWh back to the grid. At 7 cents per kWh, we make our money back plus a profit in year one. And each successive year is pure profit.

Is it just me or does this sound too good to be true? I'm going to give these guys a call and see if I can buy some balloons.

Energy Crunch

Okay, I came across an amazing article that happens to be titled 'The Energy Crunch to Come.'

If you don't know about the idea of peak oil, suffice to say that most experts agree that it's real. They disagree on the date, but this article explains why it may come sooner rather than later. His conclusion should sound familiar if you've been reading my blog:

"Only an ambitious program of energy conservation -- entailing the imposition of much higher fuel-efficiency standards for American automobiles and SUVs -- and the massive funding of R&D in, and then the full-scale development of alternative, environmentally-friendly fuels can offer hope of averting the disaster otherwise awaiting us."

A Small Effort Can Have Big Effects

So I've been asked, "you talk a big game about energy independence through renewables, but it seems so hard and expensive. Isn't it just a pipe dream?" (ok, no one asked me that... I asked myself) In truth, it's far far more expensive for us NOT to develop renewable energy. I talked about a gas tax, and then I came across this article that agrees with me, basically saying that while we've dithered and fought over what to do with our energy policy, the price of oil has jumped from $40 to $100. And there are signs that it could go to $200 or more. We're absolutely shooting ourselves in the foot with every dollar we don't spend right now on renewable energy, dollars that in the future will go three and fourfold into the pockets of foreign governments hostile to us. What a waste.

Let's look at what a little tiny change now could do for us when applied over ten years. I'm going to use the example of my 20-cent per gallon gas tax below, and say that each year we took those proceeds and built a solar plant, using the cost model of the Victorville solar energy station. Are you ready?



Doesn't that just kill you? $10 bucks a month and in ten years those 13 million people could get 40% more energy from solar, using existing technology. Considering SoCal Edison energy is already 18% renewable, this would bring the total near 60%! Victorville is being built right now, with available technology. It's not a pipe dream. Why are we not building a hundred of these, and a hundred wind and geothermal stations as well? The cost of the alternative is about to get more expensive than we can imagine.

Solar calculations - part 2

OK, I did a bit more research into the cost of solar power by looking into the Victorville, CA Solar Power station. The plant plans to build 20,000 Stirling generators, producing 25 kW each. The cost at such production levels is estimated to be $50-80,000 per generator, which is a cost per watt between $2 and $3.20, a bit lower than the Nevada One figures I mentioned in my post below.

So this stuff is realistic.

What's even more interesting is that the plant will earn back its cost in 15 years by selling power at ~7 cents/kWh, and after that it's going to "mint money," as this Business Week article puts it.

So this stuff is profitable. My question is, what's the holdup?

Solar calculations - part 1

This article is an interesting exercise in figuring out the scale of the solution. But I can simplify the math. He's basically saying the Nevada Solar One project cost $240M and puts out 64 MW of energy. That's $3.75 per watt. So he could have just skipped all his intermediate steps and said: $68 B (what Bush is asking for the Iraq war right now) buys you 18 GW. The U.S. needs ~300 GW for all our electricity needs. So $68 B buys 6% of our electricity. Amazing. Another way to think of it: with 300 million Americans, the cost to you is $227. That's it?? I'll see your $227 and happily pay my share of $3,750 to go 100% solar.

So why is this Economist article so pessimistic that solar won't amount to more than 1% of our energy needs in the next decade? There must be production limitations (i.e. we can only make so many panels per year currently). Because in that article they talk about costs of $1.40 per watt from cadmium telluride-based solar panels, which makes the cost per citizen to go 100% solar only $1,400.

Am I missing something?

Introduction to Energy Crunch

Welcome to Energy Crunch. As this is my first post, I think I'll lay out why I'm blogging here, why I'm focusing on energy.

Simply put, we are facing an Energy Crunch. Energy is going to be the #1 issue facing our country in the coming 50 to 100 years. Our economy has been built on the back of cheap energy. But getting that cheap energy out of oil has caused lots of problems. And lots of indicators show that we may not be able to get that energy out of the ground so cheaply anymore. Alternative energy sources will be needed, and fast. I say that energy is the #1 issue because working to solve the energy issue means that you're simultaneously working to solve other major issues, such as global warming, peak oil, and terrorism.

Global warming. We need to stop producing CO2. Renewable energy sources (which I will argue need to be re-branded as "free" energy sources, which is what they are... a post is almost certainly forthcoming on the re-branding of energy as the front line of the energy war) don't produce CO2, or produce a lot less of it. That case is pretty clear.

Peak oil is happening, in that oil production has already begun its decline year-to-year. Some will debate whether we're just seeing the effects of various geopolitical situations, which, when cleared up, will see us back to producing more and more oil for the foreseeable future. I think, though, the most reasonable assumption is that peak oil is here, and that we need to start thinking about what's going to replace all that oil. I'll do a post on that in the very near future.

Terrorism is linked to the oil problem, but this will be a lesser focus of my blog. Suffice to say for now that the U.S. needs massive amounts of oil, and this has meant dealing with the Middle East. It may be oversimplified to say our thirst for oil causes or funds terrorism, but not by much.

So what am I going to do? I'm on a mission of exploration. I'll be looking, and re-looking, at a lot of the potential solutions for what I see as the Energy Crunch problem. I'll spend some time discussing the problem itself (i.e., what is peak oil, have we hit it yet, etc), but I want to focus more on the solutions. What are the viable alternative energy sources out there? What new breakthroughs are popping up? How do those impact that technology as a viable source of energy in the future? How should individuals and governments act and react to these changes?

Let the energy exploration begin.