Clean Energy Digest

T. Boone Pickens explains the current situation and describes his plan to reduce America’s dependence on foreign sources of energy.

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Oil baron T. Boone Pickens has a plan for America’s energy future. The PickensPlan sets a course that leverages America’s wind resources to wean the country of dependence on foreign oil.

Pickens’ plan is a very basic one in theory. America beefs up wind-powered generation to 20% or more of our total capacity. America in turn reduces our dependence on natural gas fired power plants. Then the natural gas that we’re not using in power plans gets utilized in the transportation sector. The use of natural gas in transportation greatly reduces America’s need for imported oil.

Mr. Pickens is currently taking steps to implement the wind portion of the plan by developing up to 18,000 megawatts of wind in the vast open spaces of the Texas panhandle. That plan took one more step towards reality this past week when the Texas Public Utilities Commission (PUC) approved almost $5 billion in transmission upgrades to support the development of the wind projects. Benefits from the recently approved lines might be seen in as little as three years.

Does The Plan Make Sense?

The plan makes sense in that it sets out to develop a large amount of clean energy. Both the state of Texas and the country as a whole are likely to see economic and environmental benefits over the long term. The money invested in building massive wind farms and epic transmission projects will create sustainable employment for thousands of American workers. Once completed these projects will generate millions of megawatts of clean energy which means cleaner skies and less dependence on foreign oil. The energy generated will be less expensive than natural gas fired generation and that should help to bring down electricity prices for consumers.

The natural gas part of the plan does not make as much sense as the wind part. It’s true that new wind will reduce the need for natural gas generation. But massive wind farms won’t eliminate the need for natural gas in electricity production. Natural gas plants can generate on command. Wind farms can’t necessarily do that. Natural gas plants can ramp to meet unexpected demand. Wind farms can only ramp if a portion of their capacity is purposefully witheld. So while T. Boone’s wind farms will replace some of the need for natural gas plants, plenty of plants will still be necessary. And then there’s the transportation issue.

Natural Gas Vehicles

Natural gas use in the transportation industry in the U.S. is severely limited. According to the Pickens Plan Only 150,000 natural gas vehicles are in use in the U.S. In order for a shift in natural gas use to take place the auto industry will need to be on board with the plan.

Honda manufactures a natural gas vehicle with their Civic GX model. The car is sold in very few markets, has a $10,000 mark up over the standard Civic and requires special equipment installed in the home at extra cost to the buyer. These factors, and the lack of refueling stations, make the Civic GX a tough sell to most drivers.

And while there are various commercial natural gas fleets (some cities have natural gas buses) around the nation they represent only a small fraction of total vehicles on the road. If the Pickens Plan is to come to fruition then vehicle manufacturers will need to get on board and start developing more vehicles that run on natural gas. That does not seem likely as most of the buzz in the auto industry is focused on electric or hydrogen powered vehicles. Vehicle manufacturers are not likely to get on board until there is a workable plan to create a natural gas delivery infrastructure to support refueling. Which comes first, the chicken or the egg?

Transmitting That Power

The other major issue, which Pickens seems to have well in hand in Texas, is transmission. The state of Texas has vast open spaces that provide great opportunities for new transmission. Not so in the rest of the nation. Oh, and those lines will cost tens of billions of dollars to build. Plus there are “right of way” issues. All these details and more will continue to slow the integration of wind in areas that are populated enough to really need it.

Watching With Interest

Clean Energy Digest will be keeping an eye on T. Boone Pickens and his large Texas projects. If nothing else Mr. Pickens initiative just might become the standard bearer in the U.S. for building and transmitting wind energy on a massive scale.

Most people following energy topics know that oil and natural gas prices have soared over the past year. But let’s not forget about the other very popular source of energy that is coal.

The graphic at left shows coal prices are up about 100% since the beginning of 2008. And although coal is still very inexpensive when compared with oil and natural gas it is very likely that these price increases will have a ripple effect in the marketplace for energy.

The allure of cleaner sources of energy will surely increase as the cost of coal increases. Google has stated goal of making renewable energy cheaper than coal via their RE<C initiative. Google probably didn’t count on coal prices rising sharply when they kicked off RE<C, but the effects of the coal price increase will be what Google intended just the same.

For the moment coal is still quite a bit cheaper than all other sources of energy except nuclear. Several other factors besides price close the economic gap between coal and clean energy sources. The future cost of emissions is an important cost and a big unknown in the U.S. at this time. Producing power with coal also yields costs with respect to goodwill and public relations. Energy companies whose portfolio contains significant amounts of coal fired generation must spend extra money to convince the public that they being as responsible as they can be. That is a cost that needs to be factored into the economics of coal too.

EIA Coal News and Markets (Archive)

The Wall Street Journal recently published a special feature section on the topic of energy. A few of the stories focused on clean energy issues including the ones listed below.

The Case For and Against Nuclear Power “Proponents insist that nuclear is a necessary alternative in an energy-constrained world, while opponents are convinced that the costs are way too high to justify the safety hazards. The debate rages on.”

Shedding Light On Solar “Why is solar power so expensive? And what’s being done to bring down the costs? Here are some answers for the befuddled.”

You Can’t Get There From Here “Utilities are moving to harvest more power from renewable-energy sources like the wind and sun. The problem is getting that power to the places that need it.”

View these articles and more at the Wall Street Journal Energy section.

The New York Times reported yesterday that was putting a freeze on solar esolar nergy projects. The story was titled Citing Need for Assessments, U.S. Freezes Solar Energy Projects. While the title plays up the very popular theory that the Bush administration is against new clean energy sources, the facts of the story fail to support that theory.

On May 29, 2008 the Bureau of Land Management (BLM) announced a temporary moratorium on applications to site solar projects on public lands. According to the statement issued by the BLM, ““Preparing a programmatic EIS is a necessary first step in evaluating to what extent public lands with high solar energy potential may be able to help meet the Nation’s need for renewable energy…”

This temporary moratorium might be alarming if there was no good reason for it. But there is a good reason. The surge of applications to site solar on public lands has created the need for such evaluation. As it stands there are 125 projects for land covering almost one-million acres in the BLM queue. If those projects were to be completed the resulting energy output would be enough to power 20 million American homes.

The existing applications will continue to move forward during the programmatic EIS process. According to the BLM statement, “During work on the PEIS, the BLM will focus attention on the 125 applications already received for rights-of-way for solar energy development, while deferring new applications until after completion of the PEIS. ” In short, there are plenty of solar projects to be evaluated and developed. Also consider the fact that the scope of these projects does not include many private solar projects that are taking place all over the country.

Most people don’t understand that there is more to locating a solar plant than just dropping panels onto the ground. Consider the issue of connecting all these solar projects to the grid. Transmission line construction will be required. And you can bet your bottom dollar that such construction is likely to be opposed by many of the same groups that criticize the programmatic EIS in the first place. The process announced by the BLM can address some of the issues that are likely to be debated before companies invest millions into projects that become hampered by the protests of environmental interest groups.

The U.S. government has the obligation to perform due diligence to ensure that solar energy projects sited on public lands are feasible. This program, if operated consistent with the stated plans, assists the government in meeting that obligation while affording them the ability to focus on the robust queue of current requests.

When people talk about progress in the areas of clean energy they typically focus on technology issues. But even the best technology can’t overcome limitations imposed on renewable resources in the design of energy markets. Feed-in Tariffs and Net Metering are energy market features that provide great incentives for producers of renewable energy.

A Set Price For Production

A feed-in tariff sets a flat rate that a utility must pay someone who generates renewable electricity. Feed-in tariffs allow small producers of renewable energy a certain return on investment without the volatility of wholesale and retail market pricing.

Germany is well known as an early mover in the creation of feed-in tariffs. Germany’s tariff is widely believed to be the reason that they are now the world leader in solar powered energy production. In February of 2008,The State of California approved a feed-in tariff applicable for up to 480 megawatts of renewable energy created by small producers.

On June 11, 2008 Rep. Jay Inslee announced that he would be introducing a bill that would establish a federal feed-in tariff in the United States.

Feed-in tariff legislation is not a slam dunk by any stretch of the imagination. Because the rates paid under these tariffs are set higher than standard energy prices, they are effectively subsidized by the utilities who purchase the power. Those utilities may pass the extra costs related to the tariff on to their customers.

Balancing Production And Use

Net metering rules allow small producers of renewable energy to offset their use of energy with production from their renewable generators. Under these rules production of energy effectively rolls back the meter so that the producer is ultimately charged (or paid) for the net of their production and use. This type of pricing scheme is especially effective for small energy producers who consume more power than they generate.

The EIA reports that over 34,000 customers in the U.S. utilized net metering programs in 2006 with the vast majority (about 75%) of these customers located in California. The number of customers accessing net metering programs represents about 1% of all the customers in the United States. Net metering rules are implemented at the state level vary widely from state to state.

While net metering seems to be a very beneficial aspect of a retail electric market there are some potential drawbacks to these schemes. According to the EERE, “Net metering has the potential to be a bad deal for utilities. If market penetration of solar and other renewable energy-powered buildings becomes substantial, utilities are likely to become concerned with revenue losses.”

Common Technology Issues

The electric meter is the common technology element that is important to both of these programs. In order for these programs to work effectively a customer must have a meter that can either register produced power or effectively spin backwards in order to provide the net of consumption and production. In some cases the meter must register supply and demand time-stamped at different times of day. I plan to explore advanced metering technology and its effect on clean energy in future posts.

Notable clean energy investments for the week of June 8, 2008.

$45 trillion urged in battling carbon emissions “ The International Energy Agency said Friday that investment totaling $45 trillion might be needed over the next half-century to prevent energy shortages and greenhouse gas emissions from undermining global economic growth.”

Clear Skies Solar plans $44 million Californian solar farm “Clear Skies Solar has purchased 34 acres of land in Cantil, California, the planned site of a US$44 million eight MW solar farm.”

DOE Announces $30 Million for Plug-in Hybrid Electric Vehicles “Assistant Secretary of Energy Efficiency and Renewable Energy Andy Karsner today announced up to $30 million in funding over three years for three cost-shared Plug-in Hybrid Electric Vehicles (PHEVs) demonstration and development projects.”

US Rep. Boucher offers bill to create CCS demonstration fund “US Rep. Rick Boucher, who chairs the House Energy and Air Quality Subcommittee, introduced a bill on Thursday that would establish a private multi-billion-dollar fund to finance large-scale projects designed to demonstrate carbon-capture and sequestration technologies.”

Follow all of the clean energy investment news that I pick up around the web by bookmarking my link account at http://del.icio.us/cleanenergydigest/investments.

Here are some notable clean energy news items for the week of June 8, 2008.

Duke Energy to invest $100 million in solar power “Duke Energy Corp said on Monday it plans to spend $100 million to install solar panels at up to 850 homes, schools, stores and factories in North Carolina.”

New solar farm goes online “Sunrays falling on a 10-acre plot of solar panels in Oakdale have quietly begun to produce electricity for the South San Joaquin Irrigation District’s water treatment plant next door.”

NY to support carbon burial demonstration plant “The state of New York will grant $6 million for a demonstration coal-burning power plant that would permanently store underground emissions of the greenhouse gas carbon dioxide.”

Towering Fuel Cell “The New York Power Authority (NYPA) has inked a $10.6m deal with UTC Power that will make the redeveloped World Trade Center the site of one of the largest fuel cell installations in the world.”

Gamesa, Iberdrola Renovables ink world-biggest wind turbine deal “Spanish turbine maker Gamesa said Friday it had won the world’s largest ever wind turbine sales order from Iberdrola Renovables, for generation capacity amounting to 4,500 MW.”

More items on the news page. Follow all of the clean energy news that I pick up around the web by bookmarking my link account at http://del.icio.us/cleanenergydigest.

The end of last week featured a furious rally in the oil markets combined with a furious sell off in the American stock market. Oil ended the week on Friday up more than $10 a barrel from the close of the previous day. The Dow Jones Industrial Average dropped almost 400 points on Friday.

Many people are inclined to ask, "What happened on Friday?" That’s not the right question though. Something has been happening over a much longer period of time. It’s only now that anyone is taking notice. The chickens are coming home to roost if you will.

The situation is this. We have fast rising fuel prices, not only for oil but natural gas too. Almost everything we do requires fuel. Fuel allows people to use technology to create energy. Energy powers our homes, businesses our lifestyles. The need for energy is ubiquitous, hence the need for fuel is ubiquitous. The vast majority of the energy in the United States is generated via fossil fuels.

The U.S. isn’t the only consumer of fuel in the world. The U.K. and Europe also demand vast quantities of fossil fuels, albeit much less than the U.S. There was a time when the market was driven by demand in the U.S., U.K. and Europe. That time has past. Demand is also driven by India, China and other developing nations as well. The irony of the situation is the fact that prosperity in the U.S. and other places is the direct cause of the demand coming from India and China. Don’t blame India and China though. They’re building their economies just like the U.S. has done for decades. And we in the U.S. are driving that growth.

The situation is simple and complex at the same time. Higher fuel costs increase the cost of energy. Since energy is required to do almost everything this means that every aspect of the economy is affected by rising fuel costs. Of late the market has seen flat supply of the most necessary fuels while demand has increased. So if supply of fuel is increased along with a reduction in demand then we are likely to see lower prices for fuel and energy. Those lower prices will help to stabilize the economy in the U.S. That’s the simple part.

The hard part is figuring out what the most important problem is and how to solve it. There is a supply problem. Not enough oil is being pumped to give the market a good feeling that the value will go down. There is a demand problem. If supply increases but demand does not decrease then there may not be a drop in prices. There is a technology problem. The technology required to greatly reduce demand for fossil fuels is moving along slowly. There’s no doubt that for all the funding they’ve received of late that clean energy technologies still cannot compete with fossil fuels in terms of the ability to meet our energy requirements. These problems and others constitute the complex part of the scenario.

Countries really need strong leaders to assist in solving these sorts of complex problems. The problems related to fossil fuels are no different. The situation is dire. The rapid rise in fuel costs is starting to ripple through the U.S. economy with companies like Ford, General Motors, American Airlines, Continental Airlines (heck all the airlines) crying uncle. Gas prices are sharply higher. Food costs are sharply higher of late. This rapid rise in fuel costs is a very real problem that affects everyone. So how do we get costs under control?

Our leaders (and that means Mr. President and elected representatives) need to step up and get cracking on a pragmatic energy policy. The policy should include aggressive measures to diversify the mix of fuels we use. That means more wind, solar and biomass. It also means more nuclear power (that’s right nuclear) and electric transmission to go along with it. It also means cars that use much less gasoline than they do today.

A new energy policy should also devote assets to increasing the U.S. supply of fossil fuel. New sources of natural gas and oil are desperately needed. Without these we have no way to counter the reduced output and growing demand around the world. Drilling is unpopular but very necessary if we want to build energy security for the U.S. and the world markets.

Education should be a very key component of a new energy policy as well. All the public sees now is sound byte rhetoric from legislators looking to make headlines. Where are the leaders getting on television, explaining the situation and telling people what they can do to help? They don’t exist today. The President of the United States could do this and I have no idea why he hasn’t. Are these issues not of utmost national importance?

The situation we are in today has taken decades to create. So there’s no reason to believe that it won’t take that long to reverse. If we get started today, the United States can continue to reduce our demand for fossil fuels. We can also continue to increase our fossil fuel supplies in order to stabilize the market. We can also become the leaders who will reap great benefits from implementing the latest clean energy technologies. Finally, every American (especially those who live very large) can pitch in today by getting smarter about energy and changing their ways accordingly.

Are our leaders in Washington ready to lead the way? For the sake of the nation and the world, I sure hope so.

There’s going to be a lot of talk about cap-and-trade next week as the Warner-Lieberman Climate Security Act (S.3036) opens for discussion on the floor of the United States Senate. If don’t already know the basics then the following information can help you to understand what it’s all about.

Purpose

The purpose of the Act is stated within as follows:

(1) to establish the core of a Federal program that will reduce United States greenhouse gas emissions substantially enough between 2007 and 2050 to avert the catastrophic impacts of global climate change; and

(2) to accomplish that purpose while preserving robust growth in the United States economy, creating new jobs, and avoiding the imposition of hardship on United States citizens.

In short, the bill aims to reduce harmful emissions between 2012 and 2050 without destroying the U.S. economy.

Method

The purpose will be achieved by creating caps on emissions from certain ‘covered’ facilities. For the most part the caps will apply to any coal, natural gas or oil fired power plant. The caps will also apply to companies that operate large vehicle fleets.

The caps will be acknowledged via emissions allowances that will be doled out to a variety of parties. Companies that own ‘covered’ facilities will have the right to emit greenhouse gases up to the limit of their allowances. If a company exceeds their limit they can buy allowances from other parties or pay heavy penalties for exceeding the cap.

Emissions allowances are tradeable and bankable. Allowance holders can sell them to just about anyone they like. Allowance holders can also bank unused allowances for use in future years.

Companies who emit greenhouse gases will initially be allocated enough allowances to cover their emissions but as years go by they will be issued fewer allowances.

Affected Parties

Companies that own fossil fuel powered electric generation facilities will be subject to caps and thus receive allowances. The vehicle fleet clause will likely affect companies like UPS, Federal Express and large over the road trucking companies as well.

Because emissions allowances are tradeable, it is likely that emissions traders will buy and sell allowances as well. These traders will likely consist of established commodity trading houses as well as emissions trading start-ups that arise as a result of this legislation.

State governments, Electric and Natural Gas load serving entities (LSEs) will receive allowances as well. These parties are directed to sell the allowances and use the money for a variety of purposes. The most popular revenue spending requirements are aimed at mitigating impacts on low-income energy consumers and promoting energy efficiency.

New Government Entities

This bill creates the Climate Change Credit Corporation. The CCCC will administer the cap-and-trade program. They will be responsible for doling out emissions allowances and allocating revenue to a wide variety to companies and programs.

The Carbon Market Efficiency Board is also established. The CMEB will be responsible for assessing the economic impact of the program as well as maintaining the market for emissions allowances.

Read the rest