When I think about 2010 it seems to me that this will be a year of waiting in the clean energy space. That’s not to say that major projects such as wind and solar farms won’t be completed in 2010. Many projects will be completed but it won’t be the tipping point year for many of the newer and most promising technologies. The reasons for that would make sense to most anyone who knows a little bit about the clean energy space. Take the funding for example. Once the press releases are a day old the hard work on many of these projects begins. After all, you don’t get a check from the Department of Energy one day and start building batteries the next day. Matching funds to meet the government requirements need to be finalized. Planning needs to take place. People need to be hired. Contracts need to be negotiated and signed. Those are just a few things that typically take place before a project begins in earnest. It’s a lot of work and it takes time. The bigger the project, the longer the lead time. And there’s also the matter of projects or technologies that are underway but will not meet expectations.

What follows is a summary of some key clean energy technologies and how they are likely to fare in the current year.

Electric Vehicles - Both Nissan (the Leaf) and GM (the Chevy Volt) have promised to introduce their version of the electric automobile in 2010. The cars will be made available late in the year and in limited markets, primarily California. While there will be a lot of noise leading up to their respective launches most consumers won’t have access to buy one of these vehicles if they wanted to. Those that do live in the right markets probably won’t be able to afford the $30,000 – $40,000 price tag after Federal tax incentives. By the end of 2010 electric vehicles will still mostly be a curiosity. The ones that are on the road will definitely turn heads though.

Wind Power - Most onshore development will take place in the Upper Midwest. Northeast onshore development will be slowed by issues related to cost and location related opposition. Simply put, there are a lot more open spaces in the Upper Midwest. Land is cheaper there and developers are less likely to run into opposition due to “pollution” of the skyline. Offshore development off of the Northeast coast and in the Great Lakes will continue to be planned, discussed and debated. Cape Wind in Massachusetts will probably get the green light to move ahead by the Secretary of the Interior but either way construction will not start before the end of the year.

Biofuels - Ethanol is on the shelf as a source of fuel for motor vehicles. Notice that you’re not hearing anything about flex fuel vehicles anymore. The chart below shows the trends for web searches on the term “flex fuel vehicle”. Batteries are the next great hope. You’ll be hearing a lot more about “advanced biofuels” such as cellulosic ethanol and biodiesel.

Enhanced Geothermal - We’re still a long way off from a major breakthrough in harvesting energy from the heat within the earth. Conventional geothermal energy is a available in a small portion of the country. Enhanced geothermal promises to bring the technology to many other areas of the country. Unfortunately recent endeavors to prove the technology have not ended well. AltaRock Energy (funded in part by the DOE and Google) shut down their California project in 2009 due to drilling problems. They’ll take another crack (no pun intended) at it in 2010 with a demonstration project in Oregon.

Smart Grid - By the end of the year more electric customers than ever will have advanced meters installed in their homes. That number will still represent a very small portion of total electric consumers as most of the meters will be located in areas of Texas, California and Colorado. Many more smart meter projects are in the works due to 2009 funding commitments from the America Recovery and Reinvestment Act (ARRA) but those projects require a certain amount of lead time before meters start getting installed. Electric utilities are also dealing with issues related to financing in an environment when demand is reduced due to the recession and customers are wary of any innovations that might increase their electric bill. PG&E’s problems with their smart meter customers in Northern California are a notable development that will probably influence other utilities to choose their roll out timelines carefully, perhaps alotting more time for customer outreach before installing new meters over a wide area.

There is going to be a lot of activity in 2010. There’s no doubt about that. I don’t think we’ll see a lot of results though. At least not as much as many would hope for. Progress will be made but it won’t be obvious to the average consumer. In the years that follow 2010 we’ll start to see more of the fruits of the hard work and investment taking place today

The consumer side of smart grid involves meters that collect data on usage frequently and then make that data available to the consumer so that they can either manually or automatically (depending on how smart their appliances are) alter their electric usage during times of peak demand. That altered behavior will theoretically reduce the need for expensive and peaking generation that consumers pay for every day but only runs a few hours a year. As a result the system realizes both environmental and economic benefits. It sounds great but before the consumer can alter their usage patterns they need to get access to the data. That’s where the need for cloud computing architecture enters the scenario.

In the world of smart grid utilities will be storing much more data about customer usage than they do now. Most utilities currently take one reading of an electric meter for an entire month. With smart meters in place utilities will be storing thousands of readings a month for each meter. That means utilities will need lots and lots of databases (data centers actually) and applications to access and analyze that data. Computing power is going to be a big deal but it isn’t nearly the sweet spot for utilities. It should come as no surprise that computing giants like IBM, Google, Oracle and Microsoft are lining up to service utilities as they transfer to smart grid technology. So the data storage issues should be sorted out. Don’t forget about the customer though.

In order for the customer to be involved they need access to the data being captured by the utility and they probably need it in real time for the whole scheme to be effective. Customers will need to know, “How much power am I using RIGHT NOW, not fifteen minutes ago.” If smart grid technology delivers on its promises the utility should know that but getting the data to customers in a user friendly manner will be a trickier proposition. That’s where cloud computing platforms enter the situation again. All this data is stored somewhere (out there) in the cloud and that means the customer should have access to that data anytime they have an internet connection. Google’s Gmail service is a great example of a cloud computing service. All the data sits in a data center somewhere and a person’s local computer or iPhone or Blackberry can access that email via a web browser or other specialized program. All the heavy lifting (catching the mail, filtering spam, storage, indexing for search) happens in the cloud. And so it will need to be with customer meter data. Perhaps people could get meter data updates via email. Why not?

Two very necessary functions that utilities are not so good at involve data access and interfaces. In the world of smart grid customers will need user friendly access to data. That doesn’t mean they will visit the utility website every so often and download a csv or pdf file. User friendly means that customers must have access on the platforms, devices and in the format of their choosing. At the computer? Yes. On the mobile phone? Yes. Automatically? Yes. Via text message? Yes. HTML? Text? Yes. Yes. What will customers do with the data? If you’re the utility it really isn’t any of your business. The customers have a right to the data. And that also means they have a right to choose the interface that serves up the data to them. So once open access has been granted the customer can make the choice of interface.

Utilities may choose to make interface options available to consumers. Both Google and Microsoft have been promoting products (Google Power Meter and Hohm respectively) that can serve as an interface for utility customer meter data. But consumers may want to use other interfaces. An iPhone application to display meter data is far from a far fetched idea. How about sharing meter consumption on the Facebook page or Twitter account? Why not? People share a lot of things that you wouldn’t expect them to these days. There are many, many possibilities. Utilities have a few options here. You can try to think of all the possibilities, code applications to meet the needs then release and support them. An interesting idea but not advisable. Or utilities could offer application programming interfaces (API) that allow developers access to meter data given the permission of the customer. Or utilities could just lock the data into their own system giving customers limited access.

If the utility proponents of smart grid want the idea to take off they better seriously consider the API option. Because if you want a technology to take off you need to get people behind it. People will get behind it if they have options for accessing and using their meter data. Remember, the data belongs to the customer as much as the utility. It’s likely that they (or some enterprising software developer) will find a better use for it than the utility will. If you’re looking for some simple examples of the API option see the Twitter API. It allows developers to write applications that access a Twitter users “updates” with the permission of the user. Now think of frequent meter readings as status “updates” that the customer may want to make available to some application for whatever use suits them. Consider the image below which shows the Twitter “connection” window. It shows what applications have been given access to the Twitter updates of a particular user.

Approved Twitter Applications

Why not have a dashboard like this available to a utility customer? There’s no good reason why the customer shouldn’t have these features. Cost might be raised as a potential issue. Remember that utilities are going to have to give access to this data anyway. Giving limited access may end up costing a lot more in the long run if the technologies of smart grid are not sufficiently utilized to offer the promised benefits. Limited access could have a public relations cost associated with it as well. Imagine consumer advocates saying, “There go the utilities again, promising transparency and access to data as a result of new technologies, then failing to follow through.” Cloud computing, with it’s (theoretically) infinitely expandable architecture helps to make it possible.

Smart grid and cloud computing need to go hand in hand in order for the customer focused aspects of smart grid to be successful. Cloud computing offers great opportunities for both the utilities and customers. The technology vendors are out there. The data centers are out there. The application developers are out there. The utility industry just needs to join the party and meet them halfway.

You may remember that one time Google turned their home page black in order to help people conserve energy. The only problem with the approach was the fact that computer monitors use the same amount of energy to render a pixel regardless of the color. Google even admits that a black page background, “saves no energy.”

Google’s latest energy saving scheme is just as dubious. They have enlisted a herd of goats to handle the mowing of weeds and brush at Google headquarters. Google calls the goat initiative, “a low-carbon approach” to meeting their needs. Is it really a low-carbon approach?

Consider the fact that the goats need to be transported from their home ranch to Google and back. Our guess is that the truck transporting the goats to and fro runs on diesel fuel. How much fuels is used and how many harmful emissions are created will depend greatly on the travel distance between the home of the goats and Google HQ. At best we think it’s fair to say that it would end up being a wash.

Instead of enlisting goats that will also require care and feeding while onsite, Google should consider investing in the Hustler Zeon which is billed as, “The World’s First All-Electric Zero Turn Riding Mower.”

While this initiative appears to contain more noise than signal Google has made some laudable investments into alternative energy via Google.org with their RechargeIT and Power Meter programs.

Consider the Aptera electric vehicle (pictured at left) which is made in California by Aptera Motors. With three wheels and just enough room for two passengers this vehicle has more in common with a motor cycle than a car. But with an expected price tag between $20,000 and $40,000 the Aptera sure does have a car-like price tag.

Then there’s the Neighborhood Electric Vehicle (NEV) which is made by a Chrysler subsidiary called Global Electric Motorcars or GEM. The GEM e4 (pictured at right) is touted as, “…perfect for visiting family and friends or just recreational driving.” Unfortunately it’s only perfect if your family lives on the same block as you do. That’s because the top speed of the vehicle is  25 miles per hour and it has no doors. The vehicle is essentially a golf cart. But at a base price of over $11,000 the GEM e4 will set you back more than most used cars in very good condition.

If you’re part of the champagne and caviar set you have the option of going fully electric in a way that makes few compromises. The Tesla Roadster all electric vehicle made by Tesla Motors looks and performs like a sports car. It also has an impressive range of over 200 miles per charge. But the price tag of the Tesla Roadster is north of $100,000 and the production schedule only allows for about twenty vehicles each month. And with a 1,000 person waiting list you’d probably have to wait four to five years to get one even if you had the money to burn on this hot rod.

There’s no doubt that the idea of a fully electric car is hot right now. The problem is that the economically accessible electric vehicles aren’t really cars. And the electric cars that are real cars are not economically feasible for 99.5% of the population. The future promises many additional entrants into the space like the way over hyped Chevrolet Volt.

The Volt (pictured at right) promises a forty mile all electric range with a gasoline engine as a backup. The vehicle is set to roll of the assembly line towards the end of 2010 and have a price tag of about $40,000. There’s no guarantee that General Motors will get all of the current issues with the vehicle (like battery life for instance) resolved so the launched could be further delayed and the price could increase as well.

Chinese automaker BYD is getting into the act too, with a plug-in hybrid that has similar technology to the Chevy Volt. Last month The Wall Street Journal highlighted BYD’s efforts to build and market an electric vehicle that will eventually find its way to the United States.

These vehicles are only a few notable examples of the many alternative automobiles that we’re likely to see introduced in the next few years. Other contenders typically suffer from the same problems as the ones mentioned in this post. Most are not economical due to the prohibitive cost of installing huge battery packs. Those same battery packs also tend reduce the rear seating and cargo space availability for these vehicles,  which assists in cutting back on the practicality as well.

Many feel that mass production of electric cars will lead to lower cost battery packs. Those economies of scale may manifest themselves. But it’s also possible that mass demand for lithium battery packs could change the economics of lithium. A shortage of lithium could actually cause electric vehicle prices to rise even as demand increases.

Not everyone is betting that the plug is the answer to greatly reducing America’s dependence on gasoline as a transportation fuel. Companies like Honda and General Motors continue to invest money developing hydrogen powered vehicles lick the Chevy Equinox and the Honda FCX Clarity. Unfortunately, Hydrogen vehicles are incredibly expensive to produce and suffer from the lack of a hydrogen distribution infrastructure. The New York Times detailed the story of a New York Legislator who drove a Chevy Equinox to Washington D.C. but needed two additional Chevy Tahoe Hybrid SUVs in order to make it there.

Some really big dreamers are looking to solar to power the car of the future. The Massachusetts Institute of Technology (MIT) has  a solar energy vehicle team. And one man from Canada has engaged in a lifelong quest to evangelized solar powered cars. Since last June Marcelo Da Luz has traveled the U.S. and has set the world record for the traveling distance of a solar vehicle.  Unfortunately Mr. Da Luz’ quest is not a gasoline free one. A gas guzzling support van has followed him every step of the way.

Popular Mechanics reports, “Dubbed the Mini E, it will be available for lease in three states—California, New York and New Jersey—and only to those companies and individuals participating in the 500-unit pilot program. A 204-hp electric motor resides under the hood and powers the front wheels, a single-speed gearbox provides motive power and a 35 kilowatt-hour lithium-ion battery pack supplies the juice. Unfortunately, the battery pack takes the space normally occupied by the rear seats, so this Mini is just a twofer.”

It all sounds great, but there is a problem with small, stylish electric cars that must be considered. While these vehicles are likely to excite young, urban dwellers with a decent amount of disposable income, this same demographic is also less likely to have access to an outlet to plug into the car for charging.

Generation Y urban dwellers are more likely to live in an apartment building with a parking garage than a 3-bedroom house with a private garage. Adding electric in a shared building garage (or outdoor parking lot) requires the buy-in of building management and/or apartment owners. As a former condominium and co-op owner in the New York City area I speak from experience when I say, “Good luck with that.” It is very hard to get building boards to agree on basic building upgrades let alone ones that will require tens our thousands of dollars in electrical system upgrades.

Given the lack of available charging infrastructure in and around major cities, it stands to reason that sales of plug-in electric vehicles will fare much better in the suburbs where vehicle emissions due to traffic congestion is a much smaller issue.

The problem is clear. Plug-in electric vehicles are most needed in areas that tend to have more vehicle congestion, higher emissions and higher gas prices. But people living in those same areas also have much less access to a reliable charging infrastructure. A solution to this problem will likely make the difference between plug-in electric cars as novelty, second vehicles for the suburbs and plug-ins as the standard for urban private transportation.

The latest Energy In Brief posting by the Energy Information Administration (EIA) is very instructive on the topic of U.S. government subsidies for energy. I consider it recommended reading for anyone who wants to understand the level of government investment and how it effects energy production in the U.S.

In total, renewable energies were subsidized to the tune of $4.8 billion in 2007. That number put renewable subsidies ahead of any other type of energy source by over $2 billion.

There is detail on the amount of subsidies per unit of production as well. Wind producers were paid $23.37 per megawatt hour. Solar producers were paid $24.34 per megawatt hour. Biomass and Geothermal were subsidized at a very paltry rate of $.89 and $.92 per megawatt hour respectively.

The posting covers all types of subsidized energy and also includes comparatively generous subsidies for refined coal ($2.37 billion) and natural gas ($2.149 billion). Because coal and natural gas are so heavily relied upon for electric generation the cost per megawatt hour for either of them is very low. Natural Gas is subsidized at $.25 per megawatt hour and Coal is subsidized at $.44 per megawatt hour.

The wind industry was the largest beneficiary among renewable industries having received $666 million in production credits in 2007.

It is clear that we are in a very strong hype cycle with respect to the development of electric cars. Expectations are high and so are the stakes. After all, the company that can perfect a production model electric car probably stands to turn the industry on its head and make tons of money in the process. But a word of caution needs to be sounded as well. Most of the vehicles making the headlines these days are unlikely to find their way into the driveway of an average person anytime soon.

Chevy Volt

General Motors is banking on the Chevy Volt to change the game in the auto industry while turning the fortunes of their company. The promise is that the Volt will go forty miles on a full charge and cost between $30,000 and $40,000. The first models are scheduled to roll off the assembly line in late 2010. GM says the Volt has been designed but the battery pack has not been perfected as of yet. GM engineers have the great challenge of installing a battery pack that can last for at least ten years of use. That’s no easy task. And the proposed price tag (which will likely move higher) is at least $10,000 above what an average person can spend to buy a vehicle.

Telsa Roadster

The Tesla Roadster is a real life production electric car. The Roadster is an all electric, two seat sports car with a price tag over $100,000. The price tag alone makes this vehicle an impractical choice for more than 99% of the American population. It’s also worth noting that Tesla has very little in the way of track record when it comes to mass producing and servicing automobiles. To date only nine cars have been delivered to owners. If the current production rate continues the 1,000 person wait list of celebrities and millionaires will be filled in about 100 years.

Saturn Sky Conversion

For $25,000 Amp Motorworks will convert a Saturn Sky gasoline powered sports car to an all electric vehicle. First you have to buy the Sky for about $27,000 and then you hand the vehicle over to Amp for the conversion. So you’re looking at least $52,000 in costs to get an all electric Sky. Once the vehicle is converted it is highly likely that the manufacturer warranty will be null and void. Amp Motorworks is currently taking orders but none of the conversions have been delivered yet.

Gem Electric Cars

Global Electric Motorcars (a division of Chrysler) is marketing a line of “low-speed” electric vehicles. For about $10,000 you can own one of these vehicles which are currently being manufactured and sold. The catch involved with these vehicles is two-fold. First, the GEM is nothing close to a car, actually resembling a golf cart. Second, the low-speed feature means you will only get up to twenty-five miles per hour. It’s likely that safety related issues will limit this vehicle to gated communities and similarly traffic controlled areas.

A Growing Field of Choices

The number of electric vehicle choices will definitely grow in the coming years. Just about every major auto maker has one at some level of design or development. I also think it is safe to state that we are at least five years away from an electric automobile that can be mass produced while also being economical and practical enough for the average consumer in the U.S. to purchase.

It’s election season in the U.S. and talk of energy plans is all the rage. And while wind gets its fair share of press perhaps politicians should look offshore for something more than drilling.

The United States has thousands of miles of coastline that is rated either excellent, outstanding or superb for wind power potential by the National Renewable Energy Laboratory (NREL). There seem to be plenty of potential sites off the coast of Northeast and Southern California cities that could benefit from clean, cost effective wind power.

The political and financial resources required to site wind farms off of U.S. shores have proven themselves to be quite substantial. The Cape Wind project off the coast of Massachusetts is seven years in the making and counting. Meanwhile production costs have skyrocketed due to the rise in commodity prices. As a result the price of building an offshore wind farm may be too much to pay.

The economics may change soon as regional cap and trade schemes (RGGI for instance) and strict state Renewable Portfolio Standards (RPS) take effect. Gathering the required political capital is not likely to become an easier task. Coastal states like their coastlines to remain pristine. Then again, one should look to some of the photos coming out of Beijing to see what the skies over American cities could look like if we continue to rely so heavily on fossil fuel powered generation.

The United States is now the world leader in land based wind power production. One wonders what it will take for the U.S. to break the proverbial ice and leverage the energy assets that are within a few miles of our shores?

T Boone Pickens has made natural gas targeted for transportation use the center of his plan to wean America off of foreign energy sources. And a new study commissioned by the natural gas lobbying group American Clean Skies Foundation indicates that the United States has access to significantly more natural gas reserves than previously reported by government agencies.

It appears that many people are beginning to realize that the United States has to tackle a number of complex, inter-related problems with respect to our energy future. We need access to cleaner sources of energy. We need energy that is economically feasible. We need energy that is reliable. We need energy is native to our country.

Cleaner Sources of Energy

You can’t get much cleaner than wind and solar. These techologies emit zero harmful emissions. Unfortunately the wind and the sun provide varying levels of reliability in different parts of the country. So as reliance on wind and solar increases, there needs to be a certain amount of technology available to provide a backup. Energy storage technology could be the answer one day, but the technologies are not in a place where they can reliably provide mass energy delivery on demand in all the places where we might need it.

In some parts of the country natural gas fired power plants are providing (or are planned to provide) the backup energy needed in order to make adoption of renewable, but intermittent technologies feasible. Natural gas emits significantly less carbon dioxide than a coal plant. Natural gas is a fossil fuel though and as such does emit carbon as a result of generation. Still, many people prefer natural gas over coal or even nuclear, which releases zero emissions.

Economically Feasible Energy

Reliance on energy imported from unstable, foreign governments can get very expensive. We’re seeing that situation now. The increase in the price of oil has made every other source of fuel more expensive too. Native energy is always going to be less costly than foreign energy. And while we shouldn’t be encouraging people to use as much as they want, we are now seeing how tough times can get for American industry in an environment where the cost of energy can spiral so high, so fast.

Natural gas addresses the need for a near-term source of energy that is economically feasible. The cost is cheaper than oil and gas because this resource is plentiful in North America. That’s not to say that natural gas is not a volatile commodity. Natural gas is volatile due to the flexible nature (used in power generation, home heating and transportation) of the commodity and increasing worldwide demand. Increased exploration and a gradual reduction in demand as cleaner technologies are adopted could mitigate these economic concerns.

Reliable Energy

The 2003 NorthEast blackout showed many people how important reliable energy is to our society. When the lights go out on a 90 degree day, people want those lights (and air conditioners, and elevators, etc.) to return to life very quickly. So as the clean power system of the future is constructed reliability cannot be ignored. Cleaner technologies tend to be less reliable due to the nature of the power source (like the wind and sun) or because the technologies need to mature enough (like fuel cells) to perform more reliably.

Natural gas technology is very mature. As a result, natural gas fired power generators can be counted on to start quick and deliver adequate amounts of power when needed. Newer natural gas technologies like combined cycle make natural gas power generation even more efficient.

Domestic Energy

The United States needs energy sources that are native to our continent. Foreign sources of energy become increasingly questionable due to the volatile nature of the countries controlling the resources. Wind, solar and nuclear power all fit the bill as native sources of energy. All of these sources are emission free and economical in the long run. There are issues with safety (in the case of nuclear), reliability and maturity of the industries. Even though the U.S. aims to greatly increase output of all available clean energy sources there will still be a demand for energy.

Natural gas seems to qualify as the next best source of energy that is available domestically. Natural gas is cleaner than coal and deliverable via pipeline which serves to cut down on overall cost. Natural gas is also flexible enough for use in transportation, which in turn could contribute to reduction in demand for gasoline.

A Bridge To The Future?

For all of the reasons mentioned above I believe that natural gas will play a strong role in facilitating the clean energy future of the United States. The impact of natural gas is not a foregone conclusion though. Domestic exploration and production must increase. Investment in technologies that make natural gas cleaner, more economical and more flexible must increase. If the proper investments are made the U.S. will have a cleaner, more robust and more secure energy portfolio for many years to come.

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.

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)

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.

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.

New Government Programs

The Federal Greenhouse Gas Registry will be created to track emissions of greenhouse gases. Entities that emit greenhouse gases will be required to submit data to this registry. The Domestic Offset Program will be responsible chiefly for distributing allowances to companies that produce verifiable, permanent reductions in greenhouse gas emissions. This will allow organizations to meet some of their emissions requirements by purchasing offset allowances which they can then submit to meet cap requirements. The Deficit Reduction Fund will be created to bank allowances that are not otherwise allocated. This fund increases yearly as fewer allowances are distributed.

The Program For Tribal Communities will deliver assistance to tribal communities affected by climate change. The Climate Change Worker Training Program will be established to create jobs in fields related to renewable energy. A Science Advisory Board will be established.

The International Climate Change Adaptation and National Security Program will be established. This program will be responsible for the submission of annual reports to the President and other government agencies

A number of funds are created by this bill including: The Energy Assistance Fund, The Climate Change Worker Training Fund,The Adaptation Fund, The Climate Change and National Security Fund, The Bureau of Land Management Emergency Firefighting Fund, The Forest Service Emergency Firefighting Fund, The Climate Security Act Management Fund and The Energy Independence Acceleration Fund.

How It All Works

Creation of emissions allowances effectively puts a price on greenhouse gas emissions. Emitters will then have to pay for their emissions starting with nothing at first and then more in the future as they are allocated fewer and fewer allowances. As such, emitting greenhouse gases will get more and more expensive. This will create incentives for emitters to invest in low carbon and carbon free technologies that will ultimately help in reducing all greenhouse gas emissions in the United States.

Meanwhile the federal government will be collecting revenues via the auctioning of allocated allowances and the sale of allowances that the government allocates to themselves. The resulting revenue is used to monetize the programs, funds and agencies mentioned in the paragraph above. Ostensibly these programs, funds and agencies will serve to accelerate the development of low-carbon and carbon free technologies as well as mitigating the impact of these changes on low-income consumers of energy.

The Projected Effects

The Energy Information Administration has written an extensive impact assessment of S.3036 which I recently reviewed. The short answers are these. The emission of GHG will be significantly reduced during the time period of this bill. Most of this reduction will be due to changes in the electric power sector. It is likely that Natural Gas will become an increasingly dominant fuel source for electric generation. Coal consumption is greatly reduced. Energy prices and this energy bills for consumers will be greatly increased. The impact of increased energy prices will affect the overall economy by reducing purchasing power and lowering demand for goods and services. Industrial activity is significantly effected by the changes. Significant revenue (between $300 and $800 Billion) is generated by Federal and State Governments auction and sale of emissions allowances.

The actual effects of S.3036 depend on a lot of factors. The ability of the U.S. to develop and deploy nuclear and carbon capture and sequestration (CCS) technologies is a very important one. If the U.S. is not able to develop these technologies then the increased reliance on natural gas will be pronounced. This would likely lead to significantly higher natural gas prices which would cause a greater negative impact on the overall economy.

The Road Ahead

This is a wide ranging and controversial piece of legislation. S.3036 essentially changes the landscape with respect to the economics of energy production and consumption for the next forty years. The Act also greatly increases the size and funding of the U.S. government as a result of the agencies, programs and funds contained in the Act.

Some will see this as an onerous increase in the power and responsibility of the government. While others will view S.3036 as landmark legislation that will change the planet for the better. Some see S.3036 as a vehicle for massive wealth redistribution. While others will call it a necessary sacrifice during a time of dire need for reductions in emissions. As such, expect intense debate and discussion that will likely end up passing the issue to the next Presidential administration.

It is also worth noting that the Warner-Lieberman legislation is not the only game in town. Recently Representative Edward Markey from Massachusetts announced a bill with stricter emissions requirements than S.3036. Perhaps the two pieces of legislation will give rise to a third bill that blends provisions included in each of them.

Defining Demand Response

Demand response programs pay electric customers to reduce their load during high electric demand hours. This product provides the opportunity for customers to earn money by shifting their electric consumption to off-peak hours. Across the United States the vast majority of the customers for demand response fall into the Commercial & Industrial (C&I) category.

Imagine a manufacturing plant that operates on shifts. During the summers that plant might be able to eliminate their afternoon shift and replace it with an overnight shift, thereby reducing the overall load on the electric system during peak hours of the day. Alternatively, the same plant might have their own generation resources on site that can be utilized in the event that they are called to reduce demand.

C&I customers weigh the financial benefits of the demand response program against the inconvenience and cost of making changes to their electricity usage.

Demand Response Technology

Participation in demand response programs requires the use of advanced electric metering technology. This technology allows a central operations center to communicate with the C&I customer to let them know when to reduce demand.

In order to access the necessary technology demand response providers will contract with companies that aggregate demand response as a resource. Two well known demand response aggregators are Enernoc and Comverge. The companies provide electric customers with the necessary technology and act as an intermediary between the customer and the utilities and electric system operators who run the demand response programs.

Enernoc has posted a video that explains how their system and processes work.

Residential Demand Response

The availability of residential demand response is extremely limited in the United States. There are two main reasons for this. Residential electric prices are rarely tied to the wholesale electric markets in any way. As a result the reduction of demand provides no financial benefits for the residential consumer. Electric meter technology also requires an upgrade. The vast majority of electric consumers have older meters that do not provide the granularity required to track electric consumption changes within the day.

Some customers do have the option to benefit from reducing demand via Time Of Use (TOU) rates. Time of use rates adjust the price of residential electricity based on the time of day when the electricity is consumed. TOU rates are a form of passive demand response because the customer is not obligated to change their habits. As a result, electric system planners don’t have a strong ability to factor the effects of TOU when determining generation schedules.

Bringing residential customers into the demand response fold will require advances in technology and market rules, as well as an investment by local utilities. Such advances generally fall under the umbrella of smart grid technologies.

The Future of Demand Response

I expect demand response to become increasingly popular and eventually make a stronger move into the residential electric market for the following reasons.

• Demand response is considered a clean energy resource since its activation can reduce the output of fossil fuel powered resources
• Demand response will allow many states to meet increasingly onerous electric efficiency requirements that mandate reduced electric demand
• Unlike nuclear, clean coal, and even wind projects, there is no consumer opposition to demand response programs
• Competitive electric markets are expanding the opportunities for providers of demand response in order to meet ever increasing demand
• As electricity prices increase all classes of consumers will demand products that allow the flexibility to control costs via shifts in demand

Wide integration of demand response is going to take some time. But when you compare the effort and cost to siting a nuclear plant or offshore wind farm it’s easy to see why investing in demand response is a better bet than counting on those technologies in the near future.

• DTE Energy is seeking suppliers for their GreenCurrents program in 2009 and 2010. Proposals are due by close of business on Friday, May 2nd
• AEP subsidiary Appalachian Power is seeking 100 megawatts of clean power for operation by the end of 2010. Proposals are due by the close of business on May 30th
• AEP subsidiary Southwest Electric Power Co. is seeking between 65 and 100 megawatts of clean power for operation by the end of 2010. Proposals are due on May 19, 2008
• The Long Island Power Authority is seeking up to 50 megawatts of solar power. Final proposals are due on June 27, 2008
• Portland General Electric is seeking up to 218 megawatts of clean energy for delivery between 2009 and 2014. Proposals are due on May 23, 2008.

Renewable RFPs typically seek energy supply from sources of energy that do not produce harmful emissions and could include wind, solar or biomass. In some cases, such as the LIPA RFP, the utility will request a specific type of supply.

U.S. utilities have not typically been in the business of developing clean energy technologies. The RFP process allows those utilities to make connections with companies who specialize in clean but much smaller scale projects.

Expect to see more RFPs issued as we enter the summer of 2008. The demand for clean energy supply by utilities is partly driven by state and regional renewable supply requirements. Its also driven by the realization that utilities can’t count on fuel costs for oil or natural gas to drop anytime soon.

The amount of energy produced by these projects is not very significant. By getting into the clean energy business now these power companies can lay the groundwork for much larger clean projects that they might need down the road.

Given the fact that the U.S. has huge coal supplies the power industry continues to hold out hope that IGCC with CCS will be a significant generation source in the future. Unfortunately these technologies are as unproven as they are promising. To date there have been no successful commercial implementations of IGCC in the United States.

Development of IGCC technology is extremely expensive. Combine that fact with the general stigma surrounding anything related to coal and you have an unfriendly environment at best. In the last couple of weeks there have been a few developments related to IGCC that underscore this one step forward, one step back stalemate.

• NRG Energy has recently reiterated their commitment to developing a 600MW IGCC plant in upstate NY.
• A recent study indicated that carbon capture needs $6.4 billion in investments in order to be viable.
• RWE Power is continuing development on a 450MW IGCC plant which is scheduled to come online in 2014.
• A representative from AIG Global Marine and Energy, which reportedly has billions of dollars to invest in clean energy technologies, recently noted that he feels nuclear is more promising that IGCC with CCS.

The outlook for IGCC is not a very good one in the short term. A significant amount of investment is still required in order to make the technology commercially viable. Investment is definitely occurring but not a the rate of investment seen in other technologies like wind, solar and energy efficiency.

The U.S. has large supplies of coal and soon it will get very expensive to operate coal-fired power plants. When that time comes look for more power generators to ramp up their investment in IGCC technology. The pioneers like NRG and RWE are taking on great risk by spending on IGCC now but that could pay off for them in a big way if their projects are successful and the technology catches on with the power industry.

This particular situation highlights the risk that we may be taking if we choose to rely too much on intermittent resources like wind, solar and run-of-river hydro. Intermittent resources only run some of the time and more importantly they can’t be controlled by humans in order to increase output. So when wind is providing 1700 megawatts of power and dies down other types of resources must be called to supply reserves. It’s likely that those resources will be natural gas or oil since those types of generators can make quick adjustments to come online to meet high priority energy needs in the short term.

The situation in Texas is far from a dire one though. Texas has more than enough backup resources to cover a loss of over a thousand megawatts. All organized markets have what’s called a resource adequacy plan meant to cover the loss of their two largest baseload power plants. Think big nuclear and coals plants when you’re thinking of baseload power. The plan in Texas has the grid operator covering just over 2,000 MW of losses inside of thirty minutes. So while loss of power occurred it probably wasn’t for long.

Situations like this server to remind us how important a diverse mix of resources is to the welfare of the populace. Many people want to leverage clean grid suppliers like wind energy, solar and hydro. But at the same time we need to make sure that power is available when we really need it. A lot of that reserve power is likely to come from natural gas, nuclear and even coal. That’s why it is a vitally important task for all those planning the future of energy to understand the role that each type of supply resource plays in resource adequacy.

And while we’ve got plenty of room to add clean technologies to the power grid we also need to leave room for legacy technologies that can provide reliable power when a situation like the one in Texas arises.

Six weeks ago General Motors launched the GMnext community site which includes information and discussions on GM’s efforts with respect to renewable energy technology. Some time after the launch the new GM site was inundated with comments criticizing GM’s efforts with respect to clean energy and accusing the company of greenwashing. Greenwashing is the word used these days to indicate someone who delivers a clean (or green) energy message without actually taking real action.

General Motors took action to manage their community with respect to the environmental activists on their site. In the mean time GM Vice Chairman Bob Lutz is quoted as calling the global warming issue a “total crock” during an invite only meeting with journalists at the end of January. Needless to say the response to Mr. Lutz’s comments has been robust.

Mr. Lutz has defended himself on GM’s own FastLane blog by stating, “My beliefs are mine and I have a right to them, just as you have a right to yours. But among my strongest beliefs is that my job is to do what makes the most business sense for GM.” Lutz has been the champion within GM for the Chevy Volt electric car and has promised that he will get it into dealers in 2010.

In the meantime the Rainforest Action Network went to work on the GMnext site posting a flood of “not nice” comments directed at General Motors and their employees. As a result GM shut down comments to several of the posts (including this one) on the GMNext site. GM followed up with an online discussion with GM partner Coskata about ethanol powered vehicles.

It’s almost hard to believe that this dizzying series of events has occurred in just the past few weeks. Unfortunately what we’re seeing here is typical of a lot of the discourse that occurs in the U.S. with respect to clean energy. On one side you have activists who are angry and jaded because corporations haven’t done more to address environmental issues. On the other side you have huge corporations attempting to change, but sometimes they are undermined by outspoken executives who inject more rhetoric into the conversation.

If we want to accomplish anything meaningful with respect to clean energy in the United States then clearer heads need to prevail. Some environmental activists refuse to believe that U.S. auto companies will really change their technologies to support clean energy. So they react with completely negative commentary when an opportunity like the GMnext site appears. On the other hand Bob Lutz felt he was exercising his right to speak his mind when he called global warming a crock.

Both sides are to blame on this issue. Some environmental activists practice an angry, all-or-nothing brand of activism that does nothing to move clean energy causes forward. That certainly seems to be the case here. Mr. Lutz should know better because as a top officer of a firm like GM any comments he makes will likely be attributed to the company in some way.

Mr. Lutz has reiterated that GM is committed to developing clean technologies when he stated, “General Motors is dedicated to the removal of cars and trucks from the environmental equation, period. And, believe it or don’t: So am I!”

Let’s get on with it then. Both sides need to give a little in order for this movement to work. Words and actions should be measured so that the maximum amount of effort goes to solving problems instead of fighting over comments on blog posts.

Use the player below to listen to an interview from the For Immediate Release podcast. In the interview representatives from General Motors present their side of the story with respect to the GMnext greenwashing controversy.

In order to bring clean supply to the masses we need access to the paths between the energy sources and the energy sink points. The sources are at the assets like major wind farms. The sinks are points like New York City and Los Angeles where large amounts of power are taken off the grid to serve customer.

In a perfect world our clean energy sources would be located in close proximity to the demand. Unfortunately this is rarely the case. Political, environmental and safety (like windmills throwing ice) issues typically prohibit the siting of renewable resources near major population centers. And if the aforementioned factors aren’t an issue then there probably won’t be enough space available anyway.

We need plans in place that will allow for the expansion of transmission networks so that clean sources of energy can get to where they are needed most. The proposal of hundreds of miles of high voltage transmission lines is rarely a popular one. But people must decide whether the negative impact of transmission lines outweighs the negative impacts of foreign oil dependency and harmful emissions.

Here are a few of the initiatives currently underway that involved the development of electric transmission that will support the flow of clean energy to populated areas.

National Interest Electric Transmission Corridors (NIETC) – The Energy Policy Act of 2005 contained a provision that allowed the Federal Government to identify deficiencies in U.S. transmission networks. According to an FAQ document published by the Department of Energy the NIETC, “…is a way of focusing attention on the areas of the country that are most congested – and whose consumers stand o benefit most from alleviation of it.”

In October of 2007 two corridors were designated by the DOE as indicated below.

• Mid-Atlantic Area National Corridor (includes some or all counties in DE, OH, MD, NJ, NY, PA, VA, WV, and DC); and
  
• Southwest Area National Corridor (seven counties in Southern California and three counties in western Arizona).

More information on the progress of this initiative can be found at the Office of Electricity Delivery & Energy Reliability.

California Renewable Energy Transmission Initiative (RETI) – This project specifically addresses the need to build new transmission in order to facilitate the delivery of renewable energy to California cities. According to the RETI website, “RETI will assess all competitive renewable energy zones in California and possibly also in neighboring states that can provide significant electricity to California consumers by the year 2020.”

A very detailed presentation on this initiative from an meeting in October 2007 is located here.

ISO New England HVDC Upgrades – The New England electricity market operator (ISO-NE) is discussing the addition of an HVDC transmission line from New Brunswick in order to facilitate the flow of power (much of it renewable) from that region.

HVDC or High Voltage Direct Current lines are superior to standard alternating current transmission lines because the effects of line losses are minimized. More on this at Wikipedia.

The discussions on this topic tend to be very technical but the bottom line is that access to clean energy from New Brunswick will benefit New England, especially the high demand area around Boston. Those deeply interested in this topic can peruse the public documents for the New England Transmission Planning Committee.

Autos like the Honda Insight and Toyota Prius were the pioneers in bringing clean technology to automobiles. While interest in hybrid automobile technology has seen relatively slow adoption in the U.S., sales of these and other hybrid cars have been steadily increasing as the price of gasoline has risen above three dollars per gallon.

Car makers are now looking past the standard hybrid technology to a new set of technologies that deliver better fuel economy and lower emissions. Here is a list of some of the cars that may be a part of the next generation of clean automobiles.

Make/Model: Kia Sportage
Technology: Hydrogen Fuel Cell
Due Date: 2012
Links: Kia World, Star Phoenix, Car Keys

Make/Model: Cadillac Provoq
Technology: Hydrogen Fuel Cell
Due Date: TBD
Links: New York Times, AutoBlog, PodTech

Make/Model: Chevrolet Volt
Technology: Plug-in Hybrid
Due Date: 2010
Links: Reuters, Chevrolet, Wikipedia, Detroit Free Press

Make/Model: Ford Escape
Technology: Plug-in Hybrid
Due Date: TBD
Links: Ford, AutoBlogGreen

Make/Model: Tesla Roadster
Technology: Plug-in Electric
Due Date: 2009
Links: Wikipedia, Tesla Motors, Car and Driver

Mike Huckabee is a former three-term Governor of Arkansas who ended his last term as Governor in January of 2007. Governor Huckabee is also the author of several books including From Hope to Higher Ground: 12 Stops to Restoring America’s Greatness. Most recently he has established himself as the front runner for the Republican nomination for President by winning the 2008 Iowa Caucus.

The Position

Governor Huckabee makes the following statements on the Energy Independence issue page on his official website.

“The first thing I will do as President is send Congress my comprehensive plan for energy independence.”

“We have to explore, we have to conserve, and we have to pursue all avenues of alternative energy: nuclear, wind, solar, hydrogen, clean coal, biodiesel, and biomass.”

“We will set aside a federal research and development budget that will be matched by the private sector to seek the best new products in alternative fuels.”

“Our free market will sort out what makes the most sense economically and will reward consumer preferences.”

Our Take

Governor Huckabee makes strong statements on the subject of energy independence. Like the other Republican candidates Mr. Huckabee does not provide a detailed plan. He takes care to mention all possible alternatives, which certainly makes sense since we can’t expect that the future of clean energy will rely on one or two technologies.

At this point in the game I don’t think that any President can afford not to have a strong clean energy policy. The question we have to ask is this one. What route will each candidate take to help the U.S. get to our clean energy future. It is encouraging that Mr. Huckabee plans to share resources with the private sector allow the “free market” to sort out the technologies and fuel sources that makes the most sense. A rigid mindset that relies on the government, funded solely by tax payer dollars and punitive corporate levies, will lead to inefficient federal programs and slow clean energy innovation.

* The price of oil is affected by more than just demand for energy. We can’t control geopolitical issues and things like assassinations in Pakistan and the Iraq war will keep traders on edge.
* Demand is still a big factor and demand will continue to increase.
* Clean technologies are being developed but it is going to take time to bring things like mass solar and electric only vehicles to critical mass.

These are just a few reasons why I think that the price of crude oil will rise before it falls. I do think that the price will fall in the long run because the three situations I mentioned above can and will turn around.

In the short run we will see higher gas prices that will follow along with the increased oil prices and this is where the real difference will be made. If people see the cost of energy every day of the week it will continue to be on their minds. And when it is on people’s minds it becomes an important issue. This makes people change their consumption habits. And it makes people put pressure on their legislators to change things.

I’ll keep watching the industry news daily and report here to let you know how the tone changes.

The site selection for their experimental plant was seen as a major step forward for the project, which aims to start generating electricity in 2012. Within hours of announcing the selection a representative from the Department of Energy cautioned about spending on the project.

Deputy Assistant Secretary For Fossil Energy James Slutz made the following statements.

“As the Department of Energy (DOE) has discussed with the FutureGen Alliance for the past several months, projected cost overruns require a reassessment of FutureGen’s design.”

“DOE believes that the public interest mandates that FutureGen deliver the greatest possible technological benefits in the most cost-efficient manner. This will require restructuring FutureGen to maximize the role of private sector innovation, facilitate the most productive public-private partnership, and prevent further cost escalation.”

This is a obviously a statement indicating the project is going way over budget. The most telling message is the desire to, “…maximize the role of private sector innovation…” So not only is the project over budget but the DOE would also like the private sector partners to contribute a larger percentage of the funds required to continue.

We don’t know what this means with respect to the timeline of the FutureGen project. The Department of Energy will release details on the restructuring in January of 2008.

1. Increasing the supply of alternative fuel sources by setting a mandatory Renewable Fuel Standard (RFS) requiring fuel producers to use at least 36 billion gallons of biofuel in 2022.
2. Reducing U.S. demand for oil by setting a national fuel economy standard of 35 miles per gallon by 2020 – which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.

If you are in a corn producing state (or have invested in ethanol stocks) you’ll be happy to know that this law pretty much insures strong demand for domestic ethanol. The market agrees. Pacific Ethanol Corp., the largest ethanol producer and marketer on the West Coast, was up 18% today after having a very rough year. This law gives a very strong signal to ethanol producers as the clean energy fuel source of choice due to the lack of provisions for the extension of the wind and solar tax credit.

It also means that the average fuel economy of passengers cars will increase over the next decade due to the increased CAFE standards. So we’ll definitely be seeing more smaller vehicles and many more hybrid electric vehicles on the road. Strangely enough, rising oil prices have accelerated public demand for increased fuel efficiency. But now that this is a law expect auto companies to take more proactive steps to bring fuel efficient vehicles to market faster.

The net effect of all this should be a steady decrease in oil prices. As demand decreases the commodity becomes less valuable. But don’t expect drastic changes in oil or gasoline prices in the very near future. It’s going to take several years at a minimum to bring the right technologies online in large enough amounts to really force the worldwide petroleum markets to react to the changes.