Clean Energy Digest

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?

There has been a lot of discussion recently about the role of natural gas in the clean energy future of America.

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.

Leaders from the United Kingdom and France are working on a bold plan that would allow the EU to meet renewable energy targets by importing solar power generated in Africa.

According to a story on EurActiv.com, Gordon Brown and Nicolas Sarkozy are supporting a plan that would involve the construction of massive solar plants in North Africa. Energy from the plants would be delivered to European consumers via a new high voltage direct current (HVDC) transmission system.

The idea is based on the construction of a €45 billion high voltage direct current (DC) grid that could transfer electricity produced by Saharan and North African solar installations to consumers thousands of kilometres away. The construction of a new DC grid would be necessary since most of the EU’s existing power grids operate on the basis of alternating current (AC) and as such lose too much electricity over long distances to make such a project viable.

To call this plan incredibly ambitious would be an understatement. Between the price tag and logistics it is likely that such a project would take many years to actually complete. The idea of using HVDC to transport reneweable power over long distances is becoming a popular one. The state of California is investigating the prospect of accessing clean energy from Vancouver, British Columbia.

The much loved (just kidding) Internal Revenue Service issued a notice last week indicating that utilities are now able to benefit from production tax credits for renewable energy. The change to the code allows utilities who directly invest in or develop renewable power projects to be granted the 1.9 cent per kilowatt hour production tax credit for energy generated by wind, solar and geothermal projects.

According to a press release from Puget Sound Energy, “Prior to the revision, federal regulations (interpreting section 45 of the Internal Revenue Code) restricted federal tax credits for renewable energy production in a way that barred their use by utilities that were partnering with investors to generate renewable energy.”

Many larger utilities will sell their generated power to an affiliate company which then brokers the power on the open market. In order to qualify for the credit the final sale of the energy generated by the facility must be sold to a party unrelated to the utility. This allows the utility to sell the power to an affiliated intermediate party who can then broker the energy and complete the sale.

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

Direct Link

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.