2014 – The Year Ahead

First, let me wish all my loyal followers a very happy and healthy new year!  So what exactly does 2014 have in store for us on the energy and environment front?  Below is a list of things that I am watching, please comment and bring any topics of interest to my attention.

• Keystone XL Pipeline – Just today the State Department announced in their report that the Keystone XL Pipeline would have a minimal impact on the environment.  This report was greeted with calls for Obama to approve the project by Republicans and even some Democratic lawmakers much to the chagrin of environmentalists.  Critics of the report said it did not pay enough attention to the harmful practice of extracting the oil from the tar sands in the first place.  The proposed $7B project would carry 830,000 bpd of crude oil from the Western Canadian Sedimentary Basin and the Bakken Shale formation to Steele City, NE before moving on to refineries on the Gulf Coast.  Issuance of this report now begins a 30-day comment period for the public and a 90-day comment period for government agencies, as well as puts the heat on President Obama to take action.  As recently as June 2013 Obama stated, “Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution.  The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”  Environmentalists have called approval of the pipeline “game over” for the planet.

• California Drought – 9% of California is now in a state of “exceptional drought”.  While this might not sound like news to anyone who has seen the images of the forest fires in the Bear Republic, this is an extremely concerning issue.  In fact, “Thanks to the magic of science (and tree rings), we can now safely say that California hasn’t been this dry since around the time of Columbus, more than 500 years ago. What’s more, much of the state’s development over the last 150 years came during an abnormally wet era, which scientists say could come to a quick end with the help of human-induced climate change.”  Lack of rain combined with abnormally low snowpack could leave much of the state virtually dry within 60 – 120 days.  If you think this is just a left coast problem, think again – California is responsible for almost 12% of the country’s agriculture.

• Emerging markets – If you have been watching the markets lately you have seen a dramatic reaction to perceived threats from emerging markets.  I’ll make it quick: Fed removes the free money punchbowl from the party; possible slowdown in China; currency trouble from Brazil, Turkey, South Africa and Argentina.  So what does this all mean?  Stay tuned and I will keep you posted.

Plus we have Super Bowl XLVIII, the winter Olympics and the World Cup all coming up.  What a great year this is going to be.

Welcome back Greenbacker’s!  It’s on!

Stay Classy,

Mr. Greenbacks.

US Energy Security – Update from NY Energy Week

On Tuesday I had the pleasure of attending Redefining US Energy Security for the 21st Century as part of New York Energy Week.  The panel was composed of self described “Energy Warriors” Vice Admiral Lee Gunn (US Navy, Ret.), Brigadier General Steven M. Anderson (US Army, Ret.), and Brigadier General Stephen A. Cheney (US Marine Corps, Ret.) and offered insight into the massive amount of energy required by the DOD as well as their goals to reduce energy demand without compromising operational efficiency.  Here are some interesting facts:

• The US military is the largest organizational user of petroleum in the world consuming around 120m barrels per year at a cost of about $17 billion.
• Petroleum accounts for 71% of the DOD’s energy consumption by source; electricity ranks second at 11%, natural gas third at 8%.
• Since 2005, DOD’s petroleum use has deceased 4% but spending on petroleum increased 381% in real terms.
• After taking into account the hidden costs of personnel and assets required to move, store and protect fuel from the supplier to the point of use, one gallon of fuel can cost up to $50.
• One project that used spray foam insulation on tents in Iraq reduced cooling costs by 75% and resulted in savings of $3.6 per day!  The original contract for $95 million saves up to $1 billion dollars annually and keeps 11,000 fuel trucks off the road.  Think about the reduced risk to our soldiers who would otherwise have to protect those convoys as the fuel makes its way from its origin to its final destination.

All this adds up to a massive energy bill and a lot of time and resources dedicated fueling the operation rather than the operation itself.  The diversion of resources, vulnerability of supply chains and reduced mobility of combat forces make our military’s reliance on fossil fuels a national security issue as much as a financial one.  Each and every branch of the military understands this fact and has taken steps to increase their energy efficiency and reduce their demand.  However, the opportunities are endless.

As I stated in an earlier article, the DOD should leverage its purchasing power to drive cost reductions in advanced clean energy products.  In addition to economies of scale, the DOD would also provide real world testing of new technologies so they can be measured and verified and eventually reach commercialization.

Furthermore, as energy efficiency contributes to organizational effectiveness, there should be a top down approach where commanders are held accountable for reaching their energy reduction goals.

It is well established that our addiction to fossil fuels poses a national security risk.  It was especially motivating hearing the alarm being sounded by former members of the DOD.

Mr. Greenbacks Goes to Costa Rica!

Costa Rica is at the forefront of promoting sustainable practices in their everyday life and one of the 5 “Blue Zones” of the world where people regularly live to be over 100 and generally enjoy better health and less incidence of disease than the rest of the world.

Just a few of the common practices that we saw in Costa Rica was composting of all organic materials, low flow faucets and showers as well as automatic shut off switches on the room lights after the key has been removed.  A heavy public awareness campaign also goes a long way toward making guest appreciate the natural beauty of the land.

On our hanging bridges canopy tour, our guide explained that Costa Rica was well on its way toward meeting its power needs using renewable sources such as hydro, wind, and geothermal.  Almost 95% of CR’s power is produced from renewable sources with hydro accounting for a full 75% of the total.  Geothermal ranks second due to the areas 5 active volcanos and wind installations have been steadily increasing in recent years.  Distributed solar would make a great addition to CR’s renewable energy portfolio and would help to power regions where grid transmission is simply too costly.

Energy Policy Meets Federal Land

A recent article called Turning Pristine Public Lands Into Solar Farms in Bloomberg Businessweek highlighted the Obama administrations’ policy of opening federal lands maintained by the Bureau of Land Management and the Department of the Interior to renewable energy projects.  The executive powers that Obama is using are similar to the ones that the Bush administration used to bypass Congress and push for oil and gas drilling on those same lands in 2001.  Using Ken Salazar, the Secretary of the Interior, Obama has approved more than 37 renewable energy projects on federal lands that will power more than 3.8 million homes.

Since taking office, Obama has issued an average of 1,000 fewer drilling leases per year to oil and gas interests.  Instead, the administration has green lighted more than 18 other utility-scale solar plant, 7 wind farms, and 9 geothermal facilities.

However, certain projects have angered environmentalist groups such as the Sierra Club and the NRDC who feel that some of the projects would be better sited on 80,000 – 285,000 abandoned mine sites on federal lands instead of pristine desert space near treasured national parks such as Joshua Tree in southern California.  A coalition called the Western Lands Project is suing the Dept. of the Interior in federal court hoping to have the projects moved to those less desirable, degraded lands.

While I am generally skeptical of politicians bypassing Congress to achieve a political goal, I do favor building renewable energy plants on federal lands.  I also agree with the Western Lands Project that the Interior should look for better locations for these projects that redevelop sites that have already been ruined by mining operations.  Reusing depleted lands and brownfield development would be ideal for PV installation because the land does not have to be cleaned up beforehand and solar PV requires very little maintenance and can be seated on top of the land, not disturbing the contamination.  The EPA announced a brownfield redevelopment project called Brightfields that aims to achieve exactly that.  As with any major project, land use should be a major factor.  This is especially true when using public lands for private development.  By identifying sustainable sites that promote redevelopment of tarnished lands, the government can achieve a double victory of renewable energy and brownfield remediation.

The below image shows a refurnished open pit mine in Germany that is now one of the world’s largest PV plants at 166MW.  This site would have otherwise been left uninhabitable for any purpose.

China’s Opportunity

This week’s Bloomberg Businessweek had an article titled On China’s Electricity Grid, East Needs West, that explained the mega cities of China’s east coast are consuming resources from the coal rich areas in the country’s far western provinces resulting in lengthy transmission lines and growing instability among the minority ethnic groups there.

One of the biggest problems with having cities so far removed from the natural resources that power those cities is transmission.  In China, freight railroads and river barges are already overloaded and overcrowded.  This led party leaders to push for development of interior regions of the country and build high voltage transmission networks called the West-East Electricity Transfer Project.  By 2020 the total capacity of this project is projected to equal 60 Hoover Dams.

The second problem with this large-scale coal driven buildup is the lack of water resources available to produce steam in these plants.  Many of these planned coal plants are located in water scarce regions including Xinjiang and Inner Mongolia and has led to tensions with ethic Mongolians and Uighurs who depend on farming and herding for their livelihood.  By tapping already stressed aquifers and wetlands, there could be a larger problem looming.

Coal currently generates 80% of China’s electricity and the country is responsible for half of the annual consumption of coal worldwide.  Following the traditional model of building coal plants located far away from the end users is simply not the answer.  While high-voltage transmission lines are more efficient that shipping coal by rail or barge, much of the electricity produced is still lost in transmission.

A better idea would be harness China’s production capacity of solar PV cells and adopt a domestic policy of distributed generation.  DG is sited near the end user of the electricity and therefore less vulnerable to losses during transmission.  PV cells can be placed vertically up the sides of the country’s many skyscrapers eliminating the need to clear land for ground-based systems.  Smart building design is another idea that could drastically reduce demand for electricity and save the country from building expensive, inefficient, centralized power plants.

China’s massive infrastructure build out has been nothing short of extraordinary.  Now it has the opportunity to leap ahead of other developing nations by committing resources towards building the next generation cities.  Distributed generation, microgrids, and smart integrative building design can all help to make this idea a reality.

Unlikely Alliance

            I read a quick article in Bloomberg Businessweek last week that detailed an unlikely alliance between tar sands producers and environmentalists to put a pollution tax on the dirty, heavy crude coming out of Alberta.  Yes, that is correct.  Tar sands producers are actually lobbying for a carbon tax or cap-and-trade system that would help to clean up their operations. In British Columbia, a province that enacted a carbon tax, families are paying an average annual premium of $376 and have reduced their per capita emissions 10%.  The producer’s biggest fears are to be viewed as “too polluting” by other nations, resulting in no market for their exports.  America’s opposition to the Keystone XL pipeline highlights this fear. Unless the tar sands can change their appearance, it seems that the world would be okay without the product.  An oil industry spokesman even said that “If your country looks at Canada and says your energy exports are too carbon intensive, then it becomes and economic competitiveness issue.”

            Standing in the way of this unlikely alliance and subsequent carbon pricing is the Prime Minister Stephen Harper.  Harper has traditionally emphasized business and job creation over environmental issues and is responsible for pulling Canada out of the Kyoto Protocol, the only nation to do so.  Failure to embrace cleaner regulations on the tar sands may soon become an environmental and economic problem for The Great White North.

            The winds of change are blowing, and nations are figuring out how to monetize carbon.  If Canada can enact sensible regulation that appeases both oil producers and environmentalists, then it can be a leader in the carbon markets.  If it fights the winds of change, then it risks being left behind by the rest of the world.  The simple answer is to put a price on carbon and use the proceeds to invest in clean technology developments.

All Fracked Up and Nowhere to Go

I read an interesting article in The Economist this week regarding LNG exports in the US. This is a rather interesting article, so please read the full version for yourself.

Years ago, when the US thought they would have to import LNG’s from abroad there was a massive build out of over 24 LNG plants for regassification.  Thanks to horizontal drilling and hydrologic fracturing, the US will not have to worry about LNG imports for the next century at the earliest.  Converting these regassification plants to be export terminals makes economic sense and environmental sense.  With the exception of Sabine Pass in Louisiana who was just recently granted permission to export, all that equipment now sits idle along the gulf coast.

At the heart of the issue is the fact that American gas now sells for $3.40 per MBTU domestically but over $12 in Europe and up to $20 in Asia.  Turning American nat gas to LNG cost about $5 per MBTU, so exports of LNG can be beneficial to the economy.  Furthermore, the glut of natural gas has actually forced producers to stop producing until the supply dwindles or demand picks up.  Tapping the international markets would allow this process to balance out.  Of course, there is steady opposition to LNG exports from uncommon bedfellows of environmentalist and business proponents who respectively oppose fracking on environmental grounds and who want to maintain their access to cheap fuels.

I have gone back and forth on the subject of fracking several times now but generally agree with the economic arguments set forth in this article.  While I am not a proponent of fracking, the following issues deserve mention:

• Nat Gas is priced on a regional market as opposed to a global market.   The lack of export infrastructure acts as a subsidy thereby keeping the price of gas artificially low and promoting inefficient use of the fuel.  Increasing LNG exports will increase the price but will hopefully establish a free and transparent market.  The revenues of the fuel trade should be used in clean technology research and developing next generation technologies.
• With cheap nat gas prices in the USA, developing nations have been leaning towards coal to fuel their consumption.  Access to natural gas will hopefully reduce the emissions in the developing world more than if the gas were kept in the US.

These two points rely on the assumption that fracking remains legal.  As I write this, a moratorium on fracking (bill A.5424-A) was just passed by the Assembly and will go before the NY State Senate and then on to the Governor for signature.

Clean technology has never been more affordable or accessible to the masses.  Policy makers are now realizing the national security and economic concerns of relying on fossil fuels.  Clean, distributed sources of energy combined with sustainable development are our best options for a healthy, prosperous future.

Burning Money . . . by Wasting Energy

If you have ever wondered how much energy is wasted in the United States, then look no further than this chart from the Lawrence Livermore National Laboratory.
What your are looking at here shows how many Quads (Quadrillion BTU’s) of energy is produced from each source of energy . . . and how much is wasted through inefficient processes or simply lost as heat energy.  In 2011 more than half (57%) of the energy produced was rejected.  In terms of electricity generation, almost 2/3 of the potential energy is lost.  Cogeneration plants achieve a much higher efficiency level than conventional coal or natural gas plants.  In the transportation sector the efficiency ratio is even worse with only 25% of the energy produced actually being used.  If there are any entrepreneurs out there, I see many opportunities for improvements here.  In fact, I think this chart could show the next trillion dollar opportunity!

 

Next Generation Batteries

I read an interesting article in The Economist this week called Batteries Included?  The Future of Energy that highlighted the new developments in battery technology that aims to usher in a new era of free and renewable energy.  Storage has been the traditional problem with renewable energy deployment as the sun does not always shine and the wind does not always blow.  Our current battery technology is simply too costly and not efficient enough to store energy produced from renewable sources for use at a later time.  The Joint Center for Energy Storage Research just received a $120 million grant from the Department of Energy in order to make batteries 5x more powerful at 1/5^th the price.  The key to achieving this goal is to leverage the “Materials Program” of MIT to find new materials that are more efficient than the now infamous lithium-ion battery found in hybrids and grounded Boeing 787 Dreamliners after recent incidents of overheating.  Examples of these new opportunities include using magnesium atoms, which contain 2 valence electrons, or aluminum with 3, instead of lithium atoms that contain only 1.  The extra electron increases the amount of energy that can be stored.

In terms of grid-scale energy storage, JCESR is researching flow batteries that hold a charge in the electrolyte itself rather than inside a cell as conventional batteries do.  This allows flow batteries to store massive amounts of energy, such as that from wind farms and commercial solar farms.  However, these too face limitations.

Improvements in energy storage technology will allow renewable energy systems to play a larger role in society.  Advanced research using new technologies will eventually make renewable products cost competitive with conventional products.  Instances include new plug-in electric cars that can drive for days without being recharged and even grid-sized batteries that harness energy from wind and solar farms and produce the energy when and where it is needed.  Hopefully these technologies will prove better than anticipated and we can improve our economy and our environment at the same time.

2013 State of the Union

Well Mr. President, you proved me wrong.  “Climate Change” was mentioned a total of 3 times during your SOTU speech last night.  But more importantly was the context in which you used the phrase such as:

But for the sake of our children and our future, we must do more to combat climate change.  Yes, it’s true that no single event makes a trend.  But the fact is, the 12 hottest years on record have all come in the last 15.  Heat waves, droughts, wildfires, and floods – all are now more frequent and intense.  We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence.  Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.

To stress his point, Mr. Obama directed Congress to come up with “market based solutions” (think cap and trade) to climate change or else he would step in with an executive order.

The good news is, we can make meaningful progress on this issue while driving strong economic growth.  I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago.  But if Congress won’t act soon to protect future generations, I will.  I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.

The bill that Obama mentioned was the 2007 Climate Stewardship and Innovation Act that proposed a reduction to 2004 levels by 2012, 1990 levels by 2020, and 60% below 1990 levels by 2050.  This can be done.  We need to evaluate how we use energy and how we can make our products more efficient.  As any homeowner knows, wasted energy is wasted money and right know we can’t afford it.