Mr. Greenbacks Goes to Costa Rica!

La Fortuna, CRIt has been much too long since my last post, but I think this one is worth the wait.  Back in February Mrs. Greenbacks and myself were invited to a wedding in Costa Rica and we gladly attended!  Special shout out to Connie and Dave – Congratulations Again!

Aside from the beautiful ceremony and spectacular reception, we got to enjoy much of what Costa Rica had to offer – beaches, rainforest and volcano.

Costa Rica is at the forefront of promoting sustainable practices in their everyday life and as Mrs. Greenbacks pointed out, 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.

ImageOn 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.

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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.

coal chinaOne 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.

china water scarcityThe 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.

solar chinaA 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.

Distributed generationChina’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.

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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.
US Energy Flow Chart 2011What 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

ImageI 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 1/5th 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.

flow batteryIn 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.

World Energy Outlook 2012

The International Energy Agency released their 2012 version of World Energy Outlook today and it featured some interesting highlights.  Here are some of the points that peaked my interest:

  • In 2011, fossil fuel subsidies grew 30% to $523 billion while renewable energy received just $88 billion.

Fossil fuels according to the New Policies Scenario:

  • The US will become the largest oil producer by 2017, a net exporter of natural gas by 2020, and will be almost energy-self-sufficient (in net terms) by 2035.
  • Global oil demand increases by 7mb/d to 99mb/d in 2035 at which time price reach $125/ barrel (real terms) = (over $215/ barrel nominal terms).
  • The gas boom in North America will reverse the direction of the international oil trade, with almost 90% of Middle Eastern exports destined for Asia. 
  • Natural gas demand increase by 50% in 2035, with most of the production coming from the US, Australia, and China.
  • By 2035 we can achieve efficiency savings equivalent to 20% of global demand in 2010. 
  • By 2015 renewables become the world’s second-largest source of power generation, closing in on coal as the primary source by 2035. 

In the Efficient World Scenario, greater efforts are placed on energy efficiency measures that would cut the global demand by half.  Other benefits realized in this scenario include:

  • Global oil demand would peak by 2020 and be 13mb/d lower by 2035. 
  • “The accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest gains in India, China, the United States and Europe.”

This is all well and good, but there are a few things to note about the conclusions:

  1. Energy sufficiency does not mean that we will be insulated from the price spikes on the global market.
  2. Approximately 55% of America’s energy self-sufficiency is from increased production – the remaining 45% is from increased energy efficiency measures such as better gas mileage in cars and trucks, more efficient buildings, and smarter appliances.
  3. Electricity prices in the US will be about half that of Europe as power plants switch to cheap natural gas.  This will be a huge boom for the economy as heavy industry repopulate parts of the mid-west.  However, in terms of climate change, increased use of natural gas will be offset by increased coal usage in the developing world.

Finally, and very sobering, the report concluded that the unless a global emissions agreement is implemented by 2017, the planet will not remain within the 2 degree Celsius range that most scientists agree is the upper safe limit on warming.

Underground Coal Gassification

An interesting article in the 9/3 Bloomberg Businessweek introduced a new method of coal mining that has the potential to provide energy while limiting GHG pollution and completely avoiding mountaintop removal – one of the most destructive practices known to man.  Underground Coal Gassification (UCG) technology actually dates back more than a century but is only now gaining momentum thanks to the advances in technology as a result of the fracking boom.  UCG involves drilling well into a deep coal seem, igniting the fuel, and harnessing the gas released through combustion.  The CO2 is then pumped back into the ground to keep it from entering the atmosphere.  Many of the most harmful substances such as arsenic, mercury, and lead are left in the ground alleviating the problem of what to do with the waste (remember the TVA holding pond disaster?). 

UCG projects are currently underway in Canada, China, New Zealand, and Uzbekistan – areas where natural gas is expensive and the coal seams are hard to reach. 

There are plenty of downsides to this new technology – most notably the fact that you are in essence starting an underground mine fire (see Centralia, Pennsylvania).  Other concerns are groundwater contamination, water use, and a slew of environmental issues.  However, UCG has the potential to increase the USA’s exploitable coal reserves by a factor of 5. 

It is well established that coal-burning power plants are some of the biggest polluters in our society but their environmental effects are not limited to the generating facility.  From the beginning, whole mountains in Appalachia are blown up to access the coal in the cheapest manner possible.  After the coal is spent there is still the problem of disposing of the coal ash that contains toxins and carcinogens. 

Until our energy needs are fully met through renewable technologies, we are going to have to experiment with new processes that reduce GHG’s and are more environmentally friendly.  UCG is not the cure to our energy problem, but it does address several of the most devastating by-products of using coal as a power source.  To that end, it is definitely a technology worth researching.

 

Subsidies to the Energy Industry

“I am a big fan of clean energy, but I am bigger fan of a robust economy.”

-Mr. Greenbacks, 2012

Subsidies to the energy industry are nothing new, they have been around for decades.  Generally speaking, subsidies fall into three main categories: Direct Spending, Tax Expenditures, and Loan Guarantees.   For most of the 20th century, fossil fuels have enjoyed a long run of subsidies such as tax breaks, tax credits, tax exemptions, and deferred depreciation, just to name a few.  This extended period government support firmly entrenched fossil fuels as the sole providers of energy by making renewable energy prohibitively expensive by comparison.  The roles reversed in 2009 with the passage of the American Recovery and Reinvestment Act that eliminated some subsidies for fossil fuels and expanded subsidies for renewables.  However, as you can see below, the level of support to fossil fuels is still 6x greater than renewables.

  • The IEA estimates that in 2010 worldwide fossil fuel subsidies totaled $409 billion.  That number is expected to rise to over $650 billion by 2020 unless changes are made.
  • By comparison, only $66 billion was spent to subsidize renewable energy.

Misguided Policy?
So what is the role of subsidies?  Subsidies should be used to level the financial barriers for new and emerging technologies in order to compete in the marketplace.  Once these technologies are mature enough to stand alone, the subsidy should be removed in order to let the market forces take over and determine a true price for the product.  The support should then go on to fund another technology that could possibly compete with the first one in order to advance a competitive marketplace.   By keeping the subsidy in place for too long, one can create artificial demand that encourages waste and can quickly drain government coffers.  This could apply to any industry, but right now we are focused on the energy industry.

So should we remove all subsidies to the energy industry?  No!  The renewable energy industry has seen more ups and downs than the Cyclone on Coney Island.  Most of these Boom and Bust cycles have been created through a rush of investment in good times (subsidy ON!) followed by a lack of capital (subsidy OFF!) when the music stops.  A clear and definite subsidy policy should be implemented in order to remove the uncertainty faced by investors of clean energy projects.

Subsidies to Renewable Energy
I am a big fan of clean energy, but I am bigger fan of a robust economy.  In today’s economic climate, governments must be extremely careful how they spend their resources.  The current policies offering subsidies to the renewable energy industry have done a wonderful job of creating widespread deployment of clean energy projects.  However, many of these projects are only profitable because of the subsidy.  Current policies should be revamped in order to drive innovation and cost reductions so that renewables such as wind and solar can compete with cheap natural gas WITHOUT the subsidy.

In order to maximize the value of taxpayer dollars the following objectives should be implemented:

  1. Remove subsidies to the fossil fuel industry in order to establish a true market value that takes into account the negative externalities of these resources.  A small fee can be added to fossil fuel transactions to help fund clean energy research.
  2. New subsidies should promote efficiency gains and cost reductions through the use of steadily improving, performance-based standards.
  3. These subsidies should target advanced technologies, decrease as the cost declines, and be temporary in order to deter ongoing support.
  4. The US must increase its investment in R&D as well as leverage talent from universities and the private sector in order to establish public-private partnerships and regional clusters of advanced research and manufacturing.
  5. Utilize the strength and size of the DOD to drive commercialization of technological advances made through ARPA-E.

Implementing these policies will go a long way toward maximizing public dollars, creating a competitive clean tech industry, and ending the addiction to fossil fuels.