As you noted, they seem to be into solar and biofuels, but not wind -- but wind is the technology that's expanding and growing.  Why the problem with wind?  There's someone running his own transmission,or at least planning to, from Colorado to California.  And number two, then how did Vestas get going?

There's lots of VC $ in wind.  And to be clear, I'm in no way suggesting that all VC investors aren't going to make $.  Simply that if a significant number lose money, the headlines won't be that nuanced, and we ought to brace ourselves.

More specifically to your question, wind is enormously dependently not only on transmission investments, but also on utilities maintaining spinning reserve to compensate when the wind goes offline.  It may or may not be societally beneficial to make those investments, but they are clearly beyond the control of the investor, so my larger point holds: if wind plants don't get built because of transmission capacity, the headline will be "wind doesn't pencil", not "due to nuances in the design of our grid architecture, wind has challenges that investors didn't notice."

A final point: you make money as an investor in the the energy space - and indeed, in most spaces - not by the inherent value you create, but by the price that you are able to sell at.  People who bought pets.com early made money if they sold, notwithstanding the lack of long-term value.  So you really need to parse carefully to see if the fact that early stage investors made money implies that they were very careful about long-term value, or simply got lucky.  I don't raise to suggest anything about the specific companies you cite, but rather to caution that questions of the "what about investors who made money on company X" variety do not necessarily equate to long-term value.

Here's the missing element about "Startups".

They weren't designed to sell stuff.

They were designed to look like they might have stuff that someday people might one day buy.

The new model should be:

find customers,

then shareholders.

"This is the essence of science...you ask an impertinent question and you're on your way to a pertinent answer." -- Fox Mulder, S1E4, "Conduit"

the slideshow was concerned that people were looking for jackpot IPO chances in established fields when most times firms or tech were acquired at a smaller scale?

Yes, lots of companies made bad bets and went under.  A few emerged as leaders, then the boom hit.  

It's a good model for this coming boom, these periodic busts on the way are normal.  There hasn't been a real boom yet.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

At the risk of getting a bit sidetracked, your intermittency issue proves the larger point.  There is a growing cadre of folks asking hard questions about wind - some research at Carnegie Mellon suggests that in much of the country, wind turbines actually increase CO2 emissions because of all the coal plants that go into spinning reserve and gas-fired peakers that run in very inefficient modes where they can quickly ramp up when the wind goes out.  (Folks in the NW have told me that there is some ~700 MW of hydro power that is consistently withheld for the same reason - which at least has the benefit of not being carbon additive, but still raises the odd question of why we're curtailing one renewable so we can run another, and how one calculates the net gain.)

That in itself is a subject for a much longer post one of these days, and one for which I am getting out of my expertise, other than to note the clear environmental conflict.  But set the environmental issues aside for a moment and simply look at what that means economically: someone trying to make money of wind is innately dependent on someone else spending money to address wind's intermittency problems.  Put another way, wind investors are putting money into entities who's success is based substantially on entities and decisions they cannot control.  From a purely investment point of view, that's dangerous.

Might we solve the intermittency problem?  I guess - but it's a huge problem, big enough that I think we also ought to at least contemplate the possibility that we can't for the purposes of deciding whether or not to make those investments (whether from a VC or societal perspective.)  Otherwise, we're falling into the hydrogen trap, where we simply assume away the storage problem, in which case hydrogen is peachy, rather than admitting it might be intractable, in which case hydrogen sucks.  The case for/against intermittent renewables is not nearly so stark, but raises identical risks from an investment perspective.

My larger point is that there really isn't an analogy to this in the traditional tech-investment space and - at least from where I sit - many VC investments are exposed to these risks.

Well, it would be good to hear more about this.  Again, it's possible it could be solved with a national network, but that requires an even bigger effort than localized solutions.  Despite what you might think from some of my writing, I think it's much easier to solve a problem if the private sector can do it -- trying to plan a national network would be quite a task...anyway, thanks for the info.

This all makes geo-engineering look like the last chance for the climate.  

It can't be fixed with renewables, too intermittent.  No capital to do it anyway.  

Confidence is the key to economic recovery.  Give in to anti-renewable talking points and just what can Obama do?  He'll go with the nukers, clean coalies, and fuel farmers.  Oh, they're confident!  And the experts in the new administration trust them.

I can hear that attitude haunting us from the past...Don't worry Chamberlain will cool Hitler down, we can't afford to get in a war anyway, what with this great depression.

Those who learn from history are doomed to watch others repeat it.

Buck up troops, it's just holliday depression.  Don't give in to conventional wisdom.  That way lies madness, I see glow trains, coal trains, ammonia fertilizer trains, and  liquid CO2 trains crashing into our green future and destroying it.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

Sean and John,

The intermittency problem is not nonexistent, but is generally overplayed because some of the time wind power overdelivers the grid is undersupplied, and some of the time wind underdelivers the grid is oversupplied anyway. System load (aggregate demand) is variable as well, and since load and wind variability are independent, you can't just sum the two to get the total. This means the marginal variability to the system contributed by a variable wind source is significantly less than the variability of the wind source itself. This is why FERC ordered organized markets to ease "imbalance pricing" (charges for delivering less than bid/forecasted) penalties for wind sources in Order 890 (2007), acknowledging the old system was unduly discriminatory.

NY has applied for, and had granted (from FERC) permission to extend even more generous than FERC-mandated rules to new wind plants (technically for all 'variable resources' but no one's building big solar in NY) from 1,000 MW to 3,300 MW, about 10% of peak summer load. But they are instituting requirements that large wind plants install wind monitoring and forecasting equipment, so the ISO gets updated wind forecasts on the hour-ahead and 15-minute ahead time scale (to go with of course day-ahead forecasts/bids).

Wind tends to be more variable than intermittent - it is not dispatchable but it is fairly predictable, especially just an hour or even 15 minutes in advance.

Finally, to address Sean's point about determining net gain from carbon-free electricity that requires more inefficient use of carbon-based reserve capacity. The organized markets deal in far more than "electricity." A number of ancillary services for reliability/reserves are now marketed, as opposed to simply controlled administratively by the ISO. So once we have a cap/trade - all costs will be internalized - both the extra carbon associated with running reserve capacity less efficiently, as well as the need/value of that reserve capacity (since it is determined by the market). Again this is not in all markets yet, and some regions don't even have organized wholesale markets yet, but its over half the country (and national load) and growing. So I don't see this as an intractable issue going forward at all.

Max Epstein

Yeah!  On a related note.

I was wondering if maybe over building of offshore wind/wave power could be justified by putting unused energy in to desalinization and cloud formation.

Water is the oil of this century.  When the grid is full, dump the extra wind/wave power into pumping seawater, through desalinization systems.  Pump the water onshore through underwater pipelines.  Water is valuable already.

These floating energy platforms could also spray seawater up into the atmosphere to increase cloud formation, providing a cooling effect.  And increasing snow and rainfall on glacier and desert.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

I was wondering about the bit about the coal plants spinning waiting for the wind to die down.  That seems like a real waste; or the hydroelectric adding less power for the same reason.  Is that a big issue?  Is gas easy to start up, so that you don't have to have something spinning?  I thought there was enough baseload to handle that sort of thing; but I'm not very well educated on  how the electrical system works.  If a national wind system could reliably provide, say, up to 50% of electrical needs, would this problem go away?

You may be right - but I can assure you that utility execs I have spoken with are really nervous about wind and deploy a lot of resources (human, financial and generation) to load balancing.

Maybe we can fix all that - but we can't assume it away, or assume that it is not a very real current problem, even if we think we might be able to eliminate at some point in the future.

The issue is that most generation technologies don't ramp quickly.  A big coal plant goes from cold-to-hot in a matter of days. On the other hand, if you fire just enough fuel to keep the boiler hot and the turbine spinning at low load, you can quickly close the breaker when the load drops out.  Gas turbine start quicker, but again have cold starts measured in minutes - hours that are not amenable to instantaneous system disruptions.  So those also run in very low load (where, like coal, they are very inefficient) so that they can quickly ramp.

The benefit of hydro is that you can simply slow the flow to the turbines and let the dams behind fill a bit higher so that you can suddenly open up.

Note that wind is far from the only source of load volatility.  Volatility is caused no less by intermittent reductions in generation (the plant that suddenly has a maintenance trip, in addition to the intermittent resources that die back) as by changes in demand (i.e., your air conditioner motor suddenly kicks on).  The grid manages those volatility spikes in a variety of ways, but the increasing concentration of intermittent resources is exacerbating the system management challenge.

Maybe I should back up a bit. We have made a policy decision that electricity is so important, shortages (blackouts) are unacceptable. Since the grid doesn't store electricity, that means the system needs capacity that strictly speaking isn't "economic" if you're only thinking about the market for power, because they don't get to sell power often. When the wholesale market was deregulated in the 90's (this is separate from subsequent state efforts to deregulate retail electricity), it became apparent these vertically integrated utilities did more than just sell power. In the new emerging wholesale markets, how to provide for these reliability services without one monolithic vertically integrated utility responsible for the whole system's reliability became an issue.

The "organized markets" (new wholesale power markets) began by breaking down these services into well-defined "ancillary services" - regulation, spinning reserves, nonspinning reserves, replacement/supplementary reserves, voltage control and blackstart (some systems break it down a bit differently but this is pretty comprehensive, though I can't go into the specifics about what each does here). But spinning reserve, for example, means plants that are running at not full (and so not fully efficient) capacity, so that they can quickly ramp up if needed. Regulation is similar in this respect. These services are usually gas. Baseload is separate because it provides power but doesn't react as fast to the change in system demand, because it basically runs at full power all the time. This is nuclear and most coal. You could in theory provide baseload wind if it were distributed, but there has been a bit of an issue so far with no one wanting to disburse so much - all the wind farms sorta pop up in the windiest areas. At least NY has mentioned this as an ongoing issue.

At first these ancillary services continued to be procured by the system operators on a cost-based basis under the old regulatory model. But more and more are now procured similarly to the wholesale power market itself - the system operator purchases as much as it needs (except for ancillary services system demand is based on reliability criteria instead of aggregate demand), and accepts bids from competitive suppliers to supply its needs.

So the final point here is that in these organized markets that set the price paid for reserve capacity by the market - to the extent wind increases system costs by increasing the need for system reserves, this raises the demand for reserves and so raises the price offered to (fossil fuel) plants that offer these reserves. So this added variability is not a cross-subsidization of wind generators by other competing power sources. They profit from it as well because it expands a market they're in that wind isn't.

So Sean's point about requiring extra reserves is basically that these are underpriced because they don't currently include the cost of extra pollution of running plants less efficiently. Currently they basically just include the opportunity cost of not selling that extra power in the power market. But once you price carbon, that is no longer an externality. And so along with the point above about the system's cost of reserves also being internalized in the maturing wholesale markets, I don't see a need to fret over how the net gain comes out. It will all be internalized in the relative prices of energy and reserves/regulation.

Max Epstein

wind and solar, without storage, are both both intermittent and variable, to different degrees. both wind and sun change availability predictably by time of day and time of year (intermittent) and experience local fluctuations (variable).

CSP -- what joe romm calls "solar baseload" -- is the most compatible with the current grid because it generates heat which is much easier to store than pure juice. just needs insulation. so you get smoother ouput.

i honestly don't know why people call solar PV intermittent, though. storage is integral. a solar PV system requires storage the same way coal, oil, and natural gas require storage. the difference is the PV commodity needing handling comes after generation. batteries=pipelines, except that pipes and tanks are using physical properties so they're even simpler than insulation.

but when you bring these things up to a grid level, storage becomes less and less necessary. when you don't need it someone does; when you don't have it someone does. this is where a national HVDC network and regional supply consolidation -- making that up, i know there's a word but i can't remember it -- to aggregate many variable sources -- variable both by weather fluctuation AND local demand -- to maintain voltage -- this consolidating network is crucial and must and will be built.

this is actually the biggest reason we need to commit to efficiency first and always. application by application, the smaller we can make the differences between "on" and "off" the smaller will be the differences between peak and trough. negawatts are also negastorage.
 

It seems we're talking about different systems. Like I said in my response to Jon, I don't dispute that wind can exacerbate system variability, only that in mature organized markets this is not an externality. Wind's competitors actually internalize it by added profit from selling more reserves. If you are speaking with a utility executive whose gas-fired plants will not be allowed to recoup added revenue for providing extra regulation/reserves because its still selling at regulated marginal cost based rates, that's a different story. But while that remains the present circumstance in some areas, that's not the future of the sector, which has been steadily moving in the other direction for a good 15 years now.

Max Epstein

This is a steady source of renewable energy often overlooked.  Combined with wind/wave power platforms it could provide a consistent base and peak power. Peak could be stored in building mass as heat/cold.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

while I digest all of this with the latkes, hope we can come back to this at some point

Can you comment on combined heat and power's ability to attract venture capital. How profitable are CHP projects under today's regulatory regime? Are you worried that your access to capital will be reduced if and when the "greentech" boom goes bust?

A partial answer is that these are somewhat separate.  The bulk of CHP projects are in the $5 - 50M range while the bulk of VC investments are about the same.  Since investors would like to invest in diverse portfolios (e.g., more than one project), this means that the CHP developers are usually chasing bigger funding sources (private equity, project finance, public equity, etc.) than traditional venture capital.  In some ways, this has added - at least from my vantage point - to the challenge VC money has, because the size it is comfortable investing is more suitable to small scale solar, biogas, etc. where economics are simply more challenging for economy-of-scale reasons even before technology issues are taken into account.

We may be.  As follow on to my point though, I'm hearing from a number of folks that in many parts of the country, maintaining reserve requirements on the system now means that for every 1 MW of new wind we add, we have to add 1 MW of (typically gas-fired) reserve.  That's a big deal both environmentally and economically, and not one that any of us ought to discount in the hope that magic technology will resolve the challenges associated with electricity storage.

You're absolutely right.  A system with no wind has no meaningful increase in the need for reserve margins when 1 MW of wind is brought on line.  At the other extreme, a system with 100% wind needs 100% backup to supply power whenever the wind drops off.  But the transition to these two extremes isn't linear; at some point, wind becomes a significant enough piece of the grid that adding more requires a comparable increase in reserve margins.  (Solar can be ignored from this discussion since it simply doesn't contribute materially to the grid today, and therefore hasn't come anywhere near to the point where it's own intermittency is causing stability problems.)

I am by no means an expert on the subject, but am told by friends in the utility sector that in those places where wind has become a significant part of the grid - in particular, large swathes of the western US - we have been forced to build new fossil assets and/or change the dispatch order of existing generation assets to accomodate the wind volatility.  As you note, new build is driven by NERC rules on 1 in 10 year outages, but the dispatch is driven by the system manager regardless of NERC rules to maintain grid stability (e.g., even if the utility isn't mandated to add a gas turbine, they may still operate one of their existing units in hot standby as a result of greater wind use.)  These same folks tell me that even the NERC rules are important though, as the concentration of wind in windy areas, does create the possiblity that significant chunks of their mix shut down at the same time - again, in those areas where wind has become a significant fraction of the power on the system - thus getting to the 1:1 ratio.

I don't mean to make a big point of this, as it is ultimately not my expertise; I raised this at the start only to point out the larger issue that if you are going to invest in wind, you better appreciate those risks which are largely beyond your control.

When the system manager "changes the dispatch," its a cost to the grid, but not necessarily cross-subsidization of wind by competing fuels. Whether it is cross-subsidization depends on how well the market is designed.

In those will well-designed ancillary services (e.g. regulation) markets, there is no cross subsidization, because having to procure more spinning reserves or rely more on fast energy markets produces a benefit for wind's competitors that is internalized. Only in an immature market that continues to price ancillary services at marginal cost-based rates will there be cross subsidization, because the MC does not reflect the greater value of the service when demand goes up (and so service becomes relatively scarcer).

I never suggested that because wind at low penetrations contributes little variability that its capacity should have equal treatment with more reliable sources. Only that there is some equivalency, even if its on a sliding scale. There's no reason why you can't offer different capacity payments to each successive 100MW that comes online. Again, I'm talking specifically about mature markets, this time in regards to having capacity payments (ISO-NE, NYISO, PJM, maybe one or two more).

The markets are not always obvious because you have to merge economic efficiency with the policy preference that we have no more than one involuntary load shedding event every 10 years. Maintaining that reliability is not just a matter of getting the economics right, its a separate constraint on the market. But these issues, while not always obvious, are not intractable. I'm sure you've detected my theme here, but well designed markets will handle this issue much better than a utility executive trying to judge what goes where, especially with his decisions confounded by potential discrepancies in what kinds of energy services can be recovered under the MC-based regulatory framework.

Max Epstein

If 100 MW in wind is  built, the backup is pretty close to 100 MW. In Washington and some other areas, as I understand it, wind can reduce the use of hydro. In most of the US, inefficient natural gas is the preferred backup (not coal), and these plants are slowly ramped on and off in line with expected changes in wind power. I thought it took too long to ramp coal power.

I am curious about the GHG emissions of wind as it used. Have you ever seen such an analysis? I presume that wind plus inefficient natural gas in the Midwest produces less GHG/kWh than efficient natural gas, but is the same true in CA? Does the analysis exist?

Karen Street

You're right in the NW.  Elsewhere, the backup tends to come from fossil.  

Note that whether coal or gas, the option isn't a cold-start, as even a gas turbine needs several minutes to come on line, while the grid needs to maintain power in fractional-second time constants in response to shifting load and generation availability.  As a result, plants are run at low part load such that they can quickly ramp up to full load as called for.  (Referred to as "spinning reserve" for obvious reasons.)  A direct analogy is to your car: turn it off at a stop light and you'll be slower off the block then if you leave it in idle.  And just like a car, the fuel economy isn't great when you idle.

Re: your question, I've seen Lester Lave/Granger Morgan's group at Carnegie Mellon do presentations on the carbon impacts of wind, but I don't have the presentations.  Might google a bit and see if anything turns up.  Share it if you find something good!

Note that this potential for unintended consequence of wind power increasing emissions is due to two market failures - carbon not being priced (which underprices running plants more inefficiently at half power to ramp), and ancillary services are not fully marketed in those areas. With a price on carbon and a market for ancillary services/regulation, these problems go away. If it increases emissions, it will decrease profits, or raise the price of ancillary services so high that significant innovation will be spurred in providing carbon free ways of providing it. One current idea that already has contracts (Beacon Power's) with three organized markets is a flywheel - or mechanical battery.

Max Epstein

Although that's really not the point of the post - it was simply that if you aren't (a) cognizant of the need for market reform and/or (b) focused on finding companies with the regulatory skills (and chutzpah) to affect such reforms, then you're not likely to get a good return on your money.

to New York, New England, PJM RTO area, the Midwest ISO area, and depending on what you need from the market California.

Max Epstein