California is at it again. State regulators just set energy efficiency standards for new TVs, mostly the big flat panel models that gulp kilowatts. As a result, consumers will save about $8 billion in the next decade in the form of lower electricity bills and carbon pollution will drop equal to removing 100,000 cars from the road. As my dad used to say, “a penny saved is a penny earned” - - so why doesn’t the Consumer Electronics Association (CEA) want you to get your share of that saved carbon or those 800,000,000,000 pennies?

The CEA fears that TV makers won’t be able to add more bells and whistles to future products, because such features might draw too much additional power. Given that I can already download every show, movie, and video game ever made - - and control my entertainment center without leaving the couch - - what else would next generation TVs do for me? Make and deliver the popcorn?

In fact, if past is prologue, this new regulation will drive innovation and exciting new technologies that can be adapted into other products. Past California energy efficiency mandates have not only made Californians 40% more energy and carbon efficient than average Americans, they have also inspired the invention of things like laser printing, a process that is now used to “print” layers of materials onto thin film for making new transparent solar panels.

In response to California energy efficiency mandates that were first promulgated in the 1970s, companies like Hewlett-Packard designed the inkjet printer and within a decade were essentially printing money by selling the new technology to both businesses and consumers. After seeing them in action, Nobel Prize winning chemist Alan Heeger figured out that you could use the same process to combine thin layers of compounds that together create electricity when exposed to light. Now companies like Konarka and Energy Conversion Devices (NASDAQ: ENER) are printing their money on rooftops - - laminating solar panels, the thickness of human hair, onto products like roof tiles and windows, turning entire buildings into solar energy power plants.

And this time, the energy misers in the Golden State are not alone in saving those pennies - - the new TV regulations were supported by California’s investor owned utilities (IOUs), including PG&E, Sempra, and Edison International, because it’s good for their bottom lines. To reduce pollution and carbon, the state Public Utility Commission has long rewarded utilities for investing in energy efficiency. Watch now for those IOUs to offer money to consumers to scrap old inefficient TVs (just as they now pay to scrap your old refrigerator or clothes dryer), because it reduces their need to build new power plants and actually increases their profits. They will likely earn billions more in valuable carbon credits when the western carbon market is launched in 2012 from those investments.

Yes, as Senator Dirksen used to say, “a billion here and a billion there and suddenly you’re talking real money.” If he were alive today, he’d be reminding us of that maxim - - beamed into our living rooms on a new energy and carbon efficient TV.

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Is there a tradeoff between economics and the environment?

Do we need nuclear and coal plants for baseload power?

Dianne Feinstein (D-Calif.)

On Friday, Matt Yglesias made the point that only socialist state control seems capable of creating a robust nuclear power industry. After all, the only countries building nuke plants these days are the ones where governments are making the decisions. David Frum replied with a series of wildly overbroad assertions ranging from false to highly misleading, with no evidence or links to support them. (Nuclear power has an impressive effect on conservative error-to-word ratios.) Matt replied in turn, and in doing so echoed a familiar misunderstanding:

That said, obviously you need a certain amount electricity that can be relied upon irrespective of how windy it is or whether the sun is shining. So I’d happily see the nuclear share of the pie grow at the expense of coal and oil as the provider of that baseload electricity.

This notion has really grabbed the public imagination. It's become conventional wisdom that the grid can only incorporate a limited amount of renewable energy; ergo, we need coal and nuclear power plants for "baseload" electricity. Clean energy skeptics wave the word "baseload" around like a talisman.

There's far less to the claim than meets the eye, though. As Amory Lovins points out, it's a category error: baseload is a characteristic of aggregated demand, not of any particular kind of supply. He distills the counter-argument:

Baseload: The electricity system doesn’t rely on any plant’s ability to run continuously; rather, all plants together supply the grid, and the grid serves all loads. That’s necessary because no kind of power plant can run all the time, as Stewart says they must do to meet steady loads. I repeat: there is not and has never been a need for any particular plant or kind of plant to run all the time, and none can. All power plants fail, varying only in their failures’ size, duration, frequency, predictability, and cause. Solar cells’ and windpower’s variation with night and weather is no different from the intermittence of coal and nuclear plants, except that it affects less capacity at once, more briefly, far more predictably, and is no harder and probably easier and cheaper to manage. In short, the ability to serve steady loads is a statistical attribute of all plants on the grid, not an operational requirement for one plant. Variability (predictable failure) and intermittence (unpredictable failure) must be managed by diversifying type and location, forecasting, and integrating with other resources. Utilities do this every day, balancing diverse resources to meet fluctuating demand and offset outages. Even with a largely (or probably a wholly) renewable grid, this is not a significant problem or cost, either in theory or in practice—as illustrated by areas that are already 30-40% wind-powered.

Right now our power system might be characterized as Security Through Oversupply. We've built enough power plants to create the maximum level of power we might ever need at a given point in time; but since "peak load" times are relatively brief, most of the time dozens and dozens of large power plants are cycled down, sitting idle. As population and per-capita power use rise, the size of peak load is rising as well. The STO response is to build more plants.

The alternative will be Resilience Through Diversity: just-in-time, just-enough power from multiple, redundant, diverse sources spread over large geographical areas, managed by a reliable, intelligent power grid incorporating distributed storage. Peak load will be shaved by load spreading and efficiency; failures will be localized and self-healing rather than cascading and catastrophic; intelligence will replace brute power.

Utilities face, imminently, some very large investment decisions. Should they invest in nuclear and "clean coal" power because they will "have to" have some baseload power on the grid in 10-15 years when the plants are completed? No. For the next decade it will be a huge challenge just to get to the level of renewables integrated in Spanish and Italian grids today (30-40 percent). In the ensuing time, an enormous amount of money and engineering will go into grid resilience and intelligence. It is far too early to predict what level of renewables will be "impossible," but whatever that level turns out to be, it is certainly far distant.

This is the green pitch to utilities: Rather than spending the next decade or two building nuke and CCS plants, with all the attendant management hassles, public opposition, lawsuits, and cost overruns, why not spend it reducing demand, creating a more resilient grid, and diversifying the generation portfolio? The former is just a more expensive version of what exists now. The latter is a revolution, a platform for innovation that will make the internet look like, um, the electricity industry.

A pitch isn't enough, though. For a fusty industry like utilities, revolution is to be resisted, not celebrated. The key is not just asking utilities to use full cost accounting, but to start building such accounting into markets via regulation, legislation, and large-scale investment. Once the financial and legal incentives are correctly aligned, even utilities -- slow and regulator-dependent as they are -- will respond. Until then, until they really start trying, we shouldn't trust them about what parts of the old system are "necessary" in the new.

(For a longer and more detailed response to the "baseload" shibboleth, see Lovins' "Four Nuclear Myths" [PDF].)

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Here’s a  stunner from Climate Wire (subs. req’d) today:

Rural electric cooperatives, which represent many small, coal-dependent utilities in the Midwest and raised a ruckus in the House debate, are eligible for a portion of allowances under the new draft.

But at a conference last week, the head of the National Rural Electric Cooperative Association, Glenn English, said “the basis for a deal” on climate would not revolve so much around allowances, but around whether people in coal-dependent regions would get enough help with efficiency retrofits on homes so they can manage potential electricity spikes.

Wow — somebody who would rather have smart policies than more allowances.

Interestingly, Boxer gave the Co-ops a real piece of the action:

Small Electricity Local Distribution Companies: For further consumer protection, small LDCs (including rural electric cooperatives) receive 0.5% of distributed allowances and will receive an additional 0.5% distribution of the supplemental allowance allocation described below each year from 2012 through 2025, phasing out by 2030.

I don’t see electricity price spikes resulting from the bill, since it has numerous cost-containment features, including a price collar (ceiling and floor), and regulated utility rates in general simply don’t move very quickly.

The good news is that stimulus bill had a massive amount of money for weatherizing homes — and the House bill devotes an astonishing amount of investment and incentives toward boosting efficiency (”The triumph of energy efficiency: Waxman-Markey could save $3,900 per household and create 650,000 jobs by 2030“).  Assuming the final legislation keeps all of the efficiency measures from the House, then electricity bills will probably stay pretty darn flat for a long time — see “EPA analysis of Waxman-Markey: Consumer electric bills 7% lower in 2020 thanks to efficiency — plus 22 GW of extra coal retirements and no new dirty plants.”  One obvious improvement to the final bill would be to have part of the electricity allowances go toward, just as one third of the allowances for natural gas distributors do.

In any case, I hope that English spells out in more detail exactly what he would like to see, since NRECA was slow to support the House bill, and as a result some of the local coo-ps still are still fighting the bill.

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A Penny Saved Is…

Do we need nuclear and coal plants for baseload power?

As the Senate debated the Kerry-Boxer climate bill in Washington, President Obama travelled to Arcadia, Florida to announce a $3.4 billion investment in to modernize the U.S. energy grid. Have a look at this official White House press release on the president’s new smart grid proposal:

Speaking at Florida Power and Light’s (FPL) DeSoto Next Generation Solar Energy Center, President Barack Obama today announced the largest single energy grid modernization investment in U.S. history, funding a broad range of technologies that will spur the nation’s transition to a smarter, stronger, more efficient and reliable electric system.  The end result will promote energy-saving choices for consumers, increase efficiency, and foster the growth of renewable energy sources like wind and solar. 

The $3.4 billion in Smart Grid Investment Grant awards are part of the American Reinvestment and Recovery Act, and will be matched by industry funding for a total public-private investment worth over $8 billion.  Applicants state that the projects will create tens of thousands of jobs, and consumers in 49 states will benefit from these investments in a stronger, more reliable grid.  Full listings of the grant awards by category and state are available here and here.  A map of the awards is available here.

An analysis by the Electric Power Research Institute estimates that the implementation of smart grid technologies could reduce electricity use by more than 4 percent by 2030.  That would mean a savings of $20.4 billion for businesses and consumers around the country, and $1.6 billion for Florida alone— or $56 in utility savings for every man, woman and child in Florida.

One-hundred private companies, utilities, manufacturers, cities, and other partners received awards today, including FPL which will use its $200 million in funding to install 2.6 million smart meters and other technology that will cut energy costs for its customers.  In the coming days, Cabinet Members and other Administration officials will fan out to awardee sites across the country to discuss how this investment will create jobs, improve the reliability and efficiency of the electrical grid, and help bring clean energy sources from high-production states to those with less renewable generating capacity.  The awards announced today represent the largest group of Recovery Act awards ever made in a single day and the largest batch of Recovery Act clean energy grant awards to-date.

Today’s announcement includes:

The combined effect of the investments announced today, when the projects are fully implemented, will:

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Joe Romm draws attention to some extremely interesting thoughts from Glenn English, head of the National Rural Electric Cooperative Association. NRECA represents 900-plus small, not-for-profit, typically coal-based utilities in the Midwest. We tend to think all coal utilities are after more free allowance allocations under a cap-and-trade system, but as Climate Wire (sub req) reports, last week English said that ...

... "the basis for a deal" on climate would not revolve so much around allowances, but around whether people in coal-dependent regions would get enough help with efficiency retrofits on homes so they can manage potential electricity spikes.

These are words of wisdom, the words of a man whose primary concerns are his region and his people rather than profit. I have no idea how widespread English's view is among coal utility execs -- probably rare indeed among the for-profit set -- but I choose to take great heart from it.

Here's the truth English has grasped: it is better to give people efficiency than to give them cheaper electricity.

Given free allowances, utilities are likely to do one of two things: keep the profit and raise electricity rates anyway (as economists fear), or use it to keep rates down (as economists fear). The former scenario is bad for obvious reasons, but the latter is a more subtle danger. Holding down rates will mute the carbon price signal for dirty electricity -- meaning other forms of carbon (gas, heating oil, etc.) will have to rise in price disproportionately to make up the difference. Neither option serves the purpose of cost-effectively reducing emissions or protecting consumers.

Money invested in efficiency is a different matter: Electricity rates still go up, preserving the price signal, but electricity bills go down, because consumers use less. Here's the thing: even if ratepayers end the month with the same total out-of-pocket expenses (paying the same rate for the same amount of electricity, or paying a higher rate for less electricity), the two investments are not equivalent.

In short, efficiency investment has all sorts of social advantages, multiplier effects, and system-of-system benefits that rate assistance doesn't.

Finally, there's good reason to believe, especially in coal-dependent areas, which tend to have the least efficiency building stock, that efficiency savings can easily exceed the rise in rates that a carbon cap will generate. That means consumers will take money they used to spend on energy and spend it on something else -- and as it happens, a dollar spent spent on energy and a dollar spent elsewhere are not equivalent:

Even if we keep overall consumer spending level, then, it's better for that spending to go to non-energy sectors than to energy sectors. Efficiency shifts spending out of energy.

So, to wrap it up: English is right: the most important thing a federal program can do to "keep consumers whole" while reducing emissions cost-effectively is to invest heavily in energy efficiency. This may be the first and last time I ever say this, but: listen to the coal guy!

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One of the many tasks of running an electric utility is maintaining operating reserves and spinning reserves to handle seasonal peaks, and occasional generation failures.

Between peak demand that only occurs a few times a year, and the occasional shutdown for routine maintenance and response maintenance, utilities have to keep operating reserves -- backup equipment that is only run a few hours or at most a few days per year. This is not only a capital cost, but a maintenance cost and an administrative cost. Such capability may not be run often, but when it is needed, it is really needed. This means regular inspection and even occasional cold starts to make sure such backup will work when needed. Further this means administration and management to make sure such tests are actually done, since they are the sort of thing that can slip through the cracks.

Utilities also need spinning reserves: either power that is generated in excess of that consumed, or special types of storage and generation that can be brought online within milliseconds or nanoseconds. Some spinning reserves compensate for routine variations in demand. But, like operating reserves, a significant amount of spinning reserve exists as backup for equipment failure and for unexpected extreme demand spikes.

If you were a utility, wouldn't you love to buy power as needed for many operating reserve purposes thus needing to own, maintain, and administrate less of this seldom used equipment? Also, wouldn't you love to greatly reduce your need for spinning reserves?

Well if electric vehicles ever come into widespread use, electric utilities will get their chance to do this. Both battery electric vehicles (BEV) which run entirely on batteries charged from the grid, and plug-in hybrid electric vehicles (PHEV) which run some of the time on batteries charged from the grid, and some of the time on liquid fuel could provide storage to substitute for most operating reserves and a significant portion of spinning reserves. On average, automobiles are on the road only an hour or two a day. (Yes some cars are driven much more than this, but others much less.) That means that a high percent of this battery capacity will be plugged into the grid 24 hours, even during peak automobile usage. For occasional use, such as seasonal peaks, demand spikes, and equipment failure, it would be quite possible to pull a little power from all or most cars plugged into the grid without taking too much from any single car. Car owners who let utilities do this would set their equipment so as not let their batteries be drained enough to cause them problems. As operating reserves were brought on line over the course of two to four hours, the power that had been taken would be restored. (The ability to rent battery use reduces but does not eliminate the need for operating reserves.)

Now there is an important point. Batteries today are expensive, BEV and PHEV battery packs even more so. In addition to cell costs, automobile battery packs need battery management, cooling, and shock protection - among other requirements. So at today's prices you would not use precious battery cycles for daily use. It makes no sense to meet daily peaking and routine spinning reserve needs with today's technology at today's cost. This is not a knock on two way connections between electric cars and the grid - often called V2G. Handling seasonal peaks, out of parameter demand spikes, and occasional equipment failures is amazing enough. There are other kinds of technology that can handle daily needs at a lower cost than V2G - utility scale batteries of various types. The profit in using car batteries to replace other forms of storage, or to replace generation, comes from displacing capital that can't be fully amortized in a reasonable period of time. It makes no sense to use it as a replacement for equipment that is run daily.

What about the improvements in electric car battery technology? I would indeed expect this. But I would also expect improvements in utility scale storage. Right now utility scale batteries are less expensive than electric car batteries for several reasons. They are bigger than car batteries, and thus provide economies of scale. Some utility scale batteries are much heavier per kWh than car batteries - a minor inconvenience for utility storage, a deal killer as the power source for an automobile. Utility scale batteries will continue maintain the first advantage of economies of scale, and depending on technology may maintain the second as well - a greater tolerance for high battery mass per unit of power than car makers can afford.

I would not emphasize this point, except that many in the renewable community confuse the potential of V2G to replace occasionally used capital with the ability to handle daily peaking, and to replace spinning reserves that protect against routine daily demand variations.

I recently ran into this statement from a staff member at the Institute for Local Self Reliance:

This makes it sound as though V2G could pretty much let the SMUD become mostly renewable based. Not quite. First of all a high percentage of SMUD power is hydroelectric. Hydroelectric power is highly dispatchable, good for base load, load following and peaking. So SMUD is already in good shape to add a lot of variable renewable energy. So what about 250 MW of wind? Well SMUD has about 2,500+ MW of power. 250 MW is a bit less than 10% of total of SMUD capacity.

Nameplate capacity is not a great way to compare power sources anyway. Wind generators (like other sources) don't run all the time, and mostly run at a lower rate than nameplate output. New large wind farms produce on average 35% to 40% of theoretical nameplate capacity (which is a big improvement over even a few years ago). SMUD sales in 2008 were slightly less than 13.4 million megawatt hours. 250 MW of wind farms at 40% utilization would supply about 876,000 megawatt hours, less than 7% of total consumption. This concrete example shows that V2G is extremely valuable, but does not fill the same functions as really large scale storage or long distance transmission. V2G, if electric car use was widespread enough to make it practical, would replace some extremely expensive functions. But, if we expect renewable electricity to replace most fossil fuels, we still need either larger scale storage than V2G can provide or long distance transmission, probably both.

Again, the misconception I'm correcting has  never been spread by the V2G community. V2G advocates, quite correctly, are excited about what car batteries could legitimately do to add grid stability and lower grid costs for either conventional or renewable sources.  It seems to be renewable advocates who are not V2G experts, and don't read work by V2G experts carefully enough who expect V2G to substitute for other technologies it is not suited to replace,  who get over-excited and attribute magic powers the V2G community has never claimed.

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‘Heretic’ battles straw man

The new version of Energy Self-Reliant States manages to duplicate the fallacies of their previous reports, and adds new ones. Their takeaway: "… 3 in 5 states could get all of their electricity from in-state renewable resources." Their statistics actually support the need for transmissions. Some states can produce surplus power. Some states can't meet all their own needs. If we are going to move to 100 percent renewable energy (or nearly 100 percent), we need transmission lines to get power from states with surpluses to states without.

There are a few other tricks here. The New Rules Institute considers storage cost for meeting 20 to 35 percent of electricity needs via renewables; for that small a percent of the grid you can get by with between zero new storage or at worst a few minutes of peak power. But if we are to supply really high percentages of power from renewables we will need hours of storage. That gets expensive. Given both daily and seasonal variation in delivery of renewables, transmission (which can reduce the need for storage drastically) is the cheaper alternative. New Rules skews the numbers by not including storage needs when comparing the cost of a local mostly renewable grid to a national mostly renewable grid. A smart grid, while useful, reduces but does not replace either transmission or storage. That is because transmission and storage can both handle cases where there is zero or nearly zero power available for a brief period of time, whereas a smart grid can never reduce demand to zero or close to zero.

Other tricks: a lot of this "renewable energy" is "combined heat and power" -- parasitic electricity generated by using waste heat from industrial process. To the extent we can make the industrial processes more efficient, or run them on renewable electricity, CHP resources are lower than estimated. Similarly they have high estimates for small scale hydro, without considering how much of that small scale hydro damages the environment in ways that compare to large scale hydropower per kWh.

Another trick here is that they don't consider electricity needs if we substitute electricity for a large portion of transportation energy, and possibly for industrial needs. I know that the New Rules Institute tends to be optimistic about biomass, and possibly they think that biomass can drive transportation and industry. But when we consider both returning nutrients to the soil, and not displacing food or wilderness, I think we will find biomass potential limited compared to renewable electricity for these purposes.

Here is the bottom line: we should learn from nature in reconstructing our infrastructure to be sustainable. And nature is not purely local, not "self-reliant". Salmon migrate thousands of miles, as do many fish species. Gray Whales travel around the globe. Birds and insects cross continents.  Many local plants depend on nutrients transported thousands of miles by rivers. We should try to rest lightly on the land, making it sustainable and beautiful, efficient, robust and reliable. And if we do that we will find the right balance between local and global without prejudging where that balance lies.

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A new report from the National Research Council on the "hidden costs of energy" is, frankly, stunning.  In a sane world, it would be headline news.

Producing and using energy imposes all sorts of costs on public health, crop yields, ecosystems, recreation, educational performance ... the list goes on. Many of these costs don't end up reflected in the market price of energy; consumers don't see them or factor them into purchasing decisions. They are hidden, paid indirectly through, for example, health-care spending or environmental-remediation costs. Such costs are external to energy markets -- externalities, as economists call them -- and they represent an enormous subsidy to the dirtiest sources of energy.

I'm always left somewhat dissatisfied by discussions about externalities. People seem to imagine them as external in some sort of metaphysical way, as though the costs inhabit an immaterial and weightless ether. ("Social" costs, they're sometimes called.) But costs are costs. Someone pays them, with real money. They dampen economic productivity, like driving with one foot pressing the brake.

In 2005, Congress set about finding out just what these external costs of energy production and use amount to. It requested that the National Research Council (part of the National Academy of Science) attempt to place a number on them. On Monday, the NRC released its report: "Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use."

First, note that the report did not attempt to quantify the damage to ecosystems and agriculture wrought by climate change. It did not attempt to quantify the national security costs of securing energy supplies. It did not attempt to quantify the land-use costs of biofuels. It didn't attempt to quantify the costs of mercury pollution, which as Bill Chameides documents, are substantial. It didn't attempt to quantify the impact on taxpayers that subsidies to the coal industry impose.

So a huge chunk of costs were written out, meaning the results are extremely small-c conservative. Nonetheless, the NRC found that hidden costs amounted to $120 billion in 2005.

Of that $120 billion, a whopping $62 billion -- over half -- came from one source: coal-fired electricity plants. And that's only a partial accounting, as Ken Ward Jr. reports:

Maureen L. Cropper, a panel member and professor of economics at the University of Maryland, noted that the study also did not examine "upstream" costs of coal-fired power -- such as damage from mountaintop removal mining -- or "harm to ecosystems" from other impacts, such as disposal of toxic power plant ash.

If MTR mining, ash disposal, mercury emissions, market-distorting subsidies, and climate damage were taken into account, how much farther do you think coal's costs would rise, in both absolute and relative terms?

Remember this report the next time you hear that "coal is cheap."

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A Penny Saved Is…

The bowels of New York City's electricity system.Often referred to as "the world's biggest machine," the North American electricity grid as a whole is an integrated network of generators and millions of miles of wires that crisscross the United States and Canada. It snakes across fields, over mountains, through tunnels, along highways, beneath sidewalks, under rivers and seas. If you live anywhere in Canada or the continental United States, this mega-machine "reaches into your home, your bedroom," as one writer put it, "and climbs right up into the lamp next to your pillow."

The grid is designed as a hub-and-spoke system, in which large centralized generators supply electricity to thousands of end users. All told, the U.S. grid has about 300,000 miles of  high-voltage transmission lines and 5.2 million miles of local distribution lines. When one cable in a network short-circuits, others nearby will automatically pick up the burden. But if the surrounding cables are also overstressed, they too can fail, causing a cascading effect that can knock out major portions of a network.

In recent years, the U.S. power grid has become increasingly prone to such interruptions. Average temperatures have risen, homes have gotten bigger, and so have air-conditioning demands. Thanks to our technology-rich lifestyles and the inefficiency of our buildings and power plants, Americans consume, per capita, at least 50 percent more electricity annually than the citizens of Europe and Japan.

But we don't have the infrastructure to support our lavish habits. We've seen almost no expansion or evolution of the grid that struggles to sustain our skyrocketing demands. Former Energy Secretary Bill Richardson has explained the problem this way: "We're a major superpower with a third-world electricity grid." The average age of the equipment that makes up our grid infrastructure is more than forty years, and many components were designed and installed before World War II. If we're to see a major shift toward greener, more reliable power sources, we need a simultaneous upgrade in grid transmission technology.

*

I got a firsthand look at the challenges our power system is facing when I climbed inside the New York City grid. Con Edison's chief of underground grid maintenance, Dennis Romano, had agreed to accompany me down below with his crew of electrical engineers to explain what I was seeing. A jovial man with a permanent five o'clock shadow, Romano seemed amused if a bit baffled at my excitement over this brief trip.

Amanda Little, ready to go down the manhole.In spite of what I'd learned about the grid's fragility, I had a fanciful notion of what I'd encounter: a vast, orderly chamber 50 feet underground containing thousands of gleaming wires all labeled and mapped according to the neighborhoods and buildings they fed, gauges glowing to indicate the volumes of current coursing on each line -- as clean and intricate as the innards of the world's biggest iMac.

Instead, my descent into a manhole on lower Broadway lasted all of 17 feet-and the shallow tunnel I crouched through opened onto a chamber roughly the size of an average walk-in closet. The floor was covered with a murky pond of street runoff, crumbled asphalt, and garbage fragments, and the air was clammy and foul. The walls revealed a gory cross section of the grid: emerging from dozens of cement ducts was a spaghettilike tangle of grimy wires pulsing with so much electric current I could see them vibrate, like hoses with liquid gushing through them.

The New York City grid encompasses more than 80,000 miles of cable-enough to circle the globe four times. Peel back the sidewalks of Manhattan and you'll find a larger concentration of copper than anywhere else on the planet-more, in fact, than in the world's largest copper mine. All that metal can be found within 15 feet below street level, sandwiched in with water mains, sewage pipes, and telephone lines. (These pipes and tubes are constantly in need of repair, so they have to be placed close to street level for speedy access.) There is no large central chamber where all the wires are organized, labeled, and monitored; instead, there are some 260,000 manholes throughout the city, each one providing access to the wires feeding just a handful of buildings.

Many of these cables are over fifty years old. As the wires age, they degrade under a battery of stresses. The combination of sweltering heat in the summer and freezing cold in the winter causes them to expand, contract, and weaken. The constant vibrations of the city and its underworld-rumbling subways, feet pounding on pavement, incessant traffic-can wreak havoc over time. When water mains break and sewage lines overflow, they can soak and erode grid equipment. When salt is scattered on snowy streets, it often eventually drips into street cracks and manholes, eating away at the cables' insulation. Equally common is a nick in a cable from a construction worker's jackhammer or backhoe.

Any one of these burdens can overstress and shut down a wire. But the biggest challenge facing New York City is its outsized electricity demand, which is growing at a rate of nearly 2 percent a year. That doesn't sound like much, but it translates to an additional annual load of 200 megawatts-enough to power nearly a quarter million homes or a midsized city. "It's like moving Albany onto the New York City grid every year," Con Edison's president later told me. That's a big challenge when you have a system as congested as Con Ed's.

"See what I mean? The grid is running out of room," Dennis Romano said as we huddled in the dank manhole, gesturing at a mass of wires so dense it was like a Friday afternoon traffic jam at the mouth of the Holland Tunnel. "There's just no space down here to put more copper." The lines, he added, can only carry a finite amount of electricity: "You can't put ten pounds of baloney in a five-pound bag." Romano was describing gridlock in the most literal sense-the grid in its current form is reaching a physical threshold, meaning it can't be built out any further.  

"At the rate our demands are growing," Romano said, "we could outgrow the grid in under ten years." When we ventured back up to street level, I could see why: New York was voraciously guzzling power. Bank machines were whirring, flat-screen monitors were flickering, and an Old Navy store had flung its doors wide open, sending a misty plume of air-conditioning out into the stifling 90-degree heat. Across the way, Banana Republic and Bloomingdale's were doing the same. "That right there," said Romano, nodding toward the open doors, "is why the grid gets hammered in summer months. People assume we can air-condition the streets. They just don't think about it."  

Lou Rana, Con Ed's president, did offer some encouraging news about the direction of the energy industry today when we discussed his plans to renovate New York City's complex, aging grid. For nearly two hours, Rana excitedly discussed the "smart grid," which he described as a "high-tech, superefficient, ultrareliable, self-healing, ... clean, green electricity machine."

Con Ed has already been experimenting piecemeal with some components of a smart grid, which Rana mapped out for me, drawing squiggly lines on a whiteboard. He's been testing superconductor wires that carry far bigger loads than do the current copper cables and reduce the energy lost in transmission from 10 percent to less than 2 percent.

Rana's engineers are installing nanosensors that can monitor electrical current flows remotely, allowing grid operators to track and contain power surges before they begin to cascade. Rana is also developing a plan to obtain 20 percent of New York's City power supply from small-scale distributed power sources -- solar panels and clean-burning microplants fueled by natural gas, for instance -- installed on apartment and office buildings. This would help address the problem of building big new power plants and transmission lines on extremely limited real estate.

None of these ideas can be implemented on a large-scale basis without a major investment. A full smart-grid conversion would cost tens of billions of dollars for New York City alone. It remains to be seen who, if anyone, will be willing to pay for such a change. New York consumers famously resist rate hikes, and the state's coffers are running low. Even with sufficient funds, it's not clear whether the system could be installed in time before the grid's demands finally outgrow supply, as ever more of its aging components collapse under pressure. The easier path would be to continue replacing the grid piecemeal., copper wire by copper wire. But this won't do in the long run. Without the smart grid, more and bigger blackouts could lie ahead as demand grows in a system with limited capacity for expanded supply.

The United States is expected to see a 29 percent growth in electricity demands between now and 2030. But that number doesn't take into account a vast new market that could open up: electric vehicles. As hybrid cars are growing in popularity and new plug-in models are soon to be introduced, the futurists of today are envisioning a century in which all transportation is powered by electricity. The  whole energy system, they believe, will be unified under the flow of electrons.

This seems almost laughable given the current fragility of the U.S. electricity supply system. How, I wondered, can we confidently move toward an all-electric future if we're operating on a Third World electricity grid? One way or another, by necessity if not by choice, the archaic system of plants and cables has to be rebuilt. Will it be replaced with the same old twentieth-century fossil fuels, mechanical switches, and copper wires? Or will we opt for a smart grid and usher in a generation of clean, sustainable technologies?

"The mind can not conceive," said Thomas Edison in 1916, "what man will do in the twentieth century with his chained lightning." And a lot we did, to be sure.

But now it's time to start conceiving what we'll do in the 21st century -- and there's no time to waste.

This piece was excerpted from Amanda Little's book Power Trip: From Oil Wells to Solar Cells—Our Ride to the Renewable Future.

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Gore on the Daily Show: extended dance remix

The power grid: more feeble than you think.The trouble started on an August afternoon in a remote field in northern Ohio, miles from any town large enough to be marked on a standard road atlas. The only trace of humanity hung above the trees—an electrical cable known as the Harding-Chamberlin Line, carrying 345,000 volts of power.

By 3:00 the air temperature had risen to 90 degrees, and the cable itself had reached nearly 200 degrees Fahrenheit—roughly twice its average temperature. The aluminum core of the 3-inch-thick wire was expanding with the heat and beginning to sag.

Five hundred miles due east of that meadow I was sitting at my desk in New York City when, at 4:09 p.m., my computer suddenly shut down. The lights, music, and air-conditioning died. I heard a strange lurching sound as the elevator in my building froze with passengers trapped on board. I rushed to the window along with my officemates and was amazed to see traffic snarling to a halt up the entire length of Broadway as street signals went black. The Verizon landlines were dead and our cell phones had no signals. We hurried down eleven flights of stairs, into streets already thickening with crowds of evacuees. Storefronts, groceries, and cafés were darkened. Subway stations were emptying of travelers as word spread that the trains had no power and hundreds of people were stuck underground. It was 2003, and like most New Yorkers, we initially jumped to the same conclusion—another terrorist attack.

What had in fact happened to us, and to a majority of the residents of the metropolitan areas of New York, Newark, Baltimore, Cleveland, Detroit, and Toronto, was a blackout—larger than any other blackout in recorded history. One of the greatest achievements in industrial engineering, the 93,600 miles of electrical cable known as the Eastern Interconnection, had been brought to its knees. All because of unseen events in that distant Ohio meadow where an overloaded wire had drooped into high tree branches and short-circuited, triggering a massive cascade effect throughout the aging power grid.

As night fell, I walked up to Times Square to see its flashing billboards snuffed out, leaving the commercial El Dorado quaint and sheepish. I passed the main post office building and Bryant Park, where thousands of stranded commuters were sprawled in a mass slumber party, using their suit jackets and briefcases as pillows. Candlelight flickered in apartment windows, and I looked up past the walls of darkened buildings at a sky so brilliant with stars I could make out the soft haze of the Milky Way and the faint pulses of orbiting satellites.

Before-and-after satellite images of the event tell the story. In the before picture there is a thick streak of foamy white across the northeastern portion of the United States and southeastern Canada. In the after is just a scattering of faint droplets, the rest absorbed into the blackness of space. Fifty million Americans were without power.

*

Little finds it's tough to break that addiction.Up to that point, I had spent most of my brief career as a journalist trying to gain a better understanding of the causes of just such events—an understanding of the strengths and vulnerabilities of America’s energy landscape.

Fancying myself an amateur gumshoe, I had traveled throughout the country, from Ashland, Ore., to Tampa Bay, Fla., to write about the architects and early adopters of emerging energy technologies that could provide alternatives to fossil fuels: solar, wind, geothermal, biofuels, and hybrid-electric cars such as the Toyota Prius. I began studying and writing about the legislation that was being drafted (and blocked) to push these innovations into the mainstream. I began criticizing the federal government’s failure to take action on climate change and its unwillingness to encourage the development of clean, efficient, next-generation energy technologies.

But when the August 2003 blackout hit, I recognized one major blind spot in my understanding of energy. Nothing I’d learned in my reporting had quite prepared me for the feeling of utter helplessness and paralysis that a blackout of that scale would cause. It was the first time, for me and for millions of Americans, that the story of energy was conveyed in human terms. Here I was crisscrossing the country, chasing after innovators and wagging fingers at the government, but I’d completely neglected to examine the role of energy in my own life.

So one morning I took a small, quiet, but personally momentous tour around my office. My aim was to count the things in my midst that were, in one way or another, tied to fossil fuels.

Since nearly all plastics, polymers, inks, paints, fertilizers, and pesticides are made from petrochemicals, and all products are delivered to market by trucks, trains, ships, and airplanes, there was virtually nothing in my office—my body included—that wasn’t there because of fossil fuels.

There I sat at a desk made of Formica (a plastic), wearing a sweatshirt made of fleece (a polymer) over yoga pants made from Lycra (ditto), sipping coffee shipped from Zimbabwe, eating an apple trucked from Washington, surrounded by walls covered with oil-derived paints, jotting notes in petroleum-derived ink, typing words on a petrochemical keyboard into a computer powered by coal plants. Even the supposedly guilt-free whole-grain cereal I had for breakfast and the veggie burger I ate for lunch came from crops treated with oil-derived fertilizers. My purse yielded another trove of specimens: capsules of Extra-Strength Tylenol made from acetaminophen (a substance, like many commercial pain relievers, that is refined from petroleum); glossy magazines and a packet of photographs printed with petrochemicals; mascara, lip balm, eyeliner, and perfume that, like most cosmetics, have key components derived from oil.

I had understood this intellectually before—that the energy landscape encompasses not just oil fields, coal mines, gas stations, and the vast network of copper wires that feeds electricity to our homes and offices. It’s also the cornfields in America’s heartland, the battlefields of Iraq, and the medical labs that produce penicillin, Novocain, chemotherapy drugs, and many other treatments and cures. It’s the cosmetics shelves and magazine racks in our drugstores. It’s the constantly humming, behind-the-scenes network of ships, planes, trains, and trucks that transport products to our store shelves. It’s even our own bodies, which we routinely drape in synthetic fabrics like spandex and nylon, and feed with crops that were fertilized by fossil fuels, and stitch up with plastic sutures.

Once I connected the dots between so many seemingly disparate elements of my life—my car, my clothes, my email, my makeup, my burger, even my health—I saw an energy landscape far more vast and complex than I’d ever imagined. I realized also that this thing I’d thought was a bad word—oil—was actually the source of many creature comforts I use and love, and many survival tools I need.

But if fossil fuels are a part of everything we do, how do we go about removing them from the picture? How can we kick America’s addiction to fossil fuels, given its sheer magnitude?

The father of a friend of mine who is now a successful businessman defined his approach to problem-solving in terms he learned through painful experience as a boy growing up on a farm in Ohio: When a cow gets stuck in a ditch, first, you have to get the cow out of the ditch.  Second, you have to figure out how the cow got into the ditch. Third, you have to figure out how to stop the cow from getting into the ditch in the future.  I want, like a majority of Americans today, to get myself out of the ditch of fossil-fuel dependence. But to do it right, I—and we—need to understand the roots of the problem, to understand how, during the 20th century, fossil fuels became so thoroughly woven into the fabric of our lives.

The story of America is, in sum, the story of a power trip; to understand it, I had to go on my own. In January 2007, I set out to explore the most extreme frontiers of our energy landscape—from its deepest wells to its tallest towers. I wanted to pull at the threads of connection between fossil fuels and everyday American life and see what places they led me to, however odd or unexpected. They led me, as it turned out, to some very strange spots, from deep-sea oil rigs to Kansas cornfields, NASCAR tracks to dank city manholes, Pentagon offices to my local produce aisle.

My goal as I describe this journey is not to cast judgment on what has gone wrong in America’s energy landscape—as I have said, I’m guilty myself of buying into and even relishing it. Instead, I want simply to understand this landscape, and to celebrate its successes for all their unintended consequences. It was, after all, American ingenuity that led us down the path of fossil fuel dependence. 

And it's that same ingenuity that can change our future course and lead us to an actual, factual “green” future free from fossil fuels.

This piece was excerpted from Amanda Little's book Power Trip: From Oil Wells to Solar Cells—Our Ride to the Renewable Future.

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Oil: enough energy to melt glaciers!

In November 2006, Michelle Conlin began a year-long experiment in extreme sustainability, resolving to burn no fossil fuels, produce no trash, and eat only food grown within 250 miles of her Greenwich Village home. She gave up nearly all shopping and learned to use cloth diapers for her 2-year-old daughter. She took up bicycling and rode a scooter to work. Describing her earlier self as “espresso-guzzling, retail-worshipping” and a “take-out junkie,” she gave up coffee (with some lapses) and to-go food. Eventually she gave up electricity at home, relying on candles in her 9th-floor apartment and lots of stair climbing.

Michelle, Isabella, and Colin, still smiling.Photo courtesy Oscilloscope Laboratories

Conlin, a 42-year-old reporter at Business Week, had no blog, book deal, or film project to send her on this journey of sacrifice and self-denial. What she had was a husband.

By fortune or misfortune, Conlin is married to Colin Beavan, the self-described No Impact Man. He cooked up the No Impact Man stunt as fodder for a book of the same name, out Sept. 1. He keeps a No Impact Man blog. And a film crew recorded his year for No Impact Man the movie, also released next month.

Beavan, 45, says he undertook the project to learn if his own lifestyle could become part of a solution to the world’s environmental crises. In writing about his motivation, he says he was afraid of becoming “that brand of liberal who whines about the world but doesn’t actually do anything about it.”

“If I were still a student, I’d probably march against my adult self,” he quips.

Hence, the bathtub full of laundry and the winter dinners of local cabbage. Also, because of the deforestation crisis, no toilet paper.

While Beavan gets all the attention and the superhero nickname, his wife and their 2-year-old daughter, Isabella, are dragged along for the un-motorized ride. That’s a good thing for the film, because Conlin emerges as the most vivid character for the simple reason that she struggles to make such drastic changes in her life.

Beavan, despite his claims that he was a do-nothing liberal, seems like he was just waiting for a reason to build a kitchen compost bin, mix up natural cleaning supplies, start buying groceries at the Union Square farmers market, etc, etc. The movie shows him reflecting on and defending the project, it shows him visibly losing weight over the year, but you don’t really see him struggle.

Conlin is more sympathetic because she misses coffee and tires of eating local root vegetables. She thinks, understandably, that a year is a long time to go without buying new clothes. While No Impact Husband devotes much of his day to cooking, cleaning, and making the experiment work, she keeps her day job. The filmmakers play up Conlin’s “espresso-guzzling, retail-worshipping” characterization, but it’s still clear this is difficult for her.

The movie opens with Beavan backstage at The Colbert Report, practicing different ways of explaining his shtick. This is telling, as a lot of the movie is about the couple explaining the project. A New York Times profile about them serves as a plot development, because they’re shocked at how strongly and negatively readers react to their project.

“I didn’t quite get why people hated us,” says Conlin. She visits Eating Liberally blogger Kerry Trueman, who wrote a scathing post about No Impact Man before softening her view of the enterprise.

“This really touches a nerve for people,” Trueman says. “Aside from making people feel guilty and defensive about their consumer habits, people are very traumatized if you suggest that they should make do without something.”

Others weren’t angry but dismissive, leading Beavan to complain about the Times profile headline, “The Year Without Toilet Paper.”

Beavan holds Isabella at the Union Square Greenmarket. Photo courtesy Oscilloscope Laboratories

“What if we called it the year I lost 20 pounds without going to the gym once?” he says. “Or the year we didn’t watch TV and became much better parents as a result? Or if we called it the year we ate locally and seasonally and it ended up reversing my wife’s pre-diabetic condition?”

But if the project is meant to get people talking—and Beavan says it is—it succeeded. Colbert, Good Morning America, and a slew of other media called to get his story. Sony/Columbia bought the right to rework the story as a drama that could, reportedly, include Will Smith. (Weird, I know.)

At some point toward the end of his project Beavan makes the discovery that he isn’t alone in working toward sustainability. He visits a project to reintroduce oysters in the Hudson River and an industrial cleanup project in the Bronx and says, “There is this network of people who have been working on this stuff forever.”

It shouldn’t have taken a year-long experiment to figure that out, but Beavan understands that the publicity gods reward stunts like No Impact Year. To my knowledge, the Bronx cleanup people haven’t been invited on Good Morning America.

Beavan undertook the project expecting that it would launch a more politically engaged stage in his career. (He has a Ph.D. in electronic engineering and wrote previous books about the history of forensics and D-Day.) After learning that 12,000 diesel trucks a day pass through the Bronx neighborhood he visited, he reports, “The diesel particulates in the air are causing asthma in kids, causing brain damage in kids … I’m not talking about the polar bears, I’m not talking about people in faraway island communities who are going to be hurt when the ocean levels rise. I’m talking about people who are already feeling the effects of our over-consumptive society.”

I hope his work keeps moving in this direction. In explaining why he flipped off his apartment’s circuit breakers earlier in the film, he says, “I can’t change the way that electricity is delivered to my house.” I wanted to tell him that a lot of engineers, activists, and citizens are working hard because of their conviction that—together--they can change where electricity comes from.

He seems to sense this when he installs a rooftop solar panel and says, “For the first time I’ve realized that it’s not about using as little as I can possibly use, but finding a way to get what I need in a sustainable way.”

It might be an artificial revelation at the end of a patently artificial “experiment.” Then again, even Thoreau’s shack at Walden Pond was a stunt, with a book deal always in mind. Walden proved both deeply irritating and useful to those who were unsettled by it. No Impact Man (the movie) inhabits that tradition well.

One more note: It’s a thoroughly fun movie to watch, with great music. Watching Beavan reading Gawker comments about himself gives a sense of how hard it can be to dramatize a story about not doing things. But filmmakers Laura Gabbert and Justin Schein make the most of the Manhattan setting, using traffic jams, overflowing trash cans, and belching exhaust pipes as foils to Beavan and Conlin’s clean living. They got into the no-impact spirit, shooting from a bicycle rickshaw while filming the couple on their bikes.

Find out when the movie is coming to your city, and watch the trailer:

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You never get a second chance to make No Impact—oh wait, yes you do

On Friday, the U.S. Energy Information Administration released new monthly statistics for renewable energy output as well as output of traditional forms of power.  The good news is that renewable energy in May, the latest month for which statistics have been compiled, is at its all-time highest level, accounting for 13% of total power.  The bad news, however, is that the vast majority of this, about 9.4%, comes from traditional hydropower.  The other renewables -- wind, solar, biomass, and geothermal -- accounted for just 3.6%.   Wind accounts for 1.8%, biomass 1.3%, geothermal 0.4%, and solar 0.3% of the total. 

All of the sources of renewables grew, but the growth rates were modest.  Wind grew year-on-year by 12.5% and solar by only 3.5%.  These growth rates might be passable for mature technologies with a huge starting base.  However, for comparatively new technologies with a tiny denominator, these growth rates are not impressive.  True, the data do not reflect the full force of the Investment Tax Credit (for solar installations) extended last fall and the American Recovery and Reinvestment Act passed this winter -- because of the lag in the data.  Still they tell at best a story of an industry surviving the recession.  They do not tell a story of economic rebirth based on the promise of a low-carbon future.

There are reasons to hope clean energy would be growing much faster than these rates--the goal of lowering greenhouse gas emissions, essential to addressing climate change, and the goal of creating a new wave of clean technology-driven growth.  (The goal of energy security is less dependent on renewable technologies since coal is present in the United States but is nonetheless also served by replacing oil in our nation's energy mix.) 

However, there are also reasons to expect clean energy to be growing far faster than it is: the declining cost curves of renewables relative to fossil fuels, the large subsidies the government has put in place and the huge push America is making, from the president's speeches to the T.Boone Pickens Plan for energy independence on down.  In many states, renewable energy is even mandated through a Renewable Electricity Standard.  Looking abroad, Germany produces 7% of its power from wind, about four times what the U.S. does, and Spain's solar power capacity grew 364% in 2008.  Now that is the type of growth needed to have a real effect!  The fact is, U.S. growth rates in renewable industry are not meeting reasonable expectations for clean energy growth, let alone desirable targets.

I have been studying the question of why clean technology is moving so slowly into the marketplace in the United States and my research suggests that adoption of clean technology and renewable energy must be about more than pricing and incentives.  It is about decision-making and removing obstacles to the deployment of clean energy.  These obstacles are present, once you peer into the complex world of the electricity industry, in a host of non-economic barriers to implementation.

To understand why clean energy is not -- even with large incentives in place -- displacing dirtier forms of energy, it is important to recall the extraordinarily complex nature of the industry.  Like all large industries, the electricity industry has incumbents.  These incumbents--unlike, say, car manufacturers or computer companies -- are protected by regulation.  During the 1990s, the industry was partially deregulated so that market forces were introduced in some parts of the industry in some regions.  However, the work of regulatory reform proceeded only part way, leaving the industry in a sort of limbo.  Today, some regions of the country have wholesale competition.  Others have limited retail competition.  Still others have wholly vertically integrated companies supplying their customers with soup-to-nuts service unchanged from a half century ago.  And there is limited trade in electricity -- this in an era when frozen dinners served in the United States are made in Thailand and fresh flowers cut in Bolivia.

Indeed, the electricity industry is quite rare today in remaining geographically divided.  With some exceptions, it is illegal for a utility in one region to sell to customers in another.  There is effectively no such thing as national competition. There are, of course, many precedents for these legalized restraints on trade.  Banking used to be organized this way prior to reforms in the 1980s and 1990s.  Telecommunications after the breakup of Ma Bell but before the 1996 Telecom bill and development of national communications services was similarly organized by region.  In the case of electricity, besides the legal restraints on trade, there are major physical restraints in the form of lack of capacity on the grid to move power where it is needed.

The absence of universal market allocation of power means that decision making -- of what types of power to buy, what types of clean technology to implement, and what types of infrastructure to build -- is left frequently to a small group of decision makers who are also incumbents and have a rational bias towards decisions supporting their incumbent position.  A transformative technology, for example, could reduce the value of their legacy assets.  Building a new transmission line to connect wind power to the grid may make a plant they own obsolete.  It may therefore be entirely rational for them to discourage rather than encourage the deployment of new technology. 

It would be one thing if the decision makers were acting on their own.  However, typically they make decisions under the rate-base system that provides a guaranteed rate of return on anything they can place in the rate base.  This would ordinarily incent them toward over-investment.  However, since regulators oversee these rate cases and generally try to lower costs, the decision makers at utilities have a conflicting mandate to gain a high rate of return but also keep costs down.  This can lead to a bias toward investments that pay off immediately and against investments that pay off longer term.

The upshot is that getting the type of growth rates of renewables needed to unlock the economic and social potential of clean energy is likely to take more than economic incentives and mandates.  It may well require reform to remove obstacles to the deployment of new technology.

The energy bills now working their way through Congress contain some measures to address these problems.  But my research suggests more work needs to be done.

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Treat energy efficiency like a utility

The problem with wind power—one of them, anyway—lies in the phrase “fickle as the wind.” Ocean tides, by comparison, are a paragon of reliability. They come and go twice a day, like clockwork. Seasonally, they’re strongest at the solstices in June and December and weakest at the equinoxes in March and September.

That predictability is a big part of the appeal of generating electricity from underwater turbines. Tidal turbines also work out-of-sight, avoiding the sort of conflicts over aesthetics that have tangled up wind farm projects.

I spent a morning recently with researchers who hope to see two donut-shaped turbines lowered into Puget Sound in a pilot program run by the Northwest National Marine Renewable Energy Center, a partnership between the University of Washington and Oregon State University. If the pilot succeeds, a local utility district envisions dozens of turbines lining the sea bed in the future.

Such a full-scale deployment is a long way off, as tidal power is still in its infancy in almost every respect. There are just five or so test sites worldwide, the technology is largely unproven, environmental concerns must be settled, and it receives a minute fraction of the research funding other renewable sources receive.

“I would say that tidal power is in a state where wind was 20 years ago,” said Brian Polagye, a mechanical engineering professor at the University of Washington and a lead researcher of the Puget Sound project. “However, because tidal power leverages much of what we've learned from wind power (for the actual devices and drive trains) and offshore oil and gas (for the foundations), I would expect that tidal power will be on a steeper development curb.”

Polagye, geeky in a thoroughly endearing way, spoke with naked enthusiasm about the project out on the water last week during a tour of the test site. His research team faces lots of questions—technological, environmental, and economic. But field tests begun this spring have yielded some encouraging early results. The seafloor current turned out to be several knots  faster than earlier estimates, for example.

Because much of this is easier explained with pictures, the rest of the story is in a slideshow:

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Obama going to Copenhagen

Fair, Ambitious & Binding: Essentials for a Successful Climate Deal

This post was originally published on the website of the Center for Public Integrity and is reposted on Grist with CPI's kind permission.

More than 460 new businesses and interest groups jumped into lobbying Congress on global warming in the weeks before the House neared its historic vote on climate change legislation, a Center for Public Integrity analysis of just-disclosed lobbying records shows.

The surge in the 12 weeks leading up to the June 26 vote meant that about 1,150 different companies and advocacy organizations were promoting their vision of how the nation should tackle climate change, a more than 30 percent cumulative jump over the 880 companies and associations that were storming Capitol Hill on the issue as the year began. Some 190 of the interest groups that were lobbying in the first quarter of the year did not continue their lobbying in the April-June time period.

It’s impossible to say with certainty how much money was spent on lobbying the climate bill, since businesses don’t have to detail expenses for separate issues they are pushing in Congress — like climate, health care, the economic stimulus, or taxes. But so many groups were lobbying climate that even if the issue consumed only 10 percent of their efforts, the cost would have been more than $27 million in just the second quarter-from April through June.

The interests were wide-ranging. It’s no fluke that farm interests took center stage as the vote approached, considering that nearly 20 companies and organizations that produce or promote biofuels — including refiners and would-be refiners of plant matter from corn to wood chips to algae — started lobbying climate legislation for the first time. But they were joined by a host of others. American Superconductor of Devens, Massachusetts, pushed for the electricity grid modernization in the bill — a move that would enhance the market for its superconductor wires, which the company says can carry ten times the power of traditional copper cables and potentially double the power capacity of wind turbines. Electric grid investment also was a primary goal for PickensPlan, the advocacy project of billionaire T. Boone Pickens, which joined the lobbying fray in the second quarter. Pickens had sunk millions into the Texas wind power he touts as an important domestic resource, but electricity from the rural plains isn’t going anywhere without more wires. In fact, Pickens last month postponed his power plan due to financing problems.

Numerous religious groups, from Hadassah, the Women’s Zionist Organization of America, to the National Advocacy Center of the Sisters of the Good Shepherd, have been lobbying on the bill over the past year. In the second quarter, another advocacy group joined in: the Americans United for Separation of Church and State, concerned about possible subsidies to “faith-based” organizations for energy system retrofitting.

T. Boone Pickens. Photo courtesy of http://www.flickr.com/photos/jurvetson/ / CC BY 2.0

About 30 higher education institutions and associations — from Ivy League to community colleges — also joined in lobbying on the climate bill in the final weeks before passage, most with an eye on federal money that might be available for climate-based educational programs or research. The Exploratorium — a San Francisco-based, interactive science museum — along with four other science centers, said in a letter to the climate bill’s authors, “we see few more important issues for our future as a species” than global warming; the organizations wanted to be sure that institutions like science centers and natural history museums also would be eligible to compete for climate education grants.

“The closer we got to finishing the bill, the more intense the frenzy to get little pieces into the bill,” said a senior Congressional staffer. The aide believes the integrity of the legislation held up, nevertheless, even as the measure ballooned from the initial 648-page draft to the 1,428-page mammoth passed by the House. The main goal — reducing the nation’s carbon dioxide emissions 17 percent by 2020 — remained intact, the source said. “It worked out okay, but sometimes at the end of the day you felt like you had been pawed by a lot of people — all your good friends who just wanted to help you out on this piece of legislation.”

Companies and advocacy groups that started lobbying on global warming in the second quarter, according to filings with the Senate Office of Public Records.

Adage LLC
Algenol Biofuels, Inc.
American Sugar Cane League
Aurora Biofuels
Corn Refiners Association
Fulcrum Bioenergy, Inc.
GeoSynFuels
Green Earth Fuels
Growth Energy
Kai Bioenergy
National Biodiesel Board
New Generation Biofuels (Formerly H2Diesel)
Patriot Renewable Fuel
Petroalgae, LLC
Poet LLC
Renewable Biofuels
Novogy
Southern Minnesota Beet Sugar Cooperative
Targeted Growth

What did all these groups get for their lobbying dollars? In the case of agriculture — with nearly 80 total businesses and interests groups lobbying — it’s pretty clear, due to the high-profile showdown forced by House Agriculture Committee Chairman Collin Peterson, D-Minn., who threatened to deep-six the bill. To gain his votes and those of other committee members, the climate bill’s authors, House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., and his global warming subcommittee chair, Rep. Edward Markey, D-Mass., agreed to enhance the benefits farmers would gain for participating in the nation’s effort to cut greenhouse gases. And the legislation gave some protection to the makers of ethanol, the fuel alternative distilled mostly from corn, despite opposition from critics who claim it’s not as green as portrayed.

Agriculture-based alternative fuels were especially well represented among the new lobbying entrees. For instance, there were lobbyists from technology firms claiming they can make fuel from new sources, with at least four separate companies touting the promise of algae (Algenol Biofuels, PetroAlgae, Kai BioEnergy, and Aurora Biofuels). There were also companies like sugar maker Florida Crystals, which operates the largest biomass power plant in North America, and was pushing for greater support of biomass power development.

But the biofuel lobbying powerhouses remained the companies that refine ethanol from corn, especially POET Biorefining of Sioux Falls, South Dakota. In 2007 POET overtook agricultural giant and longtime industry standard-bearer Archer Daniels Midland as the nation’s leading ethanol producer, and its first foray into lobbying on climate was the second quarter of this year.

Former NATO Commander Wesley Clark

Leading the charge for POET was the new interest group it helped create with several other ethanol makers last fall, Growth Energy. Retired four-star general and former NATO commander Wesley Clark is the group’s public face, but there’s also a team of lobbyists behind the scenes. In addition to its chief executive Tom Buis, a long-time fixture in the farm lobby, and former Iowa Republican congressman Jim Nussle as special adviser, the group paid $30,000 to Kountoupes Consulting last quarter. That brought on board former Clinton administration congressional liaison Lisa Kountoupes, who also had been a staffer to Energy and Commerce chairman emeritus John Dingell, and Melissa Shannon, former legislative aide to House Speaker Nancy Pelosi.

Since the House vote, Growth Energy has added even more Washington firepower, hiring Anne Steckel, former aide to Illinois’ Democratic Senator Dick Durbin, the majority whip, and Ted Monoson, former aide to House Minority Leader John Boehner (R-Ohio). With what is widely seen as a tough battle coming in the Senate over the climate bill, Growth Energy’s CEO Buis says there is plenty of work ahead, beyond the changes made at the behest of House Agriculture committee chairman Peterson.

“What he did was stand up for all of rural America and say ‘We’re gong to be impacted by this and we want some of these issues addressed,’” said Buis. “Did he get them all addressed to satisfy everyone? I think that obviously Senator [Tom] Harkin [D-Iowa] and the Senate Agriculture Committee are going to be addressing other concerns. Because if you look at the Senate, it’s going to have to address ag issues, because I don’t see how you get to 60 votes without it.”

Even so, it’s still energy interests and heavy energy users that dominate the lobbying scene. Leading the pack were manufacturers, with about 200 companies and advocacy groups, followed by the power companies and utilities, with some 130. Coal and coal utility interests were seen as making out well in the House climate bill, especially regarding provisions requiring the federal government to initially give away carbon emissions “allowances” that likely will eventually be worth billions of dollars. But not all energy interests gained in that deal, which likely will slow the move to low-carbon forms of electricity generation. Enter a new interest group: America’s Natural Gas Alliance, representing more than two dozen producers of natural gas that are independent — that is, not affiliated with a larger oil company. The alliance, which represents about 40 percent of U.S. natural gas production today, argues that they should be fueling a much bigger share of the nation’s electricity production since natural gas is the least carbon-intensive fossil fuel. The coal industry has argued that such fuel-switching could be costly, but ANGA is plying the Senate, the White House, and Obama administration energy and environmental officials with maps showing how new drilling techniques mean the nation can rely more heavily on natural gas without fear of the price spikes that have previously plagued the fuel.

ANGA’s argument is being aided by a team from Wexler & Walker Public Policy Associates, including Joel Malina, a former political aide to New York Democratic Representative Nita Lowey, and Jack Howard, who was on the White House staff of both President Bushes. Howard had also been a senior adviser to GOP House Speakers Dennis Hastert and Newt Gingrich, as well as former Senate Majority Leader Trent Lott.

Rod Lowman, who spent 17 years in Washington defending the plastic industry against environmentalist critics as president of the American Plastics Council, is now pushing the benefits of natural gas as president of ANGA. “The principal question we’re getting, quite frankly, is ‘Where have you been?’” says Lowman. “The utilities and the coal industry have been at this for a very long time.” Because “most of the deals had been cut” in the House by the time ANGA started lobbying on May 1, he says the group is focusing its sights on the battle on the other side of the Capitol. Senate Environment and Public Works Committee chair Barbara Boxer, the California Democrat, says that battle will begin September 8. “The Senate will be looking at those emissions allowances, looking at offsets, looking at renewable energy standards — all those things will be revisited — and we want to make sure we are a part of that discussion,” says Lowman. “We will be a part of it.” And so, apparently, will more than 1,100 others.

David Donald, M.B. Pell, Joe Kokenge, Josh Israel, Te-Ping Chen, and Sarabeth Sanders contributed to this article.

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An observation on the greenhouse gas policy debate: Excluding those who question whether we need a GHG policy at all, the debate is fundamentally one about where certainty is most important.  Some think the most important thing is price certainty and argue for a tax.  Others think the most important thing is emissions certainty and argue for a cap.  Every lobbyist in Washington these days assures us that the most important thing is path certainty and argue for special diversions of resources to their pet cause.

What all agree on is that uncertainty is unacceptable.  And so, not surprisingly, we get policies like Waxman-Markey that are neither a pure cap nor a pure tax nor a pure subsidy, but a bit of certainty scattered hither and thither. Sausage making at it's finest.

But do we really have that much uncertainty?  At least in the electric sector (which is, after all, responsible for over 42% of US CO2 emissions), we have a fairly high degree of certainty on two ponits: in the short term, we'll shift from coal to gas.  And in the long-term, power prices will fall.

Which is probably sufficiently heretical to demand explanation.

Near Term

So why can we be certain of a near term shift to gas?  That's fairly easy: because we don't have any other choice. 

The current US power mix is supplied by coal (49%), natural gas (22%) and nuclear (19%).  Everything else is piddly.  6% hydro, 2% petroleum and 3% from all other renewables combined.  Given the 24+ month timeline required to design, finance, build and commission any new power plant, the only near term response to GHG pricing is to shift the resource allocation amongst those generators that are already built.  And while nuclear is a low-carbon power source, it can't generate any harder than it already is.  As noted here (see Fig 4), the nuclear fleet is currently running at a 90% capacity factor, and on historically trends, appears to have pretty well maxed out.  Which means that short of building new nuclear plants - hardly a quick, near term solution - there's no way to swap coal-fired electricity for nuclear. 

The gas fleet, on the other hand, hardly runs at all.  In 2006, the fleet had a 20% capacity factor.  Roughly speaking, this means that any given plant was shut down for four days out of every five.  Gas fleet capacity factor bounces a bit from year to year, but generally stays in the 20 - 30% range.  Thus, if we immediately put a price on carbon that immediately applies to all generators (color me politically naive if you wish), the immediate impact would be to shut some coal plants off and run some gas plants a bit harder.  It's not a long-term solution, and its cost depends solely on the price spread between coal and natural gas.  But as noted here, it does have the potential to quickly and massively lower the CO2 signature of the US electric sector.

Long Term

Now to the heretical part.

Let's extend our gaze sufficiently far into the future that new capital has been deployed, facilitating the retirement of the old dirty stuff.  What's it likely to look like?

I'm not foolish enough to make technology-specific predictions.  But I will go out on one very small limb: power plants deployed in response to GHG controls will be less GHG-intensive than the ones we build today.  Wind, nuke, solar, CHP, biomass, geothermal... and probably lots of other things we haven't thought of (not to mention lots of end-use conservation).

Here's the unifying feature of all those technologies: they cost less to operate on the margin than the stuff we use today.  That's not to say they're all cheaper.  After all, many of the technologies we will deploy in response to GHG regulation are technologies that today are held back due to high capital costs (solar, nuclear, etc.)  But once a power plant is installed, the decision to run it one more hour isn't based on capital cost recovery, but on the marginal cost of production.  If it costs me $2.50 to make one more widget and I can sell it for $2.51, I'll make that widget regardless of how much the widget factory cost me.  That, in a nutshell is why our nuclear fleet today runs all the time and the gas fleet doesn't.  Inclusive of capital recovery, the gas plants have lower all-in costs... but on the margin, the nuke plants make more sense to run.

This point is key, and too often overlooked.  We assume that new, low-CO2 technologies are held back by economics - but forget that those economics include both capital and variable costs.  And in the long-run, it is only the variable cost that matters.  Shifting to low-CO2 power is therefore a shift to low variable cost power.  Which in turn is a shift to low cost power. 

I should emphasize that it may take a while to get to this point, as initial prices from high-cost construction have to be amortized.  A comparison with nuclear in the 1970s is instructive, when huge cost overruns put upward pressure on prices until the political will was broken and owners went bankrupt... but the plants kept running, and today form the low-cost base for much of our grid.  This will happen again with new low-CO2 sources, for the simple reason that CO2 sources (e.g., fossil fuel) cost money.  Cut the source, save the money.

I should also note that there is one exception to the low cost/low CO2 paradigm: Coal with CCS.  It's low CO2 (if it works) but high cost.  Which is why it will never matter.  It won't be built unless subsidized, and if it is built, it won't run.  I'm certain.

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Sure, it's smart, but is it a good conversationalist?So the oven says to the refrigerator, "Don't be so cold."

That line will soon be more than a bad joke. The Jetsons are coming to life as dishwashers, washing machines, and other home appliances begin to talk to each other and to the electricity grid in an effort to manage and reduce energy use.

Last week, for instance, General Electric and Boulder, Colo.-based smart-grid startup Tendril unveiled a deal to collaborate on software to connect the industrial giant's "smart appliances" to the grid. Pilot projects with utilities are expected to begin by year's end.

Given that about half of a typical home's electricity consumption goes to power appliances, lighting, and water heating, so-called demand-response dishwashers and dryers could not only shrink your personal carbon footprint but allow utilities to avoid building new power plants to meet peak demand or firing up dirty ones to avoid brownouts.

"We're looking at targeting a 30 to 50 percent reduction in energy usage per appliance," says Tendril CEO Adrian Tuck. Tendril makes software that downloads data from smart meters to let people track their electricity usage in real time.

For most utilities, electricity demand peaks between 3 p.m. and 8 p.m., when people come home from work, cook dinner, wash clothes, run the dishwasher, charge up their mobile phones, and flick on their big-screen televisions.

During the summer they crank up their air conditioners, which is why utilities like California's PG&E have spent billions of dollars building natural gas "peaker" power plants that sit idle most of the time except when a heat wave hits. (Or in the case of the Los Angeles Department of Water and Power, dirty coal-burning power plants in Arizona and Utah provide peak power.)

Of course, you, dear consumer, could care less because you pay the same flat electricity rate regardless of what it costs the utility to meet peak demand. But not for too much longer. Smart electricity meters and the interactive power grid will allow utilities to impose variable or time-of-day pricing, which means it's going to get pricey to run the washing machine at 5 p.m. when you realize you have no clean clothes for work tomorrow.

Hence the Roombaization of the dumb dishwasher. If you turn on your oven to cook a meal when electricity rates are high, your stove will literally tell your refrigerator to delay defrosting or adjust its temperature until dinner is served. Likewise, the washing machine will send a signal wirelessly or through the home's power lines to the dishwasher to switch on after the clothes are cleaned.

"When consumers buy a new fridge they'll make a phone call or go online and register their new appliance with the grid," says Tendril's Tuck. "If they do that, the appliance will start to receive pricing information and download algorithms to modify its behavior."

If you sign up for your utility's demand-response program, the utility's computers will adjust the energy consumption of your appliances and those in thousands of other homes -- without affecting your lifestyle, Tendril and GE take pains to stress -- to ensure peak demand is met.

Or you can set up your own rules for your machines -- like specifying a monthly electricity budget and instructing your appliances not to break the bank. (Tendril is developing an app that lets customers control household appliances from their iPhone.)

Kevin Nolan, vice president of technology for GE's consumer and industrial group, notes that homes must get smart to meet climate-change goals and manage an increasingly complex electricity system -- one that will only get more complicated with solar panels on the roof and an electric car in the garage.

"When you think about having photovoltaics and plug-in cars, you really want to have an energy system in the home," says Nolan. "One appliance will need to know what the others are doing."

Smart appliances will come with higher price tags, given the added electronics. But Nolan thinks inevitable higher electricity rates will prompt people to replace their old machines when they realize the potential for savings and return on investment.

"In California, which looks like it's going to have high peak rates, the savings could be substantial," he notes.

The big question remains how much of an impact smart appliances will have on electricity consumption and greenhouse-gas emissions. While Americans may buy a new car every few years -- at least they did pre-recession -- they tend to hang on to their Kenmores for a decade and typically replace the range only when the kitchen is remodeled.

Noland and Tuck, however, think electricity prices, rebates, and pressure on utilities to meet renewable-energy goals will spur sales.

GE hybrid electric water heaterTuck met with PG&E execs two weeks ago to demo GE's smart refrigerator. Houston-based utility Reliant Energy may also conduct trials of the smart appliances; it has been deploying Tendril's in-home energy monitoring and forecasting system to its customers.

But don't expect to impress the neighbors with your high-tech intelligent washing machine. GE's smart appliances look pretty much like their dumb cousins.

Unless, that is, you buy the company's new smart hybrid hot-water heater that uses a heat pump to cut energy use by 80 percent during peak demand. It looks rather like a Dalek from Doctor Who.

Watch a GE video explaining how "energy demand management" works.

Read past Green State columns by Todd Woody.

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Solar’s rapid evolution makes energy planners rethink the grid

It was the best of half-centuries, it was the worst of half-centuries ...

Broadly speaking, there are only three things we can do to lower CO2 emissions: switch fuels, use energy more efficiently, or use less energy (conserve).

Our CO2 conversations too often focus on one of those three in isolation: Coal bad. Recycled waste heat good. Conservation isn't an energy policy. Each assertion is both narrowly true and broadly incorrect, to the extent that each simplifies three prongs into one.

To understand why, try to answer a simple question: if we shifted our power generation fleet to preferentially dispatch natural gas plants instead of coal plants, how much would CO2 emissions fall?

That would seem to be an easy bit of math: just measure the CO2/MWh of each plant, multiply the difference by the MWh switch, and we have our answer, right? Turns out it's a tad complicated, for the simple reason that the fuel switching strategy is also an efficiency strategy. Does a newly dispatched gas plant look like one of the old, 30% efficient, natural gas-fired Rankine "steamers," or does a newly dispatched gas plant look like one of the new, 50% efficient combined cycle gas turbines? What about the coal plant that gets turned off?

Better still, let's ask an easy question: how has the CO2 signature of our nation's coal and gas-fired power fleet changed with time?

DOE/EIA keeps voluminous records of fossil fuel consumption and power generation by fuel type. On the following charts, I've divided total fleet fuel use by total fleet MWh and then multiplied by a consistent 0.06 tons of CO2/mcf of natural gas / 2.7 tons CO2/ton of coal to yield the following:

Interesting. From 1960-1990, there was no statistically significant change in gas fleet CO2 emissions, which held steady at 0.63-0.65 tons/MWh. Then all of a sudden in the 1990s, the fleet transformed itself, reducing its CO2-intensivity by 25% in just 10 years. What happened?

In a word: competition. The introduction of competitive access in the 1992 Energy Policy Act (and subsequent FERC rulings) brought forth a flood of natural gas plants, many of which were nearly twice as fuel efficient as the old junk that the grid had previously relied on. Prior to that point, costs were simply something that you passed along to customers. After that point -- for much of the grid -- cost control was a route to greater profits. Not surprisingly, generator owners suddenly got religion on cost-control. And when your number one cost is fuel, that means they got religion on fuel control. That's good.

Now let's look at what happened to the coal fleet during the same period:

From 1960-1970, the coal fleet holds steady at 1.17 tons/MWh, but then starts an inexorable upward trend. While the gas fleet became more efficient with time (after 1990, at least), the coal fleet is steadily less efficient. Way less in fact -- to the point that the CO2 emissions associated with a MWh of coal-derived electricity are 18% higher today than they were in 1960.

What happened here? Two things:

1. Unintended consequences. 1970 saw the passage of the Clean Air Act, a deeply flawed bill. It was good in terms of what it did for regulated pollutants, but lousy in terms of what it did for unregulated ones (e.g., CO2). By effectively mandating pollution control approaches that impose parasitic loads on coal plants, the CAA is directly responsible for lowering coal plant energy efficiency, so that we now burn way more coal per MWh than we did before passage. We therefore emit way more CO2 per unit of useful electricity. That's not to ignore the beneficial elements of the CAA, from sulfur to particulate control, but simply to point out that an environmental regulation that encourages energy inefficiency leaves much to be desired.

2. Dispatch considerations. As noted here, the last 30 years have seen virtually no construction of new baseload power plants in the US, but have seen a steady increase in the annual load factor of currently existing baseload plants. In other words, plants that used to spend most of their life turned off now spend most of their life turned on. In the coal fleet, that means that the least efficient stuff runs more now than it used to. So in addition to the unintended consequences of the Clean Air Act, we also have the simple fact of steadily growing electricity demand that causes us to pull our power from ever-more-undesireable sources.

Why didn't the competitive forces unleashed by the 1992 EPACT also drive up the efficiency of our coal fleet, like they did for gas? Again, it's an easy answer: competition. Coal plants are lousy investments. No one builds them who has to put their own money at risk.

One last thing

Here's the tragedy: If we had run the gas fleet at a constant fuel efficiency from 1960-present, we would have emitted an additional 1.3 billion tons of CO2 into the atmosphere. That's 1.3 billion tons not in the atmosphere today thanks to energy efficiency.

On the other hand ... if we had run the coal fleet at a constant fuel efficiency from 1960-today, we would have emitted nearly 9 billion fewer tons of CO2 into the atmosphere over the last fifty years.

1,300,000,000 steps forward, 9,000,000,000 steps back.

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Last week the Department of Energy released part of the $25 billion in loans provided for through the Advanced Technology Vehicles Manufacturing Loan Program, included in Section 136 of the Energy Independence and Security Act of 2007. The delay in releasing these funds had been one of the longest running scandals in clean tech policy. Upon taking office, the Obama Administration vowed to expedite their release and Secretary Steven Chu had made finalizing rules needed to administer the program a key priority. In the first installment of the loans, Tesla, the VC-backed California maker of an all-electric sports car, founded by Ebay veterans, will receive $465 million to make its compact, all-electric Model S sedan. Ford will receive $5.9 billion to retool 11 factories across five states to improve the overall fuel efficiency of its fleet.  Finally, Nissan will receive $1.6 billion to retool a factory in Smyrna, Tennessee, to make an electric vehicle that is being developed and initially manufactured in Japan. The remainder of the money will be released next year.

DOE's announcement comes on the heels of the release of its formal $3.9 billion smart grid funding solicitation last week. The Funding Opportunity Announcement spells out the conditions and terms for those seeking funding for smart grid investments under the American Recovery and Reinvestment Act, the offical title of the stimulus bill signed into law earlier this year. These two developments, coming one after the other, are evidence that the DOE is moving rapidly on the President's goal not only of getting money out into the economy to create jobs and drive demand, but also of making investments critical to a clean energy future.

In the case of the auto loans, they could not be more timely. Autos are a capital intensive business and with credit markets still impaired, it would have been very expensive or impossible for Tesla, for example, to borrow this money on its own. However, that does not mean that the loan is not good business for the government and Tesla. CEO Elon Musk indicated he thinks that Tesla may be able to repay the loan ahead of schedule. Tesla, despite some speed bumps in its early phase, is now profitable on a unit basis, meaning the approximately $120,000 price of its sleek sports car -- which has a long waiting list -- exceeds the cost of components.  Having also recently sold a stake to Daimler Benz, the company is now reasonably well capitalized. Recently, investor Steve Wesley indicated that Tesla's sales are on track to pass $100 million, a common bar for conducting an IPO. If Tesla continues on its current track, it may be the first home run of the clean transportation industry. In any case, the DOE funding puts it on track to move from the sports car niche to the mainstream where it hopes to leverage the glamour associated with the roadster. While Ford and Nissan have greater access to the capital markets, these loans -- provided for in the 2007 energy legislation in exchange for a commitment to higher fuel efficiency -- will help achieve that goal.

In the case of the smart grid, the major barrier to moving forward has been undeveloped standards.  Normally, standards evolve slowly as industry players forge alliances and choose standards that already enjoy market adoption. In this case, the desire to stimulate the economy has accelerated this process. Secretary Chu and Commerce Secretary Gary Locke are overseeing an effort led by NIST to fast track standards for the grid to facilitate adoption. The disbursements made by DOE will indeed help establish standards insofar as the money spent will validate standards and increase adoption.

It is important that standards be as open and uniform as possible to create the broadest and fairest playing field for innovators to enter the smart grid technology market.  Because a smart grid is necessary to get clean energy online and also to drive the creation of new energy products and services, this is an area I believe is absolutely critical to determining whether clean technology can live up to its promise. 

While it remains to be seen how the smart grid will develop, these two announcements from DOE show that the Administration is on the case. These developments should be encouraging to anyone concerned about America's clean energy future.

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Is the electric sector capable of rapid, large scale reform? Many policies implicitly assume the answer to that question is No, especially when it comes to greenhouse gas (GHG) emission control.

The result is a policy conversation that hinges on the assumption that it is hard to change. How much must we spend to accelerate new technology? How many decades should we allow for a phase-in of new regulations?

As it turns out, the industry can change -- and indeed, has changed -- at a much faster pace than you might think. Contrary to conventional wisdom, it turns out to be quick and fairly painless to replace meaningful fractions of our power fleet in very short time frames.

Why should that be surprising?

The electric sector is arguably among the most regulated part of the U.S. economy. From municipal light boards to state utility commissions to the Federal Energy Regulatory Commission (FERC), there are layers upon layers of regulatory bodies designed primarily to ensure electricity reliability and cost recovery for what have historically been monopoly franchises. What those bodies were most certainly not created to provide is a rapid rate of change.

By and large, those bodies have delivered on their promise. They've kept the lights on, kept electric utility profits low enough to protect consumers but high enough to attract capital, and maintained a fairly sleepy industry with very little default risk, virtually none of the "creative destruction" that idles assets in competitive industries, and virtually no significant technological innovation. (The power plant serving your town today not only looks like the power plant that served your town 50 years ago, but most likely is the same power plant.)

While these regulations have maintained predictability within the regulated industry, they have not prevented innovation and change external to the industry. Like flood levees, these regulations have kept the external weather at bay -- but they haven't changed the weather. From new generation technologies to smart grids to emerging concerns about the environment, volatility outside of the regulated enterprise has been persistent, invisible to customers of regulated utilities only to the degree that the regulatory levees hold.

Every once in a while, the levees are breached, exposing regulated markets to the volatility those of us who live in normal markets have come to take for granted. Perhaps unsurprisingly, those historic events have brought about the most dynamic periods in the industry. GHG regulation is, without question, a massive external change to the regulated enterprise. As such, rather than presuming a static, lumbering industry response, we ought to be looking at what happened the last time external changes breached the regulatory levee.

Specifically, let's look at two recent events: the advent of wholesale market competition in the late 1990s and the creation of capacity markets in New England in the early 2000s.

1992 EPACT and FERC 888

In 1991, the U.S. had 581 GW of combined coal, natural gas, and nuclear capacity (307 GW coal, 174 GW natural gas, 100 GW nuclear). New additions were essentially zero, as the combination of Three Mile Island, the Clean Air Act, and a high fleet reserve margin gave little incentive for new construction. Meanwhile, a broader political push for deregulation was afoot. Into this environment came the 1992 federal Energy Policy Act (EPACT), which -- among other things -- provided full market access for any electric generator. (Previously, such access had been limited to regulated utilities and the narrow suite of technologies allowed under the 1978 Public Utility Regulatory Policy Act, or PURPA.)

After EPACT became law, there was essentially no discernible impact on new generator deployment; by 1995, we still had 100 GW of nuclear, had 311 GW of coal, and were up to 196 GW of natural gas.[1] It became apparent that while generators were now allowed to sell into deregulated power markets, access to the transmission grid -- which was still largely controlled by regulated monopoly utilities -- was being constrained for non-utility generators. FERC responded with Order 888, mandating non-discriminatory access to the transmission system for all power plants in 1996. That ruling was contested in the courts, but became final in 1998.

Within just 10 years after the final implementation of Order 888, nearly 200 GW of new generation capacity was added to the U.S. power grid, or 20% of the entire fleet. Nearly all was natural gas. This is a remarkable statistic: having taken nearly a century to build the first 800 GW[2] of total U.S. generation, it took us just one decade to build an additional 200 GW. Moreover, our generation fleet, which had to that point been dominated by coal, was now dominated by gas.

This is a massive rate of change in any industry, but especially in one that is supposedly resistant to quick change. Today, we take it for granted that much of our power grid is gas-marginal, but it was not self-evident that this would happen in 1995 (or, for that matter, in 1991). Arguably, we didn't even have the lens to contemplate this type of change prior to deregulation.

Note, after all, that the big, capital intensive plants that had historically been built by regulated utilities (coal and nuclear) weren't built prior to EPACT/888 and weren't built after. In that narrow sense, our belief that the industry was incapable of quick change was correct; what we failed to recognize was the scope of innovation that would occur once new players entered the industry. Those 200 GW of new gas plants were built largely by unregulated companies with fundamentally different appetites for risk than the companies that had heretofore dominated the space. And while many of those new entrants subsequently ran into financial constraints, it bears noting that in many parts of the country, the lights are on today precisely because of this unpredicted, largely unregulated construction of new natural gas facilities.

Building out 20% of the generation fleet in 10 years was a remarkable and unprecedented rate of change. But just as the deployment of new natural gas assets was starting to level off, ISO-New England would make that rate of change look downright glacial.

ISO-NE Forward Capacity Markets

In the early 2000's, ISO-New England began to consider markets for capacity services (e.g., MW, as distinct from MWh), the better to encourage long term investments in the New England grid. The Forward Capacity Market (FCM) that was ultimately developed had several noteworthy features:

ISO-NE has now completed two years under their FCM, and two corresponding forward capacity auctions (FCAs). As of their most recent auction, they had brought forth a total of 2,936 MW of demand-side resources. To put that total in perspective, the peak demand on the New England grid ranges from 19,000-24,000 MW in a typical year, with the all time peak demand recorded on August 2, 2006 of 28,130 MW.[4]

In other words, in just 2 years, the FCM program has brought forth more than 10% of the all time peak capacity demand on the New England grid, without building a single central power plant. Put another way, that's equivalent to bringing on line more than two Seabrook Nuclear plants (a 1200 MW facility in New Hampshire) in just 24 months.[5]

Note the similarity with the natural gas fleet deployment in the wake of EPACT/888. In both cases, minor market reforms allowed non-traditional entities to participate in power markets, and in both cases, the rate at which those entities engaged vastly exceeded any historical precedent.

What it means for GHG policy

Successful greenhouse gas policy will require, first and foremost, a massive reallocation of capital in the electric sector. Electricity generation accounts for over 40% of U.S. CO2 emissions, thanks to an antiquated, inefficient, fossil-fuel dominated fleet. The discussion of possible CO2 policies tends to be framed around a handful of technologies (coal, nuclear, renewables, carbon sequestration, etc.), most of which have historically been dominated by regulated monopolies. Noting the slow pace of change in that sector, this conversation inevitably turns to near-term winners and losers, with the presumption that there will be no short-term change in the fleet -- just a differential dispatch order as we migrate to lower-carbon sources.

But as the two examples above show, this assumption doesn't wash. Like New England's FCM, GHG pricing is nothing more than the monetization of an externality that was previously subsidized by the system. Like EPACT/888, it contemplates revenue streams and market participation by a host of companies and individuals who are not currently a part of the traditional power industry. Both factors suggest that the pace of fleet overhaul will be vastly quicker and cheaper than we anticipate. Will we replace 20% of the fleet in 10 years, like we did after 888? Will we move 2.5 times as fast, as we did in New England after FCM? Might it be possible to move faster still?

The one thing that is certain is that it will be decidedly faster and cheaper than we think.

Conclusions

In addition to speed, there are two broad lessons that can be taken from the examples above.

First, note that in neither case did the reform require a drain on government coffers. Governments did not have to throw money at natural gas generators, nor at demand-side resources. They simply needed to modify regulations to allow market participation by non-traditional actors.

We ought to bear this in mind as we move towards a national GHG policy. Regulators and commentators, schooled in the merits of cost-benefit analysis, have a chronic temptation to assume that any GHG reduction will cost money, and fiscal prudence demands that those costs be minimized per unit of CO2 reduction. That's a healthy approach, but one that paradoxically tends to overlook the lowest cost forms of CO2 reduction -- namely, those which cost nothing more than the political capital necessary to remove existing regulatory barriers. In a market as heavily regulated as the electric sector, one can safely presume that massive volumes of private capital stand ready to invest as soon as those barriers are removed, even before providing any explicit fiscal incentive.

Second, note that neither of the reforms that led to these investments were preconditioned on the removal of the entire regulatory edifice. A common skepticism with respect to the potential for barrier removal derives from the sheer scale of regulatory barriers. We have 100 years of regulated power monopolies in this country, with regulations at the state and federal level (not to mention jurisprudence in courts and utility commissions) designed to sustain that model. The sheer magnitude of those barriers compels one to question the hubris of anyone who thinks that reform is easy.

However, if we stand back to look at the data above, we discover the obvious: you don't need to tear down an entire dam to restore the flow of a river. You need only remove enough bricks to let the water pressure behind do the rest of the work for you. Modest regulatory reform, targeted only at the critical barriers, is sufficient to unleash massive energy sector reform.

Both lessons are cause for great optimism. Fundamentally changing the GHG signature of our economy will undoubtedly be easier, cheaper and faster than we think ... once we start.

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[1] Data here and throughout on generator fleet capacity taken from U.S. DOE/EIA.

[2] I've omitted hydro and oil capacity from this discussion, which account for the remaining ~200 GW up to the 1998 800 GW base (and were largely unchanged during the period in question).

[3] In fact, load-sited resources participate on more favorable terms than central plants, as the FCM explicitly recognizes the savings in line losses and reserve margins innate to locally-sited capacity investments.

[4] Source: ISO-NE website and personal correspondence.

[5] For comparison, 14 years elapsed between the issuance of Seabrook's permit in 1976 and full power production in 1990, and was directly responsible for the bankruptcy of Public Service of New Hampshire.

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