An Economist Offers "Some Hard Truths About Energy"

Peter Treadway, a principal at the consulting and investment management firm Historical Analytics LLC and Chief Economist at CT RISKS, has a guest post on Barry Ritholz's The Big Picture blog.

Treadway lists "Some Hard Truths About Energy" (some of which will be familiar to Green Skeptic readers).

It's worth reading the whole piece (go here), but here are the points in list form:

1. Energy independence, a.k.a., energy autarky, is an impossible and undesirable dream.

2. A major objective of US (and all importing nations) foreign policy should be to secure reliable energy supplies.

3. The free market—not the government – should be making the choice among various energy sources.

4. Domestic conventional sources of energy offer great promise.

5. So called-green energy alternatives are not necessarily easier on the environment.

6. Don't worry about peak oil.

7. Increasing energy efficiency results in the use of more energy.

Readers of The Green Skeptic will know that I agree with points 1-4, but 6-7 are a bit problematic -- and 5, well, he's only partly right.

Read his supporting arguments in the full post: Some Hard Truths About Energy.  And then tell me what you think.


Treadway also writes The Dismal Optimist blog.

Wharton Energy Conference Tries to Bridge the Future

Judging by the commentary at last Friday's Wharton Energy Conference, the bridge to the future is a double-truss of traditional and alternatives.
 
The conference, held at the stodgy, old-fashioned Union League of Philadelphia, featured a stellar group of experts in three tracks, including representatives from traditional energy sources (fossil fuels, nuclear), alternatives, and the regulatory and financial players to help navigate.

And it was no more evident than in the sentiments expressed by the speakers over lunch.

"Traditional sources of energy are going to be with us a long time," said Mark Mills, founding partner of Digital Power Capital. "The world doesn't really react to $80 barrel oil. $80 a barrel is the new floor. $150 a barrel is not question of 'if' but 'when'."

Mills was participating in a mock scenario over lunch demonstrating how an energy storage company needs navigates between those who hold the purse strings and those who have the regulatory clout to help or hinder its business.

"As an investor, I want rules and guidelines, especially around interconnection and safety, to anticipate where it is going," said Mills. "It's not important to have the "right" rules, but just have the rules not change."

After lunch, investors shared their insights about the state of financing in cleantech and energy businesses.

"Renewables have taken a beating lately," offered Michael DeRosa, a managing partner with Element Partners, a leading investor in high growth companies in the energy and clean technology markets. "But let's remember that renewables is a broad category."

"Solar seems to be the most expensive, but it has the best potential for distributed generation and actually has the lowest subsidies," suggested DeRosa. "Geothermal is a very economic source of base load generation. We should be looking at more geothermal in the US."

DeRosa shared his concerns about picking one technology over another to receive subsidies.

"Does it make sense to subsidize electric vehicles or a particular type of solar product that may have risks," asked DeRosa. "Risk in light of a lithium shortage, for example or other rare earth material, versus a subsidy for natural gas vehicles and an industry where we know we can access all the reserves?"

The subject of reserves was also taken up by those on the traditional energy side of the equation.

Representatives from Shell, ExxonMobil, and Brazil's quasi-state oil exploration company Petrobras analyzed their quest for tapping into reserves and the need for all sources of energy for the future.

"We're still going to be using a lot of fossil fuels for the foreseeable future," said Robert Lance Cook of Shell. "We see natural gas as not just a bridge fuel, but as a destination. It has a 2-to-1 advantage over coal in terms of CO2."

The future of energy is paved by old technology, new technology -- and creative folks trying to develop the right policies and financing vehicles to make innovation possible.

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Two Coasts Tell Tale of Where We Are

What happened on two coasts in the US the past two weeks speaks to our energy reality. The two coasts tell us where we are.

Both events illustrate the conundrum in which we find ourselves early in the 21st Century and very early in the transition from one primary fuel source to the next.

First the good news: Consent was given by US Secretary of the Interior Ken Salazar on Wednesday for Cape Wind, the long-stalled 468 MW wind farm project off the coast of Massachusetts. The project was held up by local interests concerned about the appearance of a line of 130 wind turbines located miles off the coast in the Horseshoe Shoal area of Nantucket Sound.

The second was the explosion, sinking, and subsequent leaking of a deep water oil facility last week, which by some estimates is now spewing 5,000 barrels (200,000 gallons) a day into the Gulf of Mexico from below the ocean floor. This spill is set to threaten the Gulf Coast, just five years after Hurricane Katrina devastated that region.

One of these events represents the future of our energy production: Cleaner, renewable, and with a free resource feed stock (the wind). The other represents a variation on the past: Dirty, dangerous, and dependent upon a dwindling feed stock (fossil fuels).

What people forget, however, whether celebrating the victory or decrying the disaster, is that we are not in a position to switch from the old to the new like a light switch in the kitchen.

We are very likely going to need the old to help foster the development of the new -- and our dependence upon the old isn't going away any time soon. Furthermore, because oil is running out, we are likely to see more risky and dangerous ventures to access what's left in the immediate future.

Extracting fossil fuels is a risky and dangerous business, as we've seen with this drilling disaster and last month's coal mine disaster in West Virginia. The sooner we can foster the transition off fossil fuels and to cleaner, renewable source the better off we will be.

But let's not forget where we are in that transition: we are just at the very beginning.

Wisdom from Wharton: Cleantech Talk

"Twenty years from now, we will look back on how we get energy the same way we look back at how we got information twenty years ago," Steve Cohen said in launching the first of two cleantech panels at last Friday's Wharton Entrepreneurship Conference 2010.

"Current Trends and Opportunities in Cleantech," moderated by Cohen, an energy lawyer with Morgan Lewis, also featured Dr. Stephen Tang, CEO of the Science Center, the oldest and largest urban incubator and science park in the world, along with Sean Casey from FiniteCarbon, a forest carbon development company, and Sam Gabbita of cleantech investor Element Partners.

Dr. Tang, a Chemical Engineer by training, knows something about the "energy of the future" having earned his entrepreneurial stripes developing hydrogen fuel cells with Millennium Cell, which recently went bankrupt.

"I took Millennium Cell to its IPO in 2000, and left in 2004. Ten years ago hydrogen fuel cells were a major focus of US automakers; at least, that's what they wanted you to believe," said Tang. "What they were really focused on were CAFE standards and keeping them from being lowered. You have to understand the headwinds."

Often those headwinds are political, such as with carbon regulation. "Carbon markets are directly responsive to government action," said Casey, of FiniteCarbon. "And in the US, we want to do it our own way."

Indeed, the energy industry itself may be its own worst enemy. As Gabbita of Element Partners put it, "The biggest challenge in Cleantech is that you're dealing with a commodity market made up of slow-movers."

This is why some believe that we won't be able to move as fast as China in terms of alternative energy adoption.

"The risk isn't that China won't adopt cleantech," Gabbita suggested. "The risk is that China is doing it now and will define the rules of the game for the future."

While China may be slow to start, they have the power of the centralized government to innovate more quickly once the decision is made to move toward adoption of alternative energy sources.

And, while some, such as keynote speaker Pennsylvania State Treasurer Rob McCord, recognize that the "energy sector has massive externalities that require government support," it may be best for entrepreneurs to proceed cautiously in pursuing government funding for their ideas.

"It's great to get government money until you realize they are in your shorts for-ever," said Harrison Wellford of Wellford Energy Advisors in a panel on "Financing Your Cleantech Ventures."

Technologies are available today to help with the transition here. However, as Ravi Barot of OxiCool suggested in that same panel, "Investors and entrepreneurs need to realize that clean technology takes time, more than other investments."

And, as Steve Tang from the Science Center related earlier in the day, "The killer app of today is more important than the platform technology of the future for energy transition to happen."

First State Innovation Clean Tech Forum

First State Innovation (FSI), a non-profit whose mission is "to increase Delaware's entrepreneurial capacity by growing, attracting, retaining and connecting high growth technology-based businesses and supporting infrastructure in the state," held its first clean tech forum this past Thursday night, October 15th, at the Chase Center in Wilmington.

Ernest Dianastasis, Managing Director of CAI and Chairman of First State Innovation, shared his vision for how the region can further innovation and business growth in the emerging green economy, and announced the formation of an angel fund, which will be managed by First State Innovation.

Modular Carpet Recycling (MCR), Sanosil USA, White Optics, and Athena Biotechnologies were the featured companies presenting to a capacity crowd of investors, entrepreneurs, politicians, and service providers.

Despite bad weather and the 8PM start of game one of the Phillies-Dodgers National League Championship playoffs, most of the audience stayed through all four pitches and three speakers.

Eight other early stage companies in the clean tech and green space displayed their products and services at exhibit tables.

Keynote speaker, Delaware Governor Jack Markell, spoke about the importance of addressing climate change and building a new economy around being cleaner, greener, and more sustainable.

"To the 4Cs of Delaware: Chemicals, Cars, Chickens, and Credit Cards," quipped Governor Markell. "We need to add a fifth: Cleantech."

Brian Yerger, an alternative energy industry analyst from AERCA Advisors, presented a state of the state's alternative energy progress and the global opportunity presented by clean technologies and renewable energy development.

Yerger cited public support for government incentives, improvements in technologies, and competitiveness increasing scale as key drivers that may help the clean tech sector, which has been hindered by credit and economic conditions. Yerger sees hopeful signs that by Q4 2010, things will be back on track for what he views as "a secular energy transformation."

Of the companies, I found Sanosil and White Optics to have the most interesting propositions.

Sanosil, a Swiss-based company, produces a non-chlorine disinfectant from Hydrogen Peroxide and Silver. Two formulas, Sanosil Water Microbiocide, which is for use in cooling towers and industrial process water, and Sanosil Disinfectant, which has been proven effective against a range of viruses and infectious diseases, including MRSA, Swine flu (H1N1), and HIV and is for use in hospitals, offices, and childcare facilities.

White Optics manufactures a patent-pending reflector that improves the efficiency and reflectance of traditional fluorescent light fixtures, such as found in most offices and older buildings or with newer lighting systems like LED arrays.

First State Innovation plans to hold another Clean Tech Forum in Febraury 2010.


(Disclosure: The Renewable Energy Business Network Mid-Atlantic Chapter, of which I am a co-founder, was one of the sponsors of First State Innovation Clean Tech Forum.)

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BuildGreen Philly: Prosperity with Sustainability

"No matter how well we develop renewable energy sources, we will not be able to meet global demand," Pennsylvania Governor Ed Rendell said to the crowd gathered at BuildGreen09 in Philadelphia in his opening keynote. "We also need to reduce consumption."

Rendell is a governor that gets it. He understands the economic realities that will drive energy consumption in the future and about a realistic response that includes all sources (including coal and nuclear), as long as can be made clean and with reduced risk. (For coal, he encourages development of carbon capture and storage technologies, to make it cleaner.)

While Rendell gets the economic side, he also understands the limits and boundaries as well. It's not just about finite resources, according to the Governor, but about demand, which will increase as the population increases globally and as economies in developing countries improve and people prosper.

Prosperity with sustainability was the tenor of the two day conference at Philadelphia's Sheraton Center City Hotel (a decidedly unsustainable venue, I might add).

As Dr. Dayna Baumeister, co-founder of the Biomimicry Guild, noted in her fantastic presentation over lunch on Thursday, it is "about learning to live and build on a dynamic, non-equilibrium, water-based, boundaried world." And not only to survive, but to thrive.

Others echoed these sentiments and highlighted the economic opportunity that presents itself right now and that is only at the beginning.

Dennis Yablonsky of the Allegheny Conference on Community Development and former secretary of the PA Department of Community and Economic Development, cited a recent study indicating there is a $30-40B market in green building, which potentially grows to $200B if you add retrofitting of existing infrastructure.

Companies all across the state are being created while older companies are reinventing themselves around the green economy, Yablonsky noted.

There was evidence of this in the panel discussions, especially around product development and research. There you could find companies such as Armstrong, which started as a cork-cutting shop in 1860, as well as new initiatives such as the team of professors from Philadelphia University who are developing construction materials from alkali-activated fly ash, a waste product of the coal industry.

Green jobs were also on the agenda at BuildGreen, with a focus on economic empowerment and the shortage of skilled and unskilled labor the new green economy requires. Education and training are needed, as well as a clear definition of what qualifies as a green job.

Awareness of the existing opportunities is also needed, however, as was made apparent by Mr. Yablonsky's revelation that there are currently 30,000 "green jobs" posted on an online job bank for Southwestern PA. The jobs range from entry level positions to $100K+ executive roles; that's a lot of job openings in an economy that needs employment. Why are these positions not being filled?

Philadelphia Mayor Michael Nutter also addressed the conference, repeating his pledge to make Philadelphia the Greenest City in America. His plan includes goals to reduce city energy consumption by 30 percent and energy costs by 10 percent, representing savings of over $3 million in a city budget that needs every extra penny.

Philadelphia is not alone in trying to glean benefits from the new green economy. Micah Kotch, from the New York City Accelerator for a Clean & Renewable Economy, an incubator initiative of NYU-Poly aimed at stimulating invention, innovation, and entrepreneurship in New York.

"Our goal is to grow an ecosystem of entrepreneurs, companies and local businesses around clean tech and renewable innovations," said Mr. Kotch.

One of their companies is Rentricity, which captures energy from water pressure reduction -- common to any municipal water distribution system -- to spin turbines and create clean electricity.

BuildGreen was convened by the Pennsylvania Green Growth Partnership and hosted by the Delaware Valley Green Building Council, which plans to host the international GreenBuild conference and expo in 2012.

My three takeaways from BuildGreen09:

1.) The transformation of the building sector to adopting green practices is both a great step forward and a great opportunity -- and other sectors, such as financial services, must now follow.
2.) The convergence of talent, resources, and infrastructure in the region is well-positioned to own a significant piece of the new green economy pie, but it still needs to foster and build the financing, commercialization, and innovation opportunities to seize the day.
3.) Biomimicry -- the conscious emulation of nature's design solutions -- is an increasing opportunity for innovation that can lead to sustainable products, companies, and services -- and a better way of life. If only we can "quiet our cleverness," as Dr. Baumeister put it.

KVA & Portable Light's Sheila Kennedy on Clean Energy Solutions

Back in March at the Aspen Environment Forum, I facilitated a panel called Energy Equity: Clean Energy for All, in which we discussed exciting new alternative energy innovations with the potential to change the lives of the "bottom billion" of the world's poor.

One of our panelists, Sheila Kennedy of KVA Kennedy & Violich Architects and the Portable Light Project, shared her designs for textiles with flexible solar materials and solid state lighting that enables people to create energy harvesting bags, blankets, and clothing using local materials and traditional weaving and sewing techniques in an open source model.

Tonight, Sheila will share her latest developments on the show "Brink," on CBS Science Channel.

"At the Aspen Forum, our discussions revolved around what we can do right now to rethink the delivery model for clean energy so it can become more widespread, accessible and enjoyable as a part of everyday life," Sheila wrote to me recently. "It's my hope that our designs can set a new direction for 'ready out of the box' clean energy products and building components that can drive the green economy —- in the developing world and right here at home."

KVA's work with energy harvesting textiles is being featured on a special episode of Brink on "Sustainable Living" tonight at 10:30 PM EST: "Brink"

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G-8 vows to cut emissions, but developing nations want more

Perhaps it was the smiling French President Nicolas Sarkozy reaching out to grab Mr. Obama's arm, as if he'd just told the best joke the Frenchman had heard from an American since Jerry Lewis.

Or perhaps it was the beaming German Chancellor Frau Merkel giving an appreciative glance at the charismatic American president.

Or maybe it was British Prime Minister Gordon Brown calling the G-8's non-binding agreement "historic" and German Chancellor Angela Merkel pointing to "a clear step forward."

I couldn't help wondering whether the G-8 summit in the central Italian city of L'Aquila wasn't a well-orchestrated jab at the previous US administration and its resistance to 80 percent reductions. It all felt a little cloying.

At the end of the day, the US and other G-8 nations have pledged to reduce their greenhouse gas emissions by 80 percent or more by 2050, and agreed that global temperatures need to be prevented from rising more than 2 degrees Celsius or 3.6 degrees Fahrenheit.

Of course, not everyone was happy with the agreement. Both environmentalists and developing nations took issue.

While environmentalists welcome the shift in US policy, they are critical of the big industrial emitters' failure to agree on more immediate goals. Developing nations feel that complying with major reductions will hamper their economic growth and keep their people in poverty.

According to sources close to the situation, representatives of developing nations, such as China, India, and Brazil still feel those who have benefited from 100-plus years of unbridled development should do more.

In other words, the burden of emissions reduction should be on those who created the problem, not on those who are struggling to catch up.

There is no question that China and India will be a major force in the upcoming negotiations. They have much at stake: both are still heavily reliant on coal to fuel their economies, but both also seem to be serious about investing in alternative energy development.

China and India seem to be serious about developing a low-carbon economy -- or at least seizing a large share of the market.

Last month, Zhang Xiaoqiang the vice-chairman of China's National Development and Reform Commission, said that China wants to produce one-fifth of its energy needs from renewable sources by 2020.

According to Lou Schwartz, of China Strategies LLC, the Chinese will spend over 3 trillion Yuan (roughly US$462 billion) on alternative energy development in the next decade. This includes 100,000 MW of installed wind power capacity by 2020.

Meanwhile, in a visit to the Solar Energy Centre in Gurgaon last month, Indian Minister for New and Renewable Energy, Dr. Farooq Abdullah, pledged that "new and renewable energy will increasingly play a larger role in meeting the development aspirations of a growing economy like India."

The US and other G-8 countries need to take notice, listen to the concerns of developing nations and do more to enable those countries leapfrog dirty technologies, while doing more at home to facilitate their own swift transition.

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David MacKay: Let's get real about alternative energy

David MacKay, a professor of physics at the University of Cambridge, offered a sober reminder to pay attention to the math when talking about alternative energy in a commentary for CNN.com this week:

We need to introduce simple arithmetic into our discussions of energy.

We need to understand how much energy our chosen lifestyles consume, we need to decide where we want that energy to come from, and we need to get on with building energy systems of sufficient size to match our desired consumption.

Our failure to talk straight about the numbers is allowing people to persist in wishful thinking, inspired by inane sayings such as "every little bit helps."

Assuming we are serious about getting off fossil fuels, the scale of building required should not be underestimated. Small actions alone will not deliver a solution.

Let's express energy consumption and energy production using simple personal units, namely kilowatt-hours. One kilowatt-hour (kWh) is the energy used by leaving a 40-watt bulb on for 24 hours. The chemical energy in the food we eat to stay alive amounts to about 3 kWh per day. Taking one hot bath uses about 5 kWh of heat. Driving an average European car 100 kilometers (roughly 62 miles) uses 80 kWh of fuel. With a few of these numbers in mind, we can start to evaluate some of the recommendations that people make about energy.

Read his full commentary here.

Professor MacKay's book, "Sustainable Energy - Without the Hot Air," is published by UIT Cambridge and is also available in electronic form for free from http://www.withouthotair.com/.

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Obamulus Rex: President's B787 Ready to Fly the Friendly Skies

After passing with a large majority of Democratic votes and 0 Republicans in favor, the $787B StimPack, known as the American Recovery and Reinvestment Act (ARRA), was signed into law today by President Obama, ringing in what he hopes will be the beginning of the recovery process.

The Administration hopes to kick-start the new green economy by rapidly increasing development of renewable energy and increasing energy efficiency in buildings and appliances, as well as throughout major sectors of the economy.

The major energy investments in the StimPack, include:

-A three-year extension to the production tax credit for wind and an extension until the end of 2013 for geothermal and biomass renewable-energy projects. In addition, the credit has been increased to 30 percent of the investment.
-$4.5 billion in direct funds to modernize the electricity grid with smart-grid technologies.
-$6.3 billion in state energy-efficiency and clean-energy grants, and $4.5 billion to make federal buildings more energy efficient.
-$6 billion in loan guarantees for renewable energy systems, biofuel projects, and electric-power transmission facilities.
-$2 billion in loans to manufacture advanced batteries and components for applications such as plug-in electric cars.
-$5 billion to weatherize homes of up to 1 million low-income people.
-$3.4 billion appropriated to the Department of Energy for fossil energy research and development, such as carbon capture and storage underground at coal power plants.
-A tax credit of between $2,500 and $5,000 for purchase of plug-in electric vehicles, to the first 200,000 in service.

Time will tell whether this baby can generate the kind of short-term impact our economy needs, but it should spur some longer-term outcomes, especially in the efficiency and renewables space. (Curious why the market didn't react more positively, especially the renewable energy stocks.)

Read this summary analysis of the StimPack from the American Council on Renewable Energy (ACORE): Overview (Note: this is a link to a PDF.)

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