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Will Solar Prices Fall into Grid Parity?

The following is a guest post written by Dan Harding. Dan has written numerous articles on the solar industry, and is a regular contributing author to CalFinder.
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Will Solar Prices Fall into Grid Parity? 


By Dan Harding

The Holy Grail…in solar-speak, it translates roughly to Grid Parity. It is a goal either mythical or predestined, depending on which side of the solar power movement the speaker resides. A recent surge in supply and technology, coupled with increased government subsidies, are tipping the scales toward destiny, although by no means is the path to grid parity set in stone. The rapid fall in prices for solar panels and other system components in an oversupplied and flooded market could continue home solar power on its way to that mythical Grail but, all mythos and wishful thinking aside, what are the odds?

Good, says Swami Venkataraman, Director of Corporate and Government Ratings at Standard & Poor’s, in a recent assessment of the U.S. solar market for Renewable Energy World. As of February, 2009, installed costs for residential and commercial photovoltaic (PV) systems had fallen to $7.60 per watt from $10.50 per watt just two years earlier. Prices continued to fall throughout 2009 and, while expected to stabilize somewhat as the national economy rebounds, they should remain on that downward slope in 2010 and beyond.

So when will solar cross that line? It could be soon, very soon in regions of the country with either abundant sunlight (southwest) or relatively high electricity costs (northeast). Yet some valuable help is still needed at the legislative level which, if provided, could propel solar power to grid parity in the short-term in the aforementioned regions.  


Three factors, says Venkataraman, can help make PV cheaper than, say, a combined-cycle gas turbine plant. One or all of the following could ensure solar power a level playing field in the long term:
  • Rising gas prices
  • Renewable portfolio standards that make renewable energy credits (RECs) more valuable
  • The passage of carbon legislation that would force gas power producers to buy carbon credits, thus forcing an increase in price for natural gas.

Including incentives, solar power is already close to grid parity in many areas. The Northeast holds the handy combination of some of the most lucrative solar incentives (per watt installed) in the country, as well as the highest electricity prices. Therefore, solar has far less distance to make up to reach at least natural gas, and gives solar power the best and fastest chance to reach grid parity in the nation. In California, where incentives have been declining for several years now, the primary advantage is in abundant sunlight (same goes for Arizona, New Mexico, west Texas, etc.), as well as a powerful RPS and a general eagerness from the public to adopt clean energy.

But as those two examples illustrate, grid parity will almost certainly NOT come to the United States as a whole all at once. Federal incentives were expanded in 2009, including the removal of the $2,000 cap on residential systems and the admittance of utilities into the Investment Tax Credit, but continue to vary widely between states. The feds provide a baseline subsidy, but what truly makes solar affordable for most homeowners and businesses are the added incentives offered by their state. So, in terms of reaching grid parity, we can expect the Southeast — despite its healthy share of sunshine — to be the slowest to reach the Holy Grail. This is due primarily to a lack of incentives, low electricity costs and a deep connection to fossil-fueled electricity.

Without incentives, there is still a real chance for PV, especially commercial PV, to reach grid parity in the relative short-term. Current capital costs for commercial PV are about $5.50 to $6.60 per watt depending on the size of the installation, according to Standard & Poor’s. Incentive levels in many northeastern states are upwards of $4.00 per watt, which means that, given incentives, the levelized cost of electricity (LCOE) of commercial PV systems was already below standard commercial rates. Furthermore, if falling panel prices enable systems to reach or fall below $5.00 per watt, then solar PV could reach parity even without subsidies.

Residential grid parity is more distant but still closest in the Northeast. Outside of the Southwest and Northeast, where solar irradiance and/or electricity costs make the solar-grid-parity question more complicated and uncertain, help will have to come from other renewables. Most notable among these are geothermal (Northwest) and wind power (Midwest). It is important when discussing grid parity for solar power not to forget its intermittency and the fact that some backup power system will be needed. Even if our solar infrastructure were so advanced as to provide all our power needs during peak load times, we would still need alternative sources to pick up the slack on cloudy days and at night.

Of course, straight-laced economics aside, we must also consider the inherent value of solar power beyond mere dollar signs. The point of renewable energy is to switch from pollutive, peaking sources of energy to clean, renewable ones. Solar power emits no greenhouse gases, no carbon dioxide and, when distributed, can provide power at or near the point of use without turning our cities into smog factories. That alone is reason enough to subsidize solar, wind, geothermal and other renewable resources until they reach the Holy Grail that is their destiny.

March 3, 2010 Posted by | guest post, reader submission, solar power, solar PV | 14 Comments

Answering Questions on OTEC – Part II

This is the second installment responding to reader questions and comments on ocean thermal energy conversion (OTEC) by Dr. Robert Cohen. Dr. Cohen’s previous entries are:

Ocean Thermal Energy Conversion

Potential Markets and Benefits from Ocean Thermal Energy

Answering Questions on OTEC – Part I

RESPONSE TO COMMENTS RE OCEAN THERMAL ENERGY POSTED ON THE R-SQUARED ENERGY BLOG

Robert Cohen, February 16, 2010

Environmental, Operational, and CO2 Issues

Since the operation of an ocean thermal plant requires the circulation through the plant of a veritable “river of water”, careful design consideration must be given to minimizing effects on the local and downstream temperature distribution with depth. Hence a lot will depend upon how the effluent seawater is discharged following passage of the warm and cold seawater inputs through the evaporators and condensers. Fortunately there is a disincentive for the plant operator to perturb the pre-existing local temperature distribution, since plant economics are greatly improved by maintaining the largest practical temperature difference between the warm seawater and the cold seawater at depth.

Design of the discharge process—i.e., how to discharge the cooled warm water and warmed cold water effluents—can be handled in various ways. For example, by discharging the cooled warm water at a depth corresponding to its new temperature, and by discharging the warmed cold water below the sunlight-affected (phototropic) zone, to prevent formation of algae blooms within that nutrient-rich cold seawater. One of the functions of the pilot plant is to monitor the discharge plumes, compare them to modeling predictions, and allow environmental scientists to assess how the plant interacts with its surroundings.

During the heyday of the federal ocean thermal R&D program, in the 70s and early 80s (prior to public concerns about CO2), a key environmental goal of the federal R&D program on ocean thermal energy was to avoid perturbing the thermal environment of the plant. Accordingly, contracts were awarded to groups at MIT and Cornell to conduct fluid-dynamical modeling studies of water circulation.

Those studies led to another likely way of satisfactorily discharging the seawater effluents to avoid significantly perturbing the thermal environment; namely, to mix the cooled warm water and warmed cold water effluents, then to discharge the mixture at a depth within the thermocline where the ambient temperature matches the resulting temperature of the mixture.

In those modeling studies, global warming and the fate of the CO2 dissolved in the upwelled cold water were not issues of significant concern. But nowadays, avoiding liberation of CO2 to the atmosphere must also be a goal in plant operation, hence future modeling of seawater circulation in connection with the design of ocean thermal plants and plantships will need to consider both temperature and CO2 parameters.

Another important design factor in avoiding CO2 emissions is proper design and operation of the ocean thermal power cycle. According to a study by Green and Guenther (1990), proper use of the “closed” power cycle would probably suppress CO2 emissions, but if the “open” cycle is used to co-produce fresh water, special care must be taken, in the course of degasifying the warm seawater, to avoid liberating CO2 to the atmosphere. It appears that most serious plant designs for multi-megawatt offshore plants are choosing the closed cycle, because the turbines needed for open-cycle operations are too large for those applications.

There is a conjectural possibility that ocean thermal plants and plantships could—in addition to their normal operation, and for a fee—take on the additional task, if feasible, of removing CO2 from the atmosphere and sequestering it in the deep ocean. But the incremental cost of achieving such sequestration would have to be considered and internalized into the plant economics.

Accordingly, one can safely make the qualified assertion that, when and if deep-sea sequestration of CO2 extracted from the atmosphere becomes technically and economically viable, then fleets of ocean thermal plants and plantships will be well-positioned for conducting that additional function, assuming that the incremental cost of doing so can be dealt with. If such sequestration were to become a realistic option, then ocean thermal technology may be in a position to win the Branson Virgin Earth Challenge Prize for removing CO2 from the atmosphere.

There has long been interest in using for mariculture (of plants or animals) the artificial, nutrient-laden, cold-water upwelling associated with the operation of ocean thermal plants. Such mariculture would utilize for fertilizer the nutrients (phosphates, nitrates, and CO2) dissolved in the upwelled cold water. But nowadays the potential viability of this co-product application would need to be reexamined, in view of the possibility that an open-ocean mariculture operation, as an adjunct to normal plant operation, could result in liberating some of the CO2 contained in the cold water into the atmosphere. Furthermore, although kelp plants, for example, fare well in a cold-water environment, conducting an open-ocean mariculture operation near the surface could result in reducing the temperature of the warm surface water fueling the ocean thermal plant, hence make the two activities incompatible.

Besides the above thermal and CO2 considerations, there are many other environmental aspects of operating ocean thermal plants and plantships. Numerous studies have been conducted regarding possible environmental impacts of ocean thermal power plants, such as: impingement and entrainment of marine organisms; possible discharges of CO2, biocides, corrosion products and working fluids; and artificial reef, nesting, and migration aspects. Those studies indicated that such potential impacts can be satisfactorily dealt with. For example, see a 1990 report by Green and Guenther, and a 1986 study report by Myers et al. The latter, conducted by researchers at NOAA and Argonne National Laboratory for the National Marine Fisheries Service (NMFS) of NOAA, is available at this URL.

Those studies probably need updating today, in view of growing concerns about global warming. In particular, further R&D will be desirable on how to avoid liberating CO2 from ocean thermal plants, and for modeling various environmental aspects of operating a fleet of ocean thermal power plants and plantships.

Despite the absence of updated studies in these areas, conjectures are being made, often without much basis, as to what environmental effects might occur as a consequence of large-scale implementation of ocean thermal energy extraction. For example, forecasts are being made regarding how much electrical power can ultimately be extracted from the vast available ocean thermal resource. It is my contention that—in the absence of hard data resulting from significant operational experience with commercial ocean thermal plants—it is currently premature to forecast likely environmental impacts or make valid quantitative forecasts of total recoverable power.

As deployment of this technology proceeds, it will be important for the environmental community to develop the modeling tools needed to forecast possible environmental effects. The adaptation of existing finite-element modeling tools is underway for applying them to the pilot plant. As part of the procedures for satisfying the NOAA licensing requirements for siting, building, and operating the pilot plant, there will probably be a year of preliminary environmental monitoring at the proposed site off Hawaii, followed by a second year to validate those measurements, compare them with modeling results, and exclude any anomalies.

The next step will be to model an array of commercial plants located around markets such as Hawaii, Puerto Rico, and Florida. Finally, as more plants are placed in operation, global models will be needed to assess any concerns about large global ocean currents. As a fleet of ocean thermal plants and plantships emerges, data will become available to validate models and assumptions, and the parameters needed for such forecasting will start becoming available.

Much will depend upon how these plants and plantships are developed, deployed, and operated—such as how their effluent seawater is discharged—and upon the degree of implementation of this technology. Those details will evolve with time and are presently rather unpredictable, since there are too many parameters, imponderables, and unknowns to reach valid conclusions in these areas.

The evolution of ocean thermal technology from a concept to a commercial reality will probably proceed cautiously and gradually at first, then accelerate. During the initial phases of that process—sort of a shakedown cruise—much will be learned operationally about how to properly handle the seawater intakes and effluents, among other environmental aspects. And, during that gradual commercial introduction of the technology, licensing requirements ought to cautiously ensure that these early plants be operated responsibly.

By the time fleets of plants and plantships are deployed, operational experience will inform their environmental design and operation. Public Law 96-310 assigned to NOAA the responsibility for licensing the operation of ocean thermal plants and plantships. Presumably EPA will also participate in this process. Recently there have been numerous meetings between the NOAA licensing team and the LM engineering team regarding licensing, and it was NOAA that initiated the technology-readiness workshop cited above. NOAA is planning another such workshop, focused on addressing environmental issues, for the summer of 2010.

Engineering Requirements and Challenges

There are various technical requirements for constructing and operating ocean thermal power plant systems, some of which pose significant engineering challenges that must be surmounted in order to achieve the commercial viability of ocean thermal systems. System requirements include ocean engineering of the platform and its external attachments, and power engineering internal to the platform. And the system solutions to all technical and environmental requirements must be achievable at a reasonable total capital cost for the system, so that, when amortized over the plant’s lifetime, the system will provide products whose costs can be competitive in the marketplace.

One of the reasons why the successful operation of a multi-megawatt pilot plant will be a critically important step in making the transition to a first-of-a-kind commercial power plant is that it will provide a capability to assess the impacts of seawater circulation and to validate analytical circulation-modeling studies.

Building and testing a pilot plant prior to designing and constructing a commercial plant is a standard, prudent industrial practice aimed at reducing risks when making the transition from any engineering concept to a commercial reality. In the case of ocean thermal, assembling the components and subsystems into a pilot-plant working system prior to making a major investment in a commercial plant can build confidence in the viability of the concept by demonstrating that it is practical at a multi-megawatt scale and by solving any unanticipated problems that emerge. Operational data and experience obtained from successful operation of a pilot plant will provide invaluable cost, environmental, and engineering-design Inputs for moving to a commercial-size plant.

Ocean engineering requirements and challenges that must be successfully surmounted in achieving commercially viable ocean thermal power plants include:

• Designing and deploying large-diameter, kilometer-long cold water pipes (CWPs)
• Flexible, detachable coupling of the CWP to the platform
• Tolerance of the CWP to vibrations caused by vortex shedding
• Detachable mooring (or dynamic positioning) of ocean thermal power plants for stationkeeping in depths equaling or exceeding a kilometer
• Operability in storms, and survivability in severe storms and hurricanes

Similarly, means must be developed for satisfactorily connecting submarine electrical cables to ocean thermal power plants, and those cables will need to be durable and capable of transmitting power to shore from large distances at a reasonable cost and with minimal power attenuation. For plantships grazing on the high seas, the stationkeeping requirement is relaxed compared to the stationkeeping requirement—usually mooring—for plants cabling electricity to shore.

Some CWP failures during deployment have historically occurred in the course of ocean thermal experiments, yet many CWPs have been deployed successfully in the past forty years. However, the CWP diameters required for large, multi-megawatt ocean thermal plants will considerably exceed those of similar pipes that have been successfully deployed at sub-megawatt power levels, largely as intakes for seawater-cooling or lake-water-cooling installations.

In 2008 DOE awarded LM a cost-shared, multi-year R&D coöperative agreement aimed at demonstrating technology for designing and deploying a CWP made of composite material. The LM technique is to fabricate sections of the CWP aboard the platform, then to assemble and deploy them as they are manufactured. LM is developing approaches for coupling the CWP to the ocean platform, as part of the NAVFAC contract mentioned here earlier.

To meet power-engineering requirements, design of the heat exchangers must address biofouling, the buildup of a layer of ocean organisms on surfaces exposed to seawater. Formation of such a slime film on the heat exchanger surfaces inhibits heat transfer, hence prevention or removal of biofouling deposits is required.

Similarly, the corrosion of the heat exchanger surfaces would inhibit heat transfer and must be avoided. In view of their lower costs and greater availability, aluminum alloys that can resist seawater corrosion are attractive candidate materials in comparison to titanium alloys.

Open-ocean testing of the biofouling of candidate heat exchangers rated at 1 MWe was conducted aboard OTEC-1, the test facility for ocean thermal system components. As part of those tests, biofouling was controlled (Gavin & Kuzay, 1981) primarily by chlorination; i.e., injection of chlorine into the evaporator and condenser. The rate of intermittent injection was 0.4 mg per liter during one hour out of each 24-hour period that the seawater systems were in operation.

Even with stringent environmental regulations, it is anticipated that chlorination levels in the discharge can be designed so as to comply with those regulations. Indeed, use of intermittent chlorination within EPA standards has already proved successful in controlling biofouling in the condensers used in conventional coastal power plants, hence that technique is a likely means for performing the same function in ocean thermal plants.

Fortunately, during the 28-year lapse since DOE ocean-thermal R&D funding began to be curtailed in 1981, the offshore oil industry has made some remarkable technological advancements in designing and operating ocean structures, much of which will be relevant to the above technical requirements for ocean thermal systems. Consequently, many of the perceived and actual risks of moving forward today have been considerably reduced, thanks to the innovations and experience of that industry. At the annual Offshore Technology Conference held in Houston in 2009, a panel session reviewing the status of ocean thermal technology was attended by some key people from the offshore oil industry.

These events were foreshadowed years ago by Derrington, 1979; Clare, 1981; and Wortman, 1981, who observed that much of the technology developed for the offshore petroleum industry will be transferable to the construction, deployment, and operation of ocean thermal systems.

Efficiency and Cost Considerations for Generating Electricity

There is a basic question as to whether the above engineering requirements for ocean thermal power systems can be achieved at a system capital cost that will provide baseload power that is cost-competitive with other sources of electricity. For ocean thermal power systems, it is clear that, because of the low net conversion efficiency, lots of capital equipment will be required to circulate a “river of water” past extensive expanses of heat exchanger surfaces.

Practical realization of an ocean thermal plant requires a physical configuration of heat exchangers, turbines, generators, pumps, and other hardware, such as a startup engine. The plant will probably be comprised of multiple power modules, whose condensers are served by a single cold water pipe.

Engineers familiar with conventional power systems that generate electricity by the combustion of fossil fuels are accustomed to dealing with conversion efficiencies of at least 30%. Hence they find it difficult to grasp that an ocean thermal power system can be viable at a net efficiency much smaller than that.

For ocean thermal power plants, typical operating ∆T’s project theoretical (Carnot) efficiencies of about 6 or 7%, while their achievable net efficiency will be about one-third of theoretical. There are two reasons for this reduction:

1) The gross power generated will be less than the theoretical target because there is some loss of temperature across the walls of the extensive areas of heat exchangers.

2) The net power output from the plant will be less than the gross power generated because there is a need for operational “housekeeping” power, mainly used to power the pumps that circulate these large volumes of seawater.

The considerable pumping power required will be used for 1) pushing seawater against the drag experienced when it flows through the heat exchangers, and 2) for moving seawater through the cold water pipe, the warm water pipe, and the seawater-effluent pipes. Some pumping power will be used to move the ammonia working fluid from the condensers to the evaporators.

The pumping power required to lift the water through the kilometer-long cold water pipe is lower than what one might anticipate. That is because, thanks to buoyancy, the pumping power actually required for that purpose is only that needed to accelerate the cold seawater, compensate for its density gradient, and counter the drag experienced alongside the CWP’s walls.

To minimize drag losses alongside the CWP walls, it is evidently desirable to employ a single CWP rather than to have multiple CWPs. One can also draw the conclusion that the CWP is a plant component amenable to an economy of scale (up to a point) as plant size and the diameter of the CWP are increased.

Granted that it will be important for ocean thermal power systems to operate at maximum/optimum efficiency, there are two reasons why focusing solely on efficiency can be diversionary or misleading when it comes to analyzing and comparing power-plant economics:

1) Net conversion efficiency is not the economic bottom line, which is energy cost, the cost of the plant’s output electricity per kWh.

2) The life-cycle energy cost of a power plant is the sum of three components: the plant’s fuel cost, O&M cost, and amortized capital cost.

For power generation from renewable energy sources, the fuel cost is zero, but the capital cost of those systems tends to be relatively high compared to a fuel-consuming plant. For power plants that burn oil, the fuel-cost component nowadays tends to be high, and is likely to increase, while their capital cost continues to be relatively low compared to that of power plants employing renewable energy.

References

Clare, R., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)

Derrington, J., 1979, in Proceedings, Sixth Ocean Energy Conference (ed. G.L. Dugger)

Gavin, A. P. & T. M. Kuzay, 1981, 0TEC-1 power system test program: biofouling and corrosion monitoring on 0TEC-1. Argonne National Laboratory

Green, H.J. and P.R. Guenther, 1990, Carbon dioxide release from OTEC cycles, Solar Energy Research Institute report TP-253-3594

Myers, E.P. et al., 1986, The potential impact of ocean thermal energy conversion (0TEC) on fisheries, NOAA Technical Report NMFS 40—Available at URL http://spo.nwr.noaa.gov/tr40opt.pdf

Wortman, E.J., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)

February 22, 2010 Posted by | global warming, guest post, ocean thermal energy conversion, otec, Robert Cohen | Comments Off on Answering Questions on OTEC – Part II

Answering Questions on OTEC – Part I

Dr. Robert Cohen has been involved in ocean thermal energy conversion (OTEC) since the early 1970’s. He has posted two guest essays here previously:

Ocean Thermal Energy Conversion

Potential Markets and Benefits from Ocean Thermal Energy

Following both essays, a number of questions and concerns were raised, so I asked Dr. Cohen if he would respond. He has written me a thoughtful and detailed response, and I will present it here in two parts.

Dr. Cohen also has a website with more information on OTEC. His contact information is available there. Part I is a general commentary on history, current status, and the projections for cost and a market-entry outlook. Part II will delve deeper into the engineering and environmental questions that were raised.

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RESPONSE TO COMMENTS RE OCEAN THERMAL ENERGY POSTED ON THE R-SQUARED ENERGY BLOG

Robert Cohen, February 16, 2010

Introduction

Numerous comments were posted on this blog in response to my two previous postings here regarding ocean thermal energy. Those comments raised various issues and concerns regarding the implementation of ocean thermal energy technology. This posting is an effort to provide some perspective on the status of ocean thermal technology, written with the intention of addressing the points people raised in their comments.

The postings by viewers tended to fall into several categories, which I shall group as follows:

  • Possible environmental impacts of plant operation on the ocean, including those on parameters such as temperature and CO2-concentrations
  • Technical and economic requirements, challenges, and hurdles for ocean thermal technology to become a commercial reality
  • System conversion efficiency and system energy costs

My Perspectives on Ocean Thermal Energy Technology

Since being assigned by NSF in 1973 to serve as the first ocean thermal program manager, charged with organizing and conducting a concerted federal R&D program on ocean thermal energy, my tentative outlook has been, and continues to be, that of a cautiously optimistic advocate of this technology. Informed by my experience since then, I have yet to encounter a demonstrable or foreseeable “show-stopper” in the technical, environmental, or economic areas that would preclude the achievement of economically/technically viable and environmentally acceptable technology for harnessing ocean thermal energy.

In the mid-1970s my outlook was first bolstered by two federally sponsored industrial studies that resulted from contracts awarded to Lockheed and TRW. After conducting an engineering evaluation, both firms independently concluded that ocean thermal technology had good prospects for achieving technical and economic viability. By “economic viability” I believe that we all mean that baseload ocean thermal power systems could become cost-competitive, at least versus oil-derived electricity.

Now, some 35 years later, both Lockheed Martin (LM) and the U.S. Navy seem to have reached similar tentative conclusions about today’s outlook for this technology.

Starting around 2007, LM began rebuilding its ocean thermal engineering team by annually investing millions of dollars of its own discretionary internal R&D funds, and is continuing to make such investments. The LM team’s effort is focused on developing the design of a multi-megawatt power plant for operation off Hawaii, successful operation of which can lead to prompt design and construction of a first-of-a-kind 100 MWe commercial plant. LM regards the latter as likely to be cost-competitive in markets like Hawaii that presently rely on oil-derived electricity. Some company perspective on LM’s effort is stated at this URL.

Recently the Naval Facilities Engineering Command (NAVFAC), which is responsible for naval-base infrastructure, competitively awarded an $8.1 M contract to the LM team. That award is for technical activities aimed at reducing overall system and developmental risks for critical subsystems and components, and at maturing a pilot-plant design. The Navy has a long-term interest in helping foster the commercialization of ocean thermal technology, achievement of which would enable it to purchase, at cost-effective rates, ocean-thermal-derived electricity and fresh water from privately developed facilities at U.S. military bases located in places like Hawaii, Guam, and Diego García.

In an effort to help call attention to what harnessing ocean thermal energy can do to help mitigate global warming, I posted some information on the Copenhagen Climate Council Web site, which can be accessed via URL here. A set of slides addressing various facets of ocean thermal energy can be downloaded there. Those slides summarize many of the technical, economic, and environmental aspects of the issues raised here.

A November 2009 workshop was convened and hosted by the NOAA people who are charged under U.S. law with licensing ocean thermal plants. That workshop was specifically aimed at exploring the technical readiness of ocean thermal energy technology, and it is my understanding that the technology received high grades there. The workshop is summarized on this Web page. [Note that the Web page is replete with hot buttons, i.e., Web links, each leading to detailed information about various technical aspects of ocean thermal that were examined at the workshop. Most, but not all, of the items that are in bold face are Web links.]

Cost and Market-entry Outlooks

The largest ocean thermal power system heretofore operated (by DOE contractors in 1980) was OTEC-1, a floating test facility designed to test candidate ocean thermal components and subsystems, such as heat exchangers, rated at 1 MWe. Lacking a turbine-generator set, that facility fell short of being a complete power system. Two complete closed-cycle ocean thermal power systems of sub-megawatt size have been successfully demonstrated. They were the 50 KWe (15 kWe net power) floating facility operated off Hawaii in 1979, which was developed by a private consortium led by Lockheed, and the 100 kWe (34 kWe net power) land-based facility operated in 1981 on the island of Nauru, which was developed by the Tokyo Electric Power Services Co.

To bridge the gap to multi-megawatt commercial plants, the LM team is designing a 5/10 MWe ocean thermal pilot plant—initially containing the first of two 5 MWe power modules—to be sited off Pearl Harbor, Hawaii. Operation of the pilot plant will provide performance, cost, and environmental data preparatory to designing and constructing a 100 MWe “commercial” plant for Hawaii’s oil-driven market.

Extrapolating pilot-plant cost estimates to what the commercial plant might cost, the LM team believes that a first-of-a-kind 100 MWe commercial plant can be built at a capital cost enabling it to compete in Hawaii’s oil-driven electricity market; i.e., to produce electricity at an avoided-cost target close to what busbar electricity is currently worth there.

Assuming that LM can achieve that energy-cost target—a busbar cost of electrical energy of roughly 20¢/kWh—then, if I work backward from that energy cost, using reasonable assumptions regarding interest rate and plant-amortization lifetime, including an additional cost of ca. 2¢/kWh for O&M, I estimate that that energy cost for a first-of-a-kind 100 MWe baseload power plant would roughly correspond to a plant capital cost target of about $1 B, or $10 per watt. If one assumes that federal tax credits are available to serve as an incentive/subsidy, then the tolerable capital cost for this first-of-a-kind commercial power plant could perhaps be about 50% higher, around $1.5 B.

In contrast, the 5/10 MWe pilot plant that LM is designing—since piloting of a technology at small scale increases the cost per unit output—will probably cost roughly several hundred million dollars, corresponding to an energy cost perhaps ranging from 40 to 60¢/kWh, making that large an investment sub-economic. Hence the pilot plant will require some subsidization, the hurdle-cost for launching this new ocean industry.

But the subsidy required sounds like peanuts nowadays. Note that during its heyday—the late 70s and early 80s—the DOE ocean thermal R&D program was being funded at about $40 M annually, equivalent to $100 M/year in today’s dollars. It may well be that Recovery Act funds or DoD will provide that subsidy, but it would be reassuring if the Obama Administration and the Congress would soon explicitly embrace ocean thermal and commit to rapidly advancing it into the marketplace, as was happening during the Nixon, Ford, and Carter Administrations.

Once the pilot plant is successfully operated, the design data and cost estimates for the first 100 MWe commercial plant will become much clearer. There are various options for funding that commercial plant. For example, about 80% of its capital investment could be federally loan-guaranteed; the remainder, roughly $200 to 300 M or so, would be venture capital, and investment tax credits would offer an additional incentive.

A comparison—albeit crude—can be made between the above $10 capital cost per watt, for baseload (continuous, 24/7) ocean thermal power capacity, versus the capital costs per watt for intermittent wind and photovoltaic power. Let’s assume wind and photovoltaic power systems that cost $4 and $7 per watt, respectively, and that they generate power about one-third of the time. Then, for purposes of making a rough comparison with the capital cost of a baseload source like ocean thermal, the intermittent wind and photovoltaic capital costs can be multiplied by three, yielding $12 and $21 per watt, respectively, compared to roughly $10 to $15/watt for a first-of-a-kind, 24/7 ocean thermal plant.

References

Clare, R., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)

Derrington, J., 1979, in Proceedings, Sixth Ocean Energy Conference (ed. G.L. Dugger)

Gavin, A. P. & T. M. Kuzay, 1981, 0TEC-1 power system test program: biofouling and corrosion monitoring on 0TEC-1. Argonne National Laboratory

Green, H.J. and P.R. Guenther, 1990, Carbon dioxide release from OTEC cycles, Solar Energy Research Institute report TP-253-3594

Myers, E.P. et al., 1986, The potential impact of ocean thermal energy conversion (0TEC) on fisheries, NOAA Technical Report NMFS 40—Available at URL http://spo.nwr.noaa.gov/tr40opt.pdf

Wortman, E.J., 1981, in Proceedings, Eighth Ocean Energy Conference (ed. E.M. MacCutcheon)

February 21, 2010 Posted by | global warming, guest post, ocean thermal energy conversion, otec, Robert Cohen | Comments Off on Answering Questions on OTEC – Part I

Energy Policy and Renewable Hydrocarbons

The following guest essay is by Frank Weigert, a retired DuPont chemist who was involved in some of DuPont’s early work on alternatives to petroleum in the mid-1970’s. This work spurred a lifelong interest in a renewable hydrocarbon economy. Recently Frank sent me an e-mail in which he described his views on a pathway that could lead us away from our dependence on petroleum. It was a very detailed and technically interesting e-mail, and I asked him if we could turn it into an essay for others to read. What developed from that request was the essay below.

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Many people find it hard to think rationally about our energy problems because there is so much misinformation and disinformation out there. Some is the innocent confusion of people misinterpreting scientific terms in layman’s language. An example is the word “oil”.

Some is more sinister, with whole industries planting lies and distortions to confuse the issues. Corporations and their lobbyists spend large amounts of money protecting their short-term interests from reforms needed to promote long-term good.

Politics distorts good decision making. If Iowa didn’t hold a Presidential beauty contest every four years, ethanol would not be on the agenda. If corn-based ethanol wasn’t on the agenda, then ethanol from cellulosics wouldn’t be either.

Economics is used as a weapon against change by polluting industries who are not now held accountable for the damage they do. Utopians refuse to see just how expensive some of their proposed solutions are. While the magnitude of our energy problem is orders of magnitude greater than the CFC / ozone problem of two decades ago, some of the precepts used to solve that problem also apply to the current one.

The world needs to think outside the box. We have a remarkable opportunity to establish a sustainable energy future that could last centuries. Short-term solutions which profit existing businesses should not be allowed to crowd it out.

1) Biofuel Definitions.

Non-chemists all too often get confused by the differences in chemical nomenclature and more conventional terms. Oil as an ingredient in salad dressing is not the same as oil as a synonym for petroleum.

Green plants make nucleic acids, proteins, hydrocarbons, carbohydrates, and lipids. Only the latter three need concern us as fuel precursors. Hydrocarbons have only carbon and hydrogen in their structure. Examples include natural rubber and other materials made from isoprene oligomerization.

Carbohydrates have formulas around (CH2O)n: Carbo (C) – hydrates (H2O). Glucose, C6H1206, is a monomer. Sucrose is made from glucose and another sugar fructose with the loss of one water molecule. Both sugars are soluble in water. Polysaccharides such as starch and cellulose are insoluble in water. Yeasts ferment soluble sugars to ethanol, an alcohol. The technology to ferment insoluble carbohydrate polymers practically does not yet exist.

Lipids are esters of the alcohol glycerin and long-chain fatty acids. Transesterification with a short chain alcohols such as methanol or ethanol converts these lipids to glycerine and esters generically known as biodiesel. Biodiesel is not a hydrocarbon.

Hydrocarbon reactions are generally many orders of magnitude faster than the reactions of polar molecules such as those involving alcohols or esters. That means that the equipment required to reform hydrocarbons is much smaller than that required to ferment carbohydrates to ethanol or transesterify lipids to biodiesel. Hydrocarbon chemistry does not require a solvent. Fermentation must be carried out in water, and yeast generally can only produce an ethanol concentration of 10% or so. The ethanol must then be separated from a large excess of water. Transesterification to make biodiesel is an equilibrium process that will not go to completion without a large excess of the small chain alcohol. That means large equipment for separation and recycle. While a hundred or so refineries provide all the transportation fuel America uses, many thousand fermentation or biodiesel facilities would be needed to produce the same amount of fuel.

The new investment required to convert from a hydrocarbon economy to one involving either ethanol or biodiesel is going to be very high. Why bother? Use hydrocarbons. Hydrocarbons such as gasoline or diesel are global warming neutral if produced entirely from biological materials.

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2) What defines a Climate Change / Hubbert’s Peak solution.

Four precepts should guide our work in solving the world’s Climate Change and Hubert’s Peak problems.

a) These are world problems. An expensive solution that works for the United States but not for China, India or Kenya is not a valid solution. America might be the Saudi Arabia of coal, but coal is not a solution for the Hubbert’s Peak problem because it exacerbates the climate change problem. Where is China going to get the land to grow corn to make ethanol? Solutions that depend on local conditions such as desert sunlight or constant high winds are not solutions to the global problem. Venture capitalists who want to get rich selling high investment solutions are part of the problem.

b) Consumers should not have to change anything.

The precept needs to be considered separately for electricity and transportation fuels.

Electricity is easy. Consumers don’t care whether the electrons that power their lights, televisions or computers come from falling water, burning coal, or splitting atoms. An electron is an electron.

Transportation fuels are harder. Hybrid cars like the Prius come closest to meeting the criterion. Consumers fill up their gas tank and don’t have to worry about the battery until it wears out. The cost of the replacement battery has not sunk in yet. A typical battery pack costs $5000 and will last five years. Thus during the life of the electric car, owners will have to pay $10,000 to replace their battery twice. You can buy a lot of expensive gasoline for that amount of money.

Plug-in hybrids WOULD be different. Suppose you live in an apartment and park 100 feet away. That’s an awfully long extension cord. A better option is to continue making gasoline and diesel, only from renewable resources. Cars powered by fuel cells or hydrogen are even more far out. People like personal transportation. Walking is not a solution. Shutting down the airline industry is not a solution.

c) Use existing investment when at all possible and minimize the need for new investment.

This is where most of the pundits get it wrong. Venture capitalists love high investment projects because they earn their fees as a percentage of the capital required. The November cover story of Scientific American is about sustainable fuels. It limits the discussion to Big Physics projects. Only toward the end do the authors offer an estimate of the capital investment required: $100 TRILLION. Ain’t gonna happen. Many of the proposed remediation projects are also horribly capital intensive and will never fly.

Many physics solutions claim they will be competitive with oil “soon.” But oil at what price? In the Middle East, countries can pump oil to the surface for a COST $5 a barrel. Americans VALUED that oil at $150 a barrel in 2008. Europeans and Japanese are willing to pay twice that, including taxes. So what is the free-market PRICE of oil? OPEC can set it anywhere within that range. If photovoltaics become competitive with oil at $100 a barrel, OPEC can lower the price to $90 a barrel until the venture capitalists give up. They then buy up the investment for pennies on the dollar, destroy it, and raise the price again. I don’t see any way to compete with $5 a barrel Middle East oil. I would be hopeful that biofuels could compete with $25 or $30 a barrel oil.

d) Biofuels should not compete with food production or cause land use issues.

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3) The algae Botryococcus braunii can potentially meet all my criteria for a solution to the Climate Change / Hubbert’s Peak problem.

Nobel Prize winner Melvin Calvin discovered a shrub growing in the Brazilian rain forest related to rubber tree in the 1970s. When tapped, this shrub exuded a latex. Calvin collected the material, (a mix of isoprene trimers) broke the emulsion, dried the organic layer, poured it into the fuel tank of a diesel powered car and drove off. No refining necessary! He correctly realized there was not enough land in the Brazilian rain forest to grow this crop. Genetic engineering did not exist back then.

Calvin made a bad mistake when he attempted to breed a modification that would grow in the desert. Making hydrocarbons needs more water than making carbohydrates. He should have been experimenting in a swamp.

Later, Calvin found the pelagic algae genus Botryococcus and studied the hydrocarbons they produce.

A summary of his work is available online, but cannot be accessed directly. You have to link through a bridge site. Here is it’s URL.


http://www.osti.gov/bridge/product.biblio.jsp?osti_id=7286

Click on the 1 MB PDF file icon. The discussion of algae begins on page 15.

Calvin reports that 86% of the dry weight of the algae is hydrocarbons, isoprene oligomers averaging n = 6 degree of polymerization. The structures include linear oligomers and cyclic structures related to steroids. They are not directly useable as transportation fuels.

The algae Botryococcus is among the slower growing breeds. It has a reported doubling time of two days. Presumably, producing hydrocarbons is harder than producing carbohydrates. Nevertheless, it is an interesting exercise in powers of 2 to calculate how quickly 1 g of algae can turn into the 100 million barrels of oil needed each day. Once you have the ocean surface carpeted with the algae, you can then harvest half the crop every doubling period in a self-sustaining manner.

One of your discussions (RR: e.g., this one) laments the fact that useful algae cannot generally compete with trash species. True, but farmers have learned how to grow crops and eliminate weeds. Farmers of the ocean will have the same incentives. Agricultural chemical companies have been very successful at finding selective herbicides for important crops. If growing algae becomes important, they will attack this problem as well.

Another possibility is to begin with an invasive species and modify it genetically to produce the hydrocarbons we want. Caulerpa taxifolia is an algae that escaped from a Monaco aquarium and now carpets the northern edge of the Mediterranean sea. When it also got loose from the Monterrey aquarium outside San Francisco, the U.S. government spent $8 million chlorinating the Pacific Ocean to eliminate the infestation. While it doesn’t make useful hydrocarbons, it does make a toxin caulerpenyne, which presumably is the secret to it success. The structure is available in Wikipedia. As the name suggests, it includes both double and triple bonds. It also has 2 acetates which according to biochemical studies are added last. The main chain contains 15 carbon atoms arranged in a way that suggests derivation from an isoprene trimer. Inhibit the acetylation steps and you have a precursor to diesel fuel. Adding the gene sequence to produce the hydrocarbons or disabling the genes that acetylate the product and you have another way to get at hydrocarbons from algae.

I believe conventional oil refineries could process this hydrocarbon mix to produce gasoline and diesel. Refineries could shut down much of their catalyst guard investment because these hydrocarbons have no nitrogen, sulfur, phosphorus, metals, or ash. This is an extremely sweet crude. These hydrocarbons should be able to replace coal as a fuel in electricity generating plants. Similarly, because it is a high quality fuel, much of the pollution abatement equipment at the back end could be shut down.

Check out the MIT Website Whatmatters for more details The URL is:

http://alum.mit.edu/news/WhatMatters/Archive/200111/

January 17, 2010 Posted by | algae, guest post, reader submission | Comments Off on Energy Policy and Renewable Hydrocarbons

Iraq Oil & Gas Production: Geopolitical Compromises and Kurdish Autonomy

The following guest essay is by Kevin Kane. Kevin is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea. Kevin previously published American Freedom from Oil: A Bipartisan Pipedream.

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Iraq Oil&Gas Production: Geopolitical Compromises and Kurdish Autonomy
By Kevin Kane

As Royal Dutch Shell and other majors increase their investments in Iraq, some oil market analysts argue that Iraq could export over 12 mb/d (million barrels per day) within a decade, significantly shifting global production closer to 100 mb/d from the present 83.5 mb/d inventory supply. Are Iraqi oil production estimates too ambitious or perhaps, not optimistic enough?

The northern Kurdish-governed territory of Iraq situated between Iran, Turkey, and Arab-Iraq is of particular importance to these expected Iraqi oil production estimates. The Kurdistan Regional Government (KRG) publicly claims to possess oil reserves greater than half the cumulative value of all the oil reserves within the Organization of Economic Cooperation and Development (OECD) community. Kurdish-Iraqi production may reach 250,000 b/d by the middle of this year and up to one mb/d before 2012.

As American forces draw down as a part of the U.S. exit strategy, many oil and gas uncertainties remain. Specifically, the KRG possess few incentives to accurately report proved reserves or encourage oil investment while the U.S. hands over political and military control to the Iraqi people—meaning that Kurdish-Iraq could possess even greater reserves than publicly stated.

Kurdistan Sovereignty over Oil Reserves

When some in the U.S. were encouraging partitioning Iraq several years ago, one could only imagine that the Iraqi-Kurds were not exactly disappointed at the prospect of having sovereign control over the future of their nation, including its oil reserves. Thus, one would be rational to assume that many Iraqi-Kurds had little intention and few incentives to cooperate with the Iraqi Central Government after liberation in 2003 from Saddam Hussein’s control of Kurdish territory Iraq.

After 2003, 7.5 million Iraqi-Kurds immediately secured their own perimeter within Iraq and set up a visa system requiring Arab-Iraqis to obtain permission to enter KRG-governed territory. The KRG then asserted themselves as an autonomous international power by establishing diplomatic channels with a number of countries including the US, UK, Germany, France, Russia, and Italy via consulates and representative offices independent of Baghdad. The KRG simultaneously took control of their oil fields and signed Exploration and Production (E&P) contracts with Hunt Oil, Det Norske Oljeselskap AS, SK Energy, and countless other oil companies to explore, develop, produce, and export oil without intending to share profits with the Iraqi Central Government.

The KRG only began to take a real interest in working with the Iraqi Central Government after the U.S. started to focus on stabilizing Iraq, which included the surge as well as encouraging sectarian cooperation and parliamentary coherence. Following the success of the U.S. troop surge in 2007 and the stabilization of Iraqi’s political affairs in 2008, the Iraqi Central Government, now more organized and confident, ruled in June 2009 that all foreign investment oil contracts made directly with the KRG are illegal.

The Iraqi Central Government now takes 83% of all oil export revenue from Kurdish territory. Because the U.S. is drawing down its forces and turning internal conflict matters over to Iraq, the world should expect the KRG to ignore central government authority and revenue-sharing agreements after the U.S. is gone.

Once the Iraqi Central Government is unable to enforce their legal authority over the KRG after the U.S. exits Iraq, the KRG will likely encourage more wildcat drilling, draw soil samples, and collect the data necessary to potentially transition reserve classifications from possible and probable to proved reserves (U.S. Reserve Classification System). The Iraqi-Kurds will then both claim all, or most, of the potential oil profits and potentially increase their commercially recoverable proved reserves estimates.

Geopolitics, Intervention, and Energy Supply Compromises

Some analysts argue that the official establishment of a Kurdistan state could create a domino for anywhere from 21 to 28 million other Kurds to stand up and demand autonomy in Kurdish-dominated regions across the Middle East. Therefore, these analysts argue that Turkey and Iran might take military action to prevent the KRG from asserting autonomy over Kurdish territory in Iraq in order to prevent the dominos from falling. However, it is unlikely Turkey and Iran would undertake such military action for fear of a blowback from Kurds within their own border regions, an outcome that would only emboldened regional Kurdish solidarity. What is more, Turkey and Iran would also be wary of taking responsibility for nation building in Iraq given the very costly U.S. experience. Thus, it is unlikely any outside forces will forcefully intervene in the Kurdish pursuit of sovereign control over northern Iraq.

Moving past the domino fear, economics proves to be the true ruler of Kurdish regional relations. Insofar, Turkey and Iran appear to prioritize investment over fear of this domino theory as both countries continue to send millions of dollars in Foreign Direct Investment (FDI) into Kurdish-Iraq due the neo-liberal nature of the KRG’s economy. In fact, in June 2009, a Turkish oil company investing in Kurdish-Iraq began exporting 40,000 b/d of oil back to Turkey through an agreement with the KRG: an estimated one billion dollars worth of oil per year at $80 per barrel.

In addition to potentially becoming a significant oil import source for Turkey and the rest of the Western world, the KRG also controls strategically located natural gas reserves that could become increasingly valuable to Europe’s diversification strategy. With almost 89% of Iraqi’s natural gas reserves within Kurdish territory—an estimated 2.83 Trillion Cubic Meters (TCM)—the European Union will likely pressure Turkey to work with the KRG—even should it become sovereign—to bring this gas to European consumers.

The KRG may be able to support some of Europe’s greater strategic needs to diversify their gas import sources and supply their fastest growing energy input source—natural gas—over the next two to three decades, particularly due to the increasing use of combined cycle gas turbines to generate electricity. Thus, if the KRG asserts itself as a sovereign country by ignoring Iraqi Central Government authority, Turkey will not cease oil and gas imports from Kurdish-Iraq out of fear of a Kurdish autonomy domino theory, whether this be by dint of personal economic interest or foreign pressure. In fact, such an outcome may induce Turkish leaders to work more closely to resolve internal conflicts with Kurds living in Turkey.

With foreign investment coming into the KRG from all over the world, these nations are sending a subtle message to the KRG: “Our governments prioritize economic development and energy security over politics.” Although regional leaders make speeches discouraging a sovereign Kurdish-Iraq, their investment actions juxtapose their rhetoric, particularly in the case of Turkey. More important than the words in a leader’s speeches are the measurable actions of their government.

Kurdish Nationalism, Oil, and Power

Like Israel after 1945, the KRG have not wasted anytime to ensure they are powerful enough to never be dominated by an occupying culture or military force, including by Arab-Iraqis that once forced on Kurds their language, culture, and rule of law. The Iraqi-Kurds are securing support from the international business community, tapping into economic integration, organizing a loyal and professional military, and developing close ties with liberal nations that prioritize development over ideology.

While Kurdish-Iraq could hold one of the keys to increasing or decreasing the expected Iraqi oil production over the next 10 years, we must remember that asking the Kurds in northern Iraq to remain unified with the rest of Iraq would be like asking Koreans after 1945 to remain unified with their previous Japanese occupiers. Thus, Iraq will not be unified should the Iraqi-Kurds have their day to decide for themselves, and that day may be coming soon.

January 12, 2010 Posted by | geopolitics, globalization, guest post, Iraq, Kurdistan | Comments Off on Iraq Oil & Gas Production: Geopolitical Compromises and Kurdish Autonomy

American Freedom from Oil: A Bipartisan Pipedream

The following guest essay is by Kevin Kane. Kevin is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea.

American Freedom from Oil: A Bipartisan Pipedream

By Kevin Kane

During election campaigns, presidential candidates, policy leaders, and pundits pander to both American fears and desires when they demand that the U.S. should pursue “energy independence” by eliminating oil imports. This has been a rallying cry of every President since the 1970s when American domestic production began a steady decline that continues through today.

Is energy independence a realistic policy, or as we are a part of one globally integrated economy, do we need a more relevant global energy strategy that captures the inherent economic and financial vulnerabilities associated with our age of irreversible interdependence?

Perhaps we need to look outside our domestic tunnel vision and broaden our perspectives on energy security. Seeing the bigger globalization picture will require leaders, starting with President Obama, to refocus the world’s perspective on energy from the zero-sum national to positive-sum international level. Essentially, the world needs a global energy strategy.

Global Energy Security

If leaders are serious about energy independence, they will ask the more appropriate energy question, “How can we create global energy security?”

When asking this more relevant question, we can derive many proposals, beginning, but not limited to, the following three general approaches:

(1) First, recognizing that global economic integration creates mutual energy insecurity, President Obama could propose addressing the topic through the G20, and call for the creation of a global energy security committee tasked to draft a global energy strategy proposal.

(2) Second, this global energy strategy should focus on building cooperation, creating transparency, eliminating barriers to foreign energy investment, eliminating energy trade-related tariffs, advancing liberalization, coordinating R&D, facilitating technology sharing, and managing mutual energy insecurity.

(3) Third and finally, we have to cease “framing” energy security as a national goal, and rephrase our terminology to reflect our mutual international energy insecurity.

Our Oil Interdependence

American leaders, and the proposals of many environmental, renewable energy, and oil company lobbyists, individually or collectively, are incapable of “freeing the U.S. from foreign oil.” While the U.S. may benefit from reducing oil imports and increasing investments in offshore drilling, energy efficiency, and oil substitute technology, we must recognize that these efforts do nothing to free the American economy from oil’s transnational social, economic, and financial linkages.

If one globalization-connected country’s economy were to experience a supply shortage or an industry-crippling price shock, seemingly distant and unrelated, but economically integrated, countries will feel the effects of these shocks in their own trade and financial sectors. Thus, in an era of globalization, nations connected to the global economy are mutually vulnerable to the effects of oil price and supply shocks regardless of their independent national energy strategies.

Consider how America’s subprime mortgage crisis rippled through seemingly unrelated economies across the entire globe, from South Korea to Russia. We should expect the same economic-linkages to spread the effects of an oil supply or price shock to seemingly energy-independent economies.

American policy leaders need to recognize that eliminating oil imports will not create energy independence.

Leader of the Energy World

As the tip of the globalization spear, American leaders need to think much bigger about how the U.S. will achieve energy security in a world where one nation’s energy insecurity is another seemingly unrelated nation’s economic vulnerability. American leaders have to recognize that the U.S. is only as energy secure as the world’s least energy-secure globalization-connected economy, which includes nearly every developed and developing country in the world. Americans pride themselves on being the leaders of the free world. Perhaps it is about time to lead the world towards universal energy security.

Biography

Kevin Kane is a market analyst, economist, Asia political affairs strategist, and Korean language linguist living in Seoul, South Korea. Kevin holds a BA in political science from Georgia State University and a Master of International Studies with a concentration in international trade and economics from Seoul National University.

Kevin has seven years of military experience serving in Asia and the U.S. as a leader in project management and government affairs, two years of intensive academic study in energy economics and the oil and gas industry, and three years of cumulative internship, fellowship, and consultant experience working alongside Asia policy strategists and fortune 100 business advisors. More details can be found in his resume here.

December 19, 2009 Posted by | energy independence, energy security, globalization, guest post | 36 Comments

Copenhagen Suggests Climate Issue Not Going Away

I have mentioned that I think ClimateGate will end up being one of the top stories of 2009. A number of people have commented or e-mailed me and said that the story will soon be forgotten. I don’t think so. I don’t think they realize the energy this gives to those who were skeptical. In my opinion, this will galvanize the opposition and make it much harder to get any legislation passed on climate change. (I am reading through a very comprehensive examination of the raw data and the nature of the temperature adjustments now at Watt’s Up With That?: The Smoking Gun At Darwin Zero)

Regardless of whether that view is accurate, I would be remiss if I didn’t have an essay devoted to the Copenhagen Conference. Prior to the Copenhagen conference, the Great Plains Institute, an energy-focused NGO that was going to delegates to Copenhagen, asked if I would be interested in receiving dispatches from their policy analysts about what’s happening in real-time inside the convention hall.

Here is one of those dispatches:

Copenhagen Suggests Climate Issue Not Going Away

Copenhagen, Denmark

Rolf Nordstrom, Wednesday, December 9, 2009

I arrived in Copenhagen on Monday afternoon and am still suffering a little jet lag, but I am awake enough to give you a glimpse of what the climate change conference taking place here these next two weeks looks and feels like, and how you might expect it to impact your life.

First, to give you a sense of scale, I want you to imagine that the vast Mall of America is filled not with shops of every kind, but with hundreds of booths from different organizations, temporary offices for delegates from 192 countries, vast meeting rooms set up with microphones and video screens, cafes, the mother of all cloak rooms, huge banks of computer stations (many with Skype and video capability built in), and the whole place teaming with people.

To get into this global “town hall” meeting, I waited in line with hundreds of others in order to get my picture taken and go through several security check points. Indeed, the elaborate airport-like security system rivals any major airline hub, complete with scanners and sniffing dogs. And all this only hints at the scale of this gathering.

If you don’t follow the climate change issue closely, it may seem like this conference in Copenhagen is coming out of thin air. But the international negotiating process on climate change has been going on for a long time and takes place through a series of meetings, each called a “Conference of the Parties to the United Nations Framework Convention on Climate Change” (or COP for short). This one, COP15, is my first and by all accounts the very largest of them all, suggesting that concern over the world’s climate has grown dramatically over the past 17 years; and of course the issue of climate change has been studied by scientists for decades prior to that.

High-level ministers and negotiators from all over the world meet every year to review the implementation of the overall Convention, which was signed back in 1992 in New York (including by the U.S.). Its objective is “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”

If you are a climate skeptic, being at this conference would prompt you to ask yourself, “if the science behind climate change is not compelling, then how is it that essentially every major country in the world—and many you’ve never heard of (think Tuvalu or Comoros), is convinced that climate change is a real and urgent challenge? Have their scientists and elected leaders all be hoodwinked?

We tend to be a bit isolated in our thinking in the U.S., but a lack of strong action on climate change has led to demonstrations in some 4,500 locations in 170 countries, and more are taking place here in Copenhagen. An example yesterday featured people convincingly dressed as trees being followed around by a scrum of reporters with cameras and sound booms as the tree people called for a halt to deforestation and the preservation of forests in the push for new forms of energy production.

No matter what happens here, you can expect there to eventually be an international agreement that places legally-binding limits on the emission of greenhouse gases. If I were a business, I would ask myself two questions:

1) Do I think this issue will go away? In other words, can we just wait it out (like a war of attrition) and hope that climate change goes away? If your answer is “yes”, what is the evidence for this view? What leads you to believe that the world will forget about climate change?

2) If the issue is not going away, then what can I do as a business (or an individual for that matter) to position myself to flourish in a carbon-constrained world?

At a minimum, you may want to stay informed. One good way to do that is to follow the proceedings and the U.S. government’s positions here in Copenhagen through this official Web site: http://cop15.state.gov/uscenter/multimedia/index.htm

Rolf Nordstrom is executive director of the Great Plains Institute, a Minnesota-based nonpartisan, nonprofit working with Midwestern States and Canadian provinces to accelerate the transition to a sustainable and prosperous low-carbon economy.

December 11, 2009 Posted by | climate change, Copenhagen, guest post | 137 Comments

The Energy Conundrum

The following is a guest post by Paul Winstanley, the Director of Energy Initiatives from the Stevens Institute of Technology.

1. Introduction

This paper was written as preparation for the recent Discover and Shell sponsored “Fossil Fuels 2050” event in October 2009 at Stevens Institute of Technology, Hoboken, New Jersey.

Energy demand continues to increase rapidly. For example, the worldwide marketed energy consumption has been forecast to increase by 44% to 678 quadrillion British Thermal Units (BTUs) from 2006 to 2030 [1]. Within this period, fossil fuels (oil, natural gas and coal) are anticipated to remain the dominant energy source. Against this avaricious appetite for fossil fuel there is ambiguity over the reserves [2]. In addition to the issues associated with the demand for fossil fuels the environmental impact associated with burning these fuels is an equally large concern.

Therefore, the future energy challenge is complex and highly interdependent. Specifically, we need to:

  • Consider the continued availability of fossil fuels;
  • Whilst we introduce credible energy alternatives;
  • Whilst we ameliorate environmental damage.
  • These three themes will now be considered in more detail.

    2. Continued Availability of Fossil Fuel

    Exploration of hitherto difficult reserves will continue. This will be driven by increasing energy costs and the availability of new technology that enable economic exploitation. Examples of technological advances include:

  • Exploration in deep ocean water;
  • The production of hydrocarbons from oil sands and shale;
  • Directional drilling to access non-vertical reserves.
  • Additionally, there is considerable scope to reduce and prioritize fossil fuel usage. This approach will be different by sector and by time. For example, the short-term viable alternatives for aviation are very limited and it is only recently that flights partially supported by bio-fuels have taken place. This contrasts to personal and mass land transportation where credible alternatives such as hybrid and all electric vehicles already exist. Here greater usage of alternative fuel vehicles should be encouraged by policy whilst longer-term solutions for aviation are researched and developed.

    3. Credible Alternatives to Fossil Fuel

    The previous section raised the opportunity to reduce and prioritize fossil fuel utilization. Given the increasing energy demand, this approach can only be pursued if credible alternatives to fossil fuel exist.

    a. Bio-Fuels. Considerable emphasis has been placed on the development and implementation of bio-fuels. In this case the overall enterprise must be environmentally and economically acceptable. Specifically, issues such as increasing the price of food crops and increasing the utilization of other resources, such as water, need to be considered actively [3].

    b. Renewable Energy. Emphasis has also been placed on the development of renewable energies. With the exception of hydro-electricity the impact of renewable energy to meet the global energy demand has been minimal [4]. There are many factors that underpin this situation:

  • Renewable energy systems and supply chains can lack maturity;
  • There is no “silver bullet” renewable energy solution;
  • Generally, renewable energy systems are large complex installations (e.g. large wind farms) that demand significant capital investment and complex planning and permitting.
  • To overcome these limitations innovation is crucially required at all stages in the renewable energy enterprise. One innovative approach could be the systematic application of energy storage and renewable energy at a smaller scale as a micro-grid. In the residential context this could be applicable at a township level. The micro-grid approach has the potential to deliver rapidly increased energy security and resilience as well as enabling a significant reduction in emissions.

    One important consideration is where geographically renewable energy systems could be developed. Much emphasis has been placed on the future energy demands of emergent economies [1]. It is important to recognize that these economies are generally not hindered by legacy. This is illustrated by the growth in cellular phones. For example, from 1997 to 2007 in emerging nations the number of cellular phones increased 18 times faster [5] on average than landlines and a technological generation was by-passed. Of greater relevance to this paper is rapid growth in London, UK of electric vehicles as a consequence of the introduction of congestion charging (which electric vehicles are exempt from). The dominant supplier of electric vehicles in London is G-Wiz [6], an Indian manufacturer. Therefore, the location of renewable energy system development may result in technological surprise.

    4. Amelioration of Environmental Damage

    The previous section raised the opportunity for an innovative micro-grid approach to reduce emissions. This approach could have a significant contribution to meeting the future emissions targets. For example, in the UK approximately 80% of the carbon emissions arise from energy consumed in buildings and electricity generation [7].

    As well as introducing renewable energy, reducing energy demands has the potential to reduce carbon emissions further. Approaches to reduce energy demands include:

  • Target setting on energy suppliers;
  • More stringent construction codes;
  • Energy labeling to highlight to consumers more efficient appliance;
  • Improved product standards, for example, minimizing power dissipation from appliances whilst they are in a “stand-by” mode;
  • Energy performance certification prior to renting or selling real estate;
  • Smart homes including smart meters and appliances to better inform users about energy consumption in order to highlight areas for energy reduction.
  • Building upon the latter point, it has been estimated that the domestic energy demand can be reduced by an additional 25% [8] by integrating appliances or products into the home so they can turn off automatically when not required. A key requirement is to realize effectively these crucial savings in a manner that is transparent to the occupants. This can be achieved by embedding intelligence and communications into appliances and is an example of an emergent systems engineering discipline – “cognition-centric systems engineering”.

    In order to meet the required 2050 environmental targets it has been estimated that 1% of the global Gross Domestic Product (GDP) needs to be invested every year from now until 2050. Given the technological element of meeting these target a shortage of skilled and experience staff is probable. At a smaller scale, this limitation has already been identified in the USA as a consequence of Stimulus Package Funding with the Department of Energy [9]. To overcome this there will be an increasingly urgent need to increase the availability of training and re-training at the technician, undergraduate and post-graduate levels.

    5. Discussion

    This paper has made the case that the future energy conundrum is complex and highly interdependent and the continued availability of fossil fuels needs to be considered along with the introduction of credible alternatives whilst ameliorating environmental damage. Pursuit of part of this triad is likely to result in an incomplete or inappropriate solution set. Therefore, it is essential to solve the future energy conundrum holistically and systematically. Moreover, the scope of the future energy challenge dictates that:

    1. Innovation will be required continuously through the energy enterprise. This is innovation in the broadest sense, not just technical, and will encompass areas such as systems to business process to supply chain.
    2. Advances are likely to happen in emergent economies that are unconstrained by the fossil fuel legacy; technological surprise could become a reality.
    3. Unless we act now there is a high probability that there will be a shortage of skilled and experienced staff, at all levels from technician to post-graduate. If this situation arises we will not have the number of skilled staff to realize our aspirations and needs.

    Paul Winstanley, Stevens Institute of Technology, November 2009

    [1] Report #:DOE/EIA-0484(2009)

    [2] http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

    [3] http://www.iwmi.cgiar.org/News_Room/pdf/Down_to_Earth__Rise_in_biofuel_demand_could_trigger_food_water_crisis.pdf

    [4] http://www.renewableenergyworld.com/rea/news/article/2009/09/renewables-global-status-report-2009-update?cmpid=WNL-Friday-September11-2009

    [5] ITU REFERENCE

    [6] http://www.greencarsite.co.uk/GREENCARS/GoinGreen-GWIZ-EV.htm

    [7] http://climatechange.cbi.org.uk/uploaded/Roadmap_SummaryDistance.pdf

    [8] http://climatechange.cbi.org.uk/uploaded/CCT_010_Buildings_v2.pdf

    [9] http://www.renewableenergyworld.com/rea/news/article/2009/04/if-we-want-more-renewable-energy-in-the-u-s-wont-we-need-more-engineers

    November 5, 2009 Posted by | alternative energy, electric cars, guest post, reader submission | 24 Comments

    Rate Crimes: Impeding the Solar Tipping Point

    The following guest essay was written by Paul Symanski. Paul is an electrical engineer with expertise in solar energy, and shares his views on why solar power often faces unnecessary headwinds.

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    To anyone who has ever spent a day in Arizona’s Valley of the Sun, it is obvious. The sunniest state in the nation is blessed, cursed, with a fierce sun. Yet, as one explores the landscape, artifacts of the capture of solar energy are conspicuously absent. This dearth is true for solar electric, domestic hot water, passive solar design, and even for urban design. It is as if the metropolis stands in obstinate defiance against the surrounding desert and its greatest gift.

    Yet, the incessant sun is a constant agitator. Even visitors happily distracted by the Valley’s many amenities will remark while lounging by the pool, drinking in the clubhouse, or enjoying a repast on a misted patio, “Why doesn’t Arizona use more solar energy?”

    Solar Tipping Point

    One answer to this persistent question can be found once one comprehends that Arizona is where it first occurred: where solar energy first became economical.

    Around the turn of the millennium, four decades after its destiny was foretold, an investment in electricity generated by an on-site photovoltaic system became a better investment than traditional investment vehicles. Finally, solar energy had become economically transcendent. Because of its abundant solar resource, solar energy’s transcendence occurred in the center of the desert Southwest, in sunny Arizona. It may not be mere chance that this tipping point coincided with the world’s peak production of petroleum.

    The concept of “grid parity” has been promulgated by an energy regime that sees the world through grid-centric eyes. A more accurate and revealing comparison is investment parity. This approach more completely – and perhaps more directly – accounts for the myriad hidden costs embedded in the economics of the world’s energy system. Both the recent economic troubles and the fact that the solar tipping point occurred during an historical low for electricity prices in Arizona reinforce the validity of economic ascendancy of solar energy.

    Implicit in the concept of grid parity is an ultimate arrival where both sides rest in balance upon the fulcrum. This subtle point of terminology further invalidates the utility of the concept of “grid parity”. The balance will likely be a brief moment of hushed breath . . . before the tipping continues in favor of solar energy.

    The concept of grid parity also establishes a false dichotomy that reveals the term to be an indirection. Solar energy should be one of a multitude of energy sources to be impartially and intelligently incorporated into a flexible network of energy sharing. The concept of grid parity is a creation of a hierarchical system of centralized generation and distribution. Like the system that created it, the term ‘grid parity’ should be recognized for what it is.

    The concept of a tipping point is a more appropriate metaphor. It is this tipping point that those favored by the status quo vigorously resist.

    Delay Tactics

    It is crucial that energy costs be accurately accounted in order to establish valid policies. Yet, in any forum where energy is discussed (present company excepted), retail energy costs are typically presented as an average, or as a range of values. Even in conversations amongst economists, engineers, scientists, business leaders, policy makers, and others who help guide our energy future, superficial valuations proliferate. Blunt statements of cost nearly always exclude associated economic, competing, and externalized costs. More dangerously, such simplification disguises a complex and telling reality.

    The key observation – and the linchpin of the Rate Crimes exposé – is that the avoided cost value of solar electricity and other energy management strategies has long been dramatically lower than the retail cost of electricity under particular rate plans.

    The graph below plots the avoided cost value of on-site solar electricity against retail energy costs under the Arizona Public Service E-32 commercial rate schedule for the summer season. The ranges of kilowatt demand and kilowatt-hour consumption reflect those of small businesses.

    The avoided cost value of solar electricity is half that of the retail cost of electricity for a great portion primarily because of the uncontrollable billing demand, and a precipitous declining block rate structure compounded by the uncontrollable billing demand being used as a multiplier for the extents of the expensive initial block.

    Of the hundred largest electric utilities (by customers served), fourteen are located in the sunny Southwest (excluding the unregulated utilities in Texas).

    Of these fourteen, three have commercial rate plans with structures that most defeat the value of solar energy and energy conservation measures. These utilities are: Arizona Public Service, Salt River Project, and Tucson Electric Power. All are Arizona utilities.

    Conclusion

    The Arizona rate schedules provide an enormous subsidy and encourage prodigal consumption by discounting energy to the largest energy consumers. This was historically a common situation in other places as well. However, Arizona is special due to its extraordinary solar resources.

    The pricing system redirects costs from any apparent savings in the residential and industrial sectors into the small commercial sector. Small commercial ratepayers have less capital, have fewer person-hours to commit to unusual projects, have less-diverse expertise, and are often constrained from making modifications to their premises. The redirection of costs into this captive market creates a hidden tax through the higher costs of goods and services, and through the subsequently higher sales tax charges.

    Furthermore, while more fortunate homeowners can avoid energy costs by investing in subsidized solar energy, renters remain a captive market.

    As you may surmise, nearly the entire Arizona economic and political system is complicit. Beyond Arizona’s borders, the state’s electricity generation from coal and nuclear sources remains the West’s dirty little secret. Environmentally conscientious Californians can nod appreciatively at their Tehachapi and San Gorgonio Pass wind farms; while behind the turbines, on the eastern horizon, the cooling towers and smokestacks of Arizona keep bright their nights.

    All Arizonans need to be able to gain full value for investments in energy conservation and in solar energy. Until Arizona’s repressive rate schedules are reformed, energy efficiency measures and solar energy in the nation’s sunniest state will have diminished value. This diminishment of the value of solar energy affects all of us by delaying a cleaner energy future.

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    Paul Symanski is an electrical engineer, designer, human factors specialist, marketer, machinist, graphic artist, musician, LEED AP, and economist born of necessity. He is experienced with renewable energy, including expertise in solar energy both in practical application and in the laboratory. He is also a competitive masters-level bicyclist. ratecrimes [at] gmail [dot] com

    http://ratecrimes.blogspot.com/

    August 6, 2009 Posted by | analysis, Arizona, avoided cost, distributed energy, economics, guest post, investment, rate schedule, reader submission, smart grid, solar power | 53 Comments

    U.S. Ramping Up Wind Power Programs Even As Concerns Surface About Possible Declines In U.S. Wind Strength

    Once again at DFW Airport, about to make my way back to Europe. So I will be offline for just a bit, but wanted to post the latest from Money Morning, which as I recently explained will be featured here whenever they have topical material to offer. As always, normal caveats apply: I am not an investment advisor. I don’t endorse any specific stocks mentioned in the following story nor the ad at the end of the story.

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    U.S. Ramping Up Wind Power Programs Even As Concerns Surface About Possible Declines In U.S. Wind Strength

    By William Patalon III – Executive Editor

    Money Morning/The Money Map Report

    Just as the United States is boosting its reliance on wind power, a new academic study set for release in August says that U.S. wind forces may be getting weaker.

    Eugene S. Takle, a professor of atmospheric science at Iowa State University, and the director of the school’s “climate science initiative,” says the research study concluded that U.S. wind strength has potentially declined by 15% to 30% during the past 30 years – an average decline of as much as 1% a year.

    While conducting the study – which will appear in the Journal of Geophysical Research – researchers reviewed wind data taken at airports around the United States, and then based their findings on two sets of figures: One set from 1973-2000, and the other from 1973-2005.

    The study concluded that three factors could be contributing to the declines in U.S. wind strength: Land-use changes, a changing climate and changes in the kind of instruments used to measure the wind, Takle told MarketWatch.com.

    “If there have been trees growing or new buildings constructed near airports, it could impact the speed of winds on airports,” Takle said. However, it is also “[basic] meteorology that the wind is driven by differences in temperature between the poles and the equator, and those differences have been narrowed by climate change.”

    Tough Timing

    The findings come at time when the United States is making a serious push to increase the amount of electricity that’s generated by wind turbines grouped into so-called wind-power “farms.” Attempts to harness the wind are part of a broader national – or even global – commitment to “green” energy sources as a way of reducing dependence on oil and other fossil fuels for power generation.

    Other power sources include solar, geothermal, hydroelectric and nuclear for commercial electricity production, while automakers are looking at new types of batteries and such innovations as power-storing “fuel cells” as alternatives to the conventional internal combustion engines that power most of the world’s cars and trucks.

    The objectives are twofold. By decreasing the U.S. reliance on foreign oil, the country is hedging against the time when global supplies of the “black gold” begin to dry up, an eventuality that will propel the prices of crude and gasoline skyward. Diversifying away from oil and, perhaps, even coal is also a way of reversing – or at least slowing – environmentally ruinous (and politically controversial) global warming.

    President Barack Obama is attempting to use the ongoing financial crisis to create a sense of urgency about America’s energy future, a challenge that no prior administration has yet been able to meet.

    About one-third of President Obama’s $800 billion-plus stimulus package will go to infrastructure, with $30 billion allocated for U.S. roads and highways and another $10 billion earmarked for railways and mass-transit systems.

    President Obama has also proposed spending $150 billion “over the next 10 years to catalyze private efforts to build a clean energy future.” The administration also proposes to increase the amount of electricity that comes from renewable resources from 10% in 2012 to 25% by 2025, Wall Street 24/7 reported in early January.

    Creating the power is only part of the problem. Delivering it will be a challenge, too, especially given the country’s aging power grid. Upgrading that aging equipment is expected to cost more than $880 billion, according to a November 2008 report from the Brattle Group.

    An Energy Boon For Entrepreneur T. Boone?

    In many cases, those federal outlays will serve only as seed capital. It will likely fall to innovators in the U.S. private sector to really energize the alternative-power market.

    One key player is legendary oilman and venture capitalist T. Boone Pickens, who has unveiled a plan to cut U.S. dependence on foreign oil through the power of alternatives such as wind and natural gas, Money Morning reported last July.

    We’re paying $700 billion a year for foreign oil. It’s breaking us as a nation,” Pickens said at the time. Former U.S. President Richard M. Nixon “said in 1970 that we were importing 20% of our oil and that by 1980 it would be 0%. That didn’t happen. It went to 42% in 1991 with the Gulf War. It’s just under 70% now. Where do you think we’re going to be in 10 years when our economy is busted and we’re importing 80% of our oil?”

    Pickens wants to create what he calls a “bridge to the future” that will help cut slash the U.S. reliance on imported foreign oil by focusing on two specific alternatives:

    • Cars that burn natural gas instead of gasoline.
    • And electricity generated by wind power.

    There’s a smooth and elegant logic to his strategy: By constructing electric-generating wind-power farms, the United States can free up natural gas supplies that currently generate 22% of the nation’s electricity. That natural gas can then be used to power cleaner-burning cars and trucks, thereby reducing our dependence on imported oil while also reducing the damage to the environment. This will also buy time for the development of other, even-greener, alternative sources of energy.

    Pickens’ Wind Power Project

    According to Pickens, wind power could eventually fulfill as much as 20% of the United States’ energy needs. Calling the Great Plains region of the United States the “Saudi Arabia of wind,” Pickens last summer launched plans for a $10 billion alternative energy project in the Texas panhandle that has the potential to one day become the world’s largest wind-power farm.

    Picken’s Mesa Power LLP plans to purchase 667 wind turbines from U.S. industrial giant General Electric Co. (NYSE: GE). Each turbine can produce 1.5 megawatts of electricity – enough to provide the ongoing power needs of 360 to 600 U.S. homes, according to Money Morning calculations based on statistics provided by Oregon Power Solutions Inc., a Baker City, OR consulting firm.

    The first phase of the Pickens project, already under construction, will produce 1,000 megawatts of electricity, enough energy to power 300,000 homes. GE will begin delivering the turbines in 2010, and current plans call for the project to start producing power in 2011.

    Ultimately, Mesa Power plans to have enough turbines to produce 4,000 megawatts of energy. Overall, the “Pampa Wind Mill” project is expected to cost $10 billion and be completed in 2014.

    Pickens has launched a “Pickens Plan” Web site, which is urges the country’s “energy army” to lobby Congress for funding and a commitment to green-energy projects.

    Other Players Showing Interest

    An Irish company – its interest in the U.S. alternative energy market piqued by the green-technology money included in the Obama administration’s stimulus package – on Monday acquired three Illinois wind farms located within 100 miles of Chicago, The Chicago Tribune reported.

    Plans call for the Dublin-based Mainstream Renewable Power to invest $1.69 billion over four years to develop the wind farms. The purchase price was not disclosed.

    “The U.S. market is of strategic importance to Mainstream, and the scale of the opportunity is strongly reflected in President Obama’s economic stimulus package, which includes $56 billion in grants and tax breaks for U.S. clean energy projects over the next 10 years and a budget of $15 billion a year to fund renewable energy programs,” Mainstream co-founder and Chief Executive Officer Eddie O’Connor said in a statement. “The administration’s goal of generating 25% of the nation’s electricity from renewable energy sources by 2025 will help revitalize the U.S. economy and protect consumers.”

    The farms have the potential to generate 787 megawatts of electricity by 2013, The Tribune said. The most advanced is the 120-megawatt Shady Oaks project in Lee County. When finished next year, it should be able to generate enough electricity to power about 30,000 homes, Mainstream said.

    The other two wind-power farms are the 467-megawatt Green River project, also in Lee County, and a 200-megawatt project set for Boone County. Construction on the Green River project will begin next year, while the Boone County project is still in is development stages.

    This is Mainstream’s second North American deal in three months; it earlier announced a Canadian wind farm project. It has also announced plans to build a wind farm in Chile.

    Founded a year ago, Mainstream was created to build and operate wind-energy, solar-thermal and ocean-current power plants in partnerships with government agencies, electric utilities, developers and investors in North and South America, Europe, and South Africa. Barclays Capital (NYSE ADR: BCS) has a 14.6% stake in Mainstream.

    Going Global

    As Mainstream’s proposed forays into South America, Europe and Africa demonstrate, the push to harness the wind isn’t limited to the United States.
    As of the end of last year, worldwide wind-powered generators were capable of generating 121.2 gigawatts (GW) of electricity. Wind power produces about 1.5% of the world’s electricity and its use is surging: The amount of electricity generated by wind power doubled between 2005 and 2008 alone.

    Several countries have already embraced wind power in a major way: As of last year, it accounted for 19% of electricity production in Denmark, 11% in both Spain and Portugal and an estimated 7% in both Germany and Ireland. As of this May, 80 nations around the world were using wind power on a commercial basis.

    Not surprisingly, China is making a big push to commercialize wind power and by last year was already the world’s sixth-largest user of wind-generated electricity. The country’s largest manufacturer of wind turbines – Xinjiang Goldwind Science & Technology Co. Ltd. – went public last year, raising nearly $250 million. It has about 33% of China’s wind-power-equipment market, according to KGI Securities Co. Ltd., a Taiwan investment-banking and brokerage firm.

    “As China’s wind power sector takes off, we think Goldwind is well positioned to become a major beneficiary, thanks to its strong brand and first mover advantage,” KGI wrote in a research report.

    Not a Complete Answer

    Although wind power has substantial promise, it’s not an infallible energy solution, and has some serious limitations – as the U.S. wind-power study shows. For one thing, although an estimated 72 terawatts of wind power on Earth can be potentially commercially viable – an amount that’s six times the estimated 15 terawatts of total power usage on earth – not all the wind energy flowing past any given point can be recovered.

    Accoridng to a science axiom known as Betz’s Law – named for the German physicist, Albert Betz, who discovered the rule in 1919 – no turbine can capture more than 59.3% of the potential energy in wind.

    And there are other challenges, some of which are caused by the natural lay of the land in a given location. In the United States, for instance, where there are now concerns about diminishing wind strength, some coastal areas may retain wind strength because of the greater temperature differences between the land and the ocean.

    Given the growing importance of wind power, more study will be required.

    Concludes the study: “Given the importance of the wind-energy industry to meeting federal and state mandates for increased use of renewable energy supplies and the impact of changing wind regimes on a variety of other industries and physical processes, further research on wind climate variability and evolution is required.”

    [Editor’s Note: Is it a new bull market, or just a bear-market rally that’s going to separate investors from the last of their cash? For the shrewdest investors, it may not matter. A new offerfrom Money Morning is a two-way win for investors: Noted commentator Peter D. Schiff’s new book – “The Little Book of Bull Moves in Bear Markets” – shows investors how to profit no matter which way the market moves, while our monthly newsletter, The Money Map Report, provides ongoing analysis of the global financial markets and some of the best profit plays you’ll find anywhere – including such markets as Taiwan and China. To find out how to get both, check out our latest offer. ]

    June 22, 2009 Posted by | guest post, investing, Money Morning, T. Boone Pickens, wind power | 25 Comments