Beyond Enemies

Despite the title, this article at WorldChanging (Working With the Enemy) certainly gets it. If we want global action against climate change, it is going to be companies who will deliver it. For as much good as all the lobbying groups and NGOs do, most only press others into action. It is going to take the financial might of Home Depot, Wal-Mart, etc. to bring about real change.

If environmentalists see corporations as the enemy, the battle is already lost. If corporations are an ally, there is no battle at all. There is cooperation.

Got Financial Innovation?

Gristmill hits the nail right on the head when they say "the next few significant developments in the solar field are going to be in the field of financial rather than technical innovation."

Let's take a look at what sorts of financial innovation are needed to advance clean energy. I've already discussed green mortgages and subsidies. But what about other more subtle innovations? I predict there is money to be made in the trading of solar exploitation rights. Perhaps you can sell the right to develop your rooftop, even if you don't want to buy the solar power yourself. Or weather futures as a financial instrument to reduce the risk of cloudy days.

There is no limit to the number of new financial tools that could be developed to further green energy development.

Tracks converging

Warren Buffet is on rails. The storied investor is buying up 15% of Burlington Northern Santa Fe, even though:
"U.S. freight shipments down 3.5% in the first eight months of the year, and intermodal traffic down 1.9%. Fewer housing starts have shrunk lumber shipments, and shipments of most commodities, motor vehicles and equipment are down."

While railroads are very efficient, and I'd love to see them used more, it does matter what they are carrying. The article talks about another railroad deal where the "gem in the deal was DM&E's rights to develop in the coal deposits of Wyoming's Powder River Basin." Being really efficient at bringing more coal out isn't really the best thing.

Get rich on poverty

An article on WorldWatch says that homes in India are being powered for a few hours each day on solar instead of kerosene.

"local and national banks to finance small loans—usually $300 to $500—for a system that typically contains a roof-installed solar PV module, storage battery, charge controller, interior wiring, and switches and fixtures with the capacity to power two-to-four low-watt compact fluorescent lamps (CFLs) and a DC fan."

Right now this seems to be a humanitarian mission costing a reported 1.5 million dollars. Maybe a savvy reader will find a way to fuse all the elements of this plan -- micro-lending, solar manufacture, infrastructure construction -- into a viable business plan.

This isn't a get-rich-quick scheme, but think about the scale: ~450 million people (1.5x the United States) suffer through grid outages daily. Millions more have no access to the grid access whatsoever. That is a vast market, and an even more awesome opportunity to help.

10 million AA batteries

There has been a lot of press about the UK power company EON's plans to create a giant battery? The two questions that come to my mind are: is it green, and does it make economic sense?

Batteries are not all that green. They have all sorts of nasty chemicals and their ability to store a charge slowly decreases with time. They are also expensive. It will be interesting to see how this plan can compete with hydrogen or compressed air as energy storage.

Start a green business

My new friends over at LivePaths have an article about potential green businesses. Many of them featured are small time ideas right now, like recycling licence plates and making your own biodiesel. But that's what you are here for. Take these ideas and run with them.

NIMBY goes out with the tides

The Energy Blog has a story about the AquaByOy 2.0, an experimental tidal power generator recently deployed off the coast of Oregon. It is not generating power right now, but collecting data that will be used to create a 250 kW test unit.

The article says that:
"A cluster of AquaBuOYs would have a low silhouette in the water. Located several miles offshore, the power plant arrays would be visible to allow for safe navigation and no more noticeable than a small fleet of fishing boats."

Safe, quiet, and unobtrusive. Should not be any not-in-my-back-yard (NIMBY) problems with these. Can something this appealing be made inland?

Breaking the Builder Conumdrum

A common problem in the market for energy efficient homes is paying for the added cost. This problem stems from different incentives for builders and home-buyers. Today, the incentive for builders is to build a big house cheaply. That way, when the real estate agent runs the "comps" Sally Shoddy's constructions look cheaper than Ernie Efficient's.

There is two ways around this. First, use more imagination. For example, if you use high quality windows and insulation, do you need as large a furnace? The Rocky Mountain Institute doesn't think so. Their building in Snowmass, CO has no furnace whatsoever.

But even if you can't get that cost down, you can use a green mortgage highlighted in today's Wall Street Journal. I predict this product will catch on in coming years. The lender rolls the price of the energy efficiencies into the mortgage.
""We liked the house but wouldn't have been able to afford to fix it up," Ms. Craig says. She says the cost of improvements adds an extra $100 to their monthly mortgage costs, but they save an estimated $2,000 a year on energy bills."

What happens is the bank considers that $2000 per year as additional income. With the subprime fallout, this will be a way to make yourself more credit-worthy to banks. So everybody wins - you get that green house and the bank qualifies you for a bigger mortgage.

And the builders?
"
The products are also available for new construction. Homes that are already energy-efficient can be audited and the amount that is predicted to be saved on utility bills is counted as extra income for the home buyer.
"
The builders can differentiate their offering from Sally Shoddy's by being able to offer this product.

Score one for distributed power

Treehugger reports and B&Q in the UK is putting up a 2MW wind turbine at their Nottinghamshire distribution center. The article was light on financial details, which left me wondering if this was a publicity stunt or a bone fide investment. Either way, I like the move toward distributed power. The blessing and curse of methods like wind and solar is that they are granular. That is, you can have a small amount of it. This is a great example of industry capitalizing on the granularity of this power source.

The Myth of Peak Energy

The Oil Drum published a long report on "global peak energy." There is lots of insightful research, including the unflinching correlation between population growth and energy use. Ultimately, it reaches the Malthusian conclusion that global energy and with it population will peak between 2025 and 2030.

The notion of peak energy seems to piggy back on the notion of peak oil. But there is a very good, physical reason for peak oil - there is only so much of it, and it can only come out of the ground so fast. Peak energy, however, is a meaningless term. Energy can come from anywhere. If there was going to be a global shortage of energy there would be a short run crisis, but enterprising citizens/companies would step up by building solar/wind/tidal/thermal/etc power plants. As the cost of energy increases, more and more sources of that energy start to look appealing.

The one thing people know how to do is reproduce. In the absence of cataclysm, they will continue to do so.

The Nuclear unLearning Curve

Bloomberg (via Gristmill) writes about the troubled construction of a nuclear plant in Finland.
"
One Areva official points to a nagging issue for reactor builders: inexperienced contractors working for an industry that has been dormant in much of Europe and the U.S. for 20 years.
"
Business types out there will be familiar with the learning curve. Essentially, every time total production is doubled, costs come down some percentage. So if you made 1000 units at $10 average cost, when you made 2000 units, the cost should be down to $8 on a 20% learning curve.

But this comment speaks to a forgetting curve. So few nuclear plants have been built that delays and problems (like lumpy concrete and problematic steel grain sizes) have run up the cost until it is "more than 25 percent over its 3 billion-euro ($4 billion) budget."

Building a new nuclear reactor takes years. If you believe in nuclear, can we build enough reactors (and deal with the waste) to make a difference?

More advice for eco-preneurs

A story in Gristmill makes a good follow-up to yesterday's company profile. I said that anyone hoping to create a new product in the that caters to the green crowd needs to make it cheap. Gristmill says:
"It's worth remembering that for those not schooled in the minutiae of climate, it is genuinely hard to figure out how to make a meaningful individual contribution, especially since most people are already overwhelmed with the workaday obligations"

In other words, make it easy too.

This is not groudbreaking, but for those of us who make an effort to "go green" it is easy to forget that the vast majority of people have no energy for such an effort.

"Better, easier, cheaper" is the mantra for all products. It is time that green products live up to that same standard. Products like the Windspire (via Treehugger) might be cool, but they are not what we should be striving toward.

Company Profile: Feuz

Treehugger has an article on a new recycling company called Feuz. Feuz blends concrete with products such as recycled glass. The results are, to my eye, impressive. I find concrete ugly and the (glossy marketing) pictures on the Feuz website were appealing.

There is no word on the price of these products. I would be surprised if Feuz can compete on price. Maybe in the high priced items like countertops with Feuz stone. But that makes Feuz another green/glamor product.

Of course, it is easy to be green if price is not an object. To all you eco-preneurs out there, bring the price down. If you make it cheap and easy to be green, the world will drive their SUVs to your door.

More on off-shore wind

Treehugger makes the argument for off-shore wind. I've talked before about off-shore wind and Treehugger capture the essence of the argument perfectly.
"Most campaigns against turbines are based around the noise and the visual impact, and these have been reduced by going offshore. It is more expensive to do it here than to do it on land"

I could campaign against coal saying that it is dirty, polluting, and kills (depending on how you calculate it) perhaps several and perhaps dozens of people each year. But somehow coal remains cheap and wind power is forced to be expensive by going off-shore.

Fox news is not journalism

I almost didn't write this article because I didn't want to spread their misinformation any further. Fox news has a story about carbon footprint. While this article is from May 2006 the author of the aptly titled "Junk Science" column has an entire range of these. Up front I will admit that buried deep down in there, there is a nugget of truth. But you have to peel back layers of misleading statements to get there. Let's examine it.

"The notion of a personal 'carbon footprint' was created by global warming alarmists to foster a sense of individual accountability [for using fossil fuels]."
In the very first sentence we learn that getting people to take individual accountability for their actions is "alarmist." I argue that individual accountability is an ideal to be worked towards.

The meat of the article says that using carbon offsets to prevent 1 degree F of global warming (whatever that means) would cost between 7 and 38 trillion dollars. The author seems completely unconcerned with global warming (and scanning the other articles in this series confirms this) and does not suggest an alternative to offsets.

First, there are few things in this world that scale in a perfect line forever. If carbon offsets were the only tool that so-called alarmists had to fight global warming, there is no reason that it wouldn't follow a learning curve just like every other industry. The more that are made, and the greater the scale, the cheaper they become. At the point where 7 trillion dollars would have been spent on them, a carbon offset would be negligibly cheap. (As a side note, if we in the US spent the 1-2 trillion dollars of the war effort on carbon offsets we'd be quite far down that curve already).

Second, offsets are not the only tool available. They are not even a primary tool. Even if we agree that offsets are too expensive a tool to use on a large scale, all that means is that we need to use another tool. Let's try conservation for starters.

At the end of the article the author mentions in passing that, as a by-product of creating their web-based carbon footprint calculator, they calculated what it takes to prevent 1C of global warming (notice he switched to C suddenly, from F). "no manmade CO2 emissions for 120 years."

This type of discovery isn't the sort that is made as a by-product of a web page. I would be surprised if this sort of statement could be made without vast amounts of climate data and computing power.

Since that is clearly not an option, what can be done? In a fair and balanced treatment of the issue, this might be discussed. Instead, the carbon offsets industry is set-up and knocked down with misleading arguments and environmentalists labeled "alarmist."

Carbon sequestration and the true cost of everything

The Gristmill provides the couterpoint to my earlier article about using waste efficiently. In the words of big coal insider Richard Coutrney "everybody knows cs [carbon sequestration] would be too expensive." Let's examine why this should be.

First, we'll start by breaking down the total cost. Off the top of my head, I can come up with something like this:
True Cost = Manufacturing Cost + Environmental Cost + Social Cost

I'm calling the manufacturing cost how much money it takes to turn raw materials into a product. The environmental cost is how much it costs to clean up the damage to the environment. And the social cost is a catch-all for items such as health, inconvenience, etc. All the deaths coal causes each year from pollution, black lung, and so on would be a social cost.

The only thing reflected in the price of coal-fired electricity (or any other good) is the manufacturing cost. In this case, the cost of the coal, plant, and employees. Adding in the cost of carbon sequestration forces some of the other environmental and social costs into the price of the electricity. The price/kWh will increase because more of the true cost is being paid by the consumer.

Compare this to clean energies like wind and solar. The environmental and social costs are much lower in those cases but the manufacturing cost is higher. If the manufacturing cost is all that matters (which is the case right now) these are not attractive alternatives. If we as consumers were somehow forced to bare the total cost, things might look different.

This has been done before. When SO2 was being cracked down on, scrubbers were installed in smokestacks. In the final analysis, this was a relatively cheap operation. But the threat (acid rain) was great enough that consumers were willing to pay the extra fraction of the true cost.

Carbon sequestration is a losing strategy because it coal is a process with a large true cost. Efficiency, like that demonstrated in the Ford example, is more appealing as the true cost is lower to begin with. The trick is making this point obvious.

Brita and Nalgene - Fighting Waste

Brita and Nalgene have teamed up for a Filter for Good campaign against bottled water. They claim that last year Americans threw away $1 billion worth of plastic bottles, including 1.5 million barrels of oil for manufacture.

Bottled water in the western world is a monument to waste. 30 years ago, people found the idea of bottling water risible. How many marketing dollars did it take to turn that around? Resist the hype and run your own blind taste test: two bottles of water and 2 samples of tap water. You might be surprised at the results.

Of course Brita and Nalgene will benefit if people drink less bottled water. Is this part of a greater rebranding effort? What other business can be spun as in the 'waste fighting' business?

Running on fumes

Ford announced that they will build a 300 kW fuel cell that runs on paint fumes. This is a brilliant example of increased business efficiency coupled with increased energy efficiency. Any waste is money out of your pocket. While Mr. Khosla might regard this as a toy, I say that if this level of zero-waste thinking gets rolling it will start to add up. What else can be run on waste?

Buying Power

I've written before about the economics of solar and argued that subsidies need to be put into place to make alternative energies competitive with other investments. Forbes has an article about companies like Wal-Mart and Whole Foods putting a similar scheme into practice. With a combination of financing and subsidies, these companies are making solar pay.

Elite Country Clubs - Enviable Subsidies

You may have read about subsidies to oil companies or my discussion on why alternate energy subsidies are good for competition. Here is the other side. The Boston Globe writes about property tax breaks up to 75% for country clubs. The property tax is justified by saying "You have to look at it like it's a good thing for the preservation of open land."

But golf courses and country clubs are to open land what my ice cube tray is to Glacier National Park. They are small, artificial, and heavy polluters. Tons of fertilizer and fresh water is used to make the greens green and the fairways fair. If the taxpayers are paying for preserved land, give them forest.

Positive economic impact of global warming

Treehugger reports that the search for the northwest passage is almost over. According to the US Snow and Ice Data center, "Analysts confirm that the passage is almost completely clear and that the region is more open than it has ever been since the advent of routine monitoring in 1972." The article didn't mention that people have been searching for the northwest passage for hundreds of years. Think of all the increased trade that can take place now.

In all seriousness, this is troubling. I report this just to demonstrate the far reaching implications of global warming.

Solar: Thermal is better than panels

According to super-star venture capitalist Vinard Khosla (early investor in google, amazon, and AOL) we need to "stop playing with toys" such as wind, photovoltaics, biodiesel, and batteries. According to Khosla, "If you're not solving 50 per cent of the problem it's not material."

While I disagree that those technologies are toys, Khosla does back an interesting technology: solar thermal. Solar thermal can be cheaper and faster to manufacture than other technologies. Khosla even claims that it can be cost competitive with coal.

I say that any little bit helps. Unless you have the sway of a Khosla, you can't solve 50% of the problem. But we need to take a real look at our energy options, and not just the "sexy" solutions of fuel cells and solar panels.

Read this before you buy anything

Treehugger has a piece about the environmental reasons of renting instead of owning. They call it "rentalism" but the notion has been around longer known as "access over ownership." They focus on short term goods, like baby items, saying that
"wouldn’t it make sense to ‘servicesize’ a lot of these goods ie, to pay for use not ownership of some of these things and then when you are done with them they get taken back, refurbished and utilized again or shared between a chain of people "

Part of the reason that renting isn't more popular is that it costs nothing to dispose of goods. What if the bottle deposit model was applied to all goods? An owner would have to pay the entire deposit, while a renter would not. Would this be enough of an incentive to rent?

To consumers: Let's get over the negative stigma of renting. Renting is just using something that you never have to throw away.

To Entrepreneurs: The access-over-ownership model is a powerful one. What service can you provide? Whatever you decide, there are some hurdles to overcome.

Some clever marketing has to happen to get people used to the idea of renting. For example, the baby items Treehugger mentioned, may not be the best place to start. Renting feels 'dirty' to many people (other people's germs, eww) and baby items need to feel sterile.

You also need to provide proper life cycle management. Your goods have to be as good as buying new, and your service will have to be better.

And if this model catches on, maybe that predator Rent-A-Center will have to adapt or die.

Biodiesel is worse than gasoline

There is so much greenwashing about biodiesel and it's time to set it down. Truthout.org explains that biodiesel "requires tractors and fertilizers and land, all of which means burning fossil fuels to make 'green' fuel." In addition, forest is often clear-cut to make room for more crops. Alarmists would say we are feeding our planet to our cars.

But you don't have to believe me (I often don't). You can believe MIT or Science (subscription required) magazine.

I used to think that biodiesel was a good first step toward something sustainable. Instead, it's a step backward.

Reference to Science: (DOI:10.1126/science.1141361)

How much is a ton of carbon worth?

The Chicago Climate Exchange (CCX) will begin to offer so-called Carbon Emission Reductions (CER). "CERs are tradable instruments, issued under the United Nations Clean Development Mechanism, for approved and verified greenhouse gas (GHG) emission reduction and sequestration projects undertaken in developing countries." That's a mouthful, but it sounds like these boil down to carbon offsets.

The primary customers will be companies who need to "hedge and manage risk from CER price fluctuations in the absence of a delivery mechanism." Translation: your company is up against emissions regulation and you haven't done anything about it.

I am optimistic about this new financial product. The market will set the price for not producing a ton of carbon. This money is a rebate off the price of clean energy.

The problem is that there is no demand for this product without regulation. Perhaps companies in Europe (where regulations are more strict) will buy offsets on the CCX, but perhaps they will just buy them on the European Climate Exchange. Commodities Now has a little bit about this.

How to make 20% on your money

Popular Science has plans for how to build a vertical wind turbine on their site. The turbine is "super-quiet" and will generate about 50 kilowatt-hours/month in winds of 6-20 mph.

So, how is this thing as an investment?

Estimated cost of supplies = $300
Electricity costs about $0.10/kWh. So 50 kWh saves you about $5/month. That's 60 bucks a year, or 20% ROI. That's market beating returns. Projects like this show that wind can make sense on a small scale.

Wind farm too expensive. But why?

Forbes writes about the Long Island wind farm that couldn't. In the beginning, the cost of construction for the wind farm was "between $150 and $200 million. In 2004, FPL Energy won the right to build the project with a bid of $356 million, pending regulatory approvals. The latest estimates put the cost at $697 million."

One of the common arguments against the wind farm is NIMBY (not in my backyard). This wind farm was going to be placed offshore, partly to avoid any NIMBY issues. It is, of course, more expensive to build over water than over land. Economists would say that this added cost is internalizing an externality. That is, the cost is paying to avoid an undesirable outcome (having to look at the windfarm).

So, why not apply this same logic to fossil fuels? There are lots of externalities associated with them such as pollution, emissions, and traffic congestion. Perhaps if this 'true' cost had to be paid to burn fossil fuels, this wind farm would have been more competitive.

Or, with ballooning cost estimates from $150 to $697 million, perhaps not.

Lets get together and ... design a power plant

shpegs.org has started a fascinating project. They want to design an open source power solar heat pump, and they need your help. The gist of the design is to exploit the temperature difference between the ground and the air.

Both the design and development approach are innovative. Will the open source software model spill over into the world of atoms? Perhaps, though there is the problem of prototyping. Who will make the (often expensive) prototypes? Seems like the best approach may be a hybrid one. Maintain a central headquarters to run tests and build prototypes, but keep the designs open source.

Something troubled me from their FAQ. "A new idea in renewable energy is priceless to society and worthless to an individual with a normal lifespan" While I have nothing but praise for the result, this seems a little defeatist. Make something open source because you believe in the cause, not because of some notion that you wouldn't make any money anyway. I hope this quote goes down in history as famously wrong such as IBM president Watsons (misattributed) quote that "there is a world market for maybe five computers."

Alt. Energy subsidies for a more perfect competition.

Over the next 5+ years, oil prices will likely keep going up. In a blinding flash of the obvious, the Boston Globe (free registration required) argues higher oil prices will attract, guess what, more oil. That shouldn’t be a surprise to any economists out there. But most people assume that higher oil prices will open the door for solar/wind/hydrogen economy.

First, where is the oil going to come from? Alberta, Canada for one. Alberta is a Saudi Arabia right in the States’ backyard. The only trick is that the oil is in the form of oil sands. Getting the oil out of the oil sands requires “from 40 percent more to five times the emissions” of the traditional oil business.

So, if we want to move away from oil what can be done about it? There has been a lot of debate between a cap-and-trade system vs. a carbon tax. I won’t get into that here, except to say that either would be better than what we have now (which is nothing).

But I want to go a step further and argue for alternative energy subsidies and that such subsidies would move the energy market closer to a perfect competition. I’ll use solar as an example, but the same could be applied to wind, passive heat pumps, and any other environmentally benign energy.

The energy industry, by its nature, is a regulated monopoly. So, the starting point is already far from a perfect competition. How can we bring it closer to that ideal? There are many, but I will focus on one. Solar panels are still expensive. A subsidy would lower this cost, and with it the barriers to entry. More suppliers of electricity (individual homeowners) would then enter the market, something economists call “Atomicity.”

If the carbon tax is in effect, these homeowners can also enjoy further savings on their electricity from not having to pay as much of this tax. But this is not a type of savings humans are particularly good at enjoying. If I give you a dollar, you get more enjoyment than out of the abstract notion of having just saved a dollar. Cutting homeowners a subsidy check will be more motivating than their passive savings. I love getting my tax refund, even though I know it’s my money to begin with.

How big of a subsidy is needed? A good metric should be to provide a subsidy large enough to make solar competitive to other types of investments. Say the yield on Treasure Bills is 4.65%. A solar panel is not liquid since it’s difficult to sell it off your roof. It is also risky since it may get damaged or you may have a run of cloudy days. These factors introduce a premium of, for example, 1%. The subsidy should make the “yield” of installing a solar panel 5.65%.

Poke holes in my argument in the comments.

Another step forward for solar

Another day, another solar advancement. University of Illinois researcher Nayfeh reports that a silicon nanoparticle thin film will "boost power, reduce heat and prolong the cell’s life." Not too shabby.

The size of nanoparticle used affects the part of the spectrum that is absorbed. With 1 nanometer particles, even UV can be absorbed. In conventional cells the UV creates heat which damages the cell over time.

No word on when the group would try to commercialize this technology, or what the incremental cost might be.

How do we know what we know?

The WorldChanging blog has piece about monitoring 315 miles of the Hudson on a "minute-to-minute basis." While the work in itself is interesting and important, the author of the article mentions that "we are quickly reaching a point where anything that's measurable about the environment that we want to know, we will."

This raises some often overlooked questions about the environmental data we do have. Take global temperature data. It seems simple to take a temperature measurement, but all sorts of complicated issues creep into it. Where are you taking these measurements - rural or urban settings? If it is urban, do you want to correct for the Urban Heat Island effect? What if your temperature station started rural but, over the years, the urban area has built up to your doorway? These sorts of issues abound.

A big buzz-word in business is "data-based decision making." That's pretty hard to argue against. Of course data is good. But one needs to be critical of how that data was gathered and what systematic bias may be introduced.

Wind may be cheaper than coal or nuclear

Not possible? According to the International Herald Tribune, new GE nuclear power plants will cost $2000-3000 per kilowatt of capacity. The article implies a similar run-up in the price of new coal capacity.

How does this compare to other types of power? According to the Canadian Renewable Energy Network (CANRen), "Modern wind turbine generators cost between $1500 and $2000 per kilowatt."

We may see the day where wind is not marketed as green electricity. It may just be cheap electricity.

Manifesto - Green Technology and Business

Compromise is for those who lack imagination.

A common argument against the conversion to so-called “alternate energy” is that it will cost too much. The compromise to the economy will be too great. This blog will dispel this myth.

To do this, I’ll cover stories about emerging and newly commercialized energy technologies. I’ll also offer facts, opinions, and occasional wild speculation. And I’ll point out where “green” and “greed” go together, where there is no compromise.

The title of this blog comes from a quote by Ralph Waldo Emerson. He said, “A creative economy is the fuel of magnificence.” And he is proven right with a startling and hopeful frequency – often several times a day. So, read on for the first post.