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.