The Dangerous Myth of Energy Independence - Informed Comment

Summary:
Robin M. Mills argues that the world is not running out of oil, that the current high energy prices are the result of a long period of low prices and under-investment, as well as irrational hostility between suppliers and consumers. Ideas about forestalling an oil crisis by ‘energy independence’, or by military action, are mistaken. The proper energy policy should be energy security, not energy independence. Objective profoundly harmed by climate, with elements of paranoia, racism and Islamophobia. Energy security is achieved when suppliers find markets, and markets find supply, at prices permitting both of them economic stability and growth, which requires a complex web of inter-relationships between producers and consumers. Policies to encourage US domestic production, increase efficiency and introduce alternative energy sources are desirable, often for environmental rather than energy security reason, but they have to be pursued with vigour and resolution. Promises to ‘jawbone’ OPEC into supplying more oil sit very oddly with the US’s uniquely comprehensive moratoria on offshore oil and gas production. Need a rational and balanced dialogue about how to co-operate on bringing that abundant energy to consumers. (Published: 02/09/08)

Comment:

• current high energy prices emerge from a long period of low prices and under-investment
• fruit of the breakdown of international energy relationships in the oil crises of 1973-4 and 1978-80
• high prices are not due to a lack of resources in the ground
• remains vast potential around the world for increasing recovery from
  
• existing fields,
  
• discovering new oil, e.g. recently deepwater Brazil
• largely untouched US offshore
• ‘unconventional’ sources such as Canada’s famous ‘oil sands’
• biofuels
• synthetic fuels from natural gas and coal, and others
• ideas about forestalling an oil crisis by ‘energy independence’, or by military action, are therefore mistaken
• such ‘solutions’ are likely to create the crisis they seek to mitigate
• proper objective of energy policy: not independence, but security
• objective profoundly harmed by climate, with elements of paranoia, racism and Islamophobia
• energy security is achieved when suppliers find markets, and markets find supply, at prices permitting both of them economic stability and growth
• requires a complex web of inter-relationships between producers and consumers
• attempts by a major nation to achieve energy self-sufficiency are very distorting to economic competitiveness
• even worse when bad relations with major energy suppliers, and conflicting messages about future energy policy, discourage much-needed investment
• if one side believes they are buying oil from terrorists, and the other thinks they are selling to neo-imperialists, it is not surprising that
  
• oil prices are high
• investment is lacking and
  
• most of world oil reserves are monopolised by state companies
• the Middle Eastern nations have generally been very reliable suppliers, and use of a mythical ‘oil weapon’ is very unlikely
• any régime would be reliant on its oil earnings to sustain the economy
• while strategic reserves in the industrialised countries give some ‘staying power’ to outlast an embargo
• policies to encourage US domestic production, increase efficiency and introduce alternative energy sources are desirable
• often for environmental rather than energy security reasons
• but: they have to be pursued with vigour and resolution
• US energy policy has been more erratic and hostile to increasing output than most of the Middle Eastern countries
• ‘pork barrel’ subsidies and the interminable, inconclusive debates over whether to open new exploration areas, build new pipelines and terminals for clean natural gas, extend support for renewable energy and increase mileage standards
• promises to ‘jawbone’ OPEC into supplying more oil sit very oddly with the US’s uniquely comprehensive moratoria on offshore oil and gas production
• military ‘control’ of oil is not achievable or cost-effective
• expenditure on such wars vastly exceeds the value of any oil ‘secured’
• while production can struggle along in war-torn areas, it is impossible to develop major new fields
• ‘Police actions’ to deal with specific threats are entirely reasonable
• as long as they are multi-lateral and proportional to the danger posed
• and carried out competently
• grandiose military adventures destroy the co-operation which is essential for global energy trade
• ‘Energy independence’ is a chimera, expensive, unachievable, and swimming against the tide of greater global economic integration
• world is not running out of oil
• we need a rational and balanced dialogue about how to co-operate on bringing that abundant energy to consumers
• if the profound misunderstanding of, and hostility towards, the Middle East, continues, the house of energy security is being built on sand

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Oil refining byproduct becomes a hydrogen goldmine - R&D Magazine

Summary:
A commercial-scale process to extract and reuse pure hydrogen from the hydrogen sulfide that naturally contaminates unrefined oil, including oil sands, has been developed by a collaboration between the U.S. Dept. of Energy's Argonne National Laboratory and Kingston Process Metallurgy Inc. (KPM) of Kingston, Ontario. It is less energy- and capital-intensive that existing processes, such as the Claus process. The reactions between the hydrogen sulfide and copper and the copper sulfide and air release energy that helps to heat the system. It produces sulfuric acid as a byproduct and is resistant to contaminants such as ammonia and various hydrocarbons, converting them to their elemental state instead. Thus far this process has only been demonstrated in the lab. A pilot scale reactor will be developed next. (Published: 03/09/08)

Notes:

• hydrogen sulfide present in crude oil and raw natural gas
• conventionally removed using Claus process, invented more than 100 years ago
• energy- and capital-intensive
• limited in terms of the other types of impurities it can handle
• costly energy-intensive modules that scrub other contaminants, such as ammonia, methane and carbon dioxide from raw oil and natural gas must be separately attached to Claus processing facilities
• loses the hydrogen in the process
• gets converted into water
• Argonne and KPM method
• centered around a molten copper reactor
• innovative process technology that is more energy-efficient than existing methods
• in the reactor, hydrogen sulfide gas is first separated from the crude oil stock, using technology already in place
• this gas is then bubbled though molten copper
• releases pure hydrogen
• the hydrogen is then captured for use as a valued product
• as the sulfur reacts with the copper, the copper is gradually turned into copper sulfide
• in addition the process creates concentrated sulfuric acid
• used widely in the chemical industry and which has become a valued agricultural commodity
• the concentrated sulfuric acid is created when copper sulfide is reacted with air to recover the pure copper
• releases a concentrated stream of sulfur dioxide which is then reacted with water
• the copper is then reused in the process with negligible losses
• the reactions between the hydrogen sulfide and copper and the copper sulfide and air release energy that helps to heat the system
• enables the products to be efficiently harvested
• system operates at a temperature of about 1,200 degrees Celsius
• contaminants such as ammonia and various hydrocarbons are reformed to their elemental constituents
• demonstrated in lab
• next step is to develop a pilot scale reactor
• Companies will be able to retrofit their facilities with the process technology or construct new plants that incorporate it

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Quote of the Day

"A lot of people in the car industry - and this is a seachange since the 1990s - have come to see dependence on gasoline as the growth bottleneck in the industry's future. They think that the real constraint on the ability to grow the car market will be dependence on a fuel that causes global warming, that puts money in the pockets of dictators, that has enormous price volatility and so forth. So they want to get off gasoline, because they now see it as a limit to their future prospects." - Jonathan Rauch, in an interview with Russ Roberts on EconTalk discussing the Chevy Volt

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Our Electric Future - The American

Summary:
Andy Grove calls for a strategy that can deflect our march toward persisting conflict by strengthening our energy resilience. The strategy includes a policy that favors sticky energy (i.e. electricity) with multiple sources and aggressively moving vehicles first toward dual-fuel mode and ultimately to running on just electricity. Focus in the past on energy independence was misguided: talking about “independence” in terms of one product in an otherwise seamless global economy is a contradiction. Energy resilience is what's needed instead, i.e. strengthening our ability to adjust to such changes. Because electricity is the stickiest form of energy (it stays in the land where it is produced), and because it is multi-sourced, it will give us the greatest degree of energy resilience. Shifting to electricity has the added advantage of helping to mitigate a major environmental threat. However, we can't rely on market forces alone: absence of common interests among the industry players is a major obstacle to action. (Published: 01/08/08)

Summary:

• significance of US first a supplier, and later as a consumer of oil has decline
• relative decline as a supplier accelerated in the 70s, after OPEC was formed, and again when it flexed its muscles by precipitating the oil shock
• significance as a customer started to decline in the early 90s as some of the developing Asian economies started to grow at a rapid rate, requiring prodigious amounts of petroleum
• OPEC has enormous control over its customers
• energy is the lifeblood of all economies
• availability of petroleum determines whether an economy grows or declines
• availability of petroleum determines employment levels
• in turn determines national political stability
• Project Indepedence
• kicked of by Nixon in early 70s
• goal
• “At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
• dramatically failed to meet that goal
• after Nixon, president after president set similar gboals
• every target was missed
• became more and more dependent on imported petroleum
• net energy imports doubled between 1970 and 1980, and then again by 1990
• goals were unwise
• faulty goals lead to the wrong actions
• problem:
• US became more and more integrated into a global economy
• goods, information, and oil move unimpeded across national boundaries
• oil flows toward the highest bidder, just like all other goods
• talking about “independence” in terms of one product in an otherwise seamless global economy is a contradiction
• correct goal
• to strengthen our energy resilience
• we must protect the U.S. economy from interruptions in the supply of such a critical commodity
• whether those interruptions are related to natural or political causes.
  
• the appropriate aim is to strengthen our ability to adjust to such changes
• how? by increasing our reliance on electricity
• electricity: energy that sticks
• oil
• moves to the highest bidder
• Fleets of tankers carry it across oceans day and night
• natural gas
• can also move around, but with extra difficulties
• on land, it can be transported in pipelines
• to carry it across oceans requires liquefaction and expensive, high-tech ships that can carry this liquid in strong, deeply cooled containers
• electricity
• it is “sticky”:
  
• it can be transported only over land
• i.e. it stays in the continent where it is produced
• it is a multi-sourced form of energy
• petroleum, coal, wind, hydroelectric, nuclear and solar
• if one source suffers a shortage, we can produce electricity from another
• because electricity is the stickiest form of energy, and because it is multi-sourced, it will give us the greatest degree of energy resilience
• nation will be best served if we dedicate ourselves to increasing the amount of our energy that we use in the form of electricity
• transportation: hardest nut to crack
• transportation uses more than half of all the petroleum consumed in this country
• conversion will not be easy
• requires substantial growth in generation capacity as well as in the capacity and reach of the transmission infrastructure
• requires that vehicles be able to run on electric power
• with the size and weight of ordinary automobiles, current technology allows electric cars to run only 100 miles or so before their batteries need to be recharged
• many drivers can live with this limitation most of the time
• but few will find the condition satisfactory all of the time
• new technology
  
• often shows up in this manner: it is not completely satisfactory in the beginning, but good enough to get going
• such approaches are known as “disruptive technologies.”
• starting low and moving up
• waiting game
• automobile industry,
• has been waiting instead for batteries to improve until they can allow electric cars to enter the marketplace with the same driving range as gasoline-fueled cars
• battery developers
• have been waiting for demand from the automobile industry to develop before fully committing the resources required to do the job
• generation and transmission infrastructures
  
• have not been built up to service the potentially explosive demand from transportation
• our exposure to the vagaries of oil supply is growing by the month
• must accelerate conversion to electricity in a major way
• U.S. government should lead the way by requiring that a growing percentage of new cars be built with dual-fuel capability
• dual fuels
• dual-fuel cars would have both an electric engine and an auxiliary gasoline engine to augment it
• dual capabilities are often built into machines to help with technology transitions
• e.g. laptops with both wired and wireless connection
• forces of disruptive technology would eventually bring about improvements in battery technology, ultimately allowing the production of an all-electric car with satisfactory driving range
• process won’t happen quickly enough on its own
• no matter how fast the production of dual-fuel cars is ramped, replacing the bulk of the approximately 250 million cars on the roads in the United States with new cars will take a decade or more
• retro-fitting
  
• need to retro-fit the low-mileage part of the fleet first
• estimates show that converting these vehicles to dual-fuel operation, even with electricity providing no more than 50 miles of driving range between daily recharging, could cut petroleum imports by 50 to 60 percent
• a stunning opportunity
• task requires major effort and investment
• may need to apply tax incentives to offset the cost of the retrofit and couple them with deep discounts on the cost of electricity used by the vehicle over some initial period, such as one to two year
• environment
• shifting to electricity has the added advantage of helping to mitigate a major environmental threat
• shift from petroleum-based vehicles to electricity-based ones would move the locus for addressing carbon emissions from millions of individual vehicles to far fewer centralized electricity-generating plants
• controlling emissions thus becomes an industrial task, easier technologically.
• estimates indicate a potential reduction of carbon emissions of around 50 percent through such a shift
• can't rely on market forces
• automobile manufacturing, battery production, and the generation and transmission of electricity are all represented by different industries
• each with its own financial aims
• absence of common interests is a major obstacle to action
• requires the coordinated commitment of several industries
• startups and new ventures, not limited by the economic rules of established industries, can break the gridlock in time
• but: we don’t have the time
• Condi Rice: “The politics of energy is warping diplomacy in certain parts of the world”
• oil has been a major factor in many wars, and it could be again
• Kissinger: “Today’s relationship between China and the United States is very similar to that of Germany, a rising country at the turn of the 20th century, and Britain, an established one. Their conflict over resources eventually led to war.”
  
• We are in a period of time in the world today where there is a shortage of resources.
• we will face “an era of persisting conflict.”
• need for a strategy that can deflect our march toward this “persisting conflict” by strengthening our energy resilience
• policy that favors sticky energy with multiple sources and that aggressively moves vehicles first toward dual-fuel mode and ultimately to running on just electricity provides the answer.

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There is hope yet for science park toilers - FT.com

Summary:
Jonathan Guthrie sees evidence that the level of innovation in the UK appears to be declining. Not much coming out of universities anymore. We're living through a fallow period for innovation, fundamental innovation is slowing up after a remarkable 40 year boom. Internet investment bubble, Schumpeterian explanation: copycats to pile in on the upswing of an innovation wave. Was a fiasco for VC investment in UK. Returns negative for average fund set up after 1996 over 5 to 10 year periods. Confidence has weakened further with the credit crunch, which has closed the market for flotations. Less money was invested in European technology start-ups last quarter than at any time since 2001. Venture capital is more fragile this side of the Atlantic than in the US. Technology investment in UK will probably recover. VCs need to market themselves, focus on the lofty top decile, not the mediocre median. Early stage technology investment is attractive as a way to lay small bets on risky, glamorous propositions. Also need a handful of breakthroughs that are immensely remunerative. Biotech lost cost. Renewable energy and power savings big hope. (Published: 30/07/08)

Notes:

• little backing from City for fledgling tech companies on UK's science parks
• Jon Moulton, a private equity investor who backs technology start-ups as a hobby
• “In the UK the level of innovation appears to be declining. Universities are being picked over very hard for ideas, but not a lot is coming out of them.”
• likens UK early stage technology investors to ufologists
• instead of joining hands and imploring Martians to land, they hope, equally fruitlessly, for a worthwhile return on investment
• living through a fallow period for innovation
  
• Walter Herriot of the St John’s Innovation Centre
• “There is a slowing up in fundamental invention, though not in the creation of niche applications.”
• reflecting on the advent in the past 40 years of personal computers, the internet and mobile phones, he says: “I cannot see an equivalent explosion in the near term.”
• similar to Schumpeter's view
• proposed that innovation progresses in waves
• profitable breakthroughs occurrs in the troughs of economic cycles
• encourages copycats to pile in on the upswing, feeding economic instability
• cfr internet investment bubble
• now looks more like a belated dash into a maturing technology rather than the new era it was billed as at the time
• fiasco has constrained any advertising claims for venture capital based on recent performance
• funds set up after 1996 have typically lost 1.4 per cent a year over five years and 1.8 per cent over 10 years
• according to the British Private Equity and Venture Capital Association
• Confidence has weakened further with the credit crunch, which has closed the market for flotations
• less money was invested in European technology start-ups last quarter – €950m (£747m) – than at any time since 2001
• Apax, progenitor of European venture capital, launched a fund last spring with no venture capital component
• Braveheart is concentrating on follow-on financings;
  
• 3i has pulled out of early stage investment altogether
• Venture capital is a more fragile flower on the eastern shores of the Atlantic than in the US
• Sir Ronald Cohen, founder of Apax,
• “The perception is that the early stage is tougher, you raise less money when you float, and there is less liquidity afterwards.”
• is technology investment is doomed to dwindle away to nothing in the UK?
• will probably recover
• dotbomb losses will drop out of short-term performance statistics during the next few years.
• returns need not then be spectacular – a long-term average is 4.5 per cent – to lure investors back
• trade bodies such as the BVCA, meanwhile, can do their bit by quoting returns exclusive of “exceptional losses” chalked up on internet plays
• marketing emphasis should be on the lofty top decile, not the mediocre median
• early stage technology investment is attractive as a way to lay small bets on risky, glamorous propositions
• absorbs just more than £1bn a year in the UK
• no backers stake money they cannot afford to lose
• in some respects it resembles alternative investments, such as art or wine, more than big buy-outs or quoted shares
• task that science park toilers face is to produce a handful of breakthroughs that are immensely remunerative
• little can be hoped for from biotech
• stricken by unprofitability as persistent as a hypochondriac’s bad back
• materials scientists have engineered a UK nanotechnology sector so tiny it is virtually invisible
• most to go for in renewable energy and power saving systems
• "scope for technological leaps equivalent to the shift from mainframes to PCs” (Sir Ronald Moulton)

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How to fix a broken venture capital model - EETimes

Summary:
Interview with Matthew Nordan about why the current VC model is broken, especially in the case of materials, energy and environment sector investing. The linear path from angel to VC to IPO no longer works due to greater costs, longer gestation times, greater technological uncertainty and ill-defined problems. This is a time of great experimentation and visible discomfort. New type of VC machine needed. Smartest venture firms cultivate relationships with the buyers of technologies. Nordan also has four rules for venture companies: Make non-obvious matches of technologies and solutions; be suspicious of exponential growth; maximize options to avoid surprises from left field; and avoid focusing on an ideal technology to such an extent that you fail to see a "good enough" technology in its wake. (Published: 22/07/08)

Notes:

• Matthew Nordan, Lux Research, President
• ideas on how to make startup financing work again
  
• old machine
• linear path
• angel funding -> VC financing -> (some cases growth equity/PE) -> public markets
• works really well for IT
• don't need tremendous amount of money; pretty capital efficient investments
  
• also for life sciences
• because there's a rule book that you can follow by using the FDA and EMEA approval cycles as a way of determining how far the company is
• none of those rules exist in the materials, energy and environment world
• and you need more money over longer periods of time (gestation times in excess of a decade)
  
• frequently break 10 year close-ended fund cycles that VCs as a rule have
• with greater levels of technology risks further down the cycle, down into the land where you have 10s of millions of dollars of investment being made by PE and growth equity funds
• machine doesn't work; need a new machine
• new machine
• some innovations promising; but you don't know what works till folks have seen a 25% IRR on doing it in a new way
• interesting: fund that raises small amounts of money to be able to go out and seed companies to get them to a stage that they are ready for a venture fund
• cut of that first part of the technology development cycle and get it to fit into a 10-year close-ended structure
• interesting: project financiers beginning to construct joint venture vehicles where there may be a carve-out slice of equity for the venture financiers that may get them some returns (some meat to take home to the cave for the LPs) before the company is able to achieve the liquidity of it
  
• particularly for water and waste technologies
• venture funds have responded by specializing
• Rockport and Kleiner Perkins Caufield & Byers
  
• invest in early-stage technology
• Riverstone and FourWinds
  
• invest in deployment of semi-mature technologies
• only a few funds like Vantage Point try to span the gamut of development and deployment
• new model of "clear-cutting" VCs
• exemplified by Khosla Ventures
• represent funders of last resort
• ultimately this a time of great experimentation and visible discomfort
• will be 5 to 10 years before we know which of any of those ingredients are going to work out
• bringing in the growth equity partner between VC and IPO
• growth equity is coming back
• VCs are not prepared to extend funding into the hundreds of millions of dollars
• smartest venture firms cultivate relationships with the buyers of technologies
• smart venture firms talk to the customers of potential startups to say what problems do you need solved five years down the line?
• ranging from OEMs in the semiconductor field to utility companies in the energy field
• then build a startup based on the wish-lists of those customers
• business plans get ripped apart five times over before the company ultimately decides what it is that it's supposed to be doing
• difference from an energy environment perspective is that the problems are generally less well defined; lack of definition
  
• as opposed to software: explicit problem that they're trying to solve upfront
• e.g. Green Fuel Technologies Corp., algae company
  
• intended to use algae to process wastes from natural gas plants and ferment biomass fuels
• turns out that you can get a lot more revenue from the same unit of algae, not by fermenting it to make biofuels, but by selling it as fish feed, or as an additive
  
• the desiccated algae itself are more valuable than the biofuels that you can make from them
• at least in the current state; may change over time

• four rules for venture companies
1. make non-obvious matches of technologies and solutions;
   
2. be suspicious of exponential growth;
   
3. maximize options to avoid surprises from left field and to be aware of unexpected breakthroughs;
   
• e.g. emerging "solar antenna" that can tune in to 800-900 nm waves, thus obsoleting several small-scale solar technologies
• also involves carefully quantifying all externalities
• e.g. the water-use requirements for ethanol and biodiesel make so-called clean energies look dirty when total inputs are taken into account.
4. avoid focusing on an ideal technology to such an extent that you fail to see a "good enough" technology in its wake

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Utilities say grid can handle rechargeable cars - MSN Money

Summary:
Energy industry officials believe they will be able to cope with the increased electric demand when rechargeable cars become a reality. Industry has already dealt with increased electric demand from millions of plasma TVs (cars consume 4x more electricity). Changeover from ICE to electric is likely to be gradual (still lot of issues with batteries to be solved). Will thus be able to handle it in same way as they handled plasma TVs. Most electric cars will likely be charged during off-peak electric use times, utilities should have no problem generating enough electricity. Potentials problems: rise in oil price causes transition to be very rapid; stress on distribution system in certain areas; electric vehicles getting larger and requiring far more electricity for recharging; and demands from people that their vehicles be recharged quickly, drawing more electricity during peak times. (Published: 23/07/08)

Notes:

• cars vs. plasma TVS
  
• rechargeable cars consume about four times the electricity as plasma TVs
• but: industry already has dealt with increased electric demand from the millions of plasma TVs sold in recent years
• experience will help them deal with the vehicle fleet changeover
• Mark Duvall, program manager for electric transportation, power delivery and distribution for the Electric Power Research Institute
• Plug-In 2008 conference
• "So as long as the changeover from internal combustion engines to electric vehicles is somewhat gradual, they should be able to handle it in the same way"
• "We've already added to the grid the equivalent of several years' production of plug-in hybrids."
• "The utilities, they stuck with it. They said, 'All right, that's what's happening. This is where the loads are going, and we're going to do this.'"
• Automakers are planning to bring rechargeable vehicles to the market as early as 2010
• but will take much longer for them to arrive in mass numbers, due in part to a current lack of large-battery manufacturing capacity
• auto and battery companies still are working on the lithium-ion battery technology needed for the cars, and on how to link the battery packs to the vehicles
• Efrain Ornelas, environmental technical supervisor with Pacific Gas and Electric Co. in San Francisco
• "We see the vehicle penetration levels coming at a rate that's manageable. It's not like tomorrow the flood gates are going to open and 100,000 vehicles are going to come into San Francisco or something like that."
• PG&E will be able to track their charging patterns and plan accordingly for the future
• current demand
• utility officials say they already are coping with increased demand
• especially during peak-use periods in the afternoon and early evening
• rest of the day, most utilities have excess generating capacity that could be used to recharge cars
• most electric cars will likely be charged during off-peak electric use times, utilities should have no problem generating enough electricity
• the preparation doesn't mean electric vehicles will be accommodated without problems and good planning
• since people with the means to buy electric cars likely will live in the same areas, utilities worry about stress on their distribution systems
• if high gasoline prices could push sales of rechargeable electric vehicles well into the millions by 2020, that could stress the system
• other possible problems include
  
• electric vehicles getting larger and requiring far more electricity for recharging
• demands from people that their vehicles be recharged quickly, drawing more electricity during peak times
• choice for consumers
• consumers will face a lot of choices about when and where they charge up their cars and how much they want to pay for the electricity
• utilities likely will raise rates to charge cars during peak use times, generally from around noon to 8 p.m., and lower them for charging during low-use hours
• e.g. PG&E charges 30 cents per kilowatt hour to charge an electric vehicle during peak hours, he said, but charges only 5 cents from midnight to 7 p.m
• talk of the cars storing electricity and sending it back to the power companies during peak times
• officials say that's a long way off

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The Next Bubble: Priming the markets for tomorrow’s big crash - Harper's Magazine

Summary:
Eric Janszen: the only thing worse than another bubble is no bubble. No coincidence that the internet and housing hyperinflations transpired within a periord of ten years. The US can no longer function without them. The bubble cycle has replaced the business cycle. The cause for this transformation lies with the rise of the FIRE economy in the late 70s. Next bubble must be large enough to recover the losses from the housing bubble collapse. Many candidates, only one fits all the criteria: alternative energy. Will be accompanied by boom in infrastructure. Danger: hyperinflations, in the long run, are always destructive. Could have serious consequences, as alternative energy and the improvement of our infrastructure are both necessary for our national well-being. The author estimates estimate of $20 trillion in speculative wealth will be created in the alternative-energy/infrastructure bubble. Unfortunately, this money will inevitably be employed to increase share prices rather than to deliver “energy security.” (Published: February 08)

Notes:

• financial bubble: a market aberration manufactured by government, finance, and industry, a shared speculative hallucination and then a crash, followed by depression
• note: term "bubble" confuses cause with effect
• a better descriptor would be “asset-price hyperinflation”
• the huge spike in asset prices that results from a perverse self-reinforcing belief system, a fog that clouds the judgment of all but the most aware participants in the market
• asset hyperinflation starts at a certain stage of market development under just the right conditions
• the bubble is the result of that financial madness, seen only when the fog rolls away.
• frequency
  
• bubbles were once very rare
• one every hundred years or so
• legislation enacted to prevent subsequent occurrences
• nowadays: barely a pause between such bouts of insanity
• before the dotcom bubble had deflated, housing bubble took off
• no coincidence that the internet and housing hyperinflations transpired within a periord of ten years
• the US can no longer function without them
• there will be many more such boom
  
• the bubble cycle has replaced the business cycle.
• how did this transformation come about?
• following WWI
• Wall Street wrote checks to finance new companies that were trying to turn wartime inventions into consumer products
• e.g. radio, refrigeration
• consumers of rising middle class were ready to buy but lacked funds
• banking system accomodated them with new forms of credit
• e.g. the installment plan
• brief recession in 1921, following which fed accomodated progress by keeping interest rates below rate of inflation
• "new era" of prosperity hailed until Black Tuesday, Oct 29, 1929
• crash, Great Depression and WWII
• brutal education for government, academia, corporate America, Wall Street and the press
• next 60 years, chastened generation managed to keep the fog of false hopes and bad credit at bay
• Keynes: emerged as the pied piper of a new school of economics that promised continuous economic growth without end
• doctrine: when a business cycle peaks and starts its downward slide, one must increase federal spending, cut taxes, and lower short-term interest rates to increase the money supply and expand credit
• the demand stimulated by deficit spending and cheap money will thereby prevent a recession
• aka. reflation
  
• WWII
• brought real recovery as a highly effective, demand-generating, deficit-and-debt-financed public-works project for the US
• war did what a flawed application of Keynes' theories could not
• Bretton Woods
• US succesfully pushed to peg the currencies of member nations to the dollar and to make dollars redeemable in American gold
• Americans could spend as wisely or foolishly as government policy decreed
• regardless of the needs of other nations holding dollars as reserves, as many dollars could be printed as desired
• 1971
• US balance of trade had run up its first deficit: $3.8b (adjusted for inflation)
• worries by Bretton Woods members that US intended to repay the money borrowed to cover its trade gap with depreciated dollars
• de Gaule demanded payment in gold
• Nixon, facing a run on the US gold supply, unilaterally ended the US legal obligation to redeem dollars with gold
• i.e. US defaulted
• decade of economic and financial-market chaos followed
• dollar remained the international currency but traded without an absolute measure of value
• inflation rose, not just in US but around the world
• Fed pushed interest rates into double digits
• set off two global recessions
• new international standards and methods for measuring inflation and floating exchange rates were established to replace the gold standard
• never again a US trade surplus after 1975
• decline of high-value finished-goods-producing industries as steel and automobiles
• new economy belonged to finance, insurance and real estate
• FIRE
• era of FIRE
• is a credit-financed, asset-price-inflation machine organized around one tenet:
• that the value of one’s assets, which used to fluctuate in response to the business cycle and the financial markets, now goes in only one direction, up, with no more than occasional short-term reversals
• free of the international gold standard’s limitations, US now had great flexibility to finance its deficits with its own currency
• massive external debts built up
  
• trade partners to the US balanced their trade surpluses with the purchase of U.S. financial assets
• especially the oil-producing nations and Japan
• process of financing our deficit with private and public foreign funds became self-reinforcing, for two reasons:
  
1. if any of the largest holders of our debt reduced their holdings, the trade value of the dollar would fall
• and with that, the value of their remaining holdings would be decreased
2. if not enough U.S. financial assets were purchased, the United States would be less able to finance its imports
• cfr. old rule about bank debt, applied to international deficit finance:
  
• if you owe the banks $3 billion, the bank owns you. But if you owe the banks $10 trillion, you own the banks.
• 1990s
• banking and securities markets were deregulated
• note: root of the 1920s bubble is believed to have been the conflicts of interest among banks and securities firms
• 1999: Glass-Steagall Act of 1933 repealed
• regulated banks and markets
• a servile federal interest-rate policy helped move things along
• FIRE rose in power
• so did a new generation of politicians, bankers, economists, and journalists willing to invent creative justifications for the system
• as well as for the projects that it financed: ranging from the housing bubble to the Iraq war
• high-water mark: the publication of the Cato Institute report “America’s Record Trade Deficit: A Symbol of Strength.”
  
• Freedom had become slavery; persistent deficits had become economic power.
• the bubble machine
• often starts with a new invention or discovery
• internet bubble
  
• Mosaic, graphical Web browser, released in 1993
• began to transform the Internet into a set of linked pages
• suddenly websites were easy to create and even easier to consume
• industry lobbyists stepped in, pushing for deregulation and special tax incentives
• by 1995, the Internet had been thrown open to the profiteers
  
• four years later a sales-tax moratorium was issued
• opening the floodgates for e-commerce
• such legislation does not cause a bubble, but no bubble has ever occurred in its absence.
• otherwise rational men and women fall under the influence of a fast-flowing and, it was widely believed, risk-free flood of money
• logic and historical precedent pushed aside
• deregulation had built the church, and seed money was needed to grow the flock
• mechanics of financing vary with each bubble
• what matters is that the system be able to support astronomical flows of funds and generate trillions of dollars’ worth of new securities
• internet bubble: seed money came from venture capital
• a few startups like Netscape went public, netting massive returns
• such liquidity events came faster and faster
• loop was formed:
  
• profits from IPO investments poured back into new venture funds, then into new start-ups, then back out again as IPOs, with the original investment multiplied many times over, then finally back into new venture-capital funds.
• public was exposed to constant reiterations of the one true faith
• government stood back
• little incentive for lawmakers to intervene
• Members of Congress, who influence the agencies that oversee market-regulation functions, have never been unfriendly to windfall tax revenues
• the FIRE sector has very deep pockets
• 2000: millions of investors with unrealized gains in mutual funds sold stock to raise enough cash to pay taxes on their capital gains
• the mass selling set off a panic, and the bubble popped.
• fictitious value
• is the delta between historical-trend growth and growth brought on by asset hyperinflation
• “One added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.” (anonymous, South Sea Bubble pamphleteer)
• goes away when market participants lose faith in the religion—when their false beliefs are destroyed as quickly as they had been formed
• Janszen: "Since the early 1980s, the free-market orthodoxy of the Chicago School has driven policy on the upward slope of an economic boom, but we’re all Keynesians on the way down: rate cuts by the Federal Reserve, tax cuts by Congress, deficit spending, and dollar depreciation are deployed in heroic proportions."
• brief national recession in the early part of 2001
• result of layoffs, cutbacks, and the collapsing stock market rippled through the economy
• despite a concerted effort by the Federal Reserve and Congress to avoid it
• despite the technology industry representing only a small fraction of the U.S. economy
• crucial dilemma: how to counter the loss of that $7 trillion in fictitious value built up during the bubble
• housing bubble
• new boom
  
• McMansions on the ground: wood and nails, granite countertops
• as opposed to castles in the sky of electrons and monetized eyeballs
• price-inflation process was traditional:
  
• way too much mortgage money chasing not enough housing
• at the bubble’s peak, $12 trillion in fictitious value had been created, a sum greater even than the national debt
• should have known better: historically, the price of American homes has risen at a rate similar to the annual rate of inflation
• Why, then, did housing prices suddenly begin to hyperinflate?
  
• formative stage of the bubble:
  
• changes in the reserve requirements of U.S. banks, and the creation in 1994 of special “sweep” accounts, which link commercial checking and investment accounts, allowed banks greater liquidity
• meant that they could offer more credit
• next, 2001 - 2002: hypergrowth
  
• Federal Reserve Funds Rate was reduced from 6 percent to 1.24 percent
• in wake of dotcom crash
  
• led to similar cuts in the LIBOR that banks use to set some adjustable-rate mortgage (ARM) rates
• drastically lowered ARM rates
  
• meant that in the US monthly cost of a mortgage on a $500,000 home fell to roughly the monthly cost of a mortgage on a $250,000 home purchased two years earlier
• demand skyrocketed, though home builders would need years to gear up their production.
• with more credit available than there was housing stock, prices rapidly rose
• supply of new capital needed to sustain hypergrowth: securitized debt
• turned out to be economic poison
• securitization
• to make a new security out of a pool of existing bonds, bringing together similar financial instruments, like loans or mortgages, in order to create something more predictable, less risk-laden, than the sum of its parts
• many such “pass-thru” securities, backed by mortgages, were set up to allow banks to serve almost purely as middlemen
• if a few homeowners defaulted but the rest continued to pay, the bank that sold the security would itself suffer little
• or at least far less than if it held the mortgages directly
• in theory, risks that used to concentrate on a bank’s balance sheet had been safely spread far and wide across the financial markets among well-financed and experienced institutional investors
• happens with most bubbles: a perfectly good idea is taken to an extreme
• in the case of the housing bubble, the new securitized debt product that drove the final stage was the collateralized debt obligation (CDO)
• CDO is a class of instrument called a credit derivative;
  
• specifically, a derivative of a pool of asset-backed securities.
  
• parts of pools of asset-backed securities that were e.g. rated at a moderately high risk of default—junk grade, such as BB—were modeled, packaged into CDOs, and rated at lower risk-investment grades, such as AAA
• these were used to finance the more creative mortgages
• stated-income or “liar loans”
• subprime mortgages were only a sideshow that appeared late, as the housing-bubble credit machine ran out of creditworthy borrowers
• main event was the hyperinflation of home prices
• risks are embedded in price and lurk as defaults
• even after the faith that supported a bubble recedes, false beliefs continue to obscure cause and effect as the crisis unfolds
• compare with chemical industry
• 40 years ago: “the solution to pollution is dilution”
• mixing toxins with vast quantities of air and water was supposed to neutralize them
• big mistake
• modern bankers have carried this mistake into the world of finance
• as more and more loans with a high risk of default were made from the late 1990s to the summer of 2007, the shared level of credit risk increased throughout the global financial system
• ballooning credit risk can be thought of as ecomonic poison
• in theory, those risk pollutants have been diluted in the oceanic vastness of the world’s debt markets
• thanks to the magic of securitization, they are made nontoxic and so pose no systemic risk
• in reality, credit pollutants pose the same kind of threat to our economy as chemical toxins do to our environment
• like their chemical counterparts, they tend to concentrate in the weakest and most vulnerable parts of the financial system
• that’s where the toxic effects show up first
• the subprime mortgage market collapse is essentially the Love Canal of our ongoing risk-pollution disaster
• more and more risk pollution is rising to the surface
• credit continues to contract
• FIRE economy depends on the free flow of credit
• will experience its first near-death experience since the sector rose to power in the early 1980s
• FIRE economy will be in need of $12 trillion by time prices reverted to mean
  
• all asset hyperinflations revert to the mean
• we can expect housing prices to decline roughly 38 percent from their peak as they return to something closer to the historical rate of monetary inflation
• if rate of decline stabilizes at between 6 and 7 percent each year, the correction has about six years to go before things stabilize
• Where will that money be found?
• "Bubbles are to the industries that host them what clear-cutting is to forest management. After several years of recession, the affected industry will eventually grow back, but slowly"
• housing bubble has left us in dire shape
• worse than after the technology-stock bubble
• Federal Reserve Funds Rate was 6 percent
• dollar was at a multi-decade peak
• federal government was running a surplus
• tax rates were relatively high
• made reflation relatively painless
• i.e. interest-rate cuts, dollar depreciation, increased government spending, and tax cuts
• now:
• Funds Rate is only 4.5 percent
• dollar is at multi-decade lows
• federal budget is in deficit
• tax cuts are still in effect
• chronic trade deficit, the sudden depreciation of our currency, and the lack of foreign buyers willing to purchase its debt will require the United States government to print new money simply to fund its own operations and pay its 22 million employees
• economy in serious trouble
• new bubble needed to keep the economy from slipping into a depression
• new bubble
• criteria
  
• the industry in any given bubble must support hundreds or thousands of separate firms
  
• financed by not billions but trillions of dollars in new securities
  
• Wall Street will create and sell those
• this sector of the economy must already be formed and growing even as the previous bubble deflates
• like housing in the late 1990s
• legislation guaranteeing favorable tax treatment for those investing in that sector, along with other protections and advantages for investors, should already be in place or under review
• finally, the industry must be popular, its name on the lips of government policymakers and journalists
• should be familiar to those who watch television news or read newspapers.
• candidates
• number of plausible candidates, but only a few meet all the criteria
• health care
  
• must expand to meet the needs of the aging baby boomers
• but there is as yet no enabling government legislation to make way for a health-care bubble
• pharmaceutical industry
• can hyperinflate only if the Food and Drug Administration was gutted of its power
• second technology boom, under the rubric “Web 2.0”
• based on improvements to existing technology rather than any new discovery.
• biotech
  
• will not inflate, as it requires too much specialized intelligence
• alternative energy: only industry that fits the bill
• is already being branded by the media
  
• Al Gore, joining Kleiner, Perkins, Caulfield & Byers
• "providing a massive dose of Nobel Prize–winning credibility that will be most useful when its first alternative-energy investments are taken public before a credulous mob"
• candidates for the 2008 presidential election invoking “energy security” in their stump speeches and on their websites
• legislation: Energy Policy Act of 2005
• authorizes $200 million annually for clean-coal initiatives, repeals the current 160-acre cap on coal leases, offers subsidies for wind energy and other alternative-energy producers, and promises $50 million annually, over the life of the bill, for a biomass grant program
• loan guarantees for “innovative technologies”
• boom in infrastructure will support alternative-energy bubble
• alternative energy and the improvement of our infrastructure are both necessary for our national well-being
• therein lies the danger: hyperinflations, in the long run, are always destructive
• estimate of $20 trillion in speculative wealth will be created
  
• gross market value of all enterprises needed to develop hydroelectric power, geothermal energy, nuclear energy, wind farms, solar power, and hydrogen-powered fuel-cell technology—and the infrastructure to support it—is somewhere between $2 trillion and $4 trillion
• assuming the bubble can get started, the hyperinflated fictitious value could add another $12 trillion
• In a hyperinflation, infrastructure upgrades will accelerate, with plenty of opportunity for big government contractors fleeing the declining market in Iraq
• thus, we can expect to see the creation of another $8 trillion in fictitious value
• That money that inevitably will be employed to increase share prices rather than to deliver “energy security.”

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Electro-Shock Therapy - The Atlantic

Summary:
Jonathan Rauch about the development of GM's Chevy Volt pluggable hybrid. (Published: 04/07/08)

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Clean Energy Investments Charge Forward Despite Financial Market Turmoil - UNEP Press Release

Summary:
Overview of the "Global Trends in Sustainable Energy Investment 2008" report by New Energy Finance for UNEP's Sustainable Energy Finance Initiative. 2007 was a record year for investment in renewable energy and energy efficiency industries. Wind energy was most popular with investors, although the fastest growing sector is solar energy. Investment in energy efficiency technology also reached a record. Sustainable energy accounted for 23% of new power capacity added globally in 2007. The EU remained the leading region for investment, while in the US acceptance of sustainable energy is becoming more widespread. Mood slightly subdued in 2008, although in Q2 most areas of investment rebounded, despite the global turmoil in the financial markets. Also noted was that carbon trading is becoming more accepted, and that private interest in the post-Kyoto market is emerging. (Published: 03/07/08)

Notes:

• 2007:
  
• record-setting year of investment in the renewable energy and energy efficiency industries
• Total sustainable energy transaction volume: $204.9b
• $148.3b in new funding entered the sustainable energy sector globally
• up 60% from 2006
• $98.2b went into new renewable energy generation
  
• wind energy again attracted the most investment: $50.2b
• especially in the US, China and Spain
• installed capacity passed the 100 GW mark
• solar power: $28.6b
• grew most rapidly: at an average annual rate of 254% since 2004
• driven by the advent of larger project financings
• heavy investment to ease the silicon bottleneck and new thin-film technology beginning to reach scale
• $50.1b went into technology development and manufacturing scale-up
• Investment in energy efficiency technology reached a record $1.8 billion
• an increase of 78% from 2006.
• According to the International Energy Agency, each $1 invested in energy efficiency an average avoids more than $2 needed to create new supply.
• $56.6b changed hands through mergers and acquisitions.
• even as a credit crunch began to roil financial markets
• 31 gigawatts of new installed generation
• sustainable energy accounted for 23% of new power capacity added globally in 2007
• about 10 times that of nuclear.
• Sustainable energy companies accounted for 19% of all new capital raised by the energy sector on the global stock markets in 2007.
• EU: remained the leading region for investment
• European asset finance up to record level of $49.5 billion
• 62% of asset finance worldwide.
• particularly later-stage financing
• supportive policies, as well as an investor base that is comfortable with financing renewable energy projects and more intense competition for deals
• US: acceptance of sustainable energy becoming more widespread
• extending beyond its traditional heartland of California
• Texas leading the wind energy charge
• new administration in 2009 is expected to make renewable energy and energy efficiency a political priority
  
• recent uncertainty in the US (particularly over the possible introduction of a CO2 regulations) has put a significant number of coal-fired generation plants on hold
• China: "Beijing Olympic Games (2008) has sharpened the country's political resolve and strengthened programmes to promote cleaner generation and cut energy intensity."
• investment in non-hydro renewables capacity in China increased by more than four times, to $10.8 billion
• new wind capacity doubled to 6 gigawatts.
• surge of Chinese solar companies listing on US and European stock markets
• public market activity is also growing at home
• e.g. Chinese wind manufacturer Goldwind raised $243 million last year in the Shenzhen Stock Exchange's first IPO related solely to renewable energy.
• Brazil: world's largest renewable energy market
• thanks to its long established hydropower and bioethanol industries
• sustainable energy investment in Brazil continued to be dominated by ethanol
• investor interest shifted there from the beleaguered US ethanol market
• investment in sugar cane cogeneration, biodiesel production and wind generation are also picking up.
• India:
• asset financing grew significantly, to $2.5 billion
• mostly for 1.7GW of new wind projects
• these installations place India fourth in the world
• both in terms of new capacity added in 2007 and total installed capacity.
• funds raised on Indian stock exchanges reached $628 million
• although: companies increasingly looked to foreign markets for new capital,
• raised $1.4 billion overseas in 2007
• public market activity was marked by a series of Foreign Currency Convertible Bonds (FCCBs) from established Indian renewable energy companies
  
• e.g. Suzlon($500 million raised) and Moser Baer($150 million).
• 2007 also saw several aggressive cross-border deals involving Indian or Chinese acquirors
• e.g. Suzlon's $1.6 billion acquisition of Repower
• China National Building Material Group's purchase of German turbine blade manufacturer NOI Rotortechnik.
• $13 billion invested in carbon funds by the end of 2007
• important source of investment for "Clean Development Mechanism" (CDM) projects in developing countries
• most new investment was into private funds
  
• carbon trading becomes more established.

• 2008: picture somewhat subdued across the sector
• only mergers and acquisitions up
  
• several substantial wind developers sold their portfolios
• many realising that with the tightening up of the credit markets they could not finance the growth themselves
• US ethanol industry undergoing restructuring
• But: Q2 2008: most areas of investment rebounded
• even as global financial markets remained in turmoil
• sustainable energy venture capital and private equity in Q2 2008 was up 34% on Q2 2007
• new build asset finance was up 8%
• public market investment showing a strong recovery with the IPO of Portuguese utility EDP's renewable energy business, EDP Renovaveis
• Q1 2008: emergence of private interest in the post-Kyoto market
• investors beginning procuring post-2012 CDM credits eligible for trading in the EU Emissions Trading Scheme.

• "Investment in the sustainable energy sectors must continue to grow strongly if targets for greenhouse gas reductions and renewables and efficiency increases are to be met"

• "Investment between now and 2030 is expected to reach $450 billion a year by 2012, rising to more than $600 billion a year from 2020. The sector's overall performance during 2007 and into 2008 sets it on track to achieve these levels."

• "Carbon Capture and Storage(CCS) is the only sector where we did not see as much progress as we had expected, with the regulatory and funding environments for these projects remaining murky and timelines for the first commercial projects being extended."

• Source: "Global Trends in Sustainable Energy Investment 2008" by New Energy Finance (UK) for UNEP's Sustainable Energy Finance Initiative

• Achim Steiner, head of UNEP, UN Under-Secretary General

• "Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe. A century later, the key difference is that a higher proportion of those looking for riches today may find them. With world temperatures and fossil fuel prices climbing higher, it is increasingly obvious to the public and investors alike that the transition to a low-carbon society is both a global imperative and an inevitability. This is attracting an enormous inflow of capital, talent and technology. But it is only inevitable if creative market mechanisms and public policy continue to evolve to liberate rather than frustrate this clean energy dawn. What is unfolding is nothing less than a fundamental transformation of the world's energy infrastructure."

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Carbon standard 'to renew trust' - BBC News

Summary:
The Carbon Trust has introduced a new benchmark, the "Carbon Trust Standard", for companies that show "real reductions in carbon footprint year-on-year." The goal is to rebuild public trust in the green claims made by firms as well rewarding companies that can demonstrate ongoing improvements. Companies that paid a third party to offset emissions on their behalf do not qualify. Three rules underpinning the standard: measurement, management and reduction of the carbon footprint. Trust is looking to see that an organisation has the appropriate governance, senior management involvement, appropriate policies and good carbon accounting processes. (Published: 24/06/08)

Notes:

• new Carbon Trust benchmark
  
• goal: to rebuild public trust in the green claims made by firms
• in response to the public's growing mistrust of companies' claims to be cutting their greenhouse gas emissions
• by highlighting businesses which have made genuine cuts in emission
• Carbon Trust Standard will only be issued to UK organisations that show "real reductions year-on-year"
• companies that paid a third party to offset emissions on their behalf would not qualify
• Tom Delay, CEO Carbon Trust
• "What businesses and consumers both share is a desire for one, credible way to prove that an organisation has not only measured, but actually reduced their carbon emissions year-on-year without the use of offsetting."
• offsetting industry
  
• has become a key player in the effort to reduce emissions
• businesses or individuals wanting to offset their emissions pay a third party, who then invests the money in clean energy projects or tree planting programmes
• In theory: the payment ensures that the emissions are offset by an equivalent carbon saving
• But: a number of schemes were criticised for failing to deliver on their promises
• Harry Morrison, Carbon Trust: "We want businesses to focus on taking action themselves and reducing their own emissions"
• standard was underpinned by three rules:
  
1. measurement of the carbon footprint
2. management of the carbon footprint
3. reduction of the carbon footprint
• Harry Morrison:
• "In order to pass the scheme, you need to have an actual numerical and quantified carbon footprint."
• "The second thing is that you need to be reducing the footprint over time."
• "Management is important because it shows whether an organisation actually has the processes in place to drive the reductions over the coming years."
• "So we are looking to see that an organisation has the appropriate governance, senior management involvement, appropriate policies and good carbon accounting processes."
• "All of that has to happen in-house."
• Twelve organisations have been awarded the Carbon Trust Standard to date
• six companies and six public bodies
• Once accredited, holders of the standard have to deliver year-on-year reductions in carbon emissions.
• Harry Morrison:
• "We think it is the first scheme in the world that rewards companies that can demonstrate ongoing improvements."
• "It is true that this is robust, and it will become even more challenging for organisations, but we are living in a time where we have to keep driving down emissions."

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Major Progress In Technology Needed For 25 Percent Renewable Energy Use To Be Affordable - ScienceDaily

Summary:
A RAND Corporation study finds that dramatic progress in renewable energy technology is needed if the United States desires to produce 25 percent of its electricity and motor vehicle fuel from renewable sources by 2025, without significantly increasing consumer costs. Finds that biomass resources and wind power have the greatest potential to contribute toward reaching the 25 x '25 goal. A large, inexpensive and easily converted biomass supply is essential if it is to be used as a renewable resource and still have a limited impact on consumers' wallets. Developing such a supply would require harvesting energy crops at a scale that greatly exceeds current production. Significant increases in the use of wind power are possible, but only with substantial technical advances to facilitate greater use of less-productive locations. (Published: 26/06/08)
Notes:

• currently renewable energy provides:
• 9.5 percent of total U.S. electricity supply
• mostly hydroelectric power
• and 1.6 percent of motor vehicle fuel
• study by the RAND Environment, Energy and Economic Development program
• requested by the Energy Future Coalition, a nonprofit environmental organization
• study considered technological and economic factors that would affect the costs of renewable energy as well as non-renewable fossil fuels
• provides a "snapshot" of the nation's potential energy expenditures if a requirement was imposed that 25 percent of electricity and motor vehicle fuels used in the United States by 2025 would come from renewable resources
  
• a goal activists have described as "25 x '25"
• finds that biomass resources and wind power have the greatest potential to contribute toward reaching the 25 x '25 goal
• Michael Toman, director of the RAND Environment, Energy and Economic Development program:
• "Expanding the use of renewable fuels will lower the long-term price of crude oil and reduce carbon dioxide emissions that are contributing to global warming."
• "However, to reap these benefits will require a major investment in improving and increasing the use of renewable energy technology."
• Biomass resources
  
• e.g. stalks from food crops, wood material and grasses
  
• can be turned into ethanol or gasoline that can power motor vehicles.
• study finds, however, that a large, inexpensive and easily converted biomass supply is essential if it is to be used as a renewable resource and still have a limited impact on consumers' wallets
• Developing such a supply would require harvesting energy crops at a scale that greatly exceeds current production.
• Toman: "Without increased biomass availability, expanded renewable energy use could impose economic burdens and result in environmental setbacks due to land conversion."

• Among the study's other key findings:

• Renewable energy technology will have to improve at the very significant pace envisioned by some renewable energy supporters in order to enjoy low-cost impacts.
• Significant increases in the use of wind power are possible, but only with substantial technical advances to facilitate greater use of less-productive locations.
• More moderate renewable energy targets -- such as 15 or 20 percent -- reduce expenditure impacts more than proportionately, though carbon dioxide reductions also are less significant.
• The federal government's policy approach to pricing of renewable motor fuels will significantly affect fuel demand and society's total energy expenditures.

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Green energy push planned for UK - BBC News

Summary:
As many as a quarter of British homes could be fitted with solar heating panels under new government plans for a "green revolution". Solar panels, wind turbines and household energy efficiency central. Price tag: £100b. Plan acknowledges green energy will cost more, will have transform large areas of British landscape and may have negative impacts on living standards. Plans due to be unveiled in coming week. (Published: 21/06/08)
Notes:

• plans due to be unveiled next week
• Malcolm Wicks, energy minister:
• the new proposals are "the most ambitious" such strategy that Britain has seen
• goal is to meet the EU target of 15% of energy from renewables by 2020
• call for 3,500 new wind turbines to be erected across the UK
• 30-fold increase in off-shore wind power generation
• quarter of British homes to be fitted with solar heating panels
  
• new loans and grants for businesses to increase green energy supply
• compulsory measure on households to boost efficiency
• total price tag: £100 billion.
• plan concedes that green power will cost more
• at a time of consumer anger over fuel prices
• plans recognise that the new energy policy could transform large areas of Britain's landscape and have a "significant impacts on all our lives...not all of these positive"
• Wicks:
  
• there is now a "huge momentum" in renewable energy provision;
  
• government would ensure that carbon emission reduction was the "core concept behind our energy strategy
• Britain currently gets less than 5% of its electricity from renewables, mainly wind.
• John Sauven, Greenpeace:
• "the plans for solar panels on seven million roofs and other steps to reduce the use of fossil fuels make sense regardless of the price of oil or the state of the climate"
• "We'll create jobs, reduce our dependence on foreign oil and use less gas, and in the long run our power bills will come down. Even if climate change didn't exist these proposals would be sensible."

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Summary only...

Business chiefs urge carbon curbs - BBC News

Summary:
A coalition of 99 companies is for the Kyoto protocol's successor to include targets for cutting greenhouse gas emissions and to establish a global carbon market. Coalition argues that cutting emissions must be made to carry economic advantages. Following Stern review and IPCC data, CEOs conclude that a responsible risk management approach to the issue requires political and business leaders to take action now. Government needs to create right environment. Environmentalists criticise lack of short-term targets and aspirational nature of targets, rather than being set in stone. Some companies are clearly in it for economic opportunities arising from climate change solutions. (Published: 20/06/08)

Notes:

• coalition of 99 companies
• includes: Alcoa, British Airways (BA), Deutsche Bank, EDF, Petrobras, Shell and Vattenfal
• companies involved span all of the G8+5 countries and virtually every major industrial sector
• ask political leaders to
  
• set targets for cutting greenhouse gas emissions and
  
• to establish a global carbon market
• argue that cutting emissions must be made to carry economic advantages.
• coalition believes that taking climate action now would be prudent
• based on scientific and economic evidence assembled by the Intergovermental Panel on Climate Change (IPCC) and the Stern Review
• "While recognising that there are still some uncertainties in the scientific and economic evidence available, these CEOs conclude that a responsible risk management approach to the issue requires political and business leaders to take action now"

• some key recommendations:

• All major economies, including developing ones such as China and India, should be included in the post-Kyoto deal, with richer countries committing to deeper and earlier emissions reduction
• Governments should aspire to halve global greenhouse gas emissions by 2050
• Governments and businesses should urgently explore bottom-up approaches to reducing emissions
• A global carbon trading system should be established as soon as possible
• Emissions caps should be applied flexibly across industry, with some sectors allowed leeway to preserve competitiveness.
• Willie Walsh, CEO BA
• "It's important that the business community demonstrates a desire to work with governments to tackle the challenge that climate change represents. But the report makes it clear that business can't operate in a policy vacuum - we need strong leadership from governments."

• Environmentalist criticisms
  
• EU's ambition is to make cuts of 20% from 1990 levels by 2020
• shorter term targets are needed
• progress towards them is easier to gauge and backsliding more obvious
• business coalition decided against setting a short term figure
• promoting a 2050 target that is "aspirational," not set in stone
• will allow wiggle-room for high-emitting industries
• may lead to a relatively weak post-Kyoto deal

• Steve Lennon, managing director of the South African energy giant Eskom
• "Creating an environment that will encourage people to do things differently is more important than setting a global target."

• some of the companies see economic opportunities arising from climate change solutions
• Caio Koch-Weser, vice chairman of Deutsche Bank
• "We see enormous opportunities for the financial industry, beyond the challenge we face as global citizens. If leadership is there to create a Kyoto successor that is based on cap and trade, then it creates a global carbon market - and then we are in business."

• blueprint for tackling climate change handed to Japanese Prime Minister Yasuo Fukuda
  
• ahead of next month's G8 summit in Japan
• aim of which is to produce a successor to the Kyoto Protocol
  
• current targets expire in 2012

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Sustainable Energy: Without the Hot Air - David J.C. MacKay

Summary:
Book on the scale of the energy channels. Not sufficient to know that a source of energy is "huge". We need to know how it compares with another "huge", namely, our huge consumption. Comparing numbers for demand with numbers for supply using renewables. Because renewable energy is so diffuse (between 0.1 and 14 W/m^2), it takes an enormous area of land (or sea) to provide the required 125 kWh/day per person. Provides four different energy plans to meet this need, each with different emphases (no carbon emissions, strong nuclear, no nuclear, etc.).

Currently reading.

Notes:

Preface

• Three different motivations drive today’s energy discussions
• fossil fuels are a finite resource
• seems possible that cheap oil (on which our cars and lorries run) and cheap gas (with which we heat many of our buildings) will run out in our lifetime
• given that fossil fuels are a valuable resource, useful for manufacture of plastics and all sorts of other creative stuff, perhaps we should save them for better uses than simply setting fire to them
• security of energy supply
• using fossil fuels changes the climate
• Climate change is blamed on several human activities, but the biggest contributor to climate change is the greenhouse effect produced by carbon dioxide (CO2).
• Most of the carbon dioxide emissions come from fossil-fuel burning.
  
• main reason we burn fossil fuels is for energy. So to fix climate change, we need to sort out a new way of getting energy
• climate change motivation runs in three steps:
  
• one: human fossil-fuel burning causes carbon dioxide concentrations to rise;
  
• two: carbon dioxide is a greenhouse gas;
  
• three: increasing the greenhouse effect increases average global temperatures.
• fact: the burning of fossil fuels is the principal reason why CO2 concentrations have gone up
• critics: burning of fossil fuels sends about seven gigatonnes of CO2 per year into the atmosphere, but biosphere and the oceans send about 1900 gigatonnes and 36 000 gigatonnes of CO2 per year into the atmosphere!
• misleading because only quantifies the natural flows of CO2 into the atmosphere, not mentioning that approximately the same amount flows back out of the atmosphere into the oceans and biosphere
• the natural flows cancel themselves out; burning fossil fuels creates a new flow that is not cancelled
  
• consensus of the best climate models seems to be that doubling the CO2 concentration would have roughly the same effect as increasing the intensity of the sun by 2%, and would bump up the global mean temperature by something like 3 deg C
• there is no doubt that such a rise is a bad thing
• such temperatures on earth have not been seen for at least 3 million years
• conceivable that the ecosystem will be so significantly altered that the earth stops providing some of the goods and services that we currently take for granted
• In the year 2000, world greenhouse gas emissions stood at about 34 billion tons of CO2 equivalent per year
• about 5 or 6 tons per year per person
• equivalent to every person burning one and a half tons of coal per year
• but: We don’t all emit 6 tons per year
• US: ~25 ton/year/person; UK: ~12 ton/year/person; China: ~ 4 ton/year/person
• i.e. US: ~4 times average; China
• Historical cumulative emissions
• UK nr. 2!
  
• Some countries like Britain have committed to a 60% reduction in greenhouse-gas emissions by 2050
• with such a reduction, climate scientists reckon it’s more likely than not that global temperatures will rise by more than 2 deg C
• global emissions need to fall by 70% or 85% by 2050 to avoid such a rise
• means Britain needs to get down from its current 10 or so tons of CO2 per year per person to roughly 1 ton per year per person by 2050
• This is such a deep cut that the best way to think about it is ‘no more fossil fuels’
• Yardstick #1: average current emissions are 1 ton of carbon per year per person
• or roughly 4 tons of CO2
• note: a round-trip intercontinental flight emits nearly two tons of CO2 per passenger (which is about half a ton of carbon), i.e. half of the average person’s annual carbon emissions
  
• Yardstick #2: we need average emissions to be 1/3 ton of carbon per year per person
• i.e. more than one intercontinental round-trip
• Debates about energy policy are often confusing and emotional because people mix together factual and ethical assertions

1. The balance sheet

• energy and power - units used in book
• energy: kWh
• aka ‘one unit’ on electricity bills
• cost ~10p in 2007
• individuals typically use a few kWh/day
  
• power: kWh/d; occasionally Watt or kiloWatt
  
• rate at which we use or produce energy
• 1 kWh/d is roughly the power you could get from one human servant
  
• 40 W ~ 1 kWh/d
• i.e. a 40W light bulb left switched on all day uses about 1 kWh/d, costing the consumer about 10p/day
• i.e. a 1000W toaster uses 1 kWh/h, or costs about 10p/hour, or 240p/day
  
• 1kW ~ 25 kWh/d
• Joule: standard international unit of energy
• too small to work with: 1 kWh ~ 3.6 MJ
• 1 W = 1 J/s
• most commonly used units in public documents
• terawatt-hours per year (TWh/y)
• 1000TWh/y per United Kingdom is roughly equal to 45 kWh/d per person
• gigawatts (GW)
• 2.5GW per UK is precisely 1 kWh/d per person
• million tonnes of oil equivalent per year (Mtoe/y)
• 2 Mtoe/y per UK is roughly 1 kWh/d per person

2. Cars

• power consumed by daily car user
• energy used (50km) = 40 kWh/d
  
• km travelled per day * energy per litre of fuel / km per litre of fuel
  
• energy per litre of fuel, or calorific value of petrol
• 10 kWh per liter
• km per litre of fuel
• 12 km/l (33 mpg)
• km travelled per day
• e.g. 50 km

3. Wind

• maximum conceivable wind power per person = 200 kWh/d
  
• assuming 100% coverage
  
• = wind power per area x area per person
• power per unit area of windfarm is about 2W/m^2
• for average windspeed of 6m/s (22km/h)
• population density
• 4000 m^2 per person
  
• 8 kW per person = 200 kWh/d per person
• more realistic: maximum conceivable wind power = 20 kWh/d per person
  
• assuming 6m/s and 10% filling
• conclusions:
• if we covered the windiest 10% of the country with windmills, we might be able to generate half of the energy used by driving a car 50 km per day each
• Britain’s onshore wind energy resource may be “huge,” but it’s not as huge as our huge consumption
  
• windmills required to provide the UK with 20 kWh/d per person are
  
• fifty times the entire wind hardware of Denmark;
  
• seven times all the windfarms of Germany;
• double the entire fleet of all wind turbines in the world
• Whitelee windfarm being built near Glasgow in Scotland
• has 140 turbines with a combined peak capacity of 322MW in an area of
  55 km2
• that’s 6W/m2, peak
• if we assume a capacity (load) factor of 33% then the average power production per unit land area is 2W/m2

4. Planes

• assuming one intercontinental round-trip per year (2 x 10,000 km):
• average energy consumption per person per day = 30 kWh per day
• i.e. flying once per year has an energy cost slightly bigger than leaving a 1 kW electric fire on, non-stop, 24 hours a day, all year
• would air travel consume much less energy if we travelled in slower propellor-driven planes?’
  
• no: planes are already almost as efficient as they could possibly be

5. Solar

• 
  

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Summary only...