Wind Power Exceeds 10% of Electricity Generation in Four States

The US added 10 Gigawatts of new wind power generation in 2009. Texas led the way with 2,239 Megawatts but 27 other states also added to their wind generation capacity last year. Four US states now generate more than 10% of their electricity from wind power. Iowa gets 20% of its electricity from wind, followed by South Dakota (13%), North Dakota (12%) and Minnesota (11%).

“Wind power projects accounted for 39 percent of all new electric generating capacity added in the U.S. in 2009," noted Ryan Wiser, a scientist at Lawrence Berkeley National Laboratory, "and wind energy is now able to deliver 2.5 percent of the nation’s electricity supply.” Berkeley Labs and the US Department of Energy released a study last week with more details on the state of wind power in the US.

Investments in wind power are creating good manufacturing jobs in the US. Seven of the top ten wind turbine manufacturers already have manufacturing facilities in the US. Two of the remaining 3 have announced plans to open manufacturing facilities here. And, of course, the actual installation and ongoing management of wind turbines create domestic jobs.

Wind power also creates competitive advantages for manufacturers by lowering electricity rates over the long term. While the up front investment is high (construction of wind farms costs about twice as much per MW as construction of coal-fired power plants), wind and other renewables are less expensive over the long term because they have zero ongoing fuel costs. This advantage will become even more pronounced if, as predicted by many economists, the costs of coal, petroleum and natural gas increase dramatically as the world economy comes out of the Great Recession.

Transmission remains a significant stumbling block. In Texas, 17% of existing wind generating capacity was not used last year because of inadequate transmission. Billions of dollars in investments in smart grid technologies will be required to pave the way for more wind and solar generation. (See DOE Says Grid Needs Upgrade to Handle Wind Power, Jan. 20, 2010).

The US accounted for 26% of all new wind generating capacity in the world last year. That put the US in second place after China, which accounted for 36% of all new wind generation capacity and is the world leader.

John Howley
Orlando, Florida

How Monitoring Dramatically Reduces Energy Costs

One of the most cost-effective ways to reduce energy costs is to monitor energy consumption in one minute increments and watch the trends over time. Almost every building will immediately find quick and easy ways to reduce energy costs by 5% or more. And knowledgeable professionals can often use the data to drive down energy costs by 20% or more and improve facility comfort and performance at the same time.

Let's take an actual example. Forward Energy Solutions recently subscribed to Continuous Energy Management & Optimization (CEMO) from Davies Energy Systems. The process involved two steps: (1) installing a real-time energy monitoring system from Noveda Technologies; and (2) having Davies Energy's engineers analyze the data and develop better ways to manage and optimize facility energy usage.

Here is the minute-by-minute display of electricity consumption that Foward Energy Solutions saw after just one day:


Notice the two distinct sets of spikes in energy consumption. The first occurred just before 4:00 a.m. when no one was in the building. The next set of distinct spikes started at 7:00 a.m. and continued until 5:00 p.m. Each of the spikes lasted only a minute or less and were not noticed by the people in the building. But over time they amounted to a significant increase in kwh consumption. They also may increase the peak demand charges on the company's monthly electric bill.

The culprits were quickly identified. A small refrigerator was malfunctioning and spiking the consumption at 4 a.m. An air-conditioning system in need of repair was causing the spikes during regular business hours.

Catching these types of problems generates immediate savings by reducing kwh consumption and peak demand charges. The avoided costs will continue to be realized each and every month into the future, often adding up to thousands of dollars in energy savings.

Identifying these types of problems early on also avoids the cost of more expensive repairs down the line. Without monitoring, no one would have noticed the air-conditioning problem until it stopped cooling the building -- most likely on the hottest day of the year. At that point, the company would have already wasted money on unnecessary energy costs, plus it would be facing the higher cost of repairing or replacing the air-conditioning system on an emergency basis. Not to mention the loss of employee productivity in a sweltering office until the repairs could be made.

Francis X. Lamparello, P.E., the Chief Technology Officer at Davies Energy Systems, says that he finds these types of issues in almost every building. But these problems are just the tip of the iceberg when it comes to saving energy. "Buildings are living, breathing entities that must be monitored and adjusted on a continuous basis," he says. "For example, maintaining proper air pressure inside the building can keep warm air from entering in the summer, and letting in more cool outside air on a sunny Fall day can give you 'free cooling' to offset the heat caused by the sun shining on the windows." All of these energy saving solutions, he points out, are free or inexpensive once you have real-time monitoring and expert advice on how to manage the facility.

What's next for Forward Energy Solutions? Now that they have the data, they are working with Davies Energy on a number of additional ways to drive down their energy costs. More on that in later blog posts.

John Howley
Orlando, Florida

New Jersey Getting 12 More Megawatts of Grid-Connected Solar Power

New Jersey’s largest regulated gas and electric utility is adding 12 megawatts of grid-connected solar energy. PSE&G hopes to start construction at its sites in Edison, Hamilton, Linden and Trenton this spring, with projects completed this summer and fall.

The four ground-mounted solar farms will be among the largest to be developed in New Jersey, with the Hamilton project being the largest in the state and the project in Linden the second largest. All four sites will utilize crystalline solar panel technology and have monitoring and communications functionality.

Together, the four projects will add 48,000 solar panels on 38.2 acres of property. They will produce enough energy to power about 1,300 homes and eliminate some 6,700 tons of CO2 emissions, the equivalent of removing nearly 1,200 cars from the road for one year.

The State of New Jersey has become a leader in solar energy installations in the last few years, installing more than 100 MW of solar energy, making it second only to California in terms of the amount of solar capacity installed.

"We're moving ahead with clean energy projects that will put people to work, installing tens of thousands of solar panels that will help the environment and stimulate the economy," said Ralph LaRossa, president and COO of PSE&G.

The latest projects are part of PSE&G's Solar 4 All program, which was approved by state regulators in July. The program involves a total of $515 million investment in 80 megawatts of solar, creating green jobs and nearly doubling the size of New Jersey's installed solar capacity.

More Important Than Copenhagen

I told you so.

Four months ago, I predicted that, "Those looking for simple solutions to climate change will be very disappointed by the absence of firm emission reduction targets in Copenhagen later this year. . . . But at the same time, [the US and China] will pursue a second path of cooperation towards achievable solutions with or without an agreement on targets." See US and China Forge a New Path on Climate Change.

That is exactly what the US and China did in Copenhagen yesterday.

Why? Because nothing this important and this complicated ever gets resolved by a committee.

Consider for a moment the race to put a man on the moon. Thomas Friedman and others have said that this should be our model for the Green energy revolution.

I agree. But we did not get to the moon by holding international conventions and listening to dictators and despots like Iran's Ahmadinejad, Zimbabwe's Mugabe, and Venezuela's Chavez lecture us on the evil nature of our plans to be the first to put a man on the moon. Nor did we wait until we could reach the lowest common denominator consensus with Russia, China and 180 other nations on how and when to put a man on the moon.

If we had followed the path of seeking international consensus before we went to the moon, then we probably never would have achieved the goal.

So, now that we have gotten Copenhagen out of our system, let's get down to the serious work of pursuing the Green energy revolution the old fashioned way. With vigorous competition among nations to be the most energy efficient and energy independent economies in the world.

Walmart has given us a good first step. The company has sent out a Sustainability Index survey to 100,000 of its suppliers. The survey asks each supplier to provide information about their carbon footprint, energy and water usage, plans and goals to reduce their carbon footprint, energy consumption and water usage, and other factors that affect the sustainability of their operations. For now, Walmart will review this data internally. But it plans in later stages to release the data to consumers and possibly even disclose a ranking of individual products based on a Sustainability Index for the product and the company that manufactured it.

If you were a factory owner in China, what would provide a better incentive for you to reduce your carbon footprint and use of energy and water? (a) An international treaty that committed China to nation-wide carbon reduction targets over a 20 or 30 year period? Or (b) a Walmart Sustainability Index that made your products unsellable to the world's largest retailer unless you reduced your own company's carbon footprint and use of energy and water?

Forget Copenhagen. We need barriers to entry that will make it difficult for producers around the world to sell their products unless they are made using non-polluting energy sources and sustainable manufacturing practices.

We also need to alter the economics of energy at home. Yes, solar and wind are more expensive than most carbon-emitting alternatives right now. But only because those carbon-emitting alternatives do not pay the full cost of their pollution. If we make coal and oil companies include in their pricing the cost of eliminating their products' emissions (either with cap and trade or a carbon tax), then solar, wind and other non-emitting alternatives would seem very inexpensive by comparison.

Lastly, we need to use government funding and regulations to promote sustainable energy based on the long-term benefits -- just as we did when we used government funds to finance space exploration.

Imagine, for example, if all new construction and renovations in the US had to be "net zero" in terms of direct and indirect carbon emissions. By "net zero" I mean that the amount of energy used by a facility from non-carbon-emitting sources like solar and wind is equal to or exceeds the amount of energy from carbon-emitting sources. This could be accomplished by a combination of building codes requiring higher levels of efficiency in buildings (which many local governments are already imposing) and subsidies for investments in solar, wind and other non-carbon-emitting energy sources.

Yes, this would cost us in the short term. But think for a moment about the competitive advantage this would give us in the longer term. What if five or ten years from now our factories used highly efficient buildings that required less energy, and that energy was supplied by solar and wind plants that had ZERO fuel costs. Our factories would have a tremendous competitive advantage over factories in China and elsewhere that continued to use power generated by coal and petroleum fuels.

I hear all those out there who say that climate issues are different because they transcend borders. But space travel transcended borders too. And we did not succeed with space travel by waiting for everyone to agree. We went out and did it.

John Howley
Woodbridge, New Jersey

Lessons From the History and Economics of Oil

My first assignment as a young lawyer -- and my introduction to the history and economics of the oil industry -- was on a behemoth antitrust case against the major oil companies.  In re Petroleum Products Antitrust Litigation involved allegations that the major oil companies conspired to fix prices by "signaling" price changes to one another and by manipulating supplies and refinery operations during the 1970's.

In between days of reviewing thousands of documents, my fellow young lawyers and I had the pleasure of working with Daniel Yergin, who was retained as one of our expert witnesses and who had just written The Prize: The Epic Quest for Oil, Money and Power, for which he would win the Pulitzer Prize.  His book is a comprehensive and fascinating account of the history and economics of the oil industry.  It is still about the best book you can find on the subject, and anyone interested in any aspect of the green energy movement must read it.

Recently, I came across a short video of Daniel Yergin reflecting on lessons that can be learned from previous shifts in energy usage as we try to move towards a more sustainable energy future.  He describes the environmental concerns of the 1950's that forced a shift from coal to oil, followed by a shift back to coal as the principal fuel for electricity generation due to coal's cost advantages and emerging technologies that ameliorated some of the environmental harms.  He also talks about the sunk costs in our existing energy infrastructure and how that creates inertia and limits our willingness and ability to change.

Click here to view the video.  Short and to the point . . . . . and definitely worth watching.

Of Energy Dreamers, Past and Present

Rich Karlgaard, the publisher of Forbes magazine, writes a column in every issue called “Digital Rules.” He is a very smart guy and, usually at least, very innovative and forward thinking.

I say “usually” because he just missed the boat in his latest blog entry on the future of renewables.

Mr. Karlgaard argues that we are stuck with coal, oil and nuclear as our major sources of electricity in the United States for the foreseeable future. He asserts that “[t]here is no way the U.S. economy can enjoy future prosperity without the big three electrical energy sources of clean coal, natural gas and nuclear.”

Why? Because only 10% of current electricity generation comes from renewable sources, and most of that comes from hydro. Solar and wind provide less than 3% of current electricity generation.

According to Mr. Karlgaard, solar, wind and other renewables cannot possibly meet a significant part of our electricity needs 10 years from now when they are starting from such a small base. His Forbes colleague Ken Fisher agrees, urging investors to “buy into fossil fuels” because they account for “89% of electricity” and “that fraction won’t change dramatically in the next decade.”

As for Thomas Friedman, John Doerr, and others who point to Moore’s Law and argue that renewables will experience the same rapid technological advances as semiconductors if given the right incentives, Karlgaard calls them “dreamers.”

Funny. That’s exactly what they said about Thomas Edison, Nicolas Telsa, and others who set out to build centralized electric power plants in the late 1800’s.

At that time, centralized electric power plants had an even smaller share of the market than renewables have today. In fact, there were only a couple of electric demonstration projects involving only a few hundred streetlights. Gas companies had a virtual monopoly on powering lights in homes and businesses, and the new electric power plants being built had to charge far higher prices than gas. The gas companies also had an existing and very efficient distribution system for their gas, while the electricity dreamers needed to build very expensive copper mains to carry the electricity to customers.

Edison, Telsa, Westinghouse, and the other dreamers who built our current centralized electric generation system also faced a number of very significant barriers beyond price. There was, for example, the fact that the electric motor had not yet been invented. So they were trying to sell electricity before it could be used in factories.

How did the dreamers prevail? Transportation and municipal contracts. The electricity dreamers got their break by building dedicated power plants for new electric streetcars and streetlights.

Once they built a base of electric generating capacity for streetcars and streetlights, the pace of innovation and growth quickened. Innovators began inventing other things to use electricity, including electric motors which revolutionized the economics of running a factory. By 1892 – less than 15 years after Edison’s first streetlight project – General Electric’s capitalization was $50 million. The incredible speed at which centralized electric power plants developed is described in The Power Makers, by Maury Klein:

“By 1900 electricity had become an integral part of American life, especially in cities. Between 1890 and 1905 the output of electric power in the United States increased a hundredfold. By revolutionizing production and manufacturing, electricity made possible the rise of the consumer economy that was to dominate the twentieth century and transform every corner of American life. Already factories consumed more than half of the electricity generated…. Arc lights illuminated the streets of even small towns and flooded with light the avenues of large cities. In 1902, some 51,000 electric streetcars whisked urban passengers along 22,000 miles of track."

Now Messrs. Karlgaard and Fisher may be correct that coal, oil and nuclear will still be significant contributors to our energy mix ten years from now. After all, centralized electric power plants did not force the gas industry into bankruptcy.

But the history of centralized electric power plants suggests that renewables can and will grow at a much faster pace than traditional fossil fuels as sources of electricity. Once started, that pace will accelerate as the competitive advantage of renewables starts having a significant impact on the bottom line.

Think about it. Five years from now, those who invested in solar and wind today will have ZERO fuel costs for that portion of their electricity needs, while those who did not invest in renewables today will still have to pay the cost of fuel for every kWh – and at higher prices than it is paying today. Add in the fact that renewable technologies five years from now will be even more efficient than today, and everyone will be clamoring for renewables. It is easy to see how the tipping point will be reached.

Or has it already been reached? China has just announced that it is constructing a 2 gigawatt solar power plant in Inner Mongolia, the largest solar plant in the world. That is on top of nearly 80 gigawatts of renewable energy that China has already built in recent years. When China has hundreds of gigawatts of fuel-free energy, what country will be able to compete when it must continually pay for fossil fuels to generate 90% of its electricity? More to the point, what country can afford to wait?

John Howley
Woodbridge, New Jersey

Pollution Economics 101

The oil industry is attacking the proposed climate change legislation that has passed the House and is on its way to the Senate. Here is a summary of the arguments from the American Petroleum Institute:

“The House climate change bill will increase costs of gasoline, diesel and aviation fuel, and drive jobs and production overseas, increasing greenhouse gas emissions (GHGs) in foreign countries that will have a new competitive advantage. Under the so-called ‘American Clean Energy and Security Act’, U.S. refiners will have to buy allowances, increasing their costs and giving a competitive advantage to non-US refiners. U.S. jobs will be lost and contrary to the bill’s intention, America will be less energy secure and more reliant on imports of gasoline and other refined products."

Wow. That’s a lot to swallow. Let’s take it step-by-step.

First, the proposed climate bill “will increase costs of gasoline, diesel and aviation fuel.”

Yes! Absolutely! Totally true! That is the entire point of the legislation! And it is a good thing!

Now before you think I am some kind of tree-hugging, left-leaning radical, let me tell you what the most famous conservative and libertarian economists say about the subject.

Alan Greenspan – the former Federal Reserve Chairman, acolyte of Ayn Rand, and self-described Libertarian – favors a hefty gasoline tax of at least $3 or more per gallon because, he says, we “need significantly higher gasoline prices to wean us off gasoline-powered motor vehicles.”

Milton Friedman agrees. Remember him? He was the Nobel-prize-winning economist from the University of Chicago who provided much of the intellectual firepower behind Reaganomics.

Why do these intellectual giants of conservative and libertarian economics favor taxes on gasoline? Simple. It has to do with something economists call “externalities.”

To understand externalities, consider a chemical company that offered to create more jobs and lower prices. There is just one catch. They will save the money to make this possible by dumping their toxic wastes into the pond in your backyard instead of disposing of the waste properly. In other words, they will make the cost of avoiding or cleaning up pollution “external” to the price of their product.

Obviously, that is not acceptable. Proper disposal of toxic waste is a cost of doing business and it should be factored into the price of the product – even if that means higher prices and/or fewer jobs.

The costs of avoiding or cleaning up pollution, however, are not always incurred by the producer or passed on to its customers. For example, coal-fired power plants have delivered relatively low-priced electricity for more than 100 years, but have also been dumping carbon dioxide and other greenhouse gases into the atmosphere. The same with petroleum products like gasoline and diesel fuel.

That is why Greenspan, Friedman, and many other conservative and libertarian economists have favored taxes on gasoline and other substances that cause pollution. Because the failure to account for the cost of pollution tends to distort many basic economic decisions such as pricing and competition. People think they are getting a good deal because their gasoline and electricity are relatively cheap. But they are really only imposing the cost of pollution on the environment.

By imposing a tax equal to the cost of avoiding or cleaning up the pollution, the market will make rational choices based on the real cost of the polluting product. And – this is very important – inventors and investors will have an incentive to develop cleaner alternatives that can be sold at a competitive price without the pollution tax.

So, the oil industry does not get any points for arguing that the climate change legislation will increase the price of gasoline, diesel fuel, and aviation fuel. That is what it is supposed to do.

BUT! The oil industry has a very legitimate point when it argues that the proposed legislation will “drive jobs and production overseas, increasing greenhouse gas emissions (GHGs) in foreign countries that will have a new competitive advantage.”

Anyone who has seen horrific pollution in developing countries knows what will happen to our environment if we simply drive up costs in the more developed economies. Without a comprehensive, global approach to pollution and climate change, we will just shift the externalities (costs of pollution) from our own backyards to backyards of very poor and politically less influential people in developing countries. And we will not be able to fence in the adverse effects.

Which leads to questions that have more to do with politics than economics. How do we get to a global solution on climate change? To what extent must we, in the more economically developed world, take the first step and make the first sacrifices? And to what extent should we refuse to budge until the rest of the world agrees to follow?

And you thought economics was the dismal science. More on the politics and diplomacy of a global climate change agreement in later posts.

John Howley
Tokyo, Japan

Distributed Generation? Try Distributed Storage.

One of the hot topics in renewable energy is "distributed generation." If every home and business would install some solar panels or small wind turbines to generate their own electricity, then any excess electricity could be sold back to the grid. Build enough small solar photovoltaic systems and windmills, the theory goes, and we won't have to build as many coal-fired power plants.

Those who support this concept make analogies to the internet, where the computing power and brainpower of numerous individuals and their personal computers can be harnessed via distributed computing and wikis and social networks into something really big and powerful.

Will the same concept work with “distributed generation” of electricity?

Not exactly.

Asa an energy efficiency measure, putting solar panels and wind turbines on individual facilities is a very good idea. It will reduce the need for that facility to draw power from the grid. But for large scale production of electricity and selling back to the grid, distributed generation does not provide the quality control and economies of scale necessary for the efficient generation and distribution of electricity. Let’s look at those two issues:

Power Quality. The internet works by allowing everyone to post whatever information they want, without any initial filter on quality. That won't work on the electric grid.

An efficient power distribution system requires that power quality (voltage, harmonics, etc.) be maintained at all times. That is difficult enough to accomplish with highly variable generation sources such as wind and solar. Every time the wind dies down or clouds start to cover the solar panels in one geographic area, the grid would have to find power elsewhere to maintain adequate voltage levels. That is a very difficult and complicated task when you are dealing with large wind and solar farms. It is even more difficult when the wind and solar power is being supplied by thousands, or tens of thousands, or hundreds of thousands of different sources, each with its own variations in power quality.

Economies of Scale. Building small windmills and solar photovoltaic arrays is not very cost efficient. The number of workers required per megawatt -- and the gasoline they will use going from one site to another -- makes this a very inefficient process. And what about maintenance? Can we really afford a renewable energy system that requires maintenance crews to take care of generation capacity that is located at hundreds or thousands of different locations?

Does that mean our electric power systems will continue to be centralized? Yes, but only on the generation side. On the storage side, distributed networks may offer an excellent solution to the problem of matching generation with demand.

The biggest inefficiency in our current electric power system is caused by the need to build excess generation capacity to meet peak demand. Many electric utilities have generators that are used less than 40% of the time. They exist solely to provide extra power when it is needed -- like from 7 am to 7 pm when every office building has its lights, computers, fax machines and HVAC systems turned on. And on that very hot August day when everyone turns on their incredibly inefficient window air-conditioning units at the same time.

Power companies must build enough generating capacity to handle the highest possible peak demand for electricity. When we operate substantially below peak capacity (like, almost every night of the year), that peak capacity goes wasted.

The real problem is not generation, but storage. If we could use that generating capacity at night and store the electricity for the next day, then we would have a truly efficient system.

Fran Lamparello, my good friend and business partner, sees the future of energy storage by looking at the past. Fran has spent his entire working life in different aspects of the energy industry, from designing building controls systems to running a home heating oil distribution business. He envisions a time in the near future when the electric utilities will address energy storage the same way the home heating oil industry did. At the customer's home or business.

By putting storage tanks at each customer's home or business, the oil companies turned their customers into a "distributed storage" network. It was a very efficient system. The distributor could buy home heating fuel during the off season when prices were low, and then store it until the winter. The distributor did not have to pay for storage of large fuel inventories because it could store that inventory at the customer's home or business. Properly sized, an oil tank at the home or business also reduced the number of trips that had to be made to deliver fuel to the customer.

Fran and I predict that you will see the same type of distributed storage system with electricity. As the efficiency and cost of fuel cells and other storage mechanisms for electricity improve, you will see utilities offering to put that storage mechanism on site at the customer's location. It may be in the form of electric cars as Tom Friedman predicts in his book "Hot, Flat, and Crowded," or it may be in the form of fuel cells.

The real value of the internet model for electricity is not “distributed generation.” It is “distributed storage.” Do not put a solar panel on every roof. Put a hydrogen fuel cell in every backyard or basement! Or an electric car in every garage!

John Howley
Manila, Philippines

Free Cooling?

A data center that requires no air-conditioning?

Google has figured out a way to do it. And it is so simple. Locate your data center in a place like Belgium where you can use outside air as “free cooling.”

The concept of “free cooling” – bringing in outside air to cool the inside of a building -- is not new. Building managers in the US and elsewhere have been doing it for decades. By controlling dampers to balance the mix of inside and outside air, building managers can use the “free” outside air to better control temperature, humidity, and air pressure inside buildings without spending money on electricity.

Actually, all of us have done this at one time or another. Like on a Fall day when the sun hitting our windows makes it a little too warm inside, even though the air outside is cool. Instead of turning on the air-conditioning, we just open the window a little. Same concept. “Free” cooling.

All Google has done is take this very basic principle of facility energy management and apply it to complex data centers by adding a dash of information technology and off-shoring. The equipment in data centers generate a lot of heat. By locating them in a cooler climate and carefully managing the amount of cool fresh air coming into the building, Google can control the temperature without needing electricity to generate air-conditioning.

Belgium does have a few days per year (maybe about 7) when the outside air temperature is not cold enough to cool a data center. Google will monitor the weather and outside temperatures. If it gets too warm in Belgium, Google will simply shut down some equipment there (which will reduce the amount of heat being generated inside the data center) and shift some of the work load to other data centers around the world until the weather in Belgium returns to normal.

Now, in complex buildings like data centers, the cooling is not entirely "free." First, you need a building management system to monitor operating conditions inside the building and external data such as weather. Then you need to use the brainpower of facilities engineers to manage the system. But that little bit of data analysis and brainpower leads to tremendous reductions in both energy costs and carbon emissions.

Pretty good results for essentially opening windows.

John Howley
Manila, Philippines