Monthly Archives: December 2012

“Promised Land”: A Love Letter To Longmont

Source: The Daily Digger

Promised Land is not a movie about “fracking.” You will be sorely disappointed if you go to the theatre expecting to see lurid visuals of sinister-looking waste water ponds, plumes of diesel soot and road dust, or bucolic landscapes scarred by roads and pipes. You will see none of that.

Promised Land is a movie about what happens before the drilling rigs and man camps rumble into town. It is the story of a rural community, proud but poor, struggling to reconcile itself with an enormous economic opportunity that comes at an enormous cost.

And, despite what you may have read in the blogosphere, it is not reflexively anti-natural gas. The movie actually does a fairly decent job of presenting all sides of the shale gas development debate. I was intrigued to read a Pittsburgh Post-Gazette article from this past June where John Krasinski, a star in the film and co-author of the screenplay, revealed that he originally conceived the story as a community facing major wind farm development. Krasinski made the switch because natural gas development is more topical, and more visceral, than wind development.  His primary point in making the film was to explore what happens when money and power come to a rural community that has neither.

I suspect the reason why the natural gas industry is so on edge about this movie is because the plot device which propels the story forward is a community referendum on whether development will be allowed within its borders. This is exactly the situation the industry faces in Longmont, Colorado, and to the same or similar degree in many other communities around the country.

The central question the movie poses is whether any amount of potential future prosperity is worth sacrificing a pastoral way of life that has defined a community for generations. Worry over polluted water is part of what fuels the townspeople’s anxiety over what to do, but it is far from their only concern.

Does a community have the right to regulate or prohibit industrial development in its borders?  It’s a tricky legal question currently playing out in Colorado and elsewhere around the country, and there is no simple answer.

One thing is certain: the natural gas industry must be forthcoming and honest about the risks that unconventional oil and gas development create, proactive in taking the steps necessary to minimize those risks, and willing to collect and publicly disclose the data necessary to enable communities to evaluate for themselves whether their health and environment are being fully protected. Many people distrust whether industry can develop shale gas safely, and it’s understandable why they are concerned – especially given recent media reports about industry hiding many of the chemicals they use behind questionable “trade secret” claims.  It appears that even the most basic steps toward greater transparency are grudging and incomplete.

In Promised Land, citizens are repeatedly lied to with predictable results. In real life, the natural gas industry has the ability to write a different story through the actions it takes to address community concerns, measure performance and disclose results. That’s a story I want to see.

Posted in Natural Gas / Tagged , | Read 4 Responses

Don’t Walk Away From Clean Energy Research & Development

“The changing energy landscape and the resulting trade opportunities it affords will continue to provide consumers with more choices, more value, more wealth and more good jobs.” – ExxonMobil Energy Outlook, 12/12/12

I agree with Exxon.

We are moving closer to energy independence. But, even as the U.S. is facing a boom in natural gas, the only way we’ll reach our goal is if we don’t shortchange alternative energy research and development.  Changing the energy landscape must include rapid advances in zero carbon energy technologies, for very good reasons that are in danger of being overlooked in the fiscal cliff negotiations.

First, despite its great promise, we should remember that important questions remain about the health and environmental impacts of natural gas operations. The extraction and distribution of natural gas can result in the release of methane – the main ingredient in natural gas and a greenhouse gas many times more potent than carbon dioxide.  Due to the many possible escape routes for methane into the atmosphere, the true carbon footprint of natural gas is uncertain right now, and we need to diversify our energy portfolio and avoid getting locked into an over-reliance on one energy source.

Second, micro-grids will be increasingly important in a world with more storms, flooding, and other “weird weather.” We must be prepared for that scenario. Alternative energy and smart grid solutions can be more resilient, if designed properly. The current model of a large, centralized energy plant is increasingly problematic.

Third, alternative energy offers enormous potential for economic development, exports, and even savings on energy bills. As just one example, look at the Department of Energy’s investments into fuel cells.  According to the Clean Energy Patent Growth Index, more clean energy patents are associated with fuel cell technologies than with any other clean energy technology, with over 950 fuel cell patents issued in 2011. Fuel cell durability has doubled, expensive platinum content has been reduced by a factor of five, and the cost of fuel cells has fallen 80% since 2002. With DOE support, 36 commercial technologies have entered the global market as of this past fall.

These advances can benefit communities across the country.  Tulare, California invested in molten carbonate fuel cells for its wastewater treatment plant; this plant now produces about 45% of the electricity needed to run the plant which translates into a savings of more than $1 million per year (not to mention 6,200 tons less CO2 per year).  With over 16,500 wastewater treatment plants in the U.S., communities could find enormous savings and build more resilience — if access to other fuel source is interrupted or electricity goes down, the plant can continue to partially operate and provide critical services to the community.

Talk about more choices and more value for communities, and more wealth and more good jobs for suppliers of fuel cells.

Posted in Renewable Energy, Washington, DC / Read 1 Response

More evidence emerges that California’s Low Carbon Fuel Standard is a winning strategy and oil industry cost estimates are full of holes

California drivers and policy makers should be breathing an extra sigh of relief this week with the release of a new study by the California Electric Transportation Coalition (CalETC). The study, an evaluation of electricity use within the state’s Low Carbon Fuel Standard (LCFS), clearly shows that electrification benefits are on the horizon and oil industry funded analyses have yet again over-dramatized the difficulty of meeting one of the state’s landmark environmental laws.

In the study, CalETC shows that using electric passenger vehicles (both battery electric and plug-in hybrid vehicles), and electric off-road equipment (forklifts and trains), has the potential to generate a significant amount of creditable greenhouse gas reductions in the LCFS.

According to CalETC, three electrification solutions can cut up to 4 million tons of greenhouse gases per year by the year 2020, a significant portion of the total reductions required under the law. What’s more, since electricity as a fuel source costs one to two dollars per equivalent gallon less than gas and diesel, once the vehicles are on the roads and rails, the LCFS can actually save drivers a significant amount of money at the pump.

Prior industry reports on the LCFS like the one funded by the Western States Petroleum Association have lamented that compliance with the LCFS isn’t possible without oil companies going out of business or charging consumers significantly more at the pump. However, a plain reading of oil company cost analyses shows they purposely avoid consideration of the benefits of widespread deployment of alternative electric vehicles (EVs) in their research.

Not the first, probably not the last

Of course, this isn’t the first time industry cost estimates of environmental regulations, and specifically the LCFS, have emerged as highly suspect. For example, in September 2012, the non-partisan business group Environmental Entrepreneurs (E2) published a report showing how well positioned the US biofuel industry is to meet demand under the California standard – a direct counterpoint to recent oil industry estimates that say biofuels simply aren’t available.

In that E2 report, researchers found that 1.6 to 2.6 billion gallons of advanced biofuel will likely be produced in 2015, with increasing volumes thereafter, meaning LCFS compliance can be achieved solely through blending low carbon biofuels in the short, medium, and potentially long term. This blending will allow for compliance over and above what the electrification opportunities provide.

Similarly, for natural gas vehicles, the industry modeling of compliance scenarios assumes natural gas technologies won’t be sufficiently ready for widespread consumer use to be counted as a legitimate LCFS compliance opportunity. However, consistently low natural gas prices along with recent investments and R&D from companies like Chesapeake Energy Corp., Clean Energy, General Electric, Whirlpool and 3M have all been aimed at increasing the availability of natural gas as a fuel for passenger vehicles and heavy duty trucks.

In yet another analysis of LCFS compliance, it was found that “significant inaccuracies and faulty assumptions” led to the results of oil industry funded studies.

A first of its kind strategy whose time has come

California’s first-of-its-kind LCFS strategy for cutting climate change pollution from transportation fuel is designed to work alongside the state’s landmark cap-and-trade regulation between now and the year 2020, facilitating the transition of California’s transportation sector towards one which is lower carbon and is powered from an array of resources.

As Elisabeth Brinton, head of the Sacramento Municipal Utility District’s retail business, so aptly puts it, the California LCFS is “a great idea whose time has come.”

For more information about entities that support the California LCFS, (read here).

Posted in General / Comments are closed

A Tale Of Two IPOs

This morning two energy initial public offerings (IPOs) made their debut.  One of them was green and one of them was brown.  Unfortunately, the mainstream media missed the boat by characterizing the brown company as successful and the green one as a miss. We don’t see it that way.

The brown company is PBF Energy, a Blackstone-backed rollup of three refiners that were divested by Valero and Sunoco.  The company, like many refiners, is having its day in the sun as refining margins are currently wide due to technical market issues relating to the relative prices of Brent and WTI crudes.  The bottom line, however, is that demand for gasoline and diesel is unlikely to grow as CAFE fuel economy standards continue to tighten.

The second company, SolarCity, has been posting over 100% annual growth in solar installations since 2009.  Additionally, the company has been a leader in residential energy efficiency and EV charging stations, and has even begun to roll out a residential energy storage solution.

Unfortunately, SolarCity’s business model requires some complex accounting that ultimately hurt their valuation.  The vast majority of their solar photovoltaic (PV) installations are executed as leases or similar structures to take advantage of various tax incentives.  This reduces the accountants’ formulation of revenue, and also makes the business unprofitable.  As an example, imagine a solar company can construct a solar system for $16k and sell it for $20k, with $3k of overhead.  They would result in $20k of revenue, $4k of gross profit and $1k of net income.  Do that enough times and you have a pretty good business.

As a lease, however, they only recognize revenue as it is received through annual lease payments, which might be around $1500.  Assuming the $3k of overhead remains, then the company would post a loss of $1500 in year one.  Economically, this might be the same or better business, but through the eyes of an accountant, this is a harder pill to swallow as the profits must be realized over the long term of the lease.

SolarCity is a new concept for the public market: it is essentially the first high-growth cleantech company that relies on an equipment leasing model. Despite projected revenue growth, the solar IPO struggled to generate demand due to this complex accounting and priced well below the expected range. On the other hand, PBF priced at the middle of its range, and sold more shares than originally expected. Longer term, however, my money would be on the company with the meteoric growth rate.  So far today, the market seems to agree.  SolarCity is up 48% from its pricing while PBF Energy has gained less than 1%.

Posted in General / Comments are closed

EDF Energy Innovation Series Feature #17: Electric Vehicle Charging From Evatran

Throughout 2012, EDF’s Energy Innovation Series will highlight around 20 innovations across a broad range of energy categories, including smart grid and renewable energy technologies, energy efficiency financing and progressive utilities, to name a few. This series will demonstrate that cost-effective, clean energy solutions are available now and imperative to lowering our dependence on fossil fuels.

Find more information on this featured innovation here.

In the last few years, the first wave of electric vehicles (EVs) has been introduced in the U.S., marking the most significant technology shift in the auto industry’s 100-plus year history.  The Chevy Volt and Nissan Leaf have received the most attention, but Ford and Toyota also have models on the market and nearly every major auto manufacturer has at least one partial- or all-electric model in the works. In other words, EVs have arrived.

Source: Evatran

All EVs can plug directly into a regular 120-volt outlet. But for faster charges, a crop of 240-volt (240v) charging stations are available at Lowe’s, Home Depot and other retailers.  Some companies, like Virginia-based Evatran, are taking charging to a whole new level, introducing technologies pioneered in the consumer electronic industry into the garage. The company’s Plugless Power EV charging system takes the plug out of EVs, making the “refueling” process as easy as parking your car.

“Our philosophy is based on ease and simplicity,” said Kevin Beck, vice president of business development and sales at Evatran.  “EVs are very simple to own and maintain.  Developing the plugging habit is one of the only hassles, and wireless charging is a game changing technology that will make the EV transition even easier.”

The Plugless Power system consists of two parts: a floor sensor connected to a wall-mounted 240v charger and hardware installed under the EV.  When the car parks over the sensor, the system uses inductive charging to refuel the car battery – no plugs necessary. The charging time varies by car model, but the Plugless Power system will provide a full charge in the same amount of time as plugging it in.

Wireless, or inductive, charging is already available for some consumer electronic products.  Several companies make smart phone cases that allow users to simply place their phones on a “charging mat” instead of searching for a charging cable.  EV batteries are a lot bigger, but the technology for Plugless Power is similar.

Inductive charging has its tradeoffs. The process isn’t as efficient as wired charging, meaning that not all the energy that makes it to the wall charger makes it into the car battery. Evatran executives acknowledge that the process isn’t perfect, but the company has already made significant improvements in efficiency and has made it a focal point of their research and development.

EVs provide a remarkable carbon benefit over gasoline.  Even an inefficient charging system using 100 percent coal-fired electricity is better for the environment than an inefficient gasoline engine.

Currently, the Plugless Power system will be installed after market by local and certified service centers, but true to its mission of simplicity, Evatran is working with EV manufacturers to provide the feature as an option when customers buy the car, like a navigation system, leather seats or tinted windows.  “The goal is to install our system into EVs before customers drive them off the lot.”

Posted in Electric Vehicles, Energy Innovation / Comments are closed

A Red Flag On Disclosure Of Hydraulic Fracturing Chemicals

It’s not often that a new regulatory idea becomes so popular that one or more states per month climb on the bandwagon. But that is precisely what has happened with the push to disclose which chemicals are pumped into the ground to stimulate oil and natural gas production during the process known as hydraulic fracturing, or “fracking.”

A year ago, only three states (Arkansas, Montana and Wyoming) required oil and gas producers to tell the public what chemicals they were using. Two other states (Colorado and Texas) were actively developing such rules. Today, just twelve months later, statutes or regulations mandating “frack” chemical disclosure are on the books in no fewer than 18 states, and proposals are pending or under consideration in several others.

FracFocus, an online registry that compiles information on hydraulic fracturing chemicals both for states where disclosure is voluntary and required, has been up and running for just 20 months, but already it houses approximately 800,000 records that include ingredients data. As of December 5, 2012, this data represented 33,606 wells. The amount of information on the site continues to grow rapidly.

It is impressive that so much information has been made available in such a short time. Still, people have begun to wonder whether the disclosure rules are accomplishing what was intended. The question is important because rules that aren’t working need to be changed. A good regulatory system is based on a process of continual improvement, not a naive idea that the rulebook can be written in a way that will never need changing.

Unfortunately, judging from early press reports, there are quite a few bugs in the system. To be fair, the reporting requirements are quite new and still being implemented — and analysis of the data has barely begun. But  problems are emerging. The issue receiving the most media attention is the sheer number of trade secret claims. Read More »

Posted in General, Natural Gas, Texas / Read 5 Responses