Energy Exchange

Solar, Wind Prompting Electricity Grid Innovation In California

By Jamie Fine / Published: March 4, 2013

In a February Wall Street Journal article (“California Girds for Electricity Woes”), reporter Rebecca Smith gives an alarmist and misleading account of California energy regulators’ efforts to secure a cleaner, less expensive, more reliable electricity grid.  Right now, California has plenty of power:  44 percent more generating capacity than it typically uses, including a considerable fossil fuel energy portfolio.  Renewables – large scale, rooftop solar, wind, and, increasingly, energy storage – make up almost 15 percent of the grid, a percentage that will more than double in the next decade.  These clean, innovative energy technologies are working to improve the system by reducing the need for fossil fuels.

The reality is that the grid is changing, driven by California’s quest to secure an environmentally safe and affordable electricity system. Increasing the amount of renewable energy on the grid will mean that more generation is variable; electricity output from solar and wind depends on sunshine or windiness, respectively.    Up to this point, California has met this challenge by backing up clean resources with fossil fuels.  But California’s ratepayers can’t afford to keep doing this, so instead of “girding for woe,” the CAISO and the CPUC met to proactively address our changing future – to move California towards cleaner, less expensive electric grid planning.

This new approach can increase California’s ability to rely on clean energy generation by building greater flexibility into the system – while giving more options to consumers.  Not only can customer-based (“demand-side”) clean energy technologies reduce reliance on polluting power plants, they are quite likely to be more reliable and are potentially more cost-effective.   Demand response, or the ability of customers to choose to save money by responding to a price or electronic signal from the grid operator in times of excess system demand, will be key to integrating large amounts of intermittent solar and wind without back-up fossil or storage.   In fact, during afternoon peak demand, where supply is extremely limited in its ability to serve load, the addition of virtual generation resulting from the participation of DR into the market will actually lower energy prices.

California has already installed a robust digital metering infrastructure – and it’s time to put these meters to work by enabling customers to participate in demand response and other demand-side programs.  Coupled with technologies that now allow for fast, reliable, automated ‘set-it-and-forget-it’ adjustments to electricity use, we can seamlessly integrate variable electricity resources, such as wind and solar, without disrupting energy users.  Customers can choose to become an energy resource instead of fossil fuel plants.  Read More »

Posted in California, Grid Modernization, Renewable Energy / Tagged , | Comments are closed

Do We Need Breakthroughs Or A Simple “Carbon Diet?”

By Jackie Roberts / Published: January 29, 2013

Over the weekend, The New Republic published an interview with President Obama, where he noted the following: “On climate change, it’s a daunting task. But we know what releases carbon into the atmosphere, and we have tools right now that would start scaling that back, although we’d still need some big technological breakthrough.”  How accurate is the call for breakthroughs and what do we really need?

First, let’s look at where we don’t need breakthroughs, but instead more deployment – energy efficiency, of course, being Exhibit A.  Creative financing, such as on-bill repayment (OBR), at scale can speed up deployment here.  Similarly, unlocking clean energy to reduce carbon emissions from the electricity sector hinges on affordability.  Wind energy is already competitive with fossil fuels, in large part because the cost of wind energy has come down around 65 percent in the last 20 years, according to the National Renewable Energy Laboratory (yes, declining natural gas prices provide new competition, but EIA projects that natural gas prices will begin to increase in 2018, and wind power purchase agreements are signed for around 20 years at a fixed price).  Residential solar is verging on the tipping point for “grid parity,” or the point at which a source of power becomes cost competitive with other sources.  Bell Labs first introduced solar cells in the 1950s.  Environment California’s Research & Policy Center recently reported that they expect solar to reach grid parity in mid-2014 to 2016 at the outset. 

Of course, progress in lowering costs and increasing efficiency comes on the heels of many smaller innovations.  For example, innovations in materials science underlie many of the most promising technology evolutions, such as the role of carbon fiber as a basic raw material for wind turbine blades or the use of Gallium Arsenide wafers to reduce manufacturing costs for solar cells.  But, nonetheless, given our country’s strength in materials science (think of our leadership with companies like Dow, Dupont and 3M), such innovations seem imminently feasible and in my mind don’t require a major “breakthrough.” 

We’ve also delivered numerous hardware and software innovations to transform our electric grid into a more resilient, smart, “green” grid.  Even carbon capture and storage, to some a high stakes technology bet, is actually just a new configuration or application of engineering equipment we have installed and used for decades, such as heat exchangers, chillers, absorbers, pumps and compressors.

Where would I wave a wand for a breakthrough?  A cheap, reliable and efficient energy storage system wouldn’t hurt, one that replaces the clunky compressed air systems or the size limitations of batteries.  But, overall, the declining cost curves for clean energy solutions, due to innovations large and small, tell us an important story:  solving the climate crises is not unaffordable or necessarily a drag on our recovering economy as many fear.  It is certainly not infeasible nor hinging on that one great technological breakthrough. 

We need non-technological breakthroughs.  Like the new head of the World Bank, Dr. Jim Kim, who in Davos described wanting to make “everything the Bank does aligned with the effort to slow down climate change.”  And it is certainly cheaper than repeating the $50 billion recovery price tags that we might face time and again as Superstorm Sandy becomes the new normal. 

Americans love the quick technical fix.  But, today we have affordable answers right in front of us, it’s the willpower we may be lacking.  So, just as most of us believe that rather than wait for a dieting breakthrough, the best answer to weight loss is reduced consumption and more exercise – we need to go on a carbon diet.  Our economic and environmental health depend on it.

Posted in Climate, Demand Response, Energy Efficiency, Grid Modernization, On-bill repayment, Washington, DC / Comments are closed

A Tale Of Two IPOs

By Brad Copithorne / Published: December 13, 2012

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

Pecan Street To Be Recognized At GridWeek 2012

By Marita Mirzatuny / Published: September 25, 2012

Next week, thousands will descend on Washington DC for GridWeek, the “only international conference focused on smart grid.” Now in its 6th year, GridWeek “attracts the complete diversity of global electric-industry stakeholders to explore Smart Grid’s impact on the economy, utility infrastructure, consumers and the environment.”

The theme for this year is centered on deriving value for all stakeholders from an increased complexity, as “grid-modernization and smart grid efforts provide the energy industry with more information, a broader system view, and more efficiency and control.” Three key elements will be explored: stakeholder value, managing complexity and smart energy policy. EDF Economist Jamie Fine will be speaking on the “New Revenue Streams for Utilities” and “Smart Grid’s Role in New Air Quality Requirements” panel discussions at GridWeek.

At the center of all of these themes is Austin’s own Pecan Street Inc. (Pecan Street). Which is why it is no surprise that it is being recognized by the GridWeek Advisory Board for “significant achievements in “Extracting Smart Grid Value” — for all stakeholders, including utilities, consumers and society at large.” Also recognized are the Smart Grid Interoperability Panel (SGIP) and Green Button, a “voluntary effort and the result of a White House call to action: ‘provide electricity customers with easy access to their energy usage data in a consumer-friendly and computer-friendly format via a “Green Button” on electric utilities’ website.’”  Read More »

Posted in Grid Modernization, Washington, DC / Comments are closed

Natural Gas – A Briefing Paper For Candidates

By Eric Pooley / Published: August 10, 2012

To download a copy of this briefing paper, please click here.

Hydraulic fracturing and horizontal drilling, processes used to extract natural gas from underground shale formations, have unlocked vast new domestic reserves — an unexpected abundance that has overturned many of America’s assumptions about energy. Every major-party candidate for public office in 2012, Republican or Democrat, must understand this new energy reality. And though each candidate’s position on natural gas development is likely to begin with a recognition of shale gas’s economic and energy security benefits, mastery of the issue requires a deeper level of understanding.  Shale gas also brings with it a set of serious risks to public health and the environment — including impacts to water, air, land, local communities and the earth’s climate. At the local level in areas where shale gas production is intense, legitimate concerns over health and environmental impacts are shared by Republican, Democratic, and independent voters alike. No candidate’s position on natural gas can be considered complete unless it addresses these impacts.

In 2001, shale gas accounted for just 2% of America’s natural gas supply.  Today, it accounts for more than 30% — while more than 90% of all new oil and gas wells being drilled in the U.S. make use of hydraulic fracturing. As unconventional natural gas production spreads into populous regions that are not accustomed to intensive industrial activity, its impacts have made it the object of intense local opposition, as manifested in the July 28th “Stop the Frack Attack” rally in Washington D.C and others like it in state capitals around the country. The environmental and public health concerns of local communities must be addressed if natural gas companies are to maintain their social license to operate.

Economic Benefits

While a majority of Americans remain unfamiliar with hydraulic fracturing, or “fracking,” according to a recent University of Texas poll, many will certainly applaud the economic benefits of low-cost natural gas. The natural gas revolution is driving: 

  • Job creation across the value chain, with rising demand for technical and professional services, for steel, pipelines and storage facilities, and for all the ancillary goods and services that arise in support of a rapidly growing industry. 
  • An unexpected expansion in the American chemical industry, with Dow and DuPont now building new plants close to shale formations. “If you had told me 10 years ago I’d be standing up on this podium making this announcement [about Dow’s $4 billion investment in four new Texas chemical plants], I would not have believed you,” Dow CEO Andrew Liveris said in April. “The cost of energy, the cost of feedstocks … was pricing the United States out of the market,” he said. But the shale “miracle” changed that. 
  • A revival in U.S steelmaking and other manufacturing industries. Nucor, which uses natural gas to make steel, is building a $750-million facility in Louisiana, just eight years after shutting down a similar plant in the same state. 
  • A new sense of the potential for U.S. energy independence and energy security.

Environmental Benefits

Increased development of shale gas could yield substantial environmental and public health benefits while helping the U.S. energy infrastructure become cleaner and less carbon-intensive. This highly desirable outcome will only be achieved, however, if the resource is developed responsibly. The potential exists because natural gas: 

  • Produces only about half the carbon dioxide of coal when burned.
  • Produces about a third as much of the smog-forming nitrogen oxides that come from burning coal.
  • Produces almost none of the mercury and sulfur dioxides that come from burning coal or oil.  

For this reason, fueling power plants with natural gas instead of coal can dramatically cut conventional air pollution, can help reduce greenhouse gas emissions from the power sector and could help turn the tide against mountaintop removal mining and other environmentally disastrous industry practices. And because natural gas-fired power plants can cycle up quickly, they can be a nimble enabler of intermittent renewable energy sources in combination with demand response and emerging large-scale energy storage technologies.

Critically, if U.S. industry and regulators are successful in measuring and reducing methane pollution, which undermines natural gas’ role as a lower carbon alternative to coal and oil, the shale gas revolution can also bring a reduction in short-term radiative forcing — the driver of global climate change — over the next several decades. Leak reduction will determine how much of a role natural gas can play in a clean, low carbon future.

In short, natural gas could be a win-win  benefiting both the economy and the environment — if we do it the right way. The right way means putting tough rules and mandatory environmental safeguards in place that protect communities and reduce methane pollution. There is no question that domestic unconventional gas supplies are leading to coal-fired power plants being retired.  The public recognizes this benefit, but the jury is still out on whether shale resources can be produced responsibly. It’s no simple task to strike a balance between public safety and the development of this crucial energy resource, but it is essential that we do so.  Americans deserve assurance that the economic, environmental and energy security benefits of shale gas development will be realized without sacrificing their health, safety, or the protection of the environment.

Clearly there are environmentally sensitive areas that should be off limits to natural gas development. And just as clearly there are some areas where intensive development will occur. Environmental Defense Fund is working with partners from academia, civil society, and industry to identify and minimize the impacts from the full range of gas development activities. Horizontal drilling and hydraulic fracturing attract significant press attention, but the issues of gas production are much broader than that.

Specific Areas of Concern

EDF sees five areas in which strong rulemaking is necessary: 

  • Mandating greater transparency in industry operations. Having good data is a prerequisite to understanding and mitigating risks, and it’s the first step toward winning back a badly damaged public trust.  Regulators should require, and companies should embrace, disclosure policies that mandate reporting of not only the chemicals used in hydraulic fracturing, but also chemicals used in drilling and operating wells – as Ohio Governor John Kasich has advocated.  Transparency should also be brought to other aspects of industry operations, such as detailed reporting of air emissions, chemical characterization of waste streams and tracking and reporting of water use and waste disposition.  Company compliance histories should also be catalogued and reported, so companies with good records can get the credit they deserve and bad actors can be identified and pushed to improve performance. 
  • Modernizing rules for well construction and operation. Poor well construction and operation can lead to groundwater contamination and to blowouts that can endanger lives and foul the surface environment. In response, EDF is working with regulators and key stakeholders to strengthen rules for proper construction and operation of hydraulically fractured wells. While stronger regulatory oversight of well construction is needed, no one should try to suggest that hydraulic fracturing itself is risk free.  Both aspects of well development need strong oversight.
  • Strengthening regulations for waste and water management.  Poor handling, storage and disposal of production fluids and other wastes is a major issue; chemical spillage is the leading cause of groundwater contamination from gas development activities. In response, EDF is pressing for measures to reduce spills, improve the use and handling of chemicals, and assure proper disposal (or recycling) of produced water.  As mentioned above, a key missing ingredient here is better data on the chemical composition of waste streams.  To be confident that handling, treatment and disposal practices are sufficient, authorities must know what substances are being handled. Finally, headline-grabbing reports of earthquakes connected to shale gas development have been linked to the waste disposal method known as deep well injection, not to hydraulic fracturing itself. This issue points to the need for improved seismic analysis prior to permitting of deep injection wells.  
  • Improving regulations to protect local and regional air quality. Air emissions resulting from the production, storage, processing, and transportation of natural gas can threaten public health. Leaks and routine venting during the extraction, processing and transportation of natural gas result in emissions of greenhouse gases and, depending on the local composition of unprocessed gas, other pollutants that contribute to locally- and regionally-elevated air pollution.  In 2009, an SMU study estimated that the combined amounts of volatile organic compounds (VOC) and nitrogen oxide (NOx) emissions from oil and natural gas production in the Barnett Shale of North Texas were comparable to amounts of those emissions from the roughly 4 million cars and trucks in the adjoining Dallas Fort-Worth metro area. Fortunately, widely available and cost-effective remedies exist: repairing worn equipment, using “green” well completion techniques and eliminating venting are just a few. In the past five years, for example, Southwestern Energy says it has cut the cost of capturing stray emissions from $20,000 a well to close to zero. The company is capturing an average of 16 million cubic feet of gas that would otherwise have been released or flared. Southwestern also uses special pop-off valves to make sure natural gas is not released into the air from well casings. If pressure causes a valve to open, the gas is captured in a closed loop that returns it to the system, saving the resource. These systems cost just $600 to $1200 a piece. 
  • Developing innovative strategies to reduce community impacts. The cumulative impact of infrastructure development, traffic, noise, lights, and the like can overwhelm communities and intrude on sensitive ecosystems and habitats; none of this is easily addressed through conventional regulatory approaches. Instead, EDF recommends that states and local governments bring together stakeholders for scientifically based, bottom-up planning processes designed to address unique local needs. Likewise, the right of local communities to regulate the location of gas development through local zoning ordinances must be preserved.  Gas operations shouldn’t receive special carve-outs from traditional local powers that other industrial activities must comply with. 

President Obama has voiced his commitment to domestic energy production through safe and responsible natural gas development, declaring that “America will develop this resource without putting the health and safety of our citizens at risk.” EDF would like to see Governor Romney and other candidates across the land call for the same careful balance. Far from being an example of regulation that chokes economic growth, strong oversight of natural gas development is necessary to ensure the sector’s continued growth, by avoiding the public backlash that could slow or even derail natural gas development.  Read More »

Posted in Methane, Natural Gas, Washington, DC / Tagged , , | Read 11 Responses

Postcard From Mark Brownstein In Israel- The Negev Desert

By Mark Brownstein / Published: June 21, 2012

High tech entrepreneurs here repeatedly tell you that Israel is a small market, so if you hope to have your idea become a commercial success, from the start it must be designed and developed with other countries and cultures in mind.  What is true for software is also true for innovative ideas for sustainable living.  The Jacob Blaustein Institute for Desert Research, a program of the Ben-Gurion University of the Negev was established in 1974 to facilitate the sustainable development of the Negev desert – an area comprising 60% of Israel’s total land mass – but quickly established itself as one of the world’s leading research institutions on the challenges of living sustainably on the world’s many dry lands.  Professor Pedro Berliner, the director of the Institute tells the story of how they discovered that planting acacia trees in close proximity to crops like wheat or maize produces better results for both trees and crop than if planted apart.  The idea was piloted in Kenya and is now being brought to Botswana, where the Blaustein Institute hopes to develop a permanent presence in partnership with one of Botswana’s existing universities.  This is a good reminder that simple, low-tech solutions can often make a big difference to both people and the planet.

Credit: Zazzle

Of course, when it comes to energy, things are rarely ever simple.  Professor David Faiman, Chair of the Department of Solar Energy & Environmental Physics at the Blaustein Institute, spent the rest of the morning explaining the challenges of bringing solar energy to scale.  For over 30 years, Dr. Faiman has pioneered research into concentrated solar, and a commercial product based on his research, manufactured and marketed by Zenith Solar, shows tremendous promise for raising efficiency, lowering cost, and greatly reducing the physical footprint of commercially meaningful quantities of solar electricity.  Dr. Faiman would surely be both embarrassed and amused to be called a solar energy rock star, but I’ll call him that all the same. 

Equally exciting is the work Dr. Faiman has been doing to conceptualize what would be required to transition Israel’s electric grid to renewable energy.  Dr. Faiman, like many Israelis I’ve met on this trip, is both a visionary and a realist.  On the one hand, he believes it is possible for Israel to get to 90 percent renewable energy based on solar, energy storage, and natural gas-fired generation, but on the other hand, he believes it could take 60 years to get there.  His primary point is that Israel needs to start the transition now for there to be any hope of making even a 60 year deadline.  This means phasing out coal (which Israel continues to depend on quite a bit) and staying away from nuclear, both of which are too inflexible for a renewable-centric world.  Investments in natural-gas fired generation might be ok, as some of these facilities would likely be required to recharge the energy storage systems that would perform the lion’s share of the work in-filling where solar output is unavailable or varies.  His overarching concern is that Israel will continue to make short-term decisions that lead to the construction of conventional energy infrastructure, such as new coal plants (a proposal for a new plant was only narrowly defeated two years ago)  that all but lock the nation into a long-term future of fossil fuel dependence and high carbon pollution.

After a short visit to the research facility of Brightsource, a concentrating solar energy provider active in the United States, we began our hour and a half journey back to Tel Aviv.  As the bus rumbled along, I reflected on the irony that in a land of all this energy technology innovation, so little of it is actually deployed in Israel.  Indeed, practically the only place you see solar photovoltaic panels deployed in Israel are on the ramshackle homes of the Bedouin, who for a variety of reasons, are not otherwise connected to Israel’s electric grid.  Tel Aviv may be a sophisticated, high tech capital, but it is the agrarian, socially-traditional Bedouin, who is light years ahead when it comes to embracing advanced energy technology.

I’ve now asked several Israelis why this is, and two answers stick out in my mind.  The first is that Israel is a place where everyone focuses on the near term, because the future is so unpredictable.  Random rocket attacks (a rocket slammed into Beersheva this morning about a half hour after we checked out of our hotel there) and sudden outbreaks of serious fighting certainly contribute to a “live for this moment” attitude.   The second answer is tied to the first.  As one Israeli explained to me, after the Yom Kippur War in 1973, Israel, like the rest of the world suffered the consequences of high oil prices and invested in renewable energy, but as oil prices fell, the government came to view renewable deployment as expensive and unnecessary.   The recent experience of the oil embargo notwithstanding, the energy minister at the time concluded that Israel’s energy requirements will always be so small in the general scheme of things that even in times of global shortage there will always be fossil fuels available somewhere, albeit at a price.  In short, Israel did not have an energy supply problem, it had a money problem, and the only challenge was to find the cheapest of available options.

Fast forward to today.  The Egyptian natural gas pipeline that carried 40 percent of Israel’s natural gas supply was blown up this spring.  And, what is the response?  The Israel Electric Company simply switched to purchasing fuel oil and coal while it waits for the nation’s significant new offshore gas reserves to come on line.  A triumph for short term thinking in a nation that sells its visionary clean energy technologies to the rest of the world.

Posted in Natural Gas / Read 1 Response