Renewable Energy Generation: “Change is not a destination, just as hope is not a strategy,” a lesson exported from Detroit
05 April 2011
Perspective by The Townsend Company
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| RPS policies as of March 2011. Source: DSIRE. Click to enlarge. |
On May 25, 1961 President John F Kennedy, in a special joint session of Congress, declared, “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.” A very clear, time-bound, one nation goal. Fifty years later, the USA is faced with a similar challenge, energy independency and climatic change.
On December 16, 2010 the US DOE Energy Information Agency (EIA) published a report projecting that renewable energy will still only constitute 12 percent of the USA’s energy sources by 2035. In contrast, the Renewable Portfolio Standards (RPS) program adopted by 29 states has varying goals from 10-40 percent renewable energy generation, deployed anywhere from 2013 to 2030. There is no one goal to rally around. Instead there is a state-by-state voluntary program, influenced by private sector interests, with differing goals, means of execution and time frames.
Imagine if JFK had proposed this as a solution for landing a man on the moon to American and the probability of the results of that effort. In contrast,
- China’s 12th five-year plan, March 5, 2011, requires 11.4 percent of energy consumption to come from non fossil fuels [earlier post]
- In France, renewable energy consumption will be 20 percent by 2020
- In Germany, renewable electricity generation will be 35 percent by 2020, and 50 percent by 2050
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| EIA projections of renewables penetration. Source: EIA. Click to enlarge. |
These three leading international energy markets illustrate how progress is being made in other major energy-intensive nations, but they are not alone. Globally, more than 100 nations have established renewable energy targets.
Closer to home, the federal fuel economy standards require the average fleet fuel economy of OEMs that sell vehicles in the USA to be 35.5 mpg by 2016. Why then do we not have the same clarity of goal for the electricity generating industry here in the USA?
Would a CAFE-type standard for renewable energy generation companies in the USA not also be appropriate? Or an RPS program that is non-voluntary with a common goal and timing objective such as those found in China, Germany or France?
The automotive industry is living proof that private companies will rarely change their behaviors without a significant stimulus to that change, and furthermore one that needs to be mandated. The 70’s oil crisis came and went; the loss of USA domestic market share occurred and a recent bankruptcy wave that hit the industry. None of these have led to a fundamental shift to the industry’s approach to propulsion. As private companies, automobile manufacturers look for the lowest cost means of getting from A to B and the premiums that they can charge for getting from A to B faster.
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| Power plant capital costs. Source: EIA. Click to enlarge. |
Without the CAFE standard and stimulus monies to promote green vehicle tech, the industry would not be headed toward a greener horizon. The same can be said for the electricity companies that generate power in the USA. Their business model dictates that they pursue the lowest-cost power source and charge the highest premiums they can for the product in an open, but federally controlled, market. These companies have sunk costs invested in coal, gas and oil plants and are content in maximizing the return on these investments. Besides the RPS program that only has individual state influence, there is no motive to change and pursue renewable energy sources.
Imagine the change to this outlook if these companies were required to provide 20 percent of the power they generated from an alternative energy source in order to provide any power to the grid. The market would focus, consolidate and find some very innovative ways to produce low-cost clean energy.
Another misconception is that the USA public will not tolerate a premium for clean electricity. In examining the latest EIA data for average retail prices of electricity, it shows the average retail price in the USA is 9.74 cents/kWh, with a range from 29.20 cents/ kWh in Hawaii to 5.61 cents/kWh in West Virginia—a 23.59 cents/ kWh or 240% swing between states. Even ruling Hawaii out as an outlier, the cost of electricity in Connecticut was 17.79 cents/ kWh, still supporting a 104 percent swing in the price of electricity per state.
It could be argued that free market mechanisms to lower electricity prices are not optimal and are very state dependent, which in turn raises the question of the efficiency of the current free market mechanism when a national grid exists. Even with the implementation of the smart grid it seems unlikely that we will all be able to buy our power from West Virginia. In contrast, imagine the public outcry if the cost of gasoline varied from $3.00 in West Virginia to $6.12 in Connecticut. (Gasoline prices varied for the week of 3/14 from $3.95 in California to $3.43 in Texas, a 15% swing.) The USA consumer pays premiums for its electricity today, dependent on where they live, making the notion of paying a premium for clean electricity not that far of a stretch for the market. However, what sort of premium would be acceptable?
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| US energy consumption by energy source. Source: EIA. Click to enlarge. |
If we consider the leading sources of renewable energy; hydro, wood, biofuels, wind, biomass, geothermal and solar, four sources fall into the clean energy category of non-emissions-generating: hydro, wind, geothermal and solar. Two are geographically constrained (hydro and geothermal), placing wind and solar as the front running mass renewable energy choices.
Per the EIA, only natural gas is now more competitive than wind generated electricity in terms of cost competitiveness based on capital cost per kilowatt. So is the notion of a premium for clean electricity misrepresented? Hard economics plays a part here as we do not have a clean sheet of paper from which to construct and implement a new electricity generator infrastructure from. The existing capital deployed in power plants is still required to generate a return on its investment and the existing power plants will, under current deregulated market rules, continue to remain as more attractive commercial option than that of funding new investment to generate clean electricity from.
This problem represents another cross over point between the automotive and electricity generation markets, the requirement to generate a financial return on existing capital and the problem of doing so during a technology change over. Hybridization of vehicles engines have been one interim step and is also starting to be seen at power plants in the electrical generation industry. Biofuels offer another—and probably greater—opportunity to this problem, and are a greener alternative to fossil fuels and can potentially be used in the same capital equipment (power plants and combustion engines) with less disruption. Surely these crossover technologies and the lessons learned in the automotive industry have a role to play in any national renewable energy deployment plan.
The concept of a federal mandated alternative energy goal is not new. In 2007 a federal level RPS program was proposed to congress requiring 15 percent of energy to be produced from renewable means by 2020, but did not pass. Today, several federal RPS programs are under consideration and are making their way through congress. Let’s hope the right one makes it through and the USA ends up with a focused renewable energy generation program. One with a clear, common and time bound goal and that places the USA back at the forefront of the renewable energy race.
About The Townsend Company
The Townsend Company LLC is a consultation and business development practice to help companies wanting to enter, grow or become more profitable in the alternative energy market. Prior to founding the company Glynne Townsend, President and CEO, led the revenue growth for A123 Systems in the automotive and grid markets and is a leading commercial authority.
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USA and the World have to be very careful with major bio-fuel production increase. USA's Physicians and Surgeons Association has stated that 35,000,000 people have already been pushed to extreme hunger and poverty by food price increases due to production of ethanol and that over 200,000+/year would die from hunger and related deceases if ethanol production is increased.
Is that what we are prepared to do to continue to drive our over sized heavy gas guzzlers and give in to the corn and ethanol lobbies?
There must be many other more acceptable ways to move people around.
Posted by: HarveyD | 05 April 2011 at 10:00 AM
It has nothing to do with that and you know it harvey. Fuel simply is a far more stable and in the end profitable crop for alot of farmers. The result is low end food is being replaced with fuel and alot more excess food is being turned into fuel.
I know around here the dairies all grow thier own corn.. and all excess corn goes straight to fuel. They also are growing alot of fuel crops too on all thier extra land.
Posted by: wintermane2000 | 05 April 2011 at 10:21 AM
W-2000. What you're saying is what we like to believe but reality could be much closer to what the Physicians and Surgeons are claiming.
Every tonne of food and/or edible crops used to produce ethanol contributes to higher food price. Please check ethanol production volume versus food prices and you will see the very close correlation.
It is basic maths that higher food prices will make poorer people hungry. Past a certain point hungry people will starve and die directly or indirectly through hunger and related deceases.
Einstein brain is not required to figure that one out.
Posted by: HarveyD | 05 April 2011 at 01:09 PM
we can consider all the complex issues of renewables vs. nuclear vs other until the end of the earth, but I don't think that this is the most important issue: it is attitude and culture.
Why this article is using a Kennedy speech as some impetus to change is central to my point. Only in america. This kennedy speech would never have worked in any other country -or- if uttered would never be realized. And i am not saying this because i am pro-amercian, i am not. America, as compared to other countries, is a very entrepreneurial, want-to-have-it-all, embrace-surplus, embrace technology society, that values the notion (for some reason) that left to individuals, collectively (but in competition), that they can overcome anything. This is valuable and this happens in no other 'rich' country (of 7) to the same degree. However, the desire to have it all and desire to live in abundance is necessarily a god-send and curse. It drives technology and innovation harder, but subjects us/them to hard times, conflicts, and moral-hand-wringing. But this is the only thing that will save us (in the sense of keeping climate in check and yet living a reasonable standard of living). In a time with uncertainty towards nuclear, severe austerity measures in europe (not only in budget, but attitude), and a feeling of retreat and defeat in the face of economic downturn, an aggressive attitude toward technology and energy surplus to help technology and society expand is crucial. There is no going back. We, at 7 billion, are already at a state where returning to a simpler life is no longer an option - we need technology to overcome what are essentially engineering issues. That being said, economics are important. Easy to say that the customer does not mind energy price increases in the sense that they would change their behavior. But this is not the point, it is industries, developers, and services people that make the world go round and it is they who work into their business plan whether the energy costs make sense - whether the project, be it housing, energy source, or product development goes ahead. And it is this that trickles down to the consumer as quality of life and surplus. Do not embrace renewables as the grail, they are not. They are but one path with which our research must go -- and for better or worse, the US needs to lead the way.
Posted by: Jer | 05 April 2011 at 01:36 PM
As far as the 'low hanging fruit' goes, the U.S. does not lead the way. For example, energy conservation thru building effeciency, insulation...Canada, nordic countries surpass the U.S.
Posted by: danm | 05 April 2011 at 04:13 PM
"35,000,000 people have already been pushed to extreme hunger and poverty by food price increases due to production of ethanol and that over 200,000+/year would die from hunger and related deceases if ethanol production is increased." HarveyD
Harvey I respect some of your claims - but statements such as this make you appear to be a superficial operative of the CCP. There IS NO organization called USA Physician's and Surgeons Association. There IS the AAPS, a somewhat conservative independent group of doctors. There is NO SUCH claim to starvation, ethanol etc. from AAPS. There is NO SUCH mention of ethanol on their entire website.
This would make you a liar Harvey. I hope I am wrong.
What the AAPS DOES say of interest is this about "peer review" politics:
Increasingly, hospitals are retaliating against physician whistleblowers to silence them and to end their careers. Sham peer review has become the weapon of choice used by hospitals to eliminate these good, conscientious physicians from the hospital.
http://www.aapsonline.org/index.php/site/article/sham_peer_review_a_national_epidemic/
Posted by: Reel$$ | 05 April 2011 at 05:16 PM
Hmm... It appears I owe Harvey an apology. There IS a press release issued under the guise of the AAPS. It announces an article by a man named Indur M. Goklany. Mr. Goklany is not a climate scientist, nor an expert in agribusiness, not trained in health or medicine, nor a medical doctor which members of AAPS are. He is an electrical engineer from Michigan State, and IPCC/World Bank sycophant.
He says he was:
"Part of the U.S. team that negotiated the UN Framework Convention on Climate Change, and later a delegate to that organization. Managed the emissions trading program in the Environmental Protection Agency before it became the vogue."
This appears to be a case where Editor-in-Chief of the Journal of Physicians and Surgeons has lost his mind or been strong armed to publish the wild speculations of an alarmist.
What is for sure is an out-of-context article published in a journal of any association DOES NOT REFLECT THE OPINION OF THE ASSOCIATION or its members. This article is hokum at best - blather at worst. No difference.
Carry on HarveyD!
Posted by: Reel$$ | 05 April 2011 at 06:26 PM
The EIA is good at keeping statistics, but not good at making projections. Here again they are making linear predictions of growth. World solar PV production grew from 140 MW per year in 2000 to 15 GW per year in 2010, a growth factor of 100x, or 10,000%. All of a sudden this exponential growth is going to level out and become linear? ...even as no technologies and innovations are coming to the market that will drive the cost of solar below current electrical prices? That is a silly prediction.
At a minimum Solar PV production will grow 20x this decade, to 300 GW per annum. Baring an eruption of the Yellowstone super-volcano, an astroid impact, or a world wide thermo-nuclear war ...by 2020 the world will be producing a Tera-watt of PV panels every 3 years, or more.
(wikipedia - 2008 world energy consumption was at the rate of 15 TW)
...by 2030 Solar will be cheaper than coal and will already be a significant source of our energy.
...by 2050 Solar will be the dominant source or our energy. It is the largest source of energy available to us. When it gets cheap enough hold onto your hat.
It is growing exponentially NOT linearly. It may not seem possible or likely, but it is actually already unavoidable ...as long as we don't have a world wide apocalypse.
Posted by: mds | 05 April 2011 at 08:43 PM
Sorry, it should say:
...even as NEW technologies and innovations are coming to the market that will drive the cost of solar below current electrical prices?
Posted by: mds | 05 April 2011 at 08:48 PM
To be blunt tough noogies. Food is going up because of fuel prices and cheap food is going away because farmers have a solid crop they can sell that isnt food. You cant do squat to change either of these factors.
Posted by: wintermane2000 | 06 April 2011 at 04:13 AM
I've said it before and I'll say it again the answer is 93 million miles away in the form of a fusion reactor.
Low tech solar thermal power plants located in the US southwest can supply all the energy that we consume.
Eutectic salt thermal storage will provide power when the sun doesn't shine.
All the technology is readily available. It's the eco freaks that are blocking progress because they don't want to inconveniece the desert ground squirrel.
Posted by: Mannstein | 07 April 2011 at 05:56 PM
We pass OFS and get synthetic fuels made from coal and natural gas, then maybe biomass can follow and the farmers have another revenue stream from their cellulose and subsidies can be rolled back.
We will need to attack on ALL fronts if we are to reduce oil imports 1/3 in 10 years. Once we are on a path to achieve that all sort of things start to fall into place. For once we are actually DOING something instead of talking it to death yet again.
Posted by: SJC | 10 April 2011 at 10:07 AM