On Dealing With Uncertainty, and a Threshold

My crystal ball is out being repaired. It’s been in the shop for most of my life – starter problems, I think, or maybe the bearings. I share this problem with most of the people who analyze the fossil fuel industry. There are so many factors, so many hands on the steering wheel, that it is essentially impossible to predict price and supply except in long term generalities. Nobody can time the market.

We have been on an undulating production plateau for oil since roughly 2005. World production for all oil-like liquids has been hovering around 84 million barrels a day. Price volatility has stalled the development of new oil fields, resulting in what some commentators refer to as the “practical peak” in oil production. What they mean is that while the world economy wallows in depression, the production of our aging oil fields will continue to decline. This won’t affect prices because of lowered demand, so the new, more expensive to develop oil fields won’t get tapped. When the world economy starts to crawl out of its present collapse, oil demand will increase, bumping up against declining supply. Steeply increasing oil prices will kill the recovery, oil demand, and oil development. Repeat until Amish.

Similar problems afflict natural gas production. Coal energy production has been flat since 2001.

There is a similar problem with global heating due to the combustion of these same fossil fuels. The scientific consensus is that it is upon us and that it is dangerous, but nobody can say with absolute certainty how soon or how abruptly it will happen. Will it be a slow evolution or will it hit a threshold and accelerate wildly? Experts differ.

I have been pondering these dual and balancing uncertainties, fossil fuel depletion and global heating, and I’d like to advocate for immediate, accelerated action.

I like skydiving as an analogy. It has both the elements of risk and inevitability. Imagine that you are a careless skydiver. You jump out of a plane at some undetermined altitude, right into a bank of clouds. You have neglected to wear your altimeter, so you have no way of knowing your distance to the ground. You haven’t checked the weather, so you don’t know how close to the ground the cloud cover goes. There you are, falling blindly through the gray mist. You know the ground is down there, and that you will inevitably be making contact with it at some speed at some time. When do you pull your ripcord? You can’t wait till you break out of the clouds and see the ground. The clouds might be too low, and your chute wouldn’t have time to open. When faced with utter uncertainty and when delay may result in death, the only answer is immediate action. You may spend some time inconveniently floating down through the clouds, but no matter.

Some, especially those who work for fossil fuel companies, advocate a go-slow approach on energy and climate issues. Further study is needed before we act, they say. When you are falling and have no idea when you might go splat, that is no time to convene a committee to study the issue. It is time to pull the ripcord.

There is one strand of that ripcord I’d like to discuss. As a renewable energy consultant and installer, I am always doing calculations, including calculations about the economics of renewable energy installations. This morning I was working up a price quote for a potential customer. I subtracted the Vermont incentive and the federal tax credit, did an idle mental rule of thumb calculation, and had a sudden start.

Due to the economic slump and increased production there is a worldwide glut of photovoltaic (solar electric) modules. The price has dropped by about two dollars per watt over the past couple of years. $8.50 per installed watt used to be the off-the-cuff number for a residential scale solar. Now it is down to around $6.50 per installed watt. Subtract the Vermont incentive of $1.75/watt and the 30% federal tax credit and it comes to $3.33/watt. Now, consider that in Vermont this watt of solar will generate about 1.2 kilowatt-hours per year, or about 30 kilowatt-hours in its module’s 25 year warranted life span. $3.33 divided by 30 equals a levelized cost of 11 cents per kilowatt-hour, almost exactly what I would pay today. (What I would pay, but I don’t, because my solar array feeds more back to the utility than I use.) The economics are more complicated than that, but as of now, in Vermont, residential solar electricity is roughly at parity with the electrons we buy at retail. We have reached a long sought threshold.

25 years may seem like a long payback, but that is a 4% return, rising with the cost of electricity, guaranteed as long as the sun rises, and covered under your homeowners insurance. It is a half a percent better for business owners, who can depreciate their solar assets.

H.446, now called Act 45, offers even more with a feed-in tariff that will probably land between 25 and 30 cents per kilowatt-hour. The Public Service Board, the utility lawyers, and the renewable energy and consumer advocates are still making the sausage on how that will play out. Still, the absolute baseline cost for net-metered customers is viable. It can only get better as retail electricity costs go up.

Solar hot water offers a better return than solar electricity, and energy efficiency better than that. Interest rates are low. So what are you waiting for? Pull the fossil fuel ripcord.

H.446 – The Vermont Energy Act of 2009

 I’d like to put in a plug for H.446 and a request to my Vermont readers to act. H.446 is a groundbreaking piece of legislation that will promote the development of renewable energy in Vermont.

The core of the bill is what is called a feed-in tariff or standard offer for renewable electricity. What this means is that utilities will be required to pay a fixed contract price for wind, solar, biomass, and hydroelectric power. The Public Service Board will set that price as follows:

“(II) The board shall include a rate of return not less than the highest rate of return received by a Vermont investor-owned retail electric service provider under its board-approved rates as of the date a standard offer goes into effect.

(III) The board shall include such adjustment as the board determines to be necessary to ensure that the price provides sufficient incentive for the rapid development and commissioning of plants and does not exceed the amount needed to provide such an incentive.”

In other words, whatever the cost of solar electricity from the panels on your roof, the price you get must ensure that you will make as good a return as the big boys with their coal and nuclear plants. The prices will start out fairly juicy and go down over time as the technology gets cheaper. This will motivate people to put in renewables sooner and lock in good prices. It puts renewable energy, especially solar and small wind, in the “stupid not to do it” category of investments.

Germany was the leader in this, enacting a feed-in tariff back in 1991, but only for wind and hydro. That was expanded to all renewable sources in 2000. The German government wanted to get 12% of the country’s electricity from renewables by 2010. They already have hit 15%. Germany has become the number one country in the world for green energy investment and has created hundreds of thousands of jobs in the industry.

And the cost to ratepayers? In Vermont it will add about 20 cents to a $100 electric bill. Not a bad price for weaning us off polluting and unsustainable energy sources and jump-starting a job creating industry. In addition to the feed-in tariff, the bill has a number of other useful measures. Quoting from Renewable Energy Vermont’s legislative page:

“Key items in the bill include:

• a standard offer for renewable energy
• clarification that thermal energy fits within the purview of the CEDF
• regulatory incentives ensuring utilities can recover permitting costs for renewable energy
• requirement that ANR reconsider its policy prohibiting wind on State lands
• improvements to residential- and commercial-building standards
• pilot downtown-community renewable-energy projects in Montpelier and Randolph
• clean energy assessment districts that would allow towns, cities, and incorporated villages to use municipal bonds to finance residential renewable-energy or energy-efficiency projects
• limitations on the power of municipalities and deeds to prohibit residential installation of renewable-energy and energy-efficiency devices, such as solar panels, residential wind turbines, and clothes lines”

Of course, Governor Doorstop, er, Douglas, is expected to veto the bill. It passed the Vermont House and Senate by reasonable, but not veto-proof majorities. It is time to make calls and send letters and emails. Send a brief, polite note to the Governor, asking him to sign H.446, although it will be a mere formality with Entergy’s man in Montpelier.

Here’s a link to Renewable Energy Vermont with links to your Rep and Senator’s vote on H.446 and how to contact them. Please do.

Update on Monday, June 1, 2009 at 10:03PM by Minor Heretic

Apparently Governor Douglas was expecting a veto override vote - he just let the veto deadline slip by. H.446 is law in Vermont. This is a big deal for the solar business in Vermont in the short term and the state's energy future in the mid to long term. Someday we are going to thank the legislators of 2009 for enabling the timely installation of the only affordable power sources we will have.

Wave power

 Water is 784 times as dense as air. You may have experienced this at the beach by getting knocked down by a relatively small wave. Some inventors have been at work taking advantage of this power.

In all the talk about new sources of renewable energy, solar and wind power have dominated the conversation, with biofuels coming in third. Hydroelectric power is a long established renewable energy option, but limited to very specific locations and restricted by environmental concerns. Wave power is just starting to show its potential, with a few installations on the coasts of Europe.

There are three basic types of wave power generators: bobbing buoys, bending buoys, and water column devices.

Bobbing buoys are basically big floats, either under water or on the surface. They travel up and down with the waves and transfer the energy of their motion though rods or cables to generators fixed to the sea floor or in the buoy itself. Ocean Power Technologies is developing the latter type of device and is in the early stages of a 1.39 MW project off the coast of Spain.

Bending buoys float on the surface and undulate with the waves, bending at their hinge points and transferring power with pistons that resist the bending. There is only one manufacturer of these right now, Pelamis.

Water column devices are installed on the shore, with a large diameter tube extending below the surface of the water. When a wave comes in, the rising water pushes a column of air up the tube and through a turbine. As with the bending buoys, there is only one company developing this model, Wavegen.

There are also a few companies developing a kind of modified hydroelectric system where waves are guided into a narrow area to make them taller. They splash over a wall and then are run back through the wall to a lower level through turbines.

Wavegen has the longest track record, with its 500-kilowatt LIMPET installation on the coast of Islay in Scotland. It has been feeding the island grid since 2000. Before that, an experimental 75 kW unit operated from 1991 to 1999. Wavegen just received approval in January for a 4-megawatt near-shore installation in Siadar Bay on the Scottish Island of Lewis.

Here’s a clip of the exhaust port on an installation on the Island of Pico in the Azores.

Pelamis has had more recent successes, with a 2.25-megawatt installation just off the northern coast of Portugal. They also have a 3-megawatt facility in development off the Orkney Islands just north of the Scottish mainland and a 5-megawatt installation planned for the west coast of Cornwall.

Here’s a video of one of their sea trials:

There are two significant benefits of wave power, to my mind. One is its relative predictability compared to wind and solar. The oceans are like a great flywheel for energy. Since wave energy devices are dependent on an oscillating energy source, they have inertial or pressure storage built in to make up for that oscillation. Arrays of wave power collectors average out their output. This means that wave power doesn’t suffer from the momentary power variations imposed on wind and solar by wind gusts or passing clouds. This means that wave generated power outputs tend to vary slowly and predictably by the hour or day.

The second significant benefit of wave power is its density. The Wavegen installation in Islay was designed for wave intensities of 25 kilowatts per meter of shoreline. That works out to a megawatt per 40 meters (131 feet). It doesn’t take a lot of shore or breakwater to produce serious power. The northern Atlantic and Pacific coasts of the United States and Canada offer a potential bonanza of clean, consistent power.

The State of Maine, for example, has 3500 miles of coastline. If one-half of one percent of that, 17.5 miles, were used for wave power generation it would amount to over 700 megawatts. There must be at least 17.5 miles of breakwaters and seawalls in Maine that could accommodate oscillating water column devices, and it would take up no shoreline at all if the floating devices were used.

Wave power is still in its early stages and needs to be accelerated through the inevitable period of technological diversity, shakeout, and further development of surviving designs. The U.K., Portugal, and Spain are leading the way in wave power development. The U.S. and Canada should look to our coasts for power and promote the technology on this side of the energy-dense Atlantic.