Five years ago I started writing this blog site because I figured energy dependence on fossil fuels would destroy America.  Nothing I’ve seen since then has changed my attitude in this regard, although initially I didn’t figure in the problems associated with climate change, nor did I fully appreciate the national security implications identified by the Joint Chiefs of Staff in 2012.  The Joint Chiefs basically said relying on fossil fuels is the greatest threat to our national security, and they also said ‘climate change’ essentially changes everything.

And national politics, particularly those surrounding our first President of color, Barack Obama, overwhelmed my desire to explore the energy issues.

As it turns out, now that President Obama has been re-elected, the energy issues are resurfacing as important despite Republican obsessions over dismantling the social safety nets, including Social Security and Medicare that have been major distractions.

Most recently the President has proposed using $2 billion in gas and oil lease revenues to fund basic research and development to find ways to replace hydrocarbons as our primary transportation fuel.   In the larger scheme of things energy, according to a New York Times article, the President is striving to “to build as broad an energy portfolio as possible for the country, with expanded oil and gas development; favorable tax treatment for nonpolluting sources like wind, solar and geothermal energy; loan guarantees for new nuclear plants; increased emphasis on energy efficiency; and research into long-term alternatives to fossil fuels.”

OK fine.  I don’t think nuclear is going anywhere anytime soon, especially since the Japanese tsunami wiped out the Fukushima nuclear power plant in 2011.  And clean coal is a non starter too, although Texas has begun a $2.5 billion ‘test’ project for sequestering carbon dioxide gas from the use of coal for energy by burying it underground.    In both cases, the ideas are non-economic.  They are the most expensive ideas in the portfolio and they need the government to insure unintended consequences because the private markets simply won’t.

The simple fact is that the rest of the world, to the degree it can afford to right now, is moving away from fossil fuel dependence as  fast as it can.   From the Rocky Mountain Institute book “Reinventing Fire,” in 2010 four German states, totaling 10 million people, relied on windpower for 43-52% of their annual electricity needs.  Denmark gets on average 26% of its energy from windpower.  The Extramadura region of Spain gets 25% of its power from solar, while the entire country has 16% of its energy supplied  by windpower.  In the US, the Minnkota Power Cooperative supplied 38% of its retail sales from wind.  Texas, yes that Texas, generated 8% of its electricity from wind in 2010, making it sixth in the world among countries, after China, the entire rest of the US, Germany, Spain and India.

While a lot of public discussion has involved solar, wind, hydro, thermal–the clean sustainable energy sources–the reality is that innovations that create efficiencies will drive most of the movement away from using fossil fuels.   We’ll simply be using less energy to do more work by being efficient, not necessarily by building new power plants, whether they are sustainable and clean or not.  Carbon fiber plane and auto frames will drop airplane and ground transportation weights by as much as 35%, and would raise car MPG ratings well into the 80MPG or greater ranges just by weight reduction.  The newest airplanes are using 20% less fuel because they contain carbon fiber frames instead of steel or aluminum.  This trend is still in its infancy, but will no doubt reduce annual transportation costs by billions of dollars within the next 10 years.

A national direct current grid, capable of transporting energy much longer distances more efficiently, would produce a national marketplace where producers of sustainable and clean energy supplies, most of which are situated in rural areas, can competitively price their energy into urban markets where most energy is used.   And a movement towards energy ‘islands’ where neighborhoods or city districts contain smaller energy plants that can supply their customers even if the larger grid cannot for some reason, can raise energy security by several magnitudes.   These types of modernizations work no matter what the energy source, but they definitely do make sustainable energy cheaper upfront where the initial resistance lies, because once built sustainable energy plants are far less expensive than fossil fueled plants.

The real impediment to all this is political.  Fossil fuel incumbents are some of the most profitable and therefore politically powerful, corporations in the world.  So far they’ve been able to successfully mute the publicity surrounding alternative energy sources, to divert everyone’s attention away from the real, substantive progress that’s been already made in sustainable sources and in energy efficiencies.  Republicans will, no doubt, fight the President’s efforts to earmark $2 billion in gas and oil revenues (that’s over 10 years, so it’s very modest in the scheme of things) to support energy research and development.

But times are changing.  Inevitably the price of gas and diesel fuels, and oil for heating, will rise simply because the rest of the planet is growing and as a result demanding larger and larger shares of these energy sources.  These developing countries understand that the US model of fossil fuel dependent economic growth can no longer be duplicated, so they are aggressively building sustainable supplies.  Nevertheless, in the meantime they will use fossil fuels too, even if they think fossil is more of a transition fuel (which it will be shown to be) rather than the bedrock fuel of their economies.

It’s a global race, in other words, to see who will be the most efficient user of energy.   As the advertisement says, ‘the best way to save on gas is to buy gas less often.’   So it goes.  It’s not a matter of using less energy, because energy use is going to climb as the world demand for it climbs, it’s a matter of getting more work done per unit of energy.

During his second inaugural address President Obama talked about climate change and infrastructure work that needs doing.  He wasn’t specific here, but I think I might have some idea of what he’s thinking about.

A lot of carbon release we create that scientists believe is a major dynamic in warming the planet comes from our energy systems, our cars, our buildings, our manufacturing facilities and, of course, our actual energy production and transmission.

The first thing to understand is a lot of that carbon discharge comes from inefficiency in our systems:  We waste most of the energy we burn with fossil fuels.   Consider that only 5% of the energy contained in our gas tanks is used to move the vehicle forward.  The rest warms the road, the tires and the air we displace or is lost in the propulsion system during braking, idling and running accessories like air conditioning or lights.  Half of all that waste is created by vehicle weight.   That’s about to change because carbon fibers have been developed, and are ramping up for mass production, which will cut as much as half that weight.

European race cars are almost completely built from these fibers, for example, but that manufacturing is crude and expensive.  That began to change in 1992 when an engineer, David Taggert, was tasked to an ultra-secret project at Lockheed Martin’s legendary Skunk Works facility in Palmdale, California.  There, Taggert and his engineers developed an advanced airframe for the F-35 Joint Strike Force that was 95% composed of carbon fiber composites.  The new plane was one third lighter than the previous version, yet even though carbon fiber composites were at the time incredibly expensive the new plane was two-thirds cheaper to build.

The use of carbon fiber composites are beginning to move into the airplane manufacturing mainstream, with Boeing’s Dreamliner wings being entirely made of this material.  The Dreamliner flies on 20% less fuel than its competitors and fuel is the single largest cost of running airlines.   Now the automotive industry is about to start making mass produced automobiles using the carbon material.  Manufacturing plants have sprung up across the globe in anticipation of the new sources of demand.  Both BMW and Toyota are in the final stages of introducing passenger vehicles utilizing the weight saving carbon fibers.  They both could be rolled out late this year as 2014 models.  Both will offer incredible mileages (100 mpg to over 200 mpg) as well as strength and safety because these carbon fibers can be made stiff and strong with joints made more flexible, malleable and energy absorbing.    The first ones won’t be cheap, ranging for $35,000 to $55,000.  But as more are sold, and as more carbon fiber manufacturing comes on line, those prices will inevitably drop dramatically.

Solar, windfarm and geothermal advances are cascading prices, and wastage, downward.  Some large energy production facilities, such as the huge solar mirror field now being built in the Mojave Desert, are already cost competitive with fossil fuels even after taking into account the subsidies fossil fuels producers receive from the federal government.  Being built by Bechtel, at 377 Megawatts, it’s the largest solar power plant being built in the world.  It is expected to be completed in 2013.  Energy engineers and interested investors are pushing for the US to build a national ‘smart’ transmission infrastructure, sort of a direct current electron superhighway that can transport energy over longer distances without losing most of the power.  Such a national system could do for energy production and transmission what the interstate highway system, built in the 1950s and 1960s, did for long distance auto and truck transportation.   Such a system would spawn sustainable power systems across the country because direct current systems can get the power from these  mostly rural power sources to cities.

If you want to learn about all the various ways our new energy world is about to develop before our eyes, go buy “Reinventing Fire,” a book sponsored by the Rocky Mountain Institute which details all the improvements which will be showing up in ever larger numbers within the next few years.

The National Resource Defense Council (NRDC) has published an innovative report that points out that using existing energy more efficiently has the greatest impact at the least cost.  Efficiency is so powerful a force the NRDC claims that even coal fired power plants can be kept on line, in many cases.

From the report:

An innovative feature of the proposal is the inclusion of
energy efficiency. State-regulated energy efficiency programs
could earn credits for avoided power generation, and avoided
pollution. Generators could purchase and use those credits
towards their emissions compliance obligations, effectively
lowering their calculated average emissions rate. Energy
efficiency is one of the lowest cost energy resources and
emission reduction options. States could use this provision
to slash emissions without costly and lengthy power plant
retrofits or new construction, reducing the overall cost of
the regulations……

Improving energy efficiency also cuts costs to consumers
and businesses. Switching to more efficient light bulbs,
adding weather-stripping or insulation in buildings, or
installing more efficient appliances and equipment, for
example, can save a typical household more than $700
per year—about one-third of the $2,200 average annual
utility bill….

The results from the model show that the proposed approach
would begin to modernize and clean up America’s electricity
sector while modestly reducing the nation’s electricity bill.
This is because energy efficiency programs adopted in
response to the incentives created by the approach would
cause overall demand to decline by 4 percent, rather

than increase by 7 percent. Meanwhile, coal-fired generation
would drop 21 percent from 2012 to 2020 instead of
increasing by 5 percent without the proposed carbon
standard. Natural gas generation would rise by 14 percent,
while renewables rise by about 30 percent (assuming no new
state or federal policies to expedite an increase in market
share for renewables)…

Investments in energy efficiency and demand response
are the lowest cost compliance pathway—much cheaper
than building new power plants or installing pollution
control equipment—so including this flexibility significantly
reduces overall costs. Energy efficiency consistently delivers
over three dollars in savings for every dollar invested,
which is one of the many reasons utilities have scaled up
annual investment from $2.7 billion in 2007 to nearly $7
billion in 2011, with a corresponding increase in energy
savings. See Figure 3: U.S. Electric Efficiency Program
Investments, 2007-2011. Efficiency investments reduce the
need to build additional power plants and infrastructure,
reduce wholesale power prices, and deliver significant bill
savings to individuals and businesses. Because substantial
reductions in CO2 can be achieved through energy efficiency
without building many new power plants or installing lots
of expensive pollution control equipment, the total costs of
compliance would be low—netting out at $4 billion in 2020.

Beezer here.  The report shows that enforcing the EPA clean air act need not be expensive.  It also says the program can be done without retiring coal plants and building brand new natural gas fired plants.  Basically the NRDC program is driven by the most efficient, least cost, techniques.  And  that technique is where efficiences come to the fore–irrespective of what fossil fuel is used.  The program provides a channel to substantial carbon dioxide reductions that doesn’t require, at least not initially, expensive replacement of coal fired power plants to gas fired ones.  The channel also allows for increased use of advanced systems like wind, solar and geothermal.

Tomorrow’s vote is first about an immediate threat to our democracy.  This threat comes primarily from the domination of large, mostly multi-national, corporations who wish to lock in their dominance by using government to limit competition.  The US Supreme Court’s Citizens United decision accelerated this effort because it unleashed a flood of corporate cash, much of it provided in secret, into our political campaign system.

This multi-billion dollar effort is causing another, longer term problem:  We as a nation are not addressing our real needs and this means we are innocently taking massive and unnecessary risks.   What are those risks?

•  We are running larger deficits and debt than is necessary.  Yet we are being pandered to, again, with more tax cuts that are guaranteed to further increase deficits and debt.
•  We are much too dependent on fossil fuel energy.  Billions of people are climbing out of poverty worldwide and demanding a larger share of fossil fuel energy, which guarantees the price of these fuels will climb.  Yet we have no national program to install sustainable, clean energy systems which would insulate our country from the increasing cost of fossil fuels.   Importantly, this dependence threatens our national security as we are in danger of being in continual wars overseas protecting our fossil fuel sources.
• We are over using chemicals and hormones in our food industry.  This is not only degrading our environment but is also creating an epidemic of ill health outcomes, like diabetes, that are taxing our health care system and costing us hundreds of billions of dollars in unnecessary spending annually.
• Our weather is very likely to become increasingly more severe due to global warming.  Yet we have not begun national programs, such as those for sustainable energy or more robust infrastructures, to prepare for dealing with these probable weather challenges.
• Our financial system is lopsided, favoring very large banking conglomerates that are shielded from competition and the dangers of their risk taking.    We have, so far, continued to socialize their losses which has removed their caution to risk taking.
• Our tax structure too much favors the incomes of the wealthy over the incomes of a majority of Americans.  Privileged rates are applied to wealthy incomes from dividends, capital gains and carried interest.  The tax laws are shot full of tax avoidance schemes designed for the wealthy like unified charitable trusts, irrevocable trusts, offshore accounts and trusts and estate taxes that avoid capital gains taxes altogether.   Combined with broad based tax cuts, these schemes guarantee high deficits and debt and the underfunding of necessary government programs like social security, medicare and medicaid.
• Our regulatory structures are too weak.  From bank risk taking, to environmental abuse, to a medical system focused on the more profitable business of treating symptoms rather than creating cures, regulators all too often look the other way or become enablers of corporations only concerned with the most profitable activity irrespective of the activity’s bad outcomes for individuals and the nation.

Beezer here.  Unfortunately one of our two political parties, the Republican party, is ‘all in’ supporting the efforts of multi-nationals.  They enable all these bad outcomes.  They support unlimited corporate campaign spending that dominates our national discussions and hides the real risks we are taking.  They favor a tax system tilted heavily in favor wealthy incomes, which in turn aggravates income inequality and suppresses both job creation and income gains for the majority of working Americans.   They pander to our want of lower taxes while endangering our needs for a safer, healthier and more competitive economy.   This is the precipice we face in tomorrow’s national elections.  If Republicans win tomorrow, then our needs will never be addressed without encountering some massive disaster of epic scale.  It’s that important.  We need to regain our ability to self-govern. 

Mitt Romney is proposing a 20% across the board tax cut for American taxpayers.  And we all know Americans love tax cuts.  But the biggest, most positive tax cut in the nation’s history would be the one we’d all enjoy if we de-carbonized our nation.  And this tax cut would be permanent.

Robert F. Kennedy Jr., is one of the most successful venture capitalists in America, in any discipline.  He’s investing in clean, non carbon power.  For $3 trillion, or about what we spent on the Iraq War, Kennedy says we could basically supplant all the carbon power plants in America with clean solar, wind and geothermal power.  And once we’ve done that our power supply would be essentially free going forward.  We could tie all these new power sources together nationally by installing a smart power grid, the one we now have is a dumb one, for about what we spent in one year on the Iraq War.  Basically free and clean energy that doesn’t pollute our air and water and thus frees up all the billions we spend each year fighting, or trying to clean up, pollution.  Free domestic energy that cuts our trade deficit by more than half because we now have to import more than 8 billion barrels of foreign oil annually.  Here’s the video of JFK Jr., explaining all this before the Commonwealth Club in San Francisco.
 

Beezer here.  The reason we haven’t already started these types of projects is because the fossil fuel corporations control our national energy discussions.  They have spent literally billions of dollars funding their surrogates in Congress, and on K St. lobbyists.  They do this because clean energy is continuing to experience a technology revolution that is quickly reducing the cost to the point where, despite the billions of taxpayer dollars spent subsidizing fossil fuels annually, clean energy is becoming more competitive.  Without those subsidies, it would become very apparent to the average American that fossil energy is too expensive and not competitive with the cleaner, safer, healthier, sustainable energy power plants we could be building right now in size.  We really need to toss these vampires off our necks and get on with building a cleaner, healthier, safer and more competitive America.

From a Bloomberg article today:

The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.

With Europe’s wind and solar farms set to triple by 2020, utilities investing in new coal and gas-fired power stations no longer face stable returns. As more renewables come on line, a gas plant owned by RWE or EON that may cost $1 billion to build will be stopped more often from running at full capacity. It may only pay for itself on days like Jan. 31, when clouds and still weather pushed an hour of power on the same-day market above 162 ($220) euros a megawatt-hour after dusk, in peak demand time.

“You’re looking at a future where on a sunny day in Germany, you’ll have negative prices,” Bloomberg New Energy Finance chief solar analyst Jenny Chase said about power rates in wholesale trading. “And a lot of the other markets are heading the same way.”

Europe’s biggest power markets give preference to renewable energy including forcing some utilities to use their fossil-fuel plants less. That cuts into profit, complicating investment decisions as the companies try to meet emission targets and replace older plants and networks that Citigroup Inc. estimates will cost them more than 900 billion euros by 2020.

Profit Margins

Northern Europe’s renewable-energy goals call for about 200 gigawatts of solar and wind capacity by 2020, or almost a third of the current installed base, compared with about 70 gigawatts today, according to the Finnish energy consultant Poyry. Even by 2014, gross profit from burning coal in Germany may skid by as much as 41 percent, according to Barclays Plc.

The gross margin at a coal power plant after deducting fuel and emission permit costs, the so-called clean dark spread, may “collapse” to as low at 3.50 euros a megawatt-hour, Barclays analysts including Peter Bisztyga said in a Sept. 1 report. The spread was at 6.15 euros today, Bloomberg data show.

Narrower margins mean it will take longer for companies to pay off building new gas- and coal-fired facilities. Those plants are needed. They can run around the clock, preventing blackouts when the sun sets or the wind dies as European power demand grows 5 percent through 2015 compared with 2010, according to Paris-based bank Societe Generale SA’s forecast.

‘Squeezed Out’

“The more intermittent technology like renewables, the more baseload generation will be squeezed out,” Volker Beckers, chief executive officer of RWE’s U.K. Npower unit, said in an interview at Bloomberg’s London bureau. Npower’s plants are largely coal- and gas-fired, or baseload, meaning they can run around the clock.

Electricite de France SA is spending 6 billion euros on its new 1,650-megawatt nuclear reactor at Flamanville in Normandy. Dong Energy A/S, Denmark’s biggest utility, inaugurated its first power station in the U.K. in February, an 824-megawatt combined-cycle gas turbine plant for 600 million pounds.

EON will miss its 2015 forecast by about 3 percent for earnings of 13.3 billion euros to 13.8 billion euros before interest, tax, depreciation and amortization if average power prices are 57.30 euros a megawatt-hour, below EON’s forecast of 60 to 62 euros, UniCredit analyst Lueder Schumacher said.

At 58.50 euros, RWE’s recurring net income will be 2.2 billion euros in 2013, compared with the German utility’s forecast of 2.5 billion, he estimated.

‘Depress’ Prices

“Too much wind can depress power prices, but then there are times when very little wind is blowing,” Poyry Director Phil Hare said in a telephone interview.

Based on weather patterns over the past 10 years, there’s a 72-hour period each year when a wind farm would produce less than 5 percent of its potential output, Hare said. “Some other plant has to be there, but the company has to make the return on its investment in just those 72 hours over 10 years.”

Germany’s renewable energy boom will make hedging the power output for utilities’ coal and natural-gas plants “more and more difficult,” according to an executive at Edison Trading SpA speaking at a conference in London.

The country’s renewable energy output may rise to 200 terawatt-hours in 2020 from 120 terawatt-hours last year, Andrea Siri, Edison’s head of continental power and origination, said yesterday, citing a regulatory forecast.

2 Million Homes

Solar plants in Germany generated as little as 23.8 megawatts at 7 a.m. Berlin time yesterday compared with 11,570 megawatts at 1:30 p.m., according to a European Energy Exchange AG’s website, tracking power capacity. A steady supply of 1,000 megawatts is enough for about 2 million homes in Germany.

Power prices on the Epex Spot SE exchange in Paris that handles German and French supply vary hour-by-hour depending on how available capacity is. At times they can become negative when renewable energy peaks and there’s a surplus of power.

At such times, generators or the grid operator pay consumers to take their electricity if they aren’t able to reduce output or hedge it. Grid operators in Germany, Europe’s biggest power market, are also required to take renewable output if it is available, just as in Spain and France.

The highest-ever hourly price in the combined German-French intraday market was 162.06 euros a megawatt-hour for delivery between 6 p.m. and 7 p.m. in Germany on Jan. 31, while the lowest was minus 55.11 euros for 2 p.m. to 3 p.m. on Feb. 6, data from the exchange showed.

Negative German Prices

The negative German prices on July 24 occurred on a day when winds averaged 15 mph in the northern state of Mecklenburg- Western Pomerania, home to many wind farms, Bloomberg weather data show.

Germany’s same-day electricity price was below zero for nine hours on that windy day on July 24, with negative prices for a total of 31 hours so far in 2011, according to Epex data. France had 9 negative hours this year.

The joint French-German intraday market started last year and has so far helped to “buffer the volatility of prices,” Epex company spokesman Wolfram Vogel said by e-mail on Sept. 16.

“The law in Germany is that renewables have priority, so utilities have the choice of turning plants down for a few hours or paying a negative price to someone in Germany or abroad,” EON spokesman Georg Oppermann said in a telephone interview. The company’s traders can protect EON against losses by watching weather patterns, he added.

‘Clearly a Negative’

“The huge amount of renewable capacity due to be added to the grid will depress not just spreads but also the outright power price,” UniCredit analyst Scott Phillips said. “This is clearly a negative predominantly for all thermal power plants, particularly coal.”

Britain plans to install more than 8,000 offshore wind turbines by 2020 to get 15 percent of electricity from renewable sources. Germany installed 7.4 gigawatts of solar photovoltaic capacity last year, the most of any nation, driving total capacity to 17,200 megawatts. Spain aims to get 20.8 percent of its total energy from marine energy, geothermal and offshore wind projects, as well as hydropower, by 2020.

German wind power capacity peaked at close to 12,000 megawatts on July 24, according to Meteogroup data, the last day of negative prices. Four days later, the most that the country’s wind parks generated was 315 megawatts.

Photovoltaic and solar-thermal plants may meet most of the world’s demand for electricity by 2060 — and half of all energy needs — with wind, hydropower and biomass plants supplying much of the remaining generation, the International Energy Agency said in August.

Capacity Payments

U.K. energy regulator Ofgem is considering paying generators to keep plants open as back-up suppliers, compensating them for down time. The so-called capacity payments, which also are being studied in Germany, are likely to favor gas over coal, as gas plants can be turned on and off faster, according to Phillips.

Subsidized power rates called feed-in tariffs, a proposed carbon floor price in Britain and other measures favoring renewable projects will lead to a shift in the “merit order” of plants across Europe, he said. Power from renewable projects will be the first to be used, followed by gas-fired power plants, which release less carbon-dioxide than coal stations.

“Margins are going to get worse over the next few years but as the value of the plant for backup starts getting interest, it becomes an issue of what they’re worth, not what they cost,” Hare said.

Beezer here.  It’s all complicated, but eventually the cost of fossil fuels will rise to a level where the real options become very clear indeed.