Smart Grid Baby Stepshttp://peakenergy.blogspot.com/2007/04/smart-grid-baby-steps.html
Dave Roberts has a good little post on the first steps towards a smart grid in the UK.
One piece of the smart-grid puzzle is home electricity monitoring -- allowing homeowners (and eventually business and factory owners) to track their electricity use in real time. As the old saw goes, what gets measured gets done. Simply making people aware of energy flows is the first step to helping them modulate those flows efficiently.
On that note, it's fantastic to see this: soon, every household in the U.K. will be able to request a smart meter and have it installed for free.
The next step, of course, is giving homeowners more automated control. One part of that is smart, grid-networked appliances that can modulate their electricity use based on current power availability and pricing. Another part is giving homeowners a way to store energy, so they can shift to stored energy at peak hours when electricity prices are higher (assuming variable pricing is put in place) -- plug-in hybrids are the low-hanging fruit there. Another is net metering, which would allow homeowners to feed power back into the grid if they're generating a surplus (through rooftop solar or wind or whatnot).
Anyway, it's coming together, slowly.
One interesting site I came across today is "Leonardo Energy" - a "Global Community for Sustainable Energy Professionals". This has lots of relevant content on renewable energy and smart grids. I'll quote a few snippets - first on their eLibrary.
The Leonardo ENERGY autoupdater downloads our eLibrary of application notes, briefing papers, minute lectures, as well as the EPQU archives on your desktop. The library includes a full-text searchable index. For the moment, 173 reports of total 2593 pages cover the subjects of power quality, distributed generation and energy efficiency.
Next from Leonardo, a post on "Grid integration of Renewable Energy Systems" in Europe.
In March, the EU Member States agreed that by 2020, 20 per cent of the energy consumption in the EU should come from Renewable Energy Systems (RES). But meeting this policy will require large-scale integration of RES electricity generation into the European grids. At the moment, there are still many technical and regulatory issues to be solved.
The GreenNet-Europe project has studied the various dimensions of large-scale grid integration of RES and written an Action Plan on the subject. It has formulated recommendations to policy makers for achieving such a large integration at a minimum cost to society. GreenNet-Europe is supported by the Intelligent Energy Europe programme of the European Commission.
Next a post on Energy Efficiency and Peak Demand Reduction.
There are obvious overlaps between the results of energy efficiency programmes and peak load management. This is the case in spite of historically different objectives of both disciplines.
Energy efficiency programs primarily seek to reduce customer energy use on a permanent basis through the installation of energy-efficient technologies. That will, in most cases, have the positive side effect of reducing peak demand. This is especially the case if it concerns the energy efficiency of appliances that are typically used during periods of peak demand. A good example is the effect of energy efficient air conditioners on peak demand on a hot summer day.
At the other side, load management programs generally focus on either curtailing or shifting demand away from high cost, peak demand periods. Curtailing demand in most cases means improving energy efficiency.
And finally, the Power of the Oceans.
In cooperation with the European Ocean Energy Association, a new Leonardo ENERGY eBook on current ocean energy projects.
Geoffrey Styles at Energy Outlook has a post on the Energy Two-Step, noting the problems with hydrogen powered cars and the need to transition away from oil via energy efficiency and electric cars - with hydrogen maybe having a role well in the future.
A recent article on hydrogen cars in MIT's Technology Review got me thinking about the big challenges we face in energy: not only must we reduce the greenhouse gas emissions of our present energy systems, but we must also begin to plan for an energy economy that relies much less on petroleum products. To most people, that probably sounds like one problem, but I believe it is really two, with potentially very different solutions. The reason for that is that the replacements for oil's primary uses in transportation are simply not ready for prime time. That means we're looking at a two-stage transition in energy systems, with work on both proceeding simultaneously. This includes some options that will require great patience, such as hydrogen. We need to be prepared to fund both near-term and long-term efforts, without worrying that work on one competes with the other.
Everything that Technology Review says about BMW's hydrogen-powered 7-series sedan is accurate today, and not just because I've been saying it here going back to 2004. Producing a hydrogen car now, as the solution to our present energy and climate change problems, will not improve matters. Not only is burning H2 in an internal combustion engine inherently just about the least efficient thing you can do with the energy that went into making the H2, as Mr. Talbot rightly points out, but the entire H2 infrastructure of production, storage and distribution is at least a decade away, maybe two or three.
If we're serious about tackling climate change any time soon, as the evidence suggests we must, then we need options that are available now. Even hybrid cars, for all their efficiency benefits, are at least one full "implementation lag" (about 15 years) away from achieving their maximum impact. We need more efficient mass-market cars starting right away, together with changes in consumer behavior, as I suggested last week. CAFE standards and tax credits can help with the former, but I don't know how to promote the latter other than by increasing the price of petroleum products, either through new taxes or the application of a cap-and-trade system for its greenhouse gas emissions.
But all of that still only buys us the time towards making more radical changes in the long haul. That's because even if we can reverse our steady upward trend in oil consumption, the billions in the developing world are on a big energy consumption uptrend from near zero per capita. Together, we will be driving inexorably toward the point at which oil production, conventional and unconventional together, won't be able to keep up with demand. Whether oil reaches a peak or an "undulating plateau" only matters in determining the full magnitude of the problem that's waiting for us, sometime between now and mid-century.
Meeting that challenge will require more than just becoming smarter about how we use oil. We will need to develop future vehicles that don't burn gasoline, diesel, or even biofuels. From what we can see today, that will come down to a race between hydrogen fuel cells and batteries, powering an all-electric vehicle. Hybrids and plug-in hybrids are the bridge to this, and the critical foundation is a vast new capacity for low-greenhouse-gas electricity or hydrogen. ...
Grist has a post on some green business announcements from Home Depot and Conoco.
Big news from big companies: Conoco is entering the biofuels biz, and Home Depot is launching a green-labeling program that could become the largest in the U.S. First, the fuel: partnering with meat giant Tyson Foods, Conoco will make biodiesel from animal fat. The companies hope to introduce the fuel in the Midwest later this year, aiming to churn out 175 million gallons annually within a few years. "That doesn't sound like much, but it's very significant," says Conoco CEO Jim Mulva. "In a tight market, every incremental increase helps improve supply availability and reduces retail-price pressure."
Meanwhile, DIY paradise Home Depot will paste an "Eco Options" label on nearly 3,000 greener products at its sprawling stores, a total that could grow to 6,000 products by 2009. "People hear about the environment ... but at the end of the day they don't know what to do," says Ron Jarvis, VP of environmental innovation. "We see educating the consumer as being the highest impact of this process."
In local news, the Herald reports that Woodside has recorded a dip in production thanks to cyclones and problems in Mauritainia. Also in the SMH - more funding for biofuels in Victoria, the debate about carbon rationing (once again, I far prefer carbon taxes to any form of capping or rationing carbon - if you want to deal with resulting social issues, do it via the tax system), a note that water tanks are most appropriate in Sydney and Brisbane and a report on a study of species decline in the tropical rainforests of Costa Rica.
Woodside Petroleum Ltd has reported a dip in production during the first quarter of 2007 after four cyclones battered its West Australian operations. Woodside, Australia's biggest independent oil and gas producer, delivered an output of 18 million barrels of oil equivalent (Mmboe) in the three months to March 31. The result was 4.9 per cent lower than the 19 Mmboe produced in the fourth quarter, but was 25.9 per cent higher than the 14.3 Mmboe produced in the corresponding quarter of 2006.
Woodside, which is looking to produce between 72 Mmboe and 78 Mmboe in calendar 2007, said the drop in production was primarily the result of interruptions caused by tropical cyclones. The oil and gas producer said also that it was still having issues with its $1 billion Chinguetti oil field in Mauritania, with output in the first quarter almost 20 per cent lower than the previous quarter.
Shaw Stockbroking resources analyst John Colnan said the first quarter was broadly in line with market expectations but that Chinguetti continued to disappoint. "The quarter was more or less in line ... the only disappointment was Chinguetti," he said. Recent media speculation suggested that Woodside might be assessing whether to sell off its troubled Mauritania assets. "It is always possible ... Woodside do have bigger fish to fry at home at the moment, unlocking Pluto and unlocking Browse (both off the coast of WA) and the full value of the North West Shelf," Mr Colnan said.
Tom Konrad has an article on Transmission Stocks: Bringing Wind Power to Where it's Needed up at Alt Energy Stocks, noting that one of the keys to the clean energy / smart grid future is improving the connectivity of the grid. He also has a follow-up at his own blog complaining that people don't seem to be interested in transmission systems (a good sign if you are looking for good value investments) - noting "This is not particularly surprising to me… electric transmission is both complex and boring. It’s also absolutely necessary for our transition to a sustainable energy economy.".
Last week, Charles told us to expect wind power industry suppliers to benefit from shortages in wind turbine components. Owens Corning (NYSE:OC) which I mentioned in my Blue Chip Alternative Energy Portfolio fits nicely into this category with their composites for turbine blades, as do the power converter stocks I mentioned two weeks ago.
As essential to wind power as any of these is improved power transmission. The National Wind Coordinating Collaborative states,
Electrical transmission facilities connecting windy areas and load centers are sometimes non-existent or minimal. Even in cases where a good wind resource has nearby transmission, that transmission often has limited capacity to transport additional energy. In fact, transmission facilities throughout much of the country are strained, and this problem is acute at specific points of congestion. The expansion of wind power is hampered by this situation, but the associated problem is not confined to wind. Instead, it is a general problem of concern to many in the electric power sector.
While the need for long distance transmission often holds up the construction of wind farms for logistical reasons (there is no incentive to erect wind turbines if you cannot get the power to market), it is unlikely to prevent investment in renewables for financial reasons. The ERCOT Competitive Renewable Energy Zones Study found that the necessary investment in transmission for the high resource zones they identified in Texas ranged from a low of 1.5% to about 12% of the cost of the generation, which will only change the overall economics of any project in marginal cases. Some of these transmission improvements will also be likely to improve system reliability, and so the full cost is unlikely to be considered totally attributable to the wind projects.
As a less expensive but unavoidable investment for new renewable energy projects, transmission improvements are well positioned to be profitable investments in our energy infrastructure as the US shifts to more sustainable electrical supplies. ...
Tom also has an excellent post on his "Peak Coal Portfolio". While I'm still cautious about the peak coal (in my lifetime) concept, I guess my peak oil portfolio will do quite well in a coal boom too (even if it does end up killing all of us).
Last week, we alerted you to a report from Germany's Energy Watch Group called “Coal: Resources and Future Production,” which predicts peak coal by 2025. Readers of AltEnergyStocks are doubtless familiar with peak oil, the inevitable fact that as we consume a finite resource (oil reserves) at some point the rate of that consumption must peak, and taper off. Serious arguments about peak oil center around "when" oil production (and consumption) will peak, not "if."
The same it true for other finite natural resources, such as natural gas, uranium, and even coal. The difference with coal is the received wisdom: that the US has two centuries of remaining coal reserves, with the (often unspoken) implication that there is no need to worry about it in our lifetimes. Other reports have drawn attention to peaking coal supplies before this, and I have no doubt that more will follow. ...
Thinking again about my hypothesis the market is overly complacent about coal supplies, how can I know when it is incorrect, either because I was wrong to begin with, or because conditions have changed? That could happen because coal will continue to be as easy to mine as most investors think, or because they become as worried about coal supplies as the situation warrants. China, where the most rapid coal depletion is taking place, may indeed recognize the severity of coming shortages, but my hypothesis is primarily about investor in US markets. Until recently, the Chinese have mostly confined themselves to buying huge chucks of our Treasury and other agency debt, but we see them rushing to secure long term coal contracts in Africa and elsewhere. Since China is a net coal importer, it is much harder for them to be as complacent about coal reserves as we are in the US. At the moment, I don't see any worrying at all about coal reserves in the popular press, and reporters typically accept the "200 years of coal" line without question. When that changes, it will be time to re-evaluate. As to my simply being wrong in my pessimism, even the normally Pollyanna-ish EIA estimates, coal production in the US will peak in 2060, which implies a peak in world production much sooner, because the US has the lion's share of remaining reserves. I don't believe that a world peak in coal production even as late as 2050 has yet been acknowledged. When it is, it will again be time to reevaluate this hypothesis. ...
What is important is when we will see unexpected price rises as demand adjusts to constrained supply. As an example, the first effects of peak oil are not happening today; instead they happened in the early 70's, when United States production peaked, and Texas could no longer act as the swing producer of oil, leading to a shift of production in the Middle East. Because of the new investment required, that shift took a number of years, during which time oil stayed at historically high levels, until new production caught up with demand.
Could something similar happen with coal? If any country is likely to be a driving force for world demand, sending prices up for everyone, that country is likely to be China, which is by far the largest producer of coal, but has only half the reserves of the US (according to the EWG report.) How many times have we heard that the US is the "Saudi Arabia of Coal"? If it is, the China is the "United States of Coal." I think a price spike in coal available for worldwide trade is the most likely investable event for peak coal in the near future.
Here are some effects I would expect from such a price spike.
1. Coal prices in current coal importers would skyrocket.
2. Coal prices in areas with easy access to ports would also rise dramatically.
3. Transportation links such as rail from coal producing regions to ports, ports, and bulk shipping would also benefit.
4. The price of electricity in regions relying on coal fired power (other than mine-mouth plants) would increase several cents per kWh.
How to prepare your portfolio for Peak Coal.
1. Companies owning or discovering new coal reserves in coal importing regions will benefit dramatically. (I'm far from an expert on coal companies, so I have no specific recommendations here. I also avoid investment in coal because of the effects of mountaintop removal and global warming.)
2. Coal mining companies with easy access to ports will also benefit dramatically.
3. Rail lines with connections to large port facilities would benefit, as well as the port operators. (Again, I'm no expert.)
4. Construction companies able to quickly build rail lines and expand port facilities will also benefit. (I don't know much, do I?)
5. Shipping companies who own large ore/coal carriers will benefit. Shipyards which produce these ships likewise.
6. Companies that use coal for purposes other than electricity generation will be hurt. Avoid coal-to-liquids companies such as Sasol [NYSE:SSL], Rentech [NYSE:RTK] and Syntroleum [NASDAQ:SYNM]. I wouldn't advise shorting these, unless you are a lot better than I am at anticipating price changes in energy markets: they'll all profit from Peak Oil, perhaps long before they are clobbered by Peak Coal.
7. Alternatives to coal based electricity will also benefit. Because coal plants supply base-load power, the first beneficiaries will be Nuclear power and Geothermal, both of which are also inherently base-load power sources. The easiest way to invest in Nuclear today is by buying uranium miners an processors. I'm personally not a big fan of this approach, but you'll find a lot of other people's uranium picks over at Seeking Alpha. Warning: there is a lot of talk about Peak Uranium as well. Since I have decided to stay away from Nuclear because of the proliferation and hazardous waste effects, I have not made an attempt to figure out how serious this will be for miners. This brings up another general point about investing: you don't have to have a hypothesis about everything... nor should you. It is much better to have a few good ideas than a stack of half-thought out ideas.
8. Geothermal is an under-appreciated renewable form of electricity generation. Ormat Technologies (NYSE:ORA) is the premier geothermal company, and should be the centerpiece of a geothermal portfolio.
9. Concentrating Solar Power CSP can be combined with thermal storage to produce base load power (or even peaking power.) North American companies are only now starting to discover CSP, wit the exception of FPL (NYSE:FPL), which owns most of the original CSP plants built in the United States in the 1970s and '80s. European Conergy AG (an engineering firm) and Iberdrola SA (a utility) are actively pursuing CSP. I'm also watching an Australian company called Enviromission (EVOMY.PK), which is developing Solar Chimney projects, which can easily be a source of base load power, and are remarkably low-tech (which leads to very low running costs.)
10. Biomass, such as wood waste and trash incineration is a good source of small amounts of base load power. Boralex (TSX: BLX)) and The Boralex Power Income Fund (TSX: BPT.UN) have experience with biomass. Another option I like are forestry and paper companies, especially ones committed to sustainability such as Catalyst (TSX: CTL) and Domtar (NYSE:UFS.) Waste Management, Inc. (NYSE: WMI) has a variety of power generation projects fueled by the trash it collects.
11. Power storage technologies such as Compressed Air Energy Storage and Flow Batteries which can allow intermittent sources of energy such as wind to meet base load power needs. One flow battery company I like is VRB Power (Toronto Venture: VRB.)
12. Hydropower based utilities, such as Idacorp (NYSE:IDA) will increase their cost advantage over coal, and their dispatchable nature will become even more valuable as a balance for intermittent wind. Some may also have valuable opportunities to take advantage of pumped hydro power storage.
Given the uncertainties about the timing and effects of the early stages of peak coal, I find it fortunate that a lot of the things I'm doing to prepare my managed portfolios for carbon regulation are the precise things I should be doing to prepare for rising coal prices. I have little doubt that serious regulation of CO2 emissions is on its way, and quite likely sooner and much more comprehensively than most investors are prepared for. But that's a hypothesis for another day. ...
Tom also has a little rant about TXU going nuclear.
A Wall Street Journal article today reports that TXU is planning on using nuclear power to replace the coal plants which they shelved recently.
This drives me batty. I do think that nuclear power is better than coal, and even better than IGCC, but basically substituting nuclear power for coal power is just replacing one nasty externality (CO2 emissions) with another: adding to the risk of nuclear terrorism and waste disposal problems.
When expected costs of CO2 are factored in, the price of nuclear power does looks good. But I ask the same question people are finally asking about global warming: “What’s the business case for destroying the planet?”
Here’s what we should be thinking for our baseload energy needs:
# Energy Efficiency…. 1-3 cents per kWh
# Concentrating Solar Power with thermal storage…. 10-15 cents per kWh (and dropping)
# Wind power, combined with pricing mechanisms to shift demand…. 4-6 cents per kWh
And for peaking power:
# Demand Response
# Time of Day Pricing
# Concentrating Solar Power with large scale thermal storage and an oversized turbine