Run the numbers

Following is a letter I wrote to a friend in local politics, in response to their concerns on the economics (or lack thereof) of solar home systems:

Solar power costs $10/watt, just for the equipment (panels, controllers, batteries, etc.) I have heard of people spending a lot more than that once they get the equipment installed. Any time I hear someone claim that they’ve installed solar power for less, I know that they’ve left some costs out of their figures. For comparison, natural gas generating stations universally cost $1/watt anywhere in the world (I built three 10MW gas generators in Bangladesh in 2000 for about $0.80/watt.) Large coal-fired power plants have historically cost even less; for example, Deseret’s 400MW power plant that serves Dixie Escalante REA cost about $0.65/watt (for power plant, mine, and railroad.)

The example that I mentioned in our last meeting was for a typical customer of our electric cooperative, of which I’m one. My home is all-electric and I use an average of 1500kWh per month. To replace that amount of energy with solar power, and assuming that the co-op's grid remains available for me to use to offset my time of consumption vs. my time of generation (I use electricity in the dark but would only generate when it’s light,) I would need to install at least 9,000W of solar panels (which would generate about 1225kWh/month.) That amount of solar panels would require 910 square feet of my roof or yard, and would cost me at least $90,000 if I installed them myself. Then, if I could get both the federal and state tax credits of $2,000 each, I would only need to finance $86,000. If I could get a second mortgage on my home at 5% for 30 years, I’d have a monthly payment of $462 for the solar panels. OR, I could just buy that much energy from the co-op for $71.54 and save the extra $400 per month.

Please let me know if you have any other questions or concerns on this or anything else in the power business.

Note: the photo above is a 100W installation on a relatively upscale home in the jungles of Bolivia, from one of my past projects.

What Puts the “Green” in “Green Power?”

Question: What puts the "green" in "green power?"
Answer: The "greenbacks" from your wallet!

Our elected representatives have already chosen to break the bank on "man-made global warming" and "carbon capture." The big problem is that nearly everyone who understands the fallacies of both issues has a vested interest in the matter. I break it out as follows:

1. The Investor Owned Utilities (IOU's), like Duke Energy Corp, see this as a big cash cow; now they have an excuse to write-off their existing coal-fired power plants that generate power at $0.03/kWh and have a blank check to replace them with natural gas-fired power plants that generate at $0.06/kWh. If you understand that the IOU’s get a fixed 8% return on all sales, then it doesn't take much math to understand why they'd love to double their wholesale power costs. It's good for their profit margins, good for their investors, and no one cares about the customer. And which IOU thought of this scam first? Enron! And when they went broke, guess to which other IOU they sold their renewables business…

2. The product manufacturers, like General Electric, are also experiencing a huge cash windfall; GE just got congress to outlaw incandescent light bulbs, whose next best replacement is CFL bulbs. Now, if they have a fixed profit margin, call it 15%, you can see why they'd love to sell light bulbs for $2.00 each rather than $0.50 each - they just quadrupled their profit margins! And that's just on the consumer side. On the utility side, in that same law congress decreed that transformer efficiencies increase from 98% to 99%. This 1% increase in efficiency will double the cost of every single transformer that every utility in America buys. So, it's all good for their profit margins and investors, and no one cares about the customer.

3. The large research labs, like Electric Power Research Institute (EPRI), are also waiting with baited breath for the huge cash infusion from congress. These scientists know full well that man-made carbon dioxide emissions are not causing global warming, and are very careful not to say anything on that subject. What they are saying, however, is that with a little extra funding EPRI could research ways to reduce our carbon dioxide emissions back to 1990 levels. (They're very clever not to make any claims as to whether or not that will affect global warming - they've let Al Gore make that case for them.) And what is their price tag for the research? $2 trillion! That's just 1/6 of our GDP is all.

4. The press has discovered that headlines featuring natural disasters, real or imagined, sell more than headlines stating that the weather is normal, cyclical, and unpredictable. Plus, they have to generate enough copy to fill their airwaves 24/7, and if you watch the news very frequently (I watch CNN, Fox News, and CBS news simultaneously on three TVs every morning for an hour during my workout at the gym) you will quickly note that there is not that much happening around the globe, so they have to stretch, fill, and generate their own news a significant portion of the time. I'm reminded of the L.A. Times' motto: "Bad news is good news, good news is bad news, and old news is history." So, of course you get the press corps clutching at every opportunity to tout "man-made global warming," making them complicit in the scam however ignorantly.

So now you have the “perfect storm” of well-funded lobbyists from the big IOUs, manufacturers, and research labs, as well as the press, all telling congress that Al Gore is right (even though they know he's not) and that our government needs to throw some serious money their way or there will be dire consequences. The only sector that I see trying to tell it like it is, and protect their consumers' best interests, are the rural electric cooperatives. Being non-profit entities we have no vested interest in seeing our rates increase - we have no profit margins to increase and no dividends to pay to share holders. We answer only to our member/consumers and our only interest is to sell electricity with the best reliability possible at the best possible price. Unfortunately, we’re so small that our lobby in Washington is relatively small, so now our only hope to stem the hemorrhaging is to ignite a grass-roots movement among our members. I was talking to our lobby people in DC last week and they told me that they'd done all they could do with the legislators in Washington and now it was up to our members to get involved. Hopefully you'll be a part of that.

Following are three questions that our lobbyists suggest that we all ask our elected officials:

1. Experts say that our nation’s growing electricity needs will soon go well beyond what renewables, conservation, and efficiency can provide; what is your plan to make sure we have the electricity we’ll need in the future?

2. What are you doing to fully fund the research required to make harmful emissions free electric plants an affordable reality?

3. Balancing electricity needs and environmental goals will be difficult. How much is all this going to increase my electric bill and what will you do to keep it affordable?

On the subject of "carbon capture": while this concept is being bandied about in Washington DC as if it were something we could actually do, it's still very much in the theoretical stage, part of that $2T study that EPRI wants to do, so no one yet understands how it would be done or what it might cost us. This is one of those cases of "if you have to ask the price, you can't afford it."

Wind Power and Bio Fuels?

I hear all the time from friends and acquaintances who think it's windy enough here in the Southwest/Four Corners states that we should all be powered by windmills. Following is what I wrote to one friend recently:

Sorry, but if you look at DOE's National Renewable Energy Lab's wind resource map (see: http://www.nrel.gov/gis/wind.html) there is very little to no usable wind in the whole Four Corners area in the states of Utah, Arizona, New Mexico, or Colorado. You need a "category 5" wind resource (dark purple on the map) to make wind power, however breezy it seems there where you live (I know I always thought of it as windy.) And then... at best you will only have wind power 15% of the time. Plus... you can only have 10% of your power from wind (the rest must come from coal, natural gas, nuclear, etc.) in order to maintain frequency stability (that's what makes your electric clocks and motors run right.) So, for heaven's sake, don't invest any money in a wind farm.

Also, I'd hate to invest any money in bio-fuels, regardless of that Virgin Airlines flight - burning down the rain forest to grow and burn more food is never good for the planet. See: http://www.cnn.com/2008/TECH/02/24/eco.biofuels/index.html

Fighting the Big "Environmental" Industry

On the political front here in Utah, I spent the past month continually commuting or phone conferencing to/with Salt Lake City for work on three separate but related fronts – a Renewable Portfolio Standard, Net Metering, and Interconnection – all three dealing with “Alternative Energy” sources (but mostly solar.) This has been a particularly busy season since the Utah legislature is currently in session. The problem is that the big “environmental” industry (notably GE and Honeywell) who bought into the existing alternative energy (mostly solar and wind) technology have gotten impatient with their market share (less than 3%) and decided to legislate themselves some more equipment sales. Unfortunately for them, their power prices are about twenty times the going rate here in Utah, which makes them unattractive. Unfortunately for us, Utah’s governor is such a flaming radical (if he weren’t so independently wealthy, thanks to his daddy, I’d say he’d been bought off by the big environmental industry) that he’s willing to betray all of Utah’s rate payers and create our own version of a Soviet-style command economy (like in California) and force us to buy from these snake-oil salesmen (most of whom are lobbying with grant money from the DOE – your and my own tax dollars – talk about being hoisted on your own petard.) But Utah isn’t alone or even the first battle state – these same battles have already been fought and lost in 24 other states, including Arizona, New Mexico, Colorado, Nevada, Texas, California, Washington, and Oregon. It’s been nearly a full-time job to try to protect our citizens from this travesty – and for whatever number of battles that we’ve won, I’m not convinced that the war is over; it’s like watching a bad horror movie – every time you think you’ve killed the Boogieman he just gets back up and starts chasing you with a big chainsaw again. It’s good to be involved in the political process a bit, however frustrating. And speaking of frustrating, I’ll save you all my rant about the national political scene – suffice it to say that I’m (literally) having nightmares about the upcoming energy and food shortages as the present and future governments continue to wreck our economy – I’m rapidly becoming an anarchist.

Lake Mead and Lake Powell drying up?

If you've read the recent studies published by the propaganda machine that we call our "free press" in which they talk about droughts in the near future drying up Lake Mead and Lake Powell, don't let these guys get you too worried. If they're correct, it's just dumb luck and not valid science - odds are that they're 100% wrong. I've studied their global climate models and they're not even accurate enough to "predict" the past, which means to use their models to duplicate past climate conditions that were measured, never mind predict the future. They totally missed predicting this past winter (2007-08) which was the coldest on recent record. This huge disconnect with reality comes from the fact that they don't even attempt to model such things as mountains, sea coasts, or even water vapor (which makes up 97% of the greenhouse gases in the atmosphere.) Besides, these models aren't even accurate on a global scale, never mind a micro-climate scale. And I know something about computer models - I've spent the last 20 years making and applying computer models to analyze and predict electrical power systems - that's what has taken me around the world for such clients as the US Government and the United Nations. So, while we should all do our part to conserve the natural resources over which we have stewardship, don't lose any sleep over these predictions or any other climate predictions based on global climate models, at least until the day when they figure out how to model how weather works.

Ten Questions and Answers

Our local county has formed an Energy Committee and are seeking comments on various issues, so I've prepared the following responses to their inquiries.

1. Issues surrounding various proposed carbon taxes:

The deliberate choice to use the word “carbon” (as in carbon taxes) is an intentional attempt to confuse and misdirect the general public into thinking that carbon dioxide (CO2), which is the actual subject of discussion and is a harmless gas and an intentional byproduct of the combustion of coal (carbon) or natural gas, is “dirty,” like handling a chunk of unburnt coal, and might even cause black lung, like coal miners get when breathing in coal dust. The same special interest groups that wish to vilify carbon dioxide are hoping that a frightened public and government might impose an artificial cost, or tax, on the emission of carbon dioxide, which would directly increase the cost of generating electricity with conventional fuels, which would in turn make their products, “alternative energy” sources such as solar and wind power, more economical by comparison. Of course, the reality and science of the issue is that carbon dioxide (not “carbon”) is a harmless gas, does not cause black lung, does not cause “global warming”, and applying an artificial cost to the electrical power generation process would only be a thinly veiled program to transfer resources from the pockets of those who use electricity (hardest hit would be residential consumers living on fixed incomes and the commercial and industrial consumers that add value to our very weak economy) to special interest groups (GE’s stock has shot up over 60% in the past five years, for example.) The entire ideology behind the concept of “Carbon Taxes” is technically flawed and needs to be eliminated from public debate through education.

2. Costs of renewable resources:

Conventional generation sources, such as coal or natural gas, cost a nominal $1 per watt to construct anywhere in the world. Typically, large generation plants (300-3000 megawatts), with economies of scale, can be constructed in the United States for considerably less than the $1 per watt. “Alternative” energy resources cost considerably more, depending on the type. For example, a hydro-power generation plant would cost $1 per watt for the generation facility, before considering the costs of the civil works (dams, penstocks, etc.) which typically drive the total costs up to at least $5 per watt. Solar power (photovoltaic) typically costs $10 per watt for just the equipment, before considering the labor costs to install the equipment, which would tend to increase the cost by 50-100% to about $20 per watt. Another cost of renewable resources is related to the location of the resource. For example, geothermal plants have to be constructed at the location of the geothermal hot springs, which can be far from existing load centers and transmission lines, and therefore have considerable additional costs associated with the transmission of the power. Another cost of renewable resources is the life expectancy related to that resource and the resulting stranded investment; Geothermal pockets are notorious for cooling off in a relatively short time after the construction of the expensive generation facility. And perhaps worst of all is the availability of renewable resources; solar power is only available when the sun is shining, wind power when the wind is blowing, but demand for electricity also occurs when it’s dark and the air is still, which means that expensive duplicate conventional generation capacity would have to be built to back-up the renewable resources. Scale is another serious issue with renewable resources; utility grade generation comes in hundreds or even thousands of megawatts (1 megawatt = 1,000,000 watts) while renewable energy tends to come in packets of hundreds of watts – a tiny fraction of the capacity required by consumers (a typical home will have a demand of 10-20,000 watts.)

3. Mandated energy portfolio standards and the potential consequences of such, including higher costs, diminished choices, loss of freedom, etc. Please state costs in easy to understand terms such as monthly or annual rate increases that would result.

Mandated renewable energy portfolio standards (RPS) are a highly effective method for government interference in the energy sector to reach catastrophic proportions in the shortest time possible. A typical RPS might mandate that a state receive 25% of their energy from renewable resources. An oversimplified illustration of the effects of this case would be as follows: the rate payers of that state would see their power costs rise from their present cost (call this 1.0 per unit) to the new cost described as:

75% @ 1.0 p.u. + 25% @ 20.0 p.u. = 4.75 p.u.

which means an increase in average energy rates of 475%! Unfortunately, the more complicated reality would be even worse since you wouldn’t be able to actually replace 25% of the generation capacity, since the backup conventional generation would still be required, but only 25% (at best) of the energy production, so you would still have some additional demand costs in this equation, likely taking the average costs up to 500% or higher. Further, the per-unit costs of the energy (1.0 for conventional and 20.0 for renewable) are the relative costs given today’s market when there is little demand for renewable energy. That ratio of 20:1 is likely to increase significantly as utilities in states with mandated RPS start to compete for limited renewable resources. Additionally, this oversimplified analysis does not include the additional taxes applied to the ratepayers that would be required to continue to subsidize the renewable energy resources. If anything can drive our limited remaining industrial and manufacturing sector to India, China, and Brazil, the 1-2 punch of the implementation of a mandated RPS and the increase in taxes can.

4. Municipal and Utility Company alternatives:

All utilities, private, municipal, or cooperative, should be required to develop and acquire the most economical power supply (electrical generation) possible while maintaining legitimate clean air standards (i.e. within allowable limits on particulates, SOx, and NOx.) Further, all utilities should be required to plan their power supplies beyond the short-term (5-years) and into the long range (20-30 years) to mitigate future power shortages.

5. Off peak usage:

Off-peak usage is one way to significantly improve the utility’s “load factor” – the measure of the utilization of the fixed assets, like generation, transmission, and distribution. All utilities must provide their commodity on-demand, at the instant that the consumer requires. In a system with a preponderance of residential customers, that means early in the morning and late in the evening, often producing load factors in the range of 20-40%. That means that the utility’s fixed plant is only utilized 20-40% of the time. If a utility can coax customers to consume energy during off-peak times, specifically during the day and at night, then the utility can improve its load factor, spread its fixed costs over a broader base, thereby decreasing the average cost of power. To this end, most utilities offer incentives to use power at off-peak times, in the form of off-peak rates. This allows the customer the freedom to choose to either pay more to use power on their own time frame, or to save money by shifting their power usage to off-peak times. This is a legitimate free-market solution to overcoming the problem of a low load factor. Any command-economy type solutions, like government mandating of off-peak usage historically has been proven to fail to achieve the desired results.

6. Efficiency & other conservation measures:

In a market-based economy, the consumer has the freedom to choose either to consume more goods and services for the market price, which tends to make the price increase with demand, or conserve (reduce their consumption), which tends to make the price decrease with the decreased demand. The consumer should always be allowed to make that choice based on the economic benefits or costs associated with each choice. Manufacturers of appliances already produce their products with a range of energy efficiencies with their associated costs, which allows the consumer to choose the best appliance for his application, given his own local energy costs. Governmental agencies that spend public money should always perform a serious cost/benefit analysis prior to adopting any efficiency/conservation measure, to avoid paying for flashy but uneconomical measures.

7. Energy development:

Utilities have the responsibility to meet the demands of the consumers in their designated service territories both today and in the future and as such are under an obligation to carefully plan for both power supply and delivery. And since such electrical infrastructure has a 30-year life (depreciation cycle) utilities should always ensure that all new plant constructed should meet the needs of its consumers for the coming 30 years. Also, since lead times for design, permitting, materials purchase, and construction are measured in years rather than months, utilities are under an equal obligation to start developing new energy projects (generation and delivery) years in advance. Elected leaders have an equal obligation to their constituents to see that permitting for such properly planned and justified energy development projects is facilitated.

8. Pollution comparables:

There is no energy development, energy consumption, or manufacturing process that is entirely emissions-free – not burning coal or natural gas for electricity generation, manufacturing compact florescent light bulbs with mercury, nor mining nickel for making Ni-Cad batteries for electric vehicles – everything contributes some pollution to the environment (nickel mining being the worst of the three cases above.) Fortunately for the environment in the United States, we solved most of the emissions problems in previous decades, with the implementation of unleaded gasoline and catalytic converters on our automobiles, “scrubbers” on our coal-fired power plants, and the whole “Pitch In” public service campaign that helped to raise public awareness and to reduce littering on our streets and highways. In recent decades our air emissions from power generation and gasoline powered automobiles has been largely reduced to harmless CO2 (beneficial to plants) and the attempts by the special interest groups to demonize CO2 in order to artificially create an increased market share for their “alternative energy” products is at the very least dishonest.

9. Capital costs and alternative sources:

As illustrated in point #2 above, the capital costs for energy generation range from conventional coal or natural gas fired generation, which costs an average of $1 per watt globally, up to $20 per watt for solar photovoltaic systems. If governmental agencies wish to encourage expensive and immature renewable energy technologies by subsidizing the capital costs, they should do so with open and honest mechanisms such as rebates or grants, paid for with tax dollars as approved by the voters. Governmental attempts to hide such grants, by passing Renewable Portfolio Standards, as in item #3 above, which force the utilities to purchase energy from (i.e. subsidize) expensive and immature energy sources, are misleading and dishonest.

10. Capacity and transmission – including issues surrounding rights-of-way and permitting:

As the County becomes ever increasingly urban, space to accommodate rights-of-way for transmission and distribution power lines becomes increasingly scarce. Accordingly, even though joint distribution facilities don’t make any sense, because the individual utilities in the county serve in distinct geographical areas, it only makes sense for the utilities to work together to create joint transmission facilities, that span from one area to another. Toward this end, a Technical Task Force was formed in the County in 1988 and currently plans and develops and operates transmission facilities jointly (to the extent practical.) These efforts should continue and should be encouraged when considering issues of rights-of-way and permitting.

Rant to a (patient) friend

Hey there Amigo,

Good to hear from you again. Here in Utah I’ve been up to my eyeballs with both technical and political work. On the political front my current battle is on the “alternative” energy front – our silly governor, who is making TV commercials with Arnold Schwarzenegger to promote their special interest agenda, is trying to impose a renewable portfolio standard on the utilities in Utah. No kidding. I’ve been driven to distraction with so many meetings up at the state capital in Salt Lake City. The proponents of this proposal keep saying that the electric rates in Utah are too low and that they should be artificially raised so that their solar and wind power projects would appear to be economical in comparison. They don’t care about the poor rate payers who are just trying to make ends meet in this current recession (that GWB is denying.) The muni’s are exempt from State law in Utah, and the IOU’s don’t care what their rates are, as long as they can collect their standard rate-of-return, so it falls to the three little piss-ant co-ops in the state to try to protect our members’ interests. It makes my blood boil every time some rich developer talks about taking money out of my little old grandma’s pockets just so he can peddle his products in a command economy situation rather than the free market that we supposedly espouse in this country.

These project developers, who want to set up alternative energy projects on my (and my Grandma’s) nickel, all point to man-made global warming as their justification. They never try to defend their position beyond adopting the Al Gore and Arnold Schwarzenegger line of “the debate is over.” I know that’s what they’d like, since they can’t point to any scientific evidence to support their claims. I’m convinced that the truth of the matter is that I’m the only one in the room up in SLC that has actually read the scientific studies published on the subject, by the IPCC and the individual scientists that make up that panel. The other side seems to be getting their “science” strictly from Hollywood. During the lunch break at the last meeting, I went to eat with the activists from the mayor’s office and the solar lobbyists (including a professor from the U of U) and attempted to engage them in a friendly scientific discussion of the facts. They acted like I was the first person to attempt such a thing – their only response was that we’d just have to agree to disagree. On the facts?! I pointed out that we weren’t discussing religion or who was the greatest rock-and-roll guitarist, but hard cold scientific facts and that there was no room for disagreement, that the facts are what they are. They had no response.

So yes, the facts clearly show that, according to our measurements, the average global temperature has increased in the past 100 years or so, since the end of the “Little Ice Age” in the 1800’s. The facts also show that CO2 (a byproduct of fossil fuel fired electric generation and vehicle emission) is a green house gas. However, none of the science (discounting the IPCC’s Summary for Policy Makers, which wasn’t written by the scientists themselves and which contradicts the scientists’ actual findings) concludes that man’s emissions of CO2 have been significant enough to account for the global warming. In fact, the only correlation that anyone has been able to show with our increasing temperature (which is only increasing in the winter and in the Northern Hemisphere) is that with solar radiation, which is clearly beyond our control. So, what Utah’s and California’s governors are proposing is all pain for no gain.

The article that I sent you may be weak in ascribing motives to the man-made Global Warming alarmists, but I’m sure that the author is just basing that on his personal experience with his own family and friends; but then, that’s what we all tend to do: filter world events through the lens of our own experiences. As for me, I have a hard time figuring out why so many people are pressuring us to take such drastic and expensive measures to try to affect the weather, when the evidence suggests that we can do no such thing regardless of how much money we throw at it. I do know that NBC news is owned by GE and that GE makes many of the “green” devices being touted on the NBC nightly “news” shows. I also know that EPRI depends on external funding to survive and that the technological “solution” to man-made global warming that they’re touting will cost $2T (their figure = 17% of our GDP), a good percentage of which will certainly flow their way at least in the early R&D years. So, if I were to hazard a guess as to the motives behind this movement it would either be TV ratings (and hence, advertising revenues) and/or increased product sales. I have thus far resisted the urge to ascribe the more sinister motives that I’ve heard bandied about, like the resurgence of socialism after their failure in the Soviet Union and Eastern Europe.

I’m not sure that you’re interested in chasing this topic as far as I have, or spending as much time reading on the subject (it is kind of dry), but if you wanted to read the boring details for yourself, I’ve posted all the links and reading lists on my blog.

As for our buddies overseas, like Bangladesh and Bolivia, which are both near and dear to my heart since living and working there, I agree that they have serious environmental problems that need addressing. However, I think we’re diverting funds from proven solutions into early adoption of expensive technologies based on an artificially induced demand. I am, of course, always open to and desirous of continuing dialog – just because I’ve come to a conclusion on the subject based on my reading to-date doesn’t mean my mind is closed to new information.

Well, I’ve gone on much too long. Sorry for the rant – it’s been that kind of month here sunny Southern Utah. You have a great weekend.

Un abrazo.

Note: I took the attached photo on my family trip to southern Chile in 2005. Watching lava bubble and boil was every bit as entertaining as watching ice (glaciers) melt.