Energy & Power Generation

Chicago Tribune Finally Wakes Up On Our Dismal Energy Future

by

Over the last few years I have written many articles about power and electricity, and in particular how transparently wrong the “dreams” and plans are for alternative technologies or the re-birth of nuclear power (although that makes me sad, for I am a big supporter of nuclear power).

A large part of the problem is that there are many variables that need to be understood in order to see what is likely to occur in the future in the energy industry. These include:

1 The motivation of key players, whether they are utility companies, government entities like the TVA or the Los Angeles Department of Water and Power

2 The financial capabilities of the key players, because often the ones with the largest amount of available funding are unlikely to “risk it all” for uncertain financial gains

3 The role of state regulators, since the utility industry still has a very strong state orientation, particularly in Texas, which has its own grid (except for El Paso)

4 The role of Federal regulators, who have can order components of deregulation which have shaken up the industry for better and for worse

5 The role of Federal agencies, such as the Nuclear Regulatory Commission, which for the most part has rubber-stamped nuclear re-licensing so far (prior to Japan), and the Department of Energy which has spectacularly failed with the Yucca Mountain storage project for nuclear waste. Also the EPA with particulate emissions

6 The role of special interest groups, particularly those against new construction of nuclear or coal plants, or transmission lines to connect the grid. These interests have won huge and damaging victories such as the demented Shoreham situation and the transmission line under Long Island that can’t be powered on

7 How electricity works (and gas, for they are intertwined), with the key note being that it is a “peak” business and not having the right amount of power in the right place makes for bad outcomes (blackouts)

8 That “classes” of rate payers such as industrial titans (aluminum plants), companies, government entities and residents have different motivations and goals. One of the most insightful things I heard in a rate case proceeding was “I don’t care if you raise utility rates, just don’t raise them on my class of service”

9 The different segments of utility operations, from generation to transmission to distribution, and how each has different economics and “closeness” to customers (you may hate your local distribution utility, but it is the generation and the lack of transmission that is driving the rates that they must charge)

10 The role of individual politicians, such as prominent ones from either party that come into power and proclaim that they can “change” the system or achieve a particular type of transformation

11 The fact that utilities are regressive in that an increase in utility rates disproportionally impacts the poor because it can represent such a big portion of their expenses and the utility actually takes action if you don’t pay (one of my first encounters in the industry happened when a small child on a plane asked if I was the guy who “turns off the power” when I said I worked in the electricity industry)

12 The availability and impact of alternatives of which the most important by far is decline in the price of natural gas for generation or to a lesser extent the fact that gasoline powered generators for home backup were once rare but are getting more common, and that many major businesses simply have to purchase parallel backup power units(quite expensive) because they can’t rely on the “dirty” power from their local utility

13 The advancement of technology captures the popular imagination, but I hardly pay attention to it at all. Our energy infrastructure is ancient; our hydro faculties may as well have been built by the ancient Egyptians, and the vast, vast majority of our nuclear plants are running on technology designed 30-40 years ago. Items like smart metering and “alternative” technologies are a drop in the bucket and don’t solve our fundamental issues of lack of base-load power and properly placed and sized transmission lines

14 The cost & availability of money whether measured in interest rates or in availability of credit or buying power is very important to capital-intensive businesses; in the 70’s during high inflation up to 25% or more of the cost of a major investment such as a nuclear power plant was just capitalized interest which was driven by the high cost of money

15 The motivation of oligopoly players is important since major utilities are adjacent to one another and tend not to compete in the other guys’ backyard; the most famous example of this was AT&T which was broken up in the classic Judge Greene decision in 1982 and then regrouped slowly over the next 25 years as shown in this hilarious but true Colbert bit

Of all the variables… the popular imagination tends to favor #13 “new technology” with magazines like Popular Mechanics talking up new reactor designs and other cool advances as well as #10 when the incoming administration talked of a (never-gonna-happen) “nuclear renaissance” in 2008.

Read more

“Carbon” is not a synonym for “CO2”

by

…any more than “hydrogen” is a synonym for “H2O.”

Senator Barbara Boxer (D-CA) seems a little confused on this point.

I’ve noticed quite a few people, in various debates about environmental matters, referring to “carbon” as generically a bad thing. Some of them are probably just using it as a shorthand for carbon dioxide, in order to save syllables or characters—others, though, really do seem to think that the discussion is about some sinister product of the Industrial Revolution, rather than the natural compound that they exhale with every breath and that is required for the growth of plants. Maybe they think it’s about carbon particulates.

The situation isn’t helped by various corporations which, when promoting their products/technologies on environmental grounds, now almost always talk about how they reduce carbon, or at best carbon dioxide, rather than talking about reductions in real air pollution in the form of mercury, sulfur dioxide, etc. The terms “carbon” and “carbon dioxide” are now generally being used as shorthand for atmospheric Bad Things.

Returning to Boxer, the levels of her ignorance and demagoguery are astonishing–but we should not forget also her amazing arrogance and self-centeredness.

A Manufacturing Renaissance?

by

The value of the dollar (shown here measured against a basket of currencies) continues to fall–this of course makes imports more expensive to American consumers. There is inflation in China:

That means Americans, Europeans and other buyers will have to pay more for those goods or seek lower-cost suppliers elsewhere. In some cases, retailers are bidding for goods at prices the exporters consider too low.

“I hear that many Chinese exporters are rejecting orders from Wal-Mart and other Western retailers,” Mr. Tao said. “I’ve been covering the Chinese economy for a long time, and I’ve never heard that before.”

…which has the same effect of making U.S. manufacturing generally more competitive.

The natural effect of these phenomena is that manufacturing in the U.S., for export and for domestic consumption, becomes more competitive and hence factories operate at higher capacity, new ones are built, and employment increases along with economic growth. There are other factors that seem to point in this direction.

The greatly increased availability of U.S. natural gas, driven by new drilling technologies, offers potential advantages both to companies using gas as a feedstock and to those which are heavy energy consumers. Dow Chemical, for example, is increasing its production of ethane and of ethane’s downstream products: Dow’s plastics business has led earnings growth this year after lower natural-gas prices made U.S. production cheaper than oil-based resins made in Europe and Asia.

And in the broader manufacturing realm, quite a few companies are realizing that the “offshoring” boom was in some cases based on superficial analysis, ignoring the logistical realities of a 6000-mile-long supply chain and the consequent inventory, forecasting, and human communications problems. Our friends at Evolving Excellence cover this topic frequently. Note also that rising oil prices directly increase the costs of bunker fuel (for ships) and jet fuel (for planes) and hence have a significant negative effect on the economics of offshoring for many kinds of products.

So, can we expect a manufacturing renaissance in the U.S.? There are certainly indications of at least a temporary uptrend, and there are structural factors, as discussed above, which have the potential of creating growth over the long term.

I am afraid, though, that we are likely to snatch defeat from the jaws of victory. Multiple political and social factors will, unless they are reversed, make it difficult for U.S. manufacturing to live up to its full potential.

Read more

Icebreakers, Lizards, and Gasoline Prices

by

After spending 5 years and nearly $4B on planning, exploration, and leases, Shell Oil has announced that it will have to scrap plans to drill for oil this summer in the Arctic Circle, off the northern coast of Alaska. The EPA has withheld the required air permits because the emissions from one single ice-breaking vessel were not included in the environmental impact calculations. More here.

In Texas and New Mexico, no icebreakers are required for oil & gas exploration…but there is danger that activity will be shut down across a wide area to avoid any possible inconvenience to this cute little guy, the Dunes Sagebrush Lizard. (Bookworm is right–the lizard does have a rather Churchill-esque expression.) If the Dunes Lizard goes on the endangered species list, then both agriculture and energy would be affected:

“We are very concerned about the Fish and Wildlife Service listing,” said Ben Shepperd, president of the Permian Basin Petroleum Association, noting the service also has proposed listing the Lesser Prairie Chicken next year. “The wolf at the door is the lizard; we’re concerned listing it would shut down drilling activity for a minimum of two years and as many as five years while the service determines what habitat is needed for the lizard. That means no drilling, no seismic surveys, no roads built, no electric lines.”

Read more

Who Needs Infrastructure? (II)

by

Commenters on the earlier post having raised several good points, I decided to write a follow-up rather than attempt to provide individual responses.

I should first say something general about technological advance and prediction horizons. Due to the immense effects of nanomachinery, as hazardous as near-future speculation may be, it becomes extraordinarily difficult more than about 20 years out. What interests me in this context is what can be done with “bulk technology” before the transition to nanotech, and how many of the developments forecast by Drexler et al may occur relatively gradually and in unlikely places, rather than swiftly and obviously emanating from North America or some other high-technology region. Jim notes the potential of the combination of desktop fabricators and satellite links. I believe that few people on Earth will see more change in the next generation than young Haitians.

Read more