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May 26

Building Wind Energy Can Save Midwestern Consumers $200 Per Year

We’ve all heard that wind energy is too expensive, and that massive investments in wind will drive up electricity rates for consumers. This argument is based on the belief that wind energy is more expensive on a per kilowatt-hour basis than traditional fossil fuels. While even this premise is up for debate (for example, wind is now the least expensive option for new generation for some utilities in the upper Midwest), the bigger problem is that this argument ignores how electricity markets actually work.

According to a study by Synapse Energy Economics that was released today, electricity markets are structured in such a way that wind power will actually lower wholesale power prices, which can ultimately reduce consumers’ electric bills. The Synapse study, which was released at an event organized by Americans for a Clean Energy Grid, finds that making substantial investments in wind power (and the necessary transmission lines to bring that wind to market) could save the average Midwestern residential consumer as much as $200 per year in 2020.

The key to understanding how this works is something called “price suppression”. In competitive power markets, like the one managed by the Midwest Independent System Operator (MISO), power is sold through an auction. Generators bid in a certain amount of power at a certain price. When the market is functioning properly, the price is always the marginal cost of operating the power plant. For a natural gas plant, the marginal cost is primarily fuel, with some amount of labor and other expenses. For a wind turbine, the marginal cost is effectively zero, since there’s no fuel cost and there are minimal other operating expenses. MISO has a supply curve, ranging from very low marginal cost resources like wind, through nuclear and coal, and ultimately ending at very expensive power from inefficient peaking plants fired with natural gas.

via Building Wind Energy Can Save Midwestern Consumers $200 Per Year | ThinkProgress.

May 26

OPEC Has Lost the Power to Lower the Price of Oil

There’s been a lot of excitement in the past year over the rise of North American oil production and the promise of increased oil production across the whole of the Americas in the years to come. National security experts and other geo-political observers have waxed poetic at the thought of this emerging, hemispheric strength in energy supply.

What’s less discussed, however, is the negligible effect this supply swing is having on lowering the price of oil, due to the fact that, combined with OPEC production, aggregate global production remains mostly flat.

But there’s another component to this new belief in the changing global landscape for oil: the dawning awareness that OPEC’s power has finally gone into decline. You can read the celebration of OPEC’s waning in power in practically every publication from Foreign Policy to various political blogs and op-eds.

via OPEC Has Lost the Power to Lower the Price of Oil – Blogs at Chris Martenson.

May 26

Greasing the Wheel: Oil’s Role in the Global Crisis

Between January 2002 and August 2008, the nominal oil price rose from $19.7 to $133.4 a barrel. This led to a large increase in oil revenues for oil exporters and a deterioration of the current account for oil importers (Figure 1). Between 2002 and 2006, net capital outflows from oil exporters grew by 348%, becoming the largest global source of net capital outflows in 2006 (McKinsey 2007).

Capital outflows from oil exporters therefore played an important role in the global liquidity glut during the build-up to the US subprime crisis. Analysis of direct capital flows is hampered by the lack of reporting transparency and the use of foreign financial intermediaries. Indirect recycling also took place, i.e. direct oil-revenue investment in a given financial market led to corresponding knock-on flows towards the ultimate net borrower. Nonetheless, analysis from the US Federal Reserve suggests that “…most petrodollar investments [found] their way to the United States, indirectly if not directly” (Federal Reserve Bank of New York 2006). In short, the US was the ultimate net borrower, in order to finance its growing current account deficit.

via The Oil Drum | Greasing the Wheel: Oil’s Role in the Global Crisis.

May 26

Financing Goes ‘Green’

Energy prices and consumption seem to be on an upward trajectory. In fact, energy costs have steadily risen over the last decade and are expected to carry on doing so as consumption grows worldwide.

Businesses Eager to Introduce Energy Efficiency

Especially for businesses, the cost of energy is an increasingly significant issue. In a survey conducted by the Organization for Economic Co-operation and Development (OECD) on business energy consumption in its member countries (e.g. France, Spain, India, USA, Russia, Poland, UK, Germany) in 2010, 96 percent of participating (large) businesses indicated that they had started implementing energy-saving measures. Moreover, when asked about their motivations to reduce energy consumption, respondents cited “reduce energy costs” as their most important driver.

However, one must be aware that the turn towards energy-efficiency is a challenging issue. It involves vast investment sums and thorny issues around planning and community relations. Thus the current reduced access to capital puts an important barrier in the way of investing in energy-efficient equipment: Bank credit is tight in mature economies. It is expected to remain so in the near-term in an atmosphere of slow economic growth and concerns about stability in the Eurozone. Furthermore, governments in key emerging markets such as China are restricting credit availability, in order to guard against inflation.

Innovative Financing Methods in Need

Businesses are therefore seeking alternatives to standard bank credit in order to finance energy-efficient investments. Innovative financing methods are thus coming to market which offset the energy-efficient investment costs against energy savings across the financing term. Within this, they effectively provide a zero-net-cost investment technique.

via Financing Goes ‘Green’ · Environmental Management & Energy News · Environmental Leader.

May 26

Artificial leaf device produces hydrogen in water using only sunlight

Scientists and researchers from the Photovoltaic and Optoelectronic Devices group from the Universitat Jaume I, led by Professor Juan Bisquert, have developed, using nanotechnology, a device with semiconductor materials which generate hydrogen independently in water using only sunlight.

This technology, which has been named artificial photosynthesis, was inspired by photosynthesis which occurs naturally (a process in which plants use sunlight to transform organic material into organic compounds, freeing chemical energy stored in the bonds of the molecule adenosine triphosphate-ATP, and obtaining energetic compounds such as sugars or carbohydrates).

The efficient production of hydrogen using semiconductor materials and sunlight constitutes a crucial challenge to make a paradigm shift towards sustainable energy technology, using inexhaustible resources that are environmentally friendly. “Although the energy efficiency of the device is still not sufficient enough for us to consider marketing it, we are exploring various ways to improve its efficiency and to show that this technology represents a real alternative to meet the energy demands of the 21st century,” comments Sixto Giménez, one of the researchers responsible for the investigation.

Hydrogen is an extremely abundant element on Earth’s surface, but in combination with oxygen: water (H20). The hydrogen molecule (H2) contains a great amount of energy that can be released when burned due to the reaction with atmospheric oxygen, creating water as the result of this combustion process. In order to convert water into fuel (H2), the H2O must be broken down into its separate components and so that the process can be carried out in a renewable way (without using subsoil fossil fuels), it is necessary to use a device which relies on solar power, and with no other assistance, to provoke the chemical reactions to break the water and form hydrogen in a way similar to leaves on plants. For this reason these devices are named artificial leaves.

The device is submerged in an aqueous solution which, when illuminated with a light source, forms hydrogen gas bubbles. Firstly, the research group used a solution with an oxidizing agent and studied the evolution of hydrogen produced by photons. “Now the biggest challenge,” comments Iván Mora, member of the team developing the solution, “is to understand the physical-chemical process which is produced by the semiconductor material and its interface with the aqueous medium in order to streamline the device process.”

The development of the artificial leaf is a great scientific challenge due to the difficulty posed by the selection of materials that will be used in the process, working continuously and not decomposing. Currently, the Photovoltaic and Optoelectronic Devices group from the Universitat Jaume I is one of the few research groups on an international level that has shown the viability of a device with these characteristics, together with the North American laboratories from MIT in Boston or NREL in Denver. The research group leader, Juan Bisquert, comments that “in comparison to other devices, that which has been developed by the UJI has the advantage of low production costs and a large collection of incident photons of light, used in the production of hydrogen photons in the infrared spectrum.”

via Artificial leaf device produces hydrogen in water using only sunlight.

May 26

S & P Opines on Securitizing Distributed Generation

Renewable energy-related asset securitization has been gaining a lot of traction lately as a number of key stakeholders from both the private and public sectors have been stepping up their collaborative efforts (including NREL’s finance team). To help frame the discussion and facilitate the creation of ratings-quality renewable energy asset pools, Standard and Poor’s (S&P) rating agency has recently produced high-level guidance on various possible risk factors in the potential securitization of renewable energy assets, cash flows, or loans.

An opinion paper published by S&P earlier this year titled, “Will Securitization Help Fuel The U.S. Solar Power Industry?” (accessible here) focused on a number of risks associated with the securitization of future solar lease or power purchase agreement (PPA) payments. Like mortgages, in order for S&P to adequately assess the credit risk associated with these cash flow-based securities, payment default risks must be understood and reasonably quantified. From S&P’s perspective, much of this payment default risk can be attributed to system performance, of which there is not an adequate amount of historical information that ensures solar panel performance is maintained over the full length of most 20-year PPA and lease cash flow agreements.

via S & P Opines on Securitizing Distributed Generation | Renewable Energy Project Finance.

May 26

Analysis: New facilities spotlight next-generation biofuels

After a decade of promise, advanced biofuels makers are entering a crucial make-or-break period with the first of a new generation of production facilities about to come on line.

The new facilities are designed to take biofuels beyond corn-based ethanol and begin to shift the industry to “advanced” fuels made with a lower carbon footprint derived from products that will not compete with demand for food.

Many of the companies are turning to cellulosic plant materials, animal waste and plant oils to churn out millions of gallons of ethanol, diesel, jet fuel or components for gasoline.

Driving the industry are U.S. government targets stretching out a decade that call for fuel suppliers to blend billions of gallons of the new biofuels into the U.S. gasoline and diesel pools, on top of the corn ethanol that already makes up about 10 percent of the gasoline market.

via Corrected: Analysis: New facilities spotlight next-generation biofuels | Reuters.

May 26

Have Wind, CSP, and PV Turned Against Each Other?

The three major investor-owned utilities (IOUs) in California are well on their way to meeting their obligations to provide a third of their power from renewable sources by 2020. As a result, they and the California Public Utilities Commission (CPUC), their regulators, are no longer thinking only about the quantity of the renewables they want. They are starting to think more carefully about the quality of the renewables and how they will fit into utility portfolios.

As of May 2012, according to the CPUC, Pacific Gas and Electric (PG&E) had procured renewables capacity equal to 20.09 percent of its 2011 electricity. San Diego Gas and Electric (SDG&E) had procured 20.80 percent, and Southern California Edison (SCE) had 21.07 percent. At recent conferences in San Francisco, San Diego, and Phoenix, renewables investors repeated, off-the-record, that the IOUs may have as much as three-quarters of their 2020 obligations under contract.

To determine the best economic choices to fill out the remainder of the renewables portfolio, the CPUC is considering a new formula. In his April 5 Rulemaking, Commissioner Mark Ferron described a redefinition of the 2004 “least cost, best fit” formula for capturing the full range of costs and benefits of renewables selected to meet the RPS.

via Have Wind, CSP, and PV Turned Against Each Other? : Greentech Media.

May 26

Obama’s Biggest Climate Decision Of The Year May Be … Palm Oil?

The Obama administration is poised to make one of the biggest climate policy decisions of its entire administration – and it’s not about coal, oil, or gas, but rainforests. EPA is deciding whether or not palm oil should be included in the Renewable Fuel Standard, which mandates that American motorists use 36 billion gallons of biofuel in their cars and trucks by 2022. In order to qualify for inclusion, palm oil would have to cut greenhouse gas pollution by at least 20 percent compared to gasoline.

Which means that it should be an easy call: Of all the biofuels, palm oil causes by far the most pollution because much of it is grown by clearing and burning dense rainforests, many of them on carbon-rich peatland, to make room for plantations. That widespread deforestation has made Indonesia the world’s third biggest global warming polluter, just behind China and the United States.

EPA recognized some of the problems with palm oil in its draft finding that palm oil does not qualify for inclusion in the RFS … but just barely. However, a close look at EPA’s draft finds that it used old and deeply flawed data to systematically underestimate the emissions from palm oil. For instance, the analysis draws on data on plantation expansion that ends in 2003 – not taking into account how much worse the palm oil industry has gotten since then.

via Obama’s Biggest Climate Decision Of The Year May Be … Palm Oil? | ThinkProgress.

May 26

Whatever happened to $200 oil?

Four years ago, when I was still chief economist at CIBC World Markets, I forecast that global economic growth was on pace to send oil prices (CL-FT90.60-0.06-0.07%) to $200 (U.S.) a barrel by 2012. In short, the argument was based on a supply-driven analysis that weighed the sources of future oil supply against the prices that would be needed to make the extraction and processing of that oil economically viable.

Since that call (which clearly hasn’t come to pass) received some attention at the time, it feels fitting to spend a few words discussing what happened to derail the projection. That particular analysis, unfortunately, didn’t adequately address the stifling impact that rising oil prices would have on economic growth. At the time, a constrained outlook for global production growth against a backdrop of runaway demand meant prices had nowhere to go but up. As subsequent events would dramatically demonstrate, though, triple-digit prices had a much more critical effect on demand than supply.

By the time oil reached $147 a barrel, the economic drag was more than sufficient to trigger a chain reaction of events—including spurring higher interest rates which pricked the U.S. sub-prime mortgage bubble—that ushered in the deepest global recession of the post-war era. Instead of marching towards $200 a barrel, oil prices abruptly reversed course and plunged all the way to $40 a barrel.

via Whatever happened to $200 oil? – The Globe and Mail.

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