Monday, December 26, 2011

NY New Years Resolution - Real Wealth Creating Jobs, En Masse


from http://www.windpoweringamerica.gov/windmaps/offshore_states.asp?stateab=ny - your tax dollars at work

Introduction
There are many famous sayings with respect to "too late". A classic is "shutting the barn door after the horse has got out". Or "better late than never", even if "it's all for naught but still for show". And that brings us back to the subject of offshore wind turbines and NY State. As you may recall, there was an initiative called the Great Lakes Offshore Wind (GLOW) project, which got canned this fall by the New York Power Authority (NYPA), or at least the NY State part of GLOW. The cancellation had a lot to do with political intrigues and personality clashes in the upper realms of NY's political bureaucracy and especially in that pot of gold known as the People's Power Company of NY - alias NYPA. NYPA is owned by the people of NY State via our state government - it is the biggest municipal electric utility (MEU) in our country. And due to the Niagara River and St Lawrence River power projects (NPP and FDR Dam), it produced an average of about 2200 MW of electricity at a cost of less than 0.2 cents/kw-hr, or about 7% of the low, low cost that NRG makes electricity at the old (76 years and counting) Huntley facility (COST is about 3 c/kw-hr, but that is not the PRICE that it gets sold at - the price is a bit of a random value). Note: NYPA also makes other electricity, but most of it is more costly to make, such as the natural gas sourced energy. And the electricity made at Huntley is made cheap, especially compared to natural gas sourced electricity. This low cost hydroelectricity is highly sought after and the subject of a lot of fighting over it, as well as impressive displays of ignorance on behalf of many local politicians, economists, businesspeople, the general public, too. More on that, in a bit...

Discussion
Some of this super-cheap hydro-power is sold at cost (transmitting it costs about 10 times what the manufacture of it costs at these largely depreciated facilities) - mostly to municipal electric utilities in NY and 6 neighboring states, and some to local industries around here. However, some of it gets sold at "market rates", which can also be called "NYISO spot price", or "NYISO price". Last year the NYISO price in WNY averaged 3.92 c/kw-hr, so a tidy profit was made on this - for example, on the 58 MW average production from the Lewiston "pumped hydro" attachment to the Niagara Power Project, which acts like a giant battery (equivalent to around 4 million car batteries (100 amp-hr ratings)). Whatever electricity that is made but not allocated via a contract with a MEU or an eligible business can get sold at the NYISO rate, which varied from 1 c/kw-hr to 12 c/kw-hr last year in WNY, and that essentially all translates into profit for NY State via its NYPA subsidiary.

Anyway, a couple of months after the demise of NY part of GLOW (see http://www.wagengineering.blogspot.com/2011/09/offshore-wind-revisted-in-2011.html), along comes a bunch of well meaning people and well meaning organizations advocating for offshore wind development near Long Island - see http://www.offshorewind.biz/2011/12/22/new-yorkers-push-for-offshore-wind-power-usa/. Sure, they hit all the right buttons, and are to be commended for the general focus on job creation, but, the time for these sentiments was a few months ago, and doing this now is .... what? Maybe this is for show, or maybe regret at seeing the massive job creation going in in Northern Europe with their offshore wind energy efforts contrasted with the whole bunch of "nothing" going on in NY State? And that "nothing" includes no manufacturing jobs, no business opportunities, no investment banking, no marine construction jobs in the offshore wind biz, and lots of opportunities for environmental destruction via the "Swiss Cheesing" (fracking) of much of upstate NY. At a minimum, offshore Long Island will be much harder to do, as this is the THIRD attempt, and the unspoken hurdle to be overcome is "are you really serious, or just pretending, AGAIN?".

For example, before this can be seriously considered, somebody is going to have to put a deal with the purchaser(s) (for example, LIPA and/or Con Ed) for a fixed price/long term supply of electricity, the developer, their suppliers, engineering and environmental consultants, the project managers/planners/schedulers, the equity investors (typically 30% in Europe) and the bank consortia (which also means putting together this consortia, typically in for 70%). This offshore deal would involve over $1 billion INITIALLY, and to make any sense, it has to be a part of a continuing program of offshore wind projects. Just putting this deal together will cost lost of money, and involve facilitators (also highly compensated) such as these: http://www.green-giraffe.eu/uploads/111201%20GGEB%20presentation%20EWEA%20Offshore%20Wind%20-%20Show%20me%20the%20Money.pdf. These people have far better things to do and real money-making opportunities to pursue than another snark-hunt equivalent which has been the two previous offshore NY "adventures".

After all, placing big wind turbines in the Atlantic Ocean in 30 to 50 meters of salt water subject to the occasional hurricane and 60 ft tall waves is not going to be cheap, nor will the electricity made by those turbines be cheap until the investment is paid off in 20 years or so. At least Lake Erie is generally less than 30 feet deep, alkaline fresh water and waves have never been reported to be more than 15 feet (30 feet peak to trough)...... Well, that 500 MW worth of projects (one of which could have been on Galloo Island in Lake Ontario, and thus pretty inexpensive) would have provided a nice "base" of suppliers, labor, consultants and engineering for the more difficult Long Island adventure, but, no go. Yes, you might need different models of turbines for the slightly less intense Great Lakes winds versus the slightly more intense Atlantic Ocean winds, but that's not a big deal - large wind turbines are customized somewhat to the wind resource. Now the Long Island project will be even less job creating, more expensive and more improbable WITHOUT the GLOW projects.

from http://www.offshore-power.net/Files/Billeder/scrobyaerial.jpg, the 60 MW Scroby Sands project in Great Britain (also owned by RWE)

If you look at the wind map at the top of the page, you will notice that the winds to the south of NYC and Long Island are in the 9 to 9.5 m/s range 90 meters above the average water surface (orange) or 8.5 to 9 m/s (purple). That is a righteously great wind resource, and with the correct turbines, would translate into at least a 45% net output for a set of turbines. At 9.25 m/s average wind speed, the probability of the turbines not making some electricity is less than 10.42%, while the chances that the wind speeds are too high is less than 5 hours per year. This covers about 4100 square miles on the wind speed map. And since about 10 GW of electricity is consumed in NYC and Long Island, and a decent sized (for example, the Nordsee 1 ~ 1 GW array - see http://www.rwe.com/web/cms/en/288766/rwe-innogy/sites/wind-offshore/developing-sites/innogy-nordsee-i/) offshore wind farm has a power capacity density of about 6.9 MW per square kilometer (average of 17.7 MW/mile^2), that means about 1255 square miles of water surface would need to be tapped to supply, on average, ALL of Long Island and NYC's electricity needs. At an average of 5 MW per wind turbine, that's 4445 of these. And, at $4.5 million per MW of capacity, a cool $100 billion would be needed. Of course, if 2 GW (delivered basis) of tidal turbines (no dam/barage needed) was employed, only about 1000 square miles of ocean would need to get tapped (tidal and offshore wind systems have comparable installed costs, though tidal turbines are still in the "rookie" stage. See http://www.offshorewind.biz/2011/12/26/european-marine-energy-centre-receives-hs1000-tidal-turbine-uk/:


from Hammerfest Strom, the manufacturer; this picture is of their 300 kw pilot unit that has been tested for 5 years in 50 meters of water (http://www.hammerfeststrom.com/products/tidal-turbines/hs300/). Yes, they are coming, and the big question is where they will be manufactured, and who will deploy them. Very fish friendly, too....

So, a nice $100 billion project, equivalent to 1.6 million jobs years, if we play our cards right, or about 80,000 direct manufacturing/construction/engineering jobs if conducted over a 20 year time interval. Odds are, the delivered electricity price would be less than would be the case if natural gas was used to make this 10 GW of electricity over the next 20 years, let alone the next 45 years. After all, prices for NYC/LI electricity would not rise significantly for 10 years, since the fraction of offshore sourced electricity would only be a small part of the supply mix until the 10 year mark is reached. And if you can predict what the price of natural gas would be in a decade from now, maybe you should also be continually winning big bucks from the NY Lotto .... as the only answer that makes sense for average future natural gas prices is "higher". Besides, those 80,000 jobs will spawn up to another 400,000 ones (the job multiplier effect).

Anyway, that quantity ($100 billion) money is now not a problem - after all, there is at least $2 TRILLION in corporate cash stashed in funds earning between 1%/yr to 3%/yr OR LESS in interest. That means that such a Long Island project would be putting less than 5% of that to work over time, but probably less than $5 billion/yr (for 20 years, that's the $100 gigabucks). And this is not money poured down a black hole, like it was for the $800 billion wasted (so far, but more expenses as the medical and other bills pile up) in the IraqNam FUBAR. This invested money would actually pay back the investor via sales of electricity, amortized over at least a 20 year period. A 7.5% ROI would be a big improvement on what they are in effect, paying people and hedge funds ("hedgies") to hide/handle. And of those 80,000 jobs, about 70% of them actually have nothing directly concerned with the wind turbine manufacture, too - most of the jobs would be associated with the foundations, construction and electrical transmission aspects. But, it would be a job creation machine the likes of which NY has not seen since WW2. And unlike the bankster jobs on Wall Street, these actually make the world a better place, and don't merely rearrange existing wealth mostly into the hands of some already really really rich people. oops, sound a bit like this article: http://www.dailykos.com/story/2011/12/18/1046522/-How-the-GOP-stole-America?via=blog_1.

Oh well, I guess people can dream; maybe that is what the new promoters of offshore Long Island are doing. But why just limit it to one spot in the state, which has weather patterns that tend to be different at any given time from eastern Lake Erie and Lake Ontario. Spreading out wind farms over a wider area (and especially to areas with different weather patterns) means that less energy storage facilities have to be built for a given average delivered quantity of electricity. And here's something to think about - we have 800 MW of extra transmission capacity available in the Dunkirk, NY region, without any upgrading (such as via thicker wires, and upping the voltage from 230,000 volts to at least 345,000 volts). One new line from Dunkirk to Buchanan, NY (present site of Indian Point) could easily replace at least one of those nukes, and a pair of them could replace both of those pesky nukes. And, of course, this could interconnect several pumped storage potential sites in the Finger Lakes and Southern Tier. Such projects are also great for job creation, and these also will help staunch the export of money to pay for either imports of natural gas, or for the cleanup of Marcellus and Utica shale regions laid to waste via fracking.

Another nice thing that the new offshore Long Island groups are doing is to focus on the job creation potential of offshore wind turbines (and maybe, eventually, they will get around to Long Island Sound's tidal energy potential). This is the most immediate benefit of such projects; the benefits of the locally produced delivered electricity take a while to be seen/pay back. And since we are at least 1 million jobs shy of what we should have in NY State alone, the Long Island projects do seem like a great idea. But why be so limited? Think big, and not just at that one spot. Odds are, the new batch of offshore wind supporters are still thinking small - a few billion dollars worth - in effect, almost a "one-timer". That is just so myopic, and so wrong. With an attitude like that, Global Climate Change easily will put Long Island into "fish farm" status before decent amounts of electricity from offshore are being tapped for this part of our state. After all, when the Greenland ice-sheets slide into the sea in a process analogous to landslides, that will raise ocean levels by at least 20 feet.

It would be far less expensive to install these big turbines on land and design them for offshore mode, and let Global Warming do its thing. Unfortunately, that does not create the number of jobs that putting them offshore in the first place does. And maybe that sounds a bit too much like being an environmental surrender monkey. Of course, we won't really have that problem in the Great Lakes, which is another reason why installing turbines in lake Erie, Lake Ontario, in Long Island Sound and in the Atlantic alongside Long Island is the smart way to go. Lots of them.

Cheap Electricity and Job Creation
Once upon a time, when the electricity in Niagara Falls was more or less stranded via inadequate long distance transmission, cheap electricity and lots of it did lead to lots of manufacturing jobs. And as a result, this region prospered. But then a lot of the sort of/actual local companies got bought out, sometimes off-shored and Corporate America/Corporate World figured out how to extract maximum profits from these operations and that cheap electricity, or else they just dumped their relic factories and went elsewhere, or just cashed out. Then add in automation, and what used to be done by 30,000 people could be done with 3,000 or less. Plus, there is only 400 MW of electricity reserved for locally situated industries. If electricity is, in effect, a raw material, it becomes a major cost factor, and obviously cheaper electricity leads to either a lower cost product and/or a higher profit product when the product price is set by higher production cost manufacturers. For example, chlor-alkali, air separation, silicon/ferro-silicon manufacture, lots of ceramics and aluminum production all have electricity as one of the (or THE) major production cost factors.

But, when electricity consumption is only a tiny fraction of the production cost, and when the generated electricity is itself only a small fraction of the total delivered electricity price, the advantages of super-cheap electricity production vanish real fast. In many cases, the cost of the "overpaid" part of executive management often exceeds the cost of the generated electricity, so that department would seem to be a better spot to look for cost-cutting. In addition, for the next couple of decades, there will be more jobs obtainable from manufacturing renewable energy systems than in using electricity in jobs where the cost of electricity is a significant production cost. As for those believing that old-timey religion about cheap electricity providing mass quantities of high paying, local wealth creating jobs, they may never change their opinion, especially since religious beliefs can trump facts on just about any occasion. After all, in the last decade in NY, most jobs have been created where electricity is the MOST expensive, not least expensive. In fact, NYPA headquarters (in White Plains, NY, one of the more exclusive, expensive sub-urbs in the state) should be moved to Niagara Falls, where electricity as well as housing is cheaper (especially in the City of Niagara Falls), air conditioning loads are significantly lower, and where almost all the over $100,000/yr employees could be paid half of what they are now hauling in and still maintain the same standard of living). And what are they waiting for - for Hell to freeze over? So, the generated electricity price is a bit over-rated when it comes to attracting a lot of jobs. Besides, all those sever-farm jobs require a massive quantity of electricity per job, and yet there is no commitment to the manufacture of the servers in WNY, which is where some serious quantities of blue-collar employment could happen. But, that's a bit of a digression...

Which leads to the Big Quest conducted by Lilly Tomlin - "The Search for Signs of Intelligent Life in the Universe". When it comes to large scale energy issues in NY State by so-called "responsible parties" and our elected/appointed officials, we would have to advise Ms. Tomlin to steer way clear of "here". But, we could get lucky - maybe the Occupiers have paved the way, and the NY Lotto motto is actually in force - "Ya Never Know". And we do wish our "Offshore Long Islanders" the best; who knows, some of those scarce as hens teeth proverbial jobs might spill into WNY, too. But it would be nice if they realized there is more to the offshore story in NY State than that sandy outcrop in the Atlantic...

DB

Sunday, December 18, 2011

WNY's New Wind Farms - the Last of Their Kind for Some Time

Introduction
If you've driven by the relics of Bethlehem Steel recently, you will see that 6 more Clipper 2.5 MW wind turbines are now installed. This 15 MW addition to the existing 25 MW array will soon be generating electricity. The incentives used for this project and to justify the investment of roughly $30 million will be extinct at the end of 2012 if nothing is done to change the wishes of the ruling Republicans of the U.S. House of Representatives; for the owner of the wind farm, it was a now or never deal. So that will mean 14 of these pollution free electricity generators, ones that are rarely ever heard but often seen. If they perform like advertised and do not experience "economic curtailment" (where wind turbines are shut off by grid operators because the added outputs of these units depress the spot market price for electricity TOO MUCH), an average of about 5 MW of natural gas sourced electricity can be avoided, which is a GOOD thing.

In other nice news, Invenergy recently announced they would soon start construction of their Stony Creek wind farm in Wyoming County. This will be located bear Rte 20A between Varysburg and Warsaw in the town of Orangeville. From a location standpoint, this is situated next to a 230,000 volt line (rated at over 300 MW of capacity) on a hill/ridgetop in diary country. The project will consist of 59 x GE xle turbines, rated at either 1.5 or 1.6 MW (but with the 82.5 meter rotor diameter in either case), total capacity being 88.5 or 94.4 MW. Again, with a 30% net output, this should average about 28 MW on a delivered basis, which also means that an average of 28 MW of natural gas sourced electricity will be replaced by the output of this project, and this is also a GOOD thing....

Discussion
Both of these projects are examples of economic development done by big companies which are also good for the American economy. First Wind (see http://www.firstwind.com/projects) has 11 operating projects rated at 735 MW and two under construction rated at 141 MW - they have concentrated on the US Northeast and in Hawaii. In this case, they are using Clipper Liberty turbines (96 meter rotors, 2.5 MW capacity, 80 meter towers); Clipper is now owned by United Technologies (UT), a major industrial/aerospace/defense contractor. The Clipper units are made in Iowa, towers (often) in Tennessee and the blades used to be made in Brazil, but after some notoriously bad quality blades, perhaps these are domestically made nowadays...

Invenergy (see http://www.invenergyllc.com/default.htm and http://www.thewindpower.net/developer_en_124_invenergy.php) now has 23 operating projects in the U.S. totaling 2025 MW of capacity. Their favorite machine of choice is the GE 1.5 MW (they have invested over $4 billion installing 1350 of these), and because they buy in bulk, they are believed to get discounts. Invenergy also owns the 112.5 MW Sheldon wind farm, which is about 10 miles east of the Orangeville location (Rte 20A might have to get renamed as "Wind Turbine Way"). General Electric (GE) is also a major defense/aerospace/finance/technology/manufacturing company, sort of like UT, only bigger. The GE turbine nacelles are made in California, the gearboxes in Erie, Pa and the blades in Pennsacola, Fla; towers for the WNY GE turbines tend to be made by DMI in Fort Erie using steel made in Hamilton. However, there are about 8,000 parts in a turbine, and lots of USA/Canada located companies supply parts and make a living/get income/pay employees based on sales of products and services to GE and Clipper.

In fact, the First Wind and Invenergy combined portfolio is almost 2760 MW, which is an investment of close to $5.5 billion. And since the number of job-years per billion dollars invested in the wind biz is about 16,000 direct ones, this supplied about 88,000 job-years of employment at manufacturing/construction wages. If the "job multiplier factor" for the wind biz is similar to the auto industry (about 4.5), this combined investment facilitated close to 400,000 job-years of employment. And since most of this has been done in the last 6 years, one can safely say that these two companies have helped create about 15,000 direct jobs and 51,000 indirect ones. Providing they keep up this pace of wind farm installations, that's a decent bit of job creating, a lot of which is centered around the Great Lakes metal-working industries.

Of course, this comes at a cost because of the bizarre way that we fund the renewable energy business in this country. In order to allow wind farm owners to make a profit while selling electricity at the rate more or less set by natural gas and coal sourced electricity providers (around 4 c/kw-hr), subsidies to the owners of the renewable energy systems are needed. In fact, no one can install ANY kind of new electricity production facilities and make a profit at a sale price of 4 c/kw-hr or less - notably new coal and nuke facilities (especially new nukes, which need over 20 c/kw-hr and are more expensive than offshore wind farms, even with their subsidies!). Besides, on a kw-hr basis, the subsidies to wind are pretty small compared to those given to coal (air pollution allowances/cost avoidance worth about $200 billion/yr - @ $85/ton CO2 for CO2 pollution and $62/ton of coal burned for particulates and SO2/NOx/elemental poisons like mercury and radon - plus the $12 billion/yr in subsidies given to coal mine owners) and nukes (subsidized money, the Price-Anderson Act, and no need to find a way to properly dispose of the spent fuel rods, for starts, as well as the equivalent of the PTC). But, instead of more logical payment systems such as those used in either Quebec or Ontario, we in this country subsidize the price of electricity, keeping it lower than it should be or would be if no subsidies were employed and if all external costs (like air pollution) were internalized.

But, let's consider the 2760 MW of installed capacity and what we are paying to subsidize this wind sourced electricity, as well as a particular benefit that rarely seems to get mentioned. At a 30% average net output, these wind farms (including the 135 MW Montana Judith Gap wind that has an average output near 42%, and which is one of the most productive ones in North America) would make about 828 MW on average, or 7.26 million MW-hr/yr. BTW, this also is about the output of a large nuke in North America (such as NY's FitzPatrick nuke near Oswego, of 838 MW capacity and 6.92 million MW-hr/yr in 2010).

The prime subsidy is the one rarely mentioned at all, which is the MACRS plus the interest paid on loans combined deduction from taxable income. The MACRS portion is mostly used up in 3 years/totally in 6 years. Over the course of 6 years, the "paper losses" estimate would be $5.5 billion (MACRS) and about $1.5 billion for the interest on $3.3 billion in loans for 6 years, totaling about $7 billion in deductions, or about $2.8 billion in avoided combined federal (35% marginal tax rate) and state (average of 5% income tax rate) taxes on regular or passive income. Next comes the PTC or its various equivalents, the ITC or the Section 1603 grants, which can be approximated by the PTC tax credit that only applies to passive income. The PTC rate is now$21/MW-hr for 10 years, so 828 MW * 8766 hr/yr *$21/MW-hr = $152 million/yr. Over 10 years, this would add up to about $1.5 billion; so far, most of this has yet to be recovered. For the "tax investors" who benefit from this via the partnerships that are made between the developers and rich people/companies/"hedgies" with massive passive income and thus a potential big passive tax bill (as long as they haul in that flow of passive cash), it's a bit of a risk; if their "booty haul" rate slows down or ceases due to another Great Recession or worse, they get no tax credit. After all, if you have no income, you still can't take any tax credits. It must be special to be able to anticipate a full decade of massive taxable income and thus book those tax credits, otherwise known as avoided taxes, as income on another set of books. But, that's a digression, and besides, who made up these crazy rules, anyway? And besides, what is crazier, having to depend on this dubious slight of hand, or thinking that we could fund a few trillion dollars worth of renewable energy investment in the US in the next decade or two in this manner?

So, the total in avoided taxes for the owners or "psuedo-owners" of this project would be $2.8 billion (MACRS/interest) and $1.5 billion (PTC), or $4.3 billion over a 10 year period. Not bad for an investment of $5.5 billion to make an average of (estimated) 828 MW. On the other hand, consider this example - Invenergy has a long term (20 year) Power Purchase Agreement (PPA) with Northwestern Energy to sell the Judith Gap energy at $31.25/MW-hr, or 3.125 c/kw-hr (http://dnrc.mt.gov/Trust/Wind/JudithGap.asp), which is really really CHEAP. That cheap electricity comes at a price, as the 135 MW of turbines cost close to $270 million in today's dollars to install. Without the subsidies, the owners would need to charge near $70/MW-hr to $80/MW-hr, at least until the project gets paid off. And other projects with less robust wind resources would need even higher prices....

At the end of 2011, the US wind turbine capacity will be around 52 GW, and the net output will be around 15.6 GW (44 GW at the end of 2010 = 13.2 GW net output). Almost all of the wind derived electricity displaces natural gas sourced electricity (but in some cases this might be fuel oil, coal or even nukes). And while some of this might be the less efficient single cycle gas turbines, a lot of combined cycle ones with a thermal efficiency averaging 45% are being displaced. This can be used to estimate how much natural gas usage is avoided, and this works out to a rate of 878 billion cubic feet/yr (bcf) of natural gas. Last year, 7,377 bcf/yr was used to make electricity, and dramatic rise from 2009 (well, for a commodity), at 6.9%/yr. Overall gas usage increased by about 5.4%, and yet prices still remained very low for gas. However, the increase in demand that would have come from not using wind turbines and actually using more natural gas would have increased prices for methane significantly. That 878 bcf would have increased demand by an additional 3.6%, so that the total increase in gas demand would have been near 9%. To get an idea on how sensitive to supply/demand imbalances natural gas prices can be, sales in 2008 were about $230 billion, but in 2009, when 3% less gas was sold, sales were only $92 billion. Pretty touchy, eh? For 2011, gas usage will be displaced at a rate of over 1 trillion cubic feet per year (tcfy), or about 4% of all natural gas used and 13% of the methane used to make electricity. Like it or not, wind turbines are now an important impediment to rising natural gas prices..... and the more wind turbines that get installed, the bigger the impediment to natural gas price increases as well as the use of fracking to extract natural gas from shale gas sources.

The increase in prices would mostly affect those who use gas for heat (about 2/3 of methane consumed each year is used just to make heat). Merely raising prices by $1/MBtu would pull $16 billion/yr out of residential, commercial and industrial customers, but this "demand shock" (where wind turbine electricity is replaced by gas sourced electricity) could have easily spiked the nation's methane bill by $50 to $100 billion/yr. All that becomes money which cannot be spent on other things, and such a price increase would act like a giant, ultra-regressive sales tax, where the proceeds don not go to pay for governmental services but instead get siphoned largely to the "upper 1%" of our income brackets. Just what we need these days..... NOT! The resulting depressed economic activity would affect our local, state and federal government in two ways - increased costs (heating schools and buildings, for example) and decreased tax revenues. Also just NOT what the doctor ordered, economically speaking, these days. Of course, gas price rises would also raise electricity prices, especially in states like NY where we have "competitive" electricity generation markets (quotes are highly deserved). Since coal and nuke generation costs remain unaffected by natural gas price increases, gas price rises translate into the equivalent of "rentier" profits to owners of coal and nuke sourced electricity generators in such states. Since most of such profits go to the upper echelons of the American income distribution and that does not seem to be very beneficial to our economy as a whole, it seems that actions encouraging these "rentier" profits associated with increasing usage of natural gas are unwise and them some.

Installations of real wealth producing investments are far too rare these days. But, if we are to fix both our economy and our climate, what is needed is installations like these two companies have undertaken, but on a massive scale, and not just exclusively by companies who need massive tax avoidance in order to lower their electricity generation prices to rates that are historically depressed levels. Investment by companies, cooperatives, individuals and governments big and small all have the same effect at job creation, and especially manufacturing job creation/retention. We need at least 400 GW of non-polluting electricity to replace pollution sourced electricity (gas, coal, nukes, some oil), which is roughly 400 times the combined First Energy/Invenergy investments to date, and it would be good if this was done in less than a decade. Then we need about 300 GW additional (delivered basis) just to replace all the natural gas used for heating (such as by replacement with heat pumps) as well as a lot of the gasoline now used in cars/diesel in trucks and trains - the diesel trucks mostly need to get replaced with electric freight rains. And it's rather obvious that if 0.828 GW delivered costs $4.3 billion in avoided taxes, this system is not going to deal with 400 GW or 700 GW delivered, even if this is on a 6 year average/10 year total basis... In case the math eludes you, that's a lot of tax avoidance by the super-rich - approximately $3.6 trillion in avoided taxes to replace all our polluting electricity sources and most of our pollution based heating. And guess who would have to make up for that budgetary discrepancy....

The Wrap-up
As for WNY, these two new wind farms can deliver lower spot market electricity prices via bumping off gas used to make electricity, which in turn will put further downward pressure on coal sourced electricity pricing. Last year we only used 46.1 MW of gas sourced electricity (see table 3, pg 6 of this report: http://www.4shared.com/document/IKgU61cv/Lee050411e.html), and adding in another 33 MW (5 + 28) means that we only have 13 MW to go until we are freed from the scourge of using that fossil fuel to make electricity. Of course, then we have to move on to the next fossil fuel scourge of our electricity system, but one scourge at a time might be the way to go at it.

Also of note, the permit and documentation for the Orangeville project can be found here: http://www.invenergyllc.com/stonycreek/index.html. One interesting conflict between the developer and those opposing it (and by default, those almost invariably in favor of more pollution) concerns the sound levels made by these turbines. The Invenergy report can be found here: http://www.invenergyllc.com/stonycreek/pdf/1/03_DEIS/DEIS_Appendices/D_Noise_Study_2010_02_11.pdf while the opposing view can be found at the end of the public comments (warning 17 MB download!): http://www.invenergyllc.com/stonycreek/pdf/2/E.2.h%20-%20Written%20Public%20Comments%20306-342.pdf. It is like night and day difference, with opponents claiming that houses located next to busy roads like Rte 20 experience amazingly quite lives. Road noise and "wind noise" - wind blowing through trees - add up to more than the wind turbines are likely to produce. The 50 dBA level is pretty low, and to be able to argue that background sound levels next to a busy road are below average hearing levels for most people (40 to 45 dBA) is a bit of a stretch. But, sound is a great arguing point because after all the measurements come in, the question of "what do they mean?" becomes the main refrain.

Finally, here is the latest of First Wind's wind farms to get commissioned - a 40 MW, 16 Clipper array in Vermont - http://www.firstwind.com/projects/sheffield-wind. And on a ridge line no less, where it will actually be seen! Oh well, I guess that beats using an old geezer nuke (Vermont Yankee) with its nasty habit of leaking radioactive Tritium into the neighborhood. BTW, Vermont Yankee is one of those 500 MW GE made units that is identical to Fukushima Unit #1.

DB

Thursday, December 15, 2011

Indian Point and Fracking for Methane in NY State

From http://nuclearromance.wordpress.com/2011/08/31/quake-raises-red-flags-for-indian-point-nukes/

Introduction
As you may have heard, there is a big fracking controversy in NY State, and especially in the rural regions that stand in the cross hairs of it. However, it turns out, at core, this is another example of squeezing the hydrocarbon dregs out of North America. Since NY has essentially no oil and natural gas resources still left to tap, the Marcellus and Utica tight shale gas resource are it as far as commercializable hydrocarbon mining goes in NY.

Natural gas (Ngas) is used in NY to make electricity (about 1/3 of Ngas consumed in the state), heat houses (about 1/3) and the remainder is used for commercial and industrial heating. All of that electricity made by Ngas in NY (about 6 GW) could be replaced with non-polluting sourced electricity, and the lowest cost way to do this would be using wind turbines along with a few additional pumped hydroelectric energy storage units (NY has two of those, one in Niagara Falls and one in southeast NY State at Blenheim-Gilboa State Park). In the process of evolving from this depletable, air polluting (the CO2 combustion by-product, "fugitive" methane emissions) fossil fuel electrical energy source, a lot of jobs could be created and maintained in NY, though it might raise the price of electricity a bit (but not out of the realms of affordability, however). To make an average of 6 GW of electricity, about 18 GW of wind turbine capacity would be needed, and at about $2.5 billion per GW of capacity these days, that's a long term investment of about $45 billion investment, and 720,000 job-years of direct employment. If you or your friends, neighbors and relatives need a job, well, that's one way to do it. Add in the jobs created by creating those wealth producing manufacturing jobs, and UB 2020 just looks like amateur hour, assuming there is even any net job creation even before all the various governmental subsidies and "prop-ups" are considered/factored into the equation.

In fact, from a marketing perspective, the only way to increase the Ngas price significantly these days is to increase the consumption of it slightly (Ngas is a price inelastic commodity). Correspondingly, the best way to keep the price low is to steadily decrease the consumption of Ngas.

But now, along comes the Indian Point nuke complex (2 operating out of the 3 nukes that have been installed there). Indian Point 2 is up for operating license renewal in 2013, and IP 3 is up for relisencing in 2015. If they do not get re-licensed (and the renewal is strongly opposed by both Governor Cuomo and Attorney General Schniederman and much of the public), some means of coming up with close to 2 GW of electricity for NY City and its northern burbs will be needed. Enter Ngas, and in particular, NY State sourced fracking derived Ngas, lots of politics, lots of intrigue, the Entergy Corporation (who owns these two major nuke cash cows) and the recent and still not crammed down the memory hole Fukushima FUBAR. Mix well, and then prepare for a a major rumble!

After all, that's a nice big new market for Ngas. Or, that's a lot of jobs making wind turbines, pumped hydro "batteries" and improvements to our existing high capacity transmission lines. And just because the latter option is more job creating (especially working class jobs), more environmentally logical/desirable, well, this is NY, and those options don't carry much weight. Right?

Discussion
In the summer of 2008, natural gas (Ngas) prices were going for over $13/MBtu on the spot market (Henry Hub - see chart at http://www.neo.ne.gov/statshtml/124.htm), but these soon crashed, partly as a result of the Great Recession reducing demand by a few percent and partly due to foolish bets made by the likes of Aubrey McClendon (CEO of Chesapeake Energy, a natural gas exploration and production (E & P) company and prime fracking advocate/pusher), who lost $2.3 billion when Morgan Stanley called in a bet he was stupid enough to make regarding gas futures contracts with them (by and large, the operator of a casino, on average, always comes up ahead, and in this case, that would be Morgan Stanley). For 2008, Ngas averaged close to $10/MBtu, so national Ngas bulk sales were close to $230 billion. By 2010, bulk prices were still in the pits (and still are), averaging below $4/MBtu, so sales were close to $92 billion/yr. In general, the cost to get Ngas out of the ground where fracking tight shales was the means to do this was greater than the price that could be obtained for this Ngas. Oops. Most frackers subsisted and continue to exist on the higher prices they had locked in via the futures market, but that jackpot only lasts for so long (most gas futures contracts are only a few years long). Or they went the "asset sales route", hoping to get bought out by cash-bloated major oil companies whose stock price is unrelated to their cash stockpile but is related to proven hydrocarbon reserves, and who are having a hard time coming up with new hydrocarbon reserves.

So how to boost Ngas consumption enough to re-establish the thermal equality with oil prices that had been the norm until the late 2000's (Ngas would need to be $18/MBtu to match crude oil at $100/bbl and 5.6 MBtu/bbl of crude oil)? Running cars and trucks on compressed natural gas (CNG) is going at a snails pace, much to the dismay of characters like T.B. Pickens (also called T. Boone, but T.B. may be a better analogy of his societal usefulness). Converting methane to gasoline and diesel (GTL plants, see http://wagengineering.blogspot.com/2010/11/marcellus-gas-pipe-dreams-or-wind.html) can be done, but at close to $18 to $25 billion per world scale facility, well, that's not in the cards when there seems to be a de-facto capital strike by corporate types against president Obama. And those darned wind turbines now make about 3% of the electricity in the US (44 GW capacity, 13 GW delivered), and displace over 4% of all the Ngas consumed in the US - that's the OPPOSITE of increasing Ngas consumption! As for shutting down coal burners and replacing them with Ngas, well, coal makes for cheaper electricity, especially from old plants. Also an "oops", even at presently depressed Ngas prices.

Besides, nobody trusts Ngas prices - since 2000 there have been 4 significant price spikes, starting with the Enron crimewave in California. About the only thing trustworthy about Ngas prices is that there is no stable long term price that can be accurately used. After all, both political and weather disasters can affect Ngas production, and slight mis-matches between supply and demand have drastic effects on Ngas prices. And then there is all that wonderful speculation activity, and the betting on bets on Ngas prices that can be done and which can dwarf the money spent on buying actually delivered product. A lot of such activity does not mesh well with those who make electricity, where most production plants last over 20 years, and in the case of the Huntley coal burner in Tonawanda, over 75 years (with occasional improvements).

And so, the question of how to replace the 2 GW of Indian Point electricity - with Ngas, with wind turbines and tidal energy systems - or whether to replace it (by extending the original 40 year operating licenses by another 20 years) is one fraught with economic, political, financial speculation, job creation or no job creation as well as societal safety and environmental ramifications. For example, if you want to minimize job creation potentials for middle class people, then keeping those plants going or else replacing them with Ngas sourced electricity would be the best way to achieve that wish-fulfillment. On the other hand, if you want to maximize job creation without pushing electricity prices so high as to cause a lot of economic misery, wind and tidal would be the way to go (requiring around $15 to $20 billion of investment/job creation). Or, you could maximize job creation by producing 2 GW delivered via solar PV (requires at least 20 GW PV capacity plus about 4 GW new pumped hydro capacity and huge storage capability and an investment/job creation expenditure north of $100 billion). Of course, that solar PV would be in the 40 to 50 c/kw-hr range, which is over 10 times the present generation price for electricity in that part of the state...).

This topic of using the replacement of the "IP Twins" is explored in further detail in a paper that was written for the benefit of the local Sierra Club (who are not fans of either new Ngas fracking in NY State or of continued operation of the IP Twins). They like renewable energy approaches to job creation and environmentally sensible electricity production (the Apollo Alliance/Blue-Green Alliance are joint efforts by the United Steelworkers and the Sierra Club). Anyway, this paper is not their official policy - just written to them as a way of sounding out some ideas.

There is just no way that the IP Twins are "safe". So far we have been lucky, but, as Clint Eastwood famously said, "Feeling lucky, punk?" They are an accident waiting to happen, and if it does happen, effectively the finances of NY State are toast. An "oops" event at one or both would render most of the wealth of NY as useless when mass radioisotopic poisoning of the majority of the population of NY and more importantly, the vast majority of the wealthy (and millions of not so wealthy) real estate in the state occurs. And there is just no accurate way to ascertain the risks (= probability of an event times the severity of that and subsequent spin-off events) of a nuke incident - you can't use Gausian ("bell-curve") statistics for "black swan" events. And then there are the humongous subsidies associated with no final disposal method of spent fuel rods ("swimming pools" don't cut it) and the Price-Anderson Act, which makes nukes possible in this counrty. The P-A Act essentially puts the Federal Government on the hook for disasters above the $10 billion mark, and an "oops" at Indian Point would likely push past $1 trillion with little effort.

Of course, there are four more nukes in NY State that also need to be shut down ASAP - all located in the SE part of the Lake Ontario coast, (Rochester-Syracuse- Oswego). And then don't forget the 12 on the Ontario side of Lake Ontario (10 active and two dormant). After all, prevailing winds tend to go from west to east, especially in the winter, when lots of Syracuse to NYC and Syracuse to Boston winds set up. It's just that there are well over 15 million people within 50 miles of the IP twins, and the money obtained from taxes down there tends to support us in WNY, so that's sort of like threatening the goose that lays those golden eggs with a sawed-off shotgun and/or an RPG. Not wise at all..

Anyway, a copy of the paper (with references and lost of numbers) can be found here:
http://www.4shared.com/document/d-fbvXsg/bwag080911b.html. Got any opinion on this matter? Maybe all we have to lose in WNY is a lot of unemployment, and we could gain employment if those nasty twins are replaced in a cost effective manner with a job-creating approach.

BTW, for those who scoff at whether this is possible, check out this article:
http://www.renewableenergyfocus.com/view/16406/comment-north-german-state-doubles-onshore-wind-energy/. While there may not be much of a way to change some peoples minds, perhaps others may not be immune to facts and logic... Of course, what might have to change is the pricing system for renewable energy in NY State - see this article as to why that might be/as to what actually works: http://energyselfreliantstates.org/content/what-renewable-energy-policy-works-best-feed-tariffs.


DB

Tuesday, December 13, 2011

Germany, Jobs and PV Electricity - Some Lessons for the USA

From http://www.solarworld.de/en/solar-power/projects-and-campaigns/for-farmers/
The money quote:
"Every single ray of sunshine provides a secure income, thanks to a SolarWorld solar power system and state incentives guaranteed under the German Renewable Energy Law. Moreover, income is assured for 20 years, irrespective of economic trends. Earnings from roof systems are comparable with those from conventional financial investment opportunities, but are more solid. Solar technology also makes an important contribution to preserving the natural environment."
Introduction
Germany recently had its one millionth PV system hooked up to the grid, and the vast majority of these have been installed in the last decade. This was made possible via their Feed-In Tariff (FIT) system, which is designed to stimulate manufacturing jobs/industries by removing a lot of the valueless added financial risk associated with fluctuating grid spot market prices (and whose exact value at any given time in the future is unknowable). Due to the way that the FIT system works, almost all PV systems in that country are hooked up to the grid. In effect, the grid and associated pumped hydroelectric energy storage units (Alps, Norway, Sweden, France, southern Germany) become the battery, buffering variable supply and variable load. Recently, PV output contributed over 12 GW to the German grid, or roughly 15% of the power needed for the country, for a short while.

Most Americans are quite ignorant of why FITs work so remarkably well, and most German's who are knowledgeable about energy pricing look at what passes for our pricing systems with a mix of horror (how could a country with so many armed and dangerous nuclear weapons be SO stupid?) and wonder (at how we hobble ourselves and our awesome renewable energy potential, but to our disadvantage/their benefit), since the dysfunctional US system certainly allows their companies and exports to be in an advantageous position. Germany has both a pretty pathetic solar PV AND wind energy resource, especially compared to the USA. We have over 30 times our present electricity consumption in commercially viable wind locations, and we also have a lot of really sunny regions. And all we in the USA really need is a bit over twice current consumption to replace all pollution sourced electricity, allow for the extra needed electrical energy storage (pumped hydro) to go all renewable and replace most of our natural gas consumption (that used for residential and commercial heat and hydrogen manufacture). Unlike Germany, we have deserts, where at least 325 all sunny days per year is a reasonable expectation; Germany has more cluody/rainy/snowy days than we have in Buffalo - and ours is a 52% "sun obstructed" climate...

Discussion
A good overview of Germany's PV efforts can be seen here: http://en.wikipedia.org/wiki/Solar_power_in_Germany. According to this article (http://thebreakthrough.org/blog/2011/03/doing_the_math_comparing_germa.shtml), over $US 86 billion had been spent/invested as of the end of 2010 to install 17.3 GW of PV capacity. Since the average output is 9.5% of the peak rating (-> 1.64 GW average output), this works out to an average cost of $US 52 billion per delivered GW, or about 60 cents/kw-hr, and that's just to generate it; there are hefty transmission costs, fees and VAT taxes on electricity sold, too, so that the full delivered cost is not cheap.... However, because of the way the FIT system operates, this small fraction of Germany's overall electricity is "blended in" to other generated sources, so the average German residential customer is only out a few Euro's a month. These days, the fully installed cost has been reduced by about 30% or so, but PV will never be cheap until the capital investment has been paid off.

In 2011, a bit more than 5 GW of PV will get installed, pushing the total up to near 23 GW, and pushing the total investment to over $US 100 billion. Almost all of these systems have been made in Germany, employing vast numbers in the chemical industry (making the semiconductors, dopants, encapsulants, cell wiring, etc), specialty glass, chemical/factory equipment needed to make PV and PV component factories, electronics (the dc output needs to get converted into ac via inverters), and then there is the fastener, framing, structural support and electrical equipment biz. Close to 200,000 people directly employed in a country of 85 million... and also a sizable export business, too. FITs are ideal for stimulating high skilled capital intensive manufacturing and all of the support systems/supply chains. In Germany, the FIT system was seen as a way to replace the employment that would be lost from the automobile sector in the late 1990's; nowadays, more steel is consumed by wind turbine manufacture than by the car industry. And that is really cool...

Most American's can't really get over the fact that the PV sourced electricity made (now about 2.5% of Germany's average electrical consumption) is so expensive. And this is completely unsubsidized - there are no tax deductions or tax credits (which almost invariably work out best for those who have a lot of money and are supposed to pay the highest tax rates) to help lower the needed price to make the investment worthwhile and at the same time be able to sell PV electricity at something like 5 c/kw-hr. The full cost of PV is paid by German consumers of electricity - the ratepayers. And since cheap prices only promote gluttony while more expensive prices promote a more efficient use of electricity - well, that's good, too, right?

The secret of why this works is the FIT system (here is how these work in a bit more detail: http://www.allianceforrenewableenergy.org/join-are.html), which has two major facets and a nifty wrinkle that is based on the way that a technology tends to develop over time. In the FIT system, all contracted Green energy (wind turbines, geothermal, biomass, biogas - which makes about 800 MW of electricity in Germany - small hydro, tidal, run of river and PV) must be sold at contracted prices when it is made and no "economic curtailment" is allowed (more on that in a bit). Then comes the FIT contract (generally a fixed price for 20 years), which is tailored to the actual cost of production for a given technology and scale of that technology. For example, onshore wind, which is less expensive that offshore wind, gets a lower price than offshore wind. The price is based on the average cost of production for that technology/scale and a socially determined reasonable return (profit). So, if you place wind turbines in a place with a really poor wind resource, you would go broke, but if you place them is a decent spot, you could make money. Unlike US mega-banking (or more properly, bankstering), failure is not rewarded. This stable price insures predictable cashflow as long as the project is decently installed and maintained. Then there is the "digression rate" (nifty wrinkle), where every year, the FIT contract prices for that technology/scale are dropped from the last year's value to match the increase in performance/drop in the manufacturing/installation costs, until those no longer drop. This forces competition between manufacturers, developers and bankers (who finance these to an amazing extent). The combination of stable pricing and digression is the main reason why Germany and countries who use the FIT system are the world leaders in wind, biogas, biomass and PV technologies, and in the employment of people making and installing them.

In Germany, renewables are a very safe investment (see "the money quote"), and actual competent banking is a big reason for this. In general, individuals, small companies, partnerships and cooperatives get 95% of the project cost as a bank loan, and for bankers, this is pretty easy money. Since they know the price for the product, and a reasonable estimate of the annual energy production is also a given (required for loan), it is really easy to determine if the owner will be able to pay back the loan. Contrast that with the U.S. for wind projects, where at least 60% of the project is equity and less than 40% is debt. In a place like NY, the full price that will be obtained for the electricity is unknowable, as is the likelihood that the investor(s) will be able to use the tax credits/deduction incentives, or whether enough of the project output will get shaved off by economic curtailment to send the financials into the red zone. All that uncertainty ups the financial risk of the project, which means loans that come in at higher interest rates and shorter terms than in FIT countries. It makes the USA less competitive, so much so that our superior wind and solar resources are rendered meaningless.

One advantage of the FITs is that they actually force the prices of pollution based electricity DOWN, and in some instances, polluters actually have to pay up to 5 c/kw-hr for someone to take their generated electricity (this price lowering tendency is called the Merit Order Effect, alias MOE). The increase in renewable electricity production at relatively constant consumption rates results in less consumption of coal and natural gas (mostly imported into Germany), and with less demand comes lower prices. Which is good, right? And the "no curtailment" aspect prevents utilities from cutting off renewable generators whenever a large surge (sunny and/or windy day) of green electricity depresses the spot market price (even into negative territory) and ruins the profits of the owners of coal burners and nukes. Oh well...

So, FITs are designed to stimulate employment in value added manufacturing, which is where advanced industrial societies (like the US and Germany) create most of their real wealth (mining and agriculture also result in real wealth production). And, for good measure, some electricity gets made with no pollution, no possibility of a nuclear "oops event", and no fuel consumption. Also, when that electricity gets made there is the added benefit that is puts some downward pressure on fossil fuel prices that are going up as a result of depletion as well as increased demand for energy worldwide. Net new employment in the renewable energy business in Germany is roughly 350,000 in the last decade, equivalent to about 1.4 million in the U.S. Not bad... After all, would you trade real unemployment north of 16% (U6 value) for employment, but at slightly higher electricity prices, or maybe even the same prices once the MOE is factored in?

But a funny thing happened, along with all these other societally beneficial things, and this is especially noticeable in the PV biz in Germany. In 2010 there were 250,000 new PV installations, 7.4 GW of capacity and an the average size was 29 kw (though most of the installed systems would be smaller than the average, since there were some larger installations). Most of these are small scale investments, probably averaging about $US 100,000 each. But, for 5% down (or $US 5000), individuals, families, partnerships and groups of friends can also become owners of income generating energy production systems. That 29 kw average unit would make about 24 MW-hrs/yr of electricity, and at $US 450/MW-hr (45 c/kw-hr), that's about $10,800/yr, or roughly about $500/yr in profit based on that $5,000 investment. Try getting that from a bank. Of course, most of the revenue from the sales of electricity go to pay back the loan, but, it sure beats 0.5% from a bank account in a bank that probably did something really stupid like invest in Spanish government bonds or Irish real estate values. Plus, people tend to like investing in something that makes the world a better place, gets them a bit of money, does not lose money and helps put their fellow citizens to work who would otherwise be unemployed. And while similar things are done with wind turbines, in 2010 an average new turbine installed was 3 MW in size and it probably cost $US 8 million. And 5% of $US 8 million is still $US 400,000, so that's a pretty hefty threshold to market entry, and not available to everybody. But 5 grand? Sign me up... Oh wait, this is the US, where such opportunities do not exist. Instead, real estate or an often kleptocartic stock market (see http://www.zerohedge.com/news/goldman-punkd-clients-yet-again) awaits its next small investor suckers... excuse me, potential investors alarmed a the net loss of money that happens when you leave your money in the bank.

Besides, what else are they doing with their roof, the south side of a barn, that parking lot for their business, or maybe the back yard that otherwise needs more mowing? And when the bank loan gets paid off, they will have a nice income supplement of, for this project, about $US 5000/yr.

It is now the strong desire of middle and working class Germans to actually have something to invest in that is driving the German PV biz. They don't trust their stock market much these days, either. And the ones who bought into European Sovereign Bonds...they can't be pleased with that choice at all. Otherwise, they have dead end options like more bars and restaurants, or real estate (you can never lose there, right?). And they are more than willing to pay more for their electricity in order to employ their neighbors, as well as provide a decent low risk way to invest some of their savings in something that actually makes Germany a better place. Naturally, all that export income from the sale of PV's and PV factory components also is nice, too.

Of course, the government and most German's realize that most of their electricity will be made by non-PV routes, even when coal usage fades to nothing, the Russian gas fields get drained or that gas gets too pricey, and tall of their remaining nukes get shut down. Odds are, onshore and offshore wind will supply most of Germany's electricity. Besides, maybe soon some Made in Germany PV systems will get installed in North African deserts, and then the HVDC power systems (also made in Germany) will transmit it across the Mediterranean via underwater lines (also made in Germany) into Europe. Geez, more jobs....

DB

Thursday, December 8, 2011

2011 Durban Climate Talks - A Failure to Communicate

From http://www.nordex-online.com/fileadmin/MEDIA/Fotos/nordex_hybrid-tower_140meters.jpg, a 2.5 MW turbine on a 140 meter tall "hybrid" tower (80 meters concrete, 60 meters steel), located in a very industrial part of some city (possibly Hamburg, Germany). The taller hub height taps stronger winds than it would using an 80 meter tall (usually all steel) tower, resulting in at least 20% greater energy output for that site than would be the case with the 80 m tower. Cool, and then some....

Introduction
Durban, South Africa is hosting the 17th UN Sponsored Climate Conference, an event that is largely invisible to the American public thanks to essentially non-existent mass media coverage (scandals and the circus-like Republican primary campaign soap opera seem to be more entertaining). And it looks like there will be no upgrade of the problematic Kyoto Agreement, which, like tax-based subsidies for wind power in the U.S., is better than nothing, but sure leaves a lot to be desired. And, as a businessman just said in a Democracy Now interview, in business you rarely get 17 times to do a deal, and thus, maybe this is not a productive way to achieve a useful result.

Odds are, he has a point, though his preferred solution might not work, either, especially if it involves the sale of "carbon credits", whose price in Europe has collapsed from $US 33/ton of CO2 pollutant to less than $US 3/ton of CO2. The sale of those "credits" was supposed to fund all kinds of wonderful stuff, but this was based on people paying extra to consume electricity, oil and natural gas. And given the impending collapse of the Euro and the austerity induced recessions affecting almost all of Europe and much of the US economy, that is not a happening concept.

Many third and fourth world countries (often presently characterized by low per capita CO2 pollution and low per capita fossil fuel consumption) are complaining, with lots of justification, that the U.S. is not going to reduce it's CO2 pollution rate (as in ~ 6 gigatons CO2 pollution per year for 300 million people) significantly in the nest 8 years. This is because we will keep on burning coal to make cheap electricity, burning natural gas for heat and electricity and burning oil for cars, trucks and jet airplane transport at essentially a constant level (on the plus side, at least we are not increasing our CO2 pollution rate, as is the case with China and India). In effect we are using up their share of the "CO2 dump" that is our atmosphere, and have been for a long time. And they think that the present administration should, could and/or would try to order U.S. citizens and companies to drop our fuel usage/CO2 pollution significantly by 2020, or that U.S. residents/companies would willingly do so by paying more in the form of de-facto CO2 pollution fees (those "carbon credits" or something equivalent, like increased sales taxes on gasoline). Well, any administration that attempts such a thing now or in the next few years would be voted out of office in record time, and US citizens, the majority of whom are actually experiencing a declining standard of living, are not going to pay more to use less energy, at least willingly. As for paying MORE taxes to fund fund a $100 billion global climate change adaptation/"third world greening" when local, state and federal services are already getting whacked for lack of governmental tax revenues, that is also not likely. And while increasing taxes on those who have pigged out at the proverbial trough in this country (the top 10% of earners, and especially the top 1%/top 0.1% top 0.01%) is a very popular concept (about 75% or greater popular approval), getting that accomplished to even a minor extent for domestic purposes is proving a difficult task. To fund overseas economic development, even if it is "green", is also not a likely sell to most Americans at the present time..

So we have a massive failure to communicate. In many ways, the vast majority of the world is expecting Americans to willingly cut their CO2 pollution rate by roughly 66% in 8 years, and if this means a significantly lower standard of living for most Americans, (energy usage and economic standard of living are pretty well connected/correlated - see http://www.theoildrum.com/node/8670), so be it. And since the vast majority of Americans are already experiencing a declining real standard of living, notably a result of higher oil prices, and are not happy about that (seriously, who would be?), calls to magnify that trend by a factor of close to 10 are going to be way past unpopular. Since our government is at least nominally a democracy (in reality, more a mix of democracy, kelptocracy, purchased media access, oligarchy and "oiligarchy", as well as others), the consent of the governed would be needed to accomplish this drastic lowering to our standard of living for MOST people. And that is just so not happening...

A Possible Solution...
Of course, there are ways that the US could keep consuming roughly our present level of energy, but without the CO2 pollution. And we actually need NO input from the rest of the world to do this - we can make all the wind turbines, solar hot water heaters, PV panels, pumped hydro storage units, electric cars, electric trains, electric heat pumps and upgrades of where we live and work to a decent level of energy efficiency we need. We could probably even do it in 8 years. But instead, our country nudges into the 21st century at a snail's pace with regards to energy efficiency and renewable energy installations, and this is best exemplified by commercial scale wind turbines. We have a wind resource capable of supplying 30 times our present electricity consumption (around 420 GW), yet this year only ~ 9 GW will be installed, equal to 3 GW on an average delivered basis. We would need over 120 to 140 years to replace our present pollution based electricity generation at this rate. And as of 2013, essentially all wind turbine installations will stop unless the Republican efforts to kill off the wind industry are circumvented...

The basic problem is that, in much of the world and especially the U.S., if it is not profitable, and especially if it is a money loser, renewable energy installations will not take place at climatically speaking meaningful rates. With coal derived electricity production cost (NOT including external costs like particulate and CO2 pollution) in the 2 to 4 c/kw-hr range, and the real, unsubsidized cost of wind derived electricity in the 7 to 15 c/kw-hr (depends on the site wind resource), something needs to be done. Either wind based electricity is allowed to be sold on a cost plus reasonable profit basis (PPA's, Feed-In Laws), wind is subsidized (in the US, via avoided taxes and tax-payer funded grants/price subsidies) and/or pollution based electricity prices are raised SIGNIFICANTLY (raising all electricity prices), but something has to be done. The existing electricity markets are deformed, terminally short-term focused and unable to correctly price the real external costs of pollution and the risk of nuke "oops" events.

So, if one desired to correct this problem, perhaps making renewable energy profitable (even only modestly so is all that is needed) is all that is required. But, until is is profitable to sell renewable electricity at significantly increasing quantities, orders for this equipment will not happen at rates that are climatically meaningful (i.e. those that will prevent the 2 C increase in average air temperatures due to excessive human caused CO2 pollution). And with no orders come no jobs to make and install these systems, and with no jobs/employment base comes no business and labor constituency which can advocate for the "wind biz" and other renewables. And the supply pipeline - everything from steel manufacture to transformers, epoxy resin, glass fiber and generator production - will also not be an advocate for renewable electricity. Money and jobs talk, and all else will wither... that's one of the American Ways...

Of course, a WW2 style effort at wind turbine installation could employ millions, and those millions might employ close to ten million other people. That would be good, right...? Electricity production in the U.S., via coal and natural gas combustion, is responsible for roughly 40% of the CO2 air pollution presently emanated (see this article for the list of CO2 pollution by countries for 2009: http://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions), so that's 2.4 Gigaton/yr reduction in CO2 pollution... Another "low hanging fruit" opportunity is residential and commercial heating, which consumes roughly 60% of US natural gas usage (and is responsible for another 0.8 GT/yr of CO2 pollution) - combinations of better insulation, passive solar retrofits, solar hot water heaters and electric heat pump systems could rapidly eliminate a lot of this, and the reduction in natural gas usage would also have another great benefit - it would drop and/or keep low natural gas prices for users who don't or can't readily switch. Anyway, that's over a 50% Co2 pollution reduction from present rates, and a rather massive job creation and real wealth generation effort, all in one.

The last half of US CO2 pollution is largely oil based, and this will be much more difficult to achieve, as it is oil based. At present, our society is using the "demand destruction caused by higher prices" method of minimizing oil usage. Most oil products are used for transportation, and our society has adapted to incredibly gluttonous oil consumption levels - notably cars/sub-urbs, long distance trucks instead of trains, much train usage just for coal transport, and medium to long distance travel by jet planes. Due to an effect called the "Export Land Model" - see http://en.wikipedia.org/wiki/Export_Land_Model - prices are now rising at an average rate of 14.6%/yr. This results in an exponential price rise of roughly doubling every 5 years - so the crude oil price of $100/bbl in 2011 is apt to be near $200/bbl in 2016, and the prices for kerosene (jet fuel), gasoline and diesel are apt to double in 5 years. This price rise is graphically shown in the following graph (data for graphs from U.S. Energy Information Agency).


The smart people will adapt to use less oil products to get what they need to do via transportation, or perhaps no oil to speak of via higher mileage cars, electric mass transit and electric or plug-in hybrid cars. Those less smart, or those unable to change, or unwilling to change to more fuel efficient cars/more electrified cars/no cars, less vehicle miles traveled per day, and less need for long distance trucking/more rail will get, economically speaking, spanked severely. Odds are, this will not be equitably distributed negative behavior modification via higher oil pricing, but that seems to be our country's present policy.

Conclusion
The electricity and residential/commercial heating segments of the US energy consumption portfolio are probably the easiest to switch over from pollution based to non-pollution based, and we could drop our national CO2 pollution rate by roughly half and drastically stimulate employment/our economy in doing so. All that is needed is a way or ways to make this renewable electricity modestly profitable and in some cases, just not a money loser. The oil half of our CO2 pollution portfolio will be a tougher nut to crack, especially since so much of our country is built around gasoline/diesel/kerosene consuming transportation. But, demand destruction does work, and will be increasingly effective AND increasing cruel to those who have the least. While there are many governmental actions that can help wean us off the oil addiction, it seems that not enough pain in the form of higher prices has been applied to most Americans, though we may be close to that point. Till then, lots of ouch to go around....

But for the third world and the fourth world countries (where things are really bad, like Somalia) representatives at the Durban Conference, the path should be pretty clear. If they want the U.S. to drop it's CO2 pollution rate fast, just make renewable electrical energy production profitable within the U.S. Odds are, due to Peak Oil and especially Peak Global Net Oil Exports, the transport part will drive solutions like greater car mileage/less truck travel/more train transport in short order as prices rise at, what to many, is a dizzying rate. And they really should by-pass the gasoline epoch, since they will just get out-bid for the remaining bits by China and India, anyway.

For the U.S., we will need to prevent Chinese mercantilism from doing to our renewable energy sector what they did with shoes and clothes. And if it requires import duties or quotas based on the slave labor wages Chinese companies pay (many owned by the government or military), so be it. In this country, we need the jobs associated with mass producing wind turbines more than we actually need that wind-sourced electricity, at least for now. And a big wind industry in the U.S., employing at least 1 million people directly, is what the 3rd and 4th worlders in Durban need more than handouts from non-existent carbon credit monies, anyway. It's what gets the electricity segment off of fossil fuels and nukes, and "climate friendly". Who knows, maybe some of those countries might even like to buy some of our QUALITY made turbines for themselves, whether big, commercial scale, or village sized (where the U.S. is a world leader). And if they want grants, why not take this as Made in USA wind turbines, and not money that is far too often squandered via corrupt 3rd and 4th world government and business leaders....

Oh well, my 2 cents worth. What's yours?

DB

BTW, just announced, South Africa has selected Nordex (who has an American assembly facility in Arkansas) for two wind projects totaling 174 MW capacity. South Africa has a great wind resource, and plenty of ability to store electrical energy via pumped seawater (lots of cliffs near the ocean). It's time they quit being coal exporting/coal based hypocrites and also join the 21st century: http://www.nordex-online.com/en/news-press/news-detail.html?tx_ttnews[tt_news]=2223&tx_ttnews[backPid]=1&cHash=b3c628d9f3

Wednesday, December 7, 2011

Denmark's Newest Offshore Wind Array

One of the monopile foundations for the Anholt wind farm made at the Bladt factory in Aalborg, Denmark. These often use 4" thick steel plates that have to get rolled into "cans", then welded, and then these are welded together after passing inspection/documenting the quality. The length of these range from 35 to 45 meters, and these weigh between 450 to 580 tons. 111 of these are needed for the Anholt array. From http://www.offshorewind.biz/2011/12/06/anholt-offshore-wind-farm-construction-to-begin-soon-denmark/

Here is how the "cans" are made, but with 4" (10 cm) thick steel plate, not so easy:


Introduction
The announcement of the beginning of the construction phase for the Anholt wind turbine array recently was made. This wind farm will be located about 25 km (15 miles) from the northeast tip of Denmark in the Baltic Sea. This wind farm will supply about 4% of Denmark's electricity (well, there are only 5.5 million people in the country), and it will supply between 250,000 to 400,000 households with all of their electricity, depending on how the average usage of a household is defined. And it will mean that about half a megaton/yr of CO2 pollutant does not get dumped into our planet's air, which would be the case in natural gas or coal was used to make that electricity.

Discussion
This is a pretty big project, estimated to cost around $US 1.8 billion, and is owned by Denmark's main electric utility (DONG, 50%) and a pair of Danish pension funds (20% + 30%). It will use 111 of Siemens SW3.6 x 120 wind turbines (3.6 MW capacity, 120 meter rotor diameter). These will be made in Denmark (Siemens bought out the Bonus wind turbine company a few years ago) - blade and nacelles in Brande, Dk, and the monopile foundations and turbine towers will be made by other companies in Denmark. The medium (34,000 volts) and high voltage underwater cable will be made in Germany (Nexans), and the substation/transformers (stepping up the 34 kv volt feeds from the turbines to 220 kv so it can be sent onshore) will probably be made by either Siemens or ABB somewhere in Europe. A brief summary can be seen here: http://www.dongenergy.com/SiteCollectionDocuments/wind/anholt/Anholt_offshore_wind_farm.pdf. But, with about 8,000 components to these turbines, lots of smaller companies will als get a piece of this action, and most of them local, too. And lots of money in marine construction is going to be spent (see page 4 for views of 4 of these vessels, and also http://www.4coffshore.com/windfarms/anholt-denmark-dk13.html).

In other words, jobs, jobs, jobs! High value added manufacturing jobs, environmental and geotechnical review, design, project management, logistics, legal and electrical engineering jobs, to name a few. And scheduling.... there will be lots of "moving parts" and quite the tight choreography required, with weather as the wild card. And since so many of these jobs are in Denmark and/or near Denmark, this will be a significant economic boost to the Danish economy. Another benefit is the avoidance of future fossil fuel imports. This 400 MW wind farm will have an average output of at least 160 MW, and this will avoid the need for between $85 to $100 million per year in coal imports, or significantly more if natural gas had to be imported from Russia for this electricity.

Of course, this does not come cheap. The $1.8 billion investment will be repaid by Danish electricity consumers, who will pay about 18.9 c/kw-hr for 20 TW-hrs (20 million MW-hrs) of electricity (about 14.3 years worth). That expensive electricity will get blended in with the electricity from mostly paid off wind turbines from onshore, as well as with the offshore ones that are still getting paid off. But, this is much cheaper than a new nuke, and more dependable, too. And there is a 100% certainty that no radiation "oops" event will happen, as has been the case at Fukushima, where a humongous does of Sr-90 contaminated water just spilled into the ocean, poisoning that region for the next century (it has a half-life of ~ 28.8 years, and is a nasty varmit, as Sr-90 gets concentrated in bones and then causes leukemia). With these wind turbines, no need for CO2 "sequestration" exists, either, which can cost in excess of 10 c/kw-hr for just that. The wind farm will also utilize the pumped and stored hydro facilities in nearby Sweden and Norway (more underwater electric cables between them and Denmark) to store excess electricity when the winds are blowing fast during times of low electricity demand.

The Baltic Sea has a lot in common with Lake Erie. Both are shallow water bodies surrounded by large industrialized populations. And both ice up in the winter (the Baltic is "brackish", with a salt content less than in the Atlantic Ocean). But, that is not a major problem. Of course, it never really was much of a problem in Lake Erie, either, and so easily engineered around, despite claims to the contrary by opponents of offshore wind turbines in Lake Erie......

This may be one of the last set of wind farms that use turbines as small as this 3.6 MW model. Siemens recently introduced a 6 MW x 154 meter rotor diameter unit with a gearless drive, but several years of actual field trials will be needed before it is deployed in large numbers. Here is a picture of this 3.6 MW unit installed near the shore near Copenhagen at the Avedore Holme project (see picture below, 3 of these installed in ~ 2 meters of water, 400 meters from shore http://www.4coffshore.com/windfarms/avedøre-holme-denmark-dk15.html). That project "only" cost about $US 33 million, but it also allowed Siemens to get real world data, and to examine the installation approach. Slight delays in the schedule can totally trash the economics of an offshore wind project, which is why project management is so important for these efforts.

From http://www.energy.siemens.com/hq/pool/hq/power-generation/wind-power/E50001-W310-A169-X-4A00_WS_SWT_3-6_120_US.pdf

As described earlier, there are lots of economic benefits that come from such a massive Keynesian-like stimulus at this time/state of the European economy. In this recent paper (http://www.peri.umass.edu/fileadmin/pdf/published_study/PERI_military_spending_2011.pdf - page 7) that describes the wisdom-deficient approach of using militarism as an economic growth program, data for the job creating potential of clean energy systems are provided. A bit over 16,000 job-years per billion dollars invested comes from wind turbines, and this does not even describe the benefits of not exporting money for importing fuels, and making electricity with no negative health effects. Other efforts have described wind turbine induced job creation and similar values were obtained. This project will create about 28,800 direct job-years, and lots of "spin-offs" and "multiplier effects" also arise.

And we sure could use some of that in Buffalo, right? Oops, not an option, thanks to the NYPA cancellation of the GLOW initial 500 MW set of projects. Instead, we get a future based on pollution sourced electricity - from nukes in Ohio and NY, and lots of coal burners. How 20th century can you get, right? One other hope for polluters was the faint prospect that more natural gas (from fracking) will be used to make the electricity that 500 MW of offshore wind could have made, but will not make. Not only would this backwards approach still create 733,000 tons/yr of CO2 pollution by burning 12 billion cubic feet/yr of methane, but that would also cause natural gas prices to rise as a result of increasing gas demand. And seriously, who needs that?

No wonder a lot of us formerly complacent types are not happy campers any more. We could do so much better on America's North Coast... Way to go, Occupiers, for changing the "public conversation" from dead end topics like financial Shock Therapy (also called Austerity, debt reduction during a major recession) to live wire topics like job creation as a cure for economic inequality and economic decline! Keep up the great work!

DB

Thursday, December 1, 2011

Offshore Wind - Now a Big Deal in Europe in 2011 and Beyond

The Sprogo wind farm in Denmark, deliberately placed next to a major bridge across "The Great Belt", where they can be seen, composed 7 x Vestas 3 MW x V90 turbines with gravity foundations. This stretch of water does freeze over in cold winters (http://www.helcom.dk/ice_breaking/icebreaking_main.htm). See http://www.4coffshore.com/windfarms/sprogo-denmark-dk12.html and http://www.sundogbaelt.dk/uk.

Introduction
Installing wind turbines in shallow waters near land has been done as an experimental project since 1991 (those 11 x 450 kw units in the Vindeby wind farm are still operating, btw). However, these days it is a really big deal, with over $US 25 billion worth UNDER CONSTRUCTION, and over 4000 MW (4GW) now operating, involving an investment of close to $US 12 billion, and producing an average of close to 1.3 GW on an average continual basis. In 2011, a bit more than 1 GW of capacity will be brought on line, worth about $US 5 billion. Over half a trillion dollars worth of permitted or in the process of getting approvals projects. The offshore wind installation business is now touted as one of the MAJOR job creating pushes for Europe for the next 20 years. Got the picture?

And to the bosses at NYPA, a few questions. Are you proud of yourselves, yet over you decision to make NY State irrelevant in the offshore wind industry? After all, your efforts at quashing offshore wind in NY State for once and for all (despite claims to the contrary about try # 3 near Long Island) could be a veritable fountain of gold for the natural gas business in NY State, and a major hurt to NY's natural gas and electricity consumers, too.... How does it feel to be such an aid and comfort to the natural gas industry and the associated financial speculators who live on betting on future methane prices, while the job creation potential of offshore wind in NY State (several times that of the frackers, and not even an environmental threat like fracking for gas and oil is) gets the "bug on a windshield" treatment... Happy now?

Discussion
Last week, there was a major offshore wind energy conference in Amsterdam - "Offshore 2011", sponsored by the European Wind Energy Association (EWEA) - see http://www.offshorewind2011.info/. The events have grown from 150 participants in 2002 to the 8200 or more attendees plus lots of exhibition space and exhibitors. And also, there was some intense marketing and sales efforts , with several tens of billions of dollars in direct sales, and more than that set up in the near future. And in conjunction with this event EWEA put out a great report detailing the current state of the business and future trends - see http://www.ewea.org/fileadmin/ewea_documents/documents/publications/reports/23420_Offshore_report_web.pdf (93 pages, but easy to understand).

One part of the executive summary really caught my eye - by 2030, an estimated 300,000 Europeans will be employed making and installing offshore wind turbines. And due to the high multiplier effect that goes with such jobs, this will directly and indirectly employ close to 1.5 million other people. By 2020, the (at least) 40 GW of installed capacity will be making over 16 GW of electricity on an average basis, or more than the output of 16 x 1.1 GW nukes. Or, put another way, that is a lot of avoided imported natural gas and coal, a lot of avoided CO2 pollution, and a lot of wealth creation. And a lot of avoided new nukes, too.... which IS a good thing.

In fact, the strong desire by the German population to dump nukes has made followers out of the presently politically and economically conservative German leaders. Ever since the various Fukushima reactor hydrogen gas explosions, nukes have been about as popular in much of Europe as syphilis and AIDS put together. So that leads to the next question - where to get the ~ 10 GW of electricity now made by Germany's still operating nukes within 10 years, and how to do so without burning any more natural gas or coal? Germany has a pretty crappy onshore wind resource, at least compared to the U.S., and even with almost 28 GW in onshore wind turbine capacity in a country of 85 million people, more electricity is needed. And while lots of progress has been made in the PV industry in Germany thanks to Feed-In Laws (same for wind and biogas), the solar resource in Germany is even crappier than is the average onshore wind resource. Well, their portion of the North Sea and to a lesser extent, the Baltic Sea, has excellent wind resources - notoriously so for the North Sea, where winds average between 9 to 11 m/s at 100 meters above the surface. And so, that's where the wind turbines are going, using turbines with capacities ranging from 3 MW to 7 MW, despite the pain and high cost of installing them. And since the North Sea is pretty shallow, these units will be installed on foundations attached to the seabed and sticking about 45 feet to 60 feet above the average surface of the water (wave height considerations).

At present, the UK has more offshore turbine capacity installed than any other country - almost 1.8 GW, and 11 of the biggest 25 offshore installations are located in British waters. And there are very impressive amounts of offshore wind turbine arrays being installed around the British Isles, including the 1 GW London Array. However, Germany will soon be catching up, with several 400 MW sized installations, as well as a recently announced 576 MW (96 x 6 MW) project by Vattenfall costing nearly $US 2.6 billion - see http://www.powerengineeringint.com/articles/2011/11/vattenfall-to-build-576-mw-north-sea-wind-farm.html. Jobs, Jobs, Jobs.... most of them difficult to outsource, and ones where quality counts (and this excludes China a significant extent).

Here is another summary of this event by one of key participants - http://www.eurotrib.com/story/2011/12/2/162029/490. It is centered around the second major floating turbine demonstration - this one of a 2 MW Vestas V80 wind turbine attached to a triangular floating support, installed offshore of Portugal, where waters are deep, but winds are generally impressive. The first one was the "Hywind" floating spar unit installed in 180 meters of water in Norway, using a Siemens 2.3 MW turbine (summer of 2009, and still going strong). There is a huge potential combination of near shore, deep water, fast wind arrangements where the traditional offshore foundations (monopile, tripod, gravity caison, jacket) that will only work in depths up to 50 meters are not appropriate in deeper water. In the Great Lakes, this especially means Lakes Michigan, Ontario and Superior, where floating turbines would be a great way to make electricity. Most of the entire west coast of the U.S., and a lot of the Gulf of Maine, are also perfect for floating turbines.

So in conclusion, how's the local job scene on the southern side of The Great Lakes these days? Not so good, right? So much potential, so much underused capacity to build stuff, so many people who could be making and installing non-polluting offshore wind farms, and onshore ones, too, but who instead are also being treated similar to the bug on a windshield, only maybe with less respect. And yes, all those offshore wind arrays will probably raise the price of electricity a bit, but the job creation, the benefits of making electricity without pollution (especially nuke fallout...), and alleviating the need to export massive troves of treasure to pay for imported fossil fuels more than compensates for the higher price.

And unlike the U.S, most of this offshore electricity will be sold without subsidies and on a cost plus reasonable return basis, with prices set via Feed-In Tariffs or the result of long term Power Purchase Agreements from successful bidders on these projects. As it turns out, when you get efficient with electricity and concentrate on the jobs made by manufacturing renewable energy systems, the economic benefits vastly outweigh those from cheaper generated electricity prices. And of course, a lot of those cheaper prices are a temporary mirage, all related to what are for now manifestations of natural gas being sold below its replacement cost.

How's that for a way to introduce the windiest month of the year in Buffalo?

DB

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