Monday, February 25, 2013

Rules of the Game - A Forum Primer

Sometimes it is beneficial to view the bigger picture, to get on top of things and look around, to actually see the forest and not get preoccupied with all the trees. Sort of like this, where perhaps you can see what is possible and not get so hung up on why the possible seems to be so out of reach, so impossible.... at least, in this part of the world.


from http://www.altenergyshift.com/gallery/image/241-enercon-e-126-wind-turbine-above-low-clouds/. Right now, that kind of picture cannot be seen "in real life" in the USA (this picture was taken two years ago in Estinnes, Belgium - see http://www.7mw-wec-by-11.eu/events.html). The Enercon E-126 is still the biggest wind turbine in the world, installed by one of the biggest crawler cranes in the world, made by a company widely held to make the highest quality wind machines in the world, ones which are not sold in the USA. The top of the nacelle would be about 470 feet above the ground (a 15 meter diameter "egg" placed on a 135 meter tall concrete tower) and the blade tops out at close to 650 feet at the peak part of its rotation. In many parts of Europe, the winds near the ground tend to be pretty wimpy by US standards, so to tap decent winds, you've got to "reach for the stars". And just to assemble the main crane takes about 100 trucks worth of equipment - see http://www.renewableenergyworld.com/rea/news/article/2009/09/e-126-in-action-enercons-next-generation-power-plant. Installing one of these units is not a trivial event...

This turbine is rated at 7.5 MW, and it is now being mass produced. It is made possible by Feed-In Tariffs from both the technological and construction/financing standpoint. These units at Estinnes have an average output of about 32% of their rated capacity, and the array of 11 of these averages around 21 MW. It's what can be done if people are serious about making electricity at reasonable prices and in significant quantities from regions where the wind resource is considered "moderate". Of course, installing a 2.5 MW is also a pretty big event, and 3 of those can also have a similar output. But according to the maker of these 7.5 MW units, more energy generation per unit area of land is possible with the "big boys".

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There will be a day-long conference hosted by the EPA and UB coming soon (March 14) to Buffalo
called the The Western New York Green Infrastructure Forum. "The Forum will cover important and practical issue to allow local communities in Western New York better prepare for, fund and create green infrastructure projects." Will it get something done, or be a "total tease"? Will our community get any closer to giving fossil fuels - especially petroleum consuming automotive transportation and coal generated electricity - the boot, and will we be able stave off the plague of potential "Frackingmania", either  as a result of this session or just because of dumb luck? Can we overcome the "curse of cheap electricity"? This "curse" gives us no new jobs but which keeps the electricity bill remarkably low, as long as you only concentrate on the generated portion and ignore the fees to transport it to customer locations, and keep burning that coal imported from apparently foreign lands, like West Virginia and Wyoming... Of course, that leads to more CO2 pollution of our atmosphere, along with associated climate destabilization; for this, this is a minor inconvenience in order to get their fix of 3.1 cents/kw-hr average generated electricity pricing, though that might not be true for their descendents.....

So what makes turbines like the E-126 happen in Europe or Canada but not here in the USA, where we have more wind energy than we know what to do with, by a factor of at least 20, and one of the biggest electricity consumption rates of any country on the planet? Actually, it's pretty simple, and until the issue is dealt with, it makes all kinds of existing WNY infrastructure pretty useless. The secret - at least to many of us in this country - is that in much of Europe the owners of these turbines can actually get a price for their product (electricity from the turbines) that will cover the cost of generating the electricity, which is mostly the capital cost of this unit. The price for their product that they get will be fixed for a 20 year or so period, and this allows the owners to finance the project at a much lower interest rate/over longer length of time than would otherwise be the case. That can knock 3 to 5 cents/kw-hr off the cost to generate that electricity versus where "Ya never know" is the pricing motto, and allow electricity to be made for around 8 to 10 c/kw-hr in that not-so-windy part of the planet.

In contrast to that idea of price stability for wind energy, we have a Casino market for electricity in places like NY State, where electricity prices vary with time, and, as far as investment bankers are concerned, are unpredictable. These prices have hourly, daily and seasonal patterns that tend to reflect some combination of coal, nuclear and especially natural gas prices; the prices for wind sourced electricity in NY are based on these pollution based energy supplies/market prices. And it does not matter a bit that a wind turbine does not have any fossil fuel costs involved in making its energy.... Another aspect of the US wind energy pricing arrangement is that the project has to rack up huge "paper losses" (rapid depreciation) - losses that can be deducted from other taxable income, and which have the strange but true property of counting as "tax income". But this means that the project owners must have other taxable income - and large amounts, too, which means this trick is only available to the select few who qualify via large incomes.... It is very "Zen" in order to make money (from Federal and State governments), you have to lose money (on paper); these imaginary losses (MACRS) are essential to the business, and generally worth more than the Production Tax Credit or Investment Tax Credit.

The ability to get fixed prices that are reasonable and long term creates a market for renewable electricity. With that market, it allows a manufacturer to build renewable energy systems and to do the R & D needed to make successively better models as the years go by. It justifies construction companies buying Terex Demag 9800 cranes (needed to install an Enercon E126 and similar sized units, which were announced as commercial products by the likes of Vestas, RE Power, Nordex, Alstom, GE and Siemens), and then people also get hired building and designing those devices, and lots of other things, too. It's the creation of economic demand - the opposite of both austerity and crooked casino style economies - that is almost like magic, except that it is not magic at all - and very well documented, should anyone that falls into the category of "The Serious People" care to look into it. But, so far, they have a pretty impressive record of doing no such thing, both on a national and especially a local level. If they did bother to look, we probably would not need a WNY REDC, and especially one pursuing an apparently obsolete "Eds and Meds" based economic vision - something that became obsolete over a decade ago, about the time Oxychem decided to scrap a $500 million investment in pharmaceutical intermediates in pursuit of quick riches in the US natural gas business....

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One of the aspects of renewable energy from wind is that it can be quite variable in the hour-day-week time-frame, but with predictable seasonal and especially an annual output characteristic. If a region had a way to buffer this variability, as well as to match the fluctuating (though predictable) daily demand, they should be sitting pretty with respect to accommodating a very significant wind "content". This part of NY State has that arrangement, but very little of it appears to be used with respect to wind energy. WNY has some pretty significant infrastructure for renewable energy, mostly sitting in idle mode. We have a very over-sized local electric grid, thanks to the closure of so many factories, and the loss of at least 100,000 people in the past two decades. We have "the big battery" - rated at 240 MW and 4800 MW-hr. There is another 170 MW battery across the river Niagara Falls, Ontario, with 510 MW-hr of energy storage. And if need be, there is the capability of "draining the Falls" for another 1 GW in an emergency. We could make more of these if needed, as there are plenty of hill-water-electric lines combinations available, and these are also nifty job creating construction projects. We have quite the capability of buffering highly variable outputs from wind turbines with the predictably fluctuating average demand, in addition to having some serious grid connectivity with Ontario, the "Utica Junction" in Central NY State, and Pennsylvania (plus the 435/3950 MW-hr MW Seneca pumped hydro facility located next to the Kinzua Dam on the N Y-Pa border.

Another part of the equation is the pretty decent wind resources and lots of land, coupled to the recent commercialization of "low wind speed turbines" (LWST). With that, a new market opportunity opens - the lower portion of "hybrid towers". A hybrid tower consists of an upper "conventional" steel tower placed on a lower reinforced concrete section which offers greater rigidity and the ability extend a turbine hub height from 80 meters or 100 meters to up to 140 meters. The increased heights can raise the annual energy output of a given turbine by 20% to 40% because of the faster winds present at greater heights above the ground. While hybrid or all concrete towers (such as the ones used by the Enercon  E126) have been quite common in Europe for many years and are becoming even more common as larger turbines are used, they are still pretty rare items in the US. And hence, a new business opportunity, one where quality and local availability are at a premium, with no existing competitors of note.

Of course, if WNY has one thing, it is limestone, the raw material for concrete. In some cases, you can even use the accumulated ash form coal burners plus limestone plus some caustic soda for higher strength concretes. We will never run out of limestone, dolomite and sand around here.... More importantly, we have lots of skilled labor going to waste from not making anything of value - a manifestation of lack of economic demand.... After all, it's skilled labor that turns $30,000 worth of concrete and $50,000 worth of reinforcing steel rebar and cables into at least $500,000 worth of tower.

In conclusion, remember that all the wondrous talk of infrastructure that could be built, or actual infrastructure that is made (for example, new electrical transmission line upgrades) doesn't do much good unless we get a sane pricing system for renewable electricity. Without that, we are sort of whistling past the economic graveyard, and construction of any new Green Infrastructure with regards to the production of energy is the nearly the same as building a new office building that can only be filled if its tenants are pirated from existing neighboring buildings. Or perhaps a better example is the actual installation of mass quantities of wind turbines without manufacturing any significant part of them in this region, something that has been the rule to date in NY State, and which is almost unique to NY State. We still have no official explanation of how THAT occurred...., nor apology from any state officials for this occurring..... It turns out the manufacturing jobs that produce the 8,000 or so components of a modern wind turbine, and the new styles of cranes needed for them - alias the supply chain - is the actual infrastructure that we are in need of  to the greatest extent, and then some.

Anyway, that's perhaps a new wrinkle on "Green Infrastructure" for this part of the world. What's your spin on this topic?

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