Guest Blogger Mike Brace on Clean Energy Scalability
Investing in Green Energy
– Mike Brace
I think that one of the hardest questions we face when considering the technology paths of tomorrow is which one we chose. There are many great, novel and truly workable ideas for new ways to harness the natural energy flow of this planet and generate energy, motion and work from it. With this many choices the question then becomes which one we chose to pursue en masse.
The answer will be based on a myriad of inputs: conversion factors, collection means, cost-effectiveness, environmental impact, energy source and availability, and so on. The one input that many people miss is that of scalability. In terms of green energy I define scalability as “the technology’s ability to meet a significant percentage of the demand for the energy (or work) in which it produces.” It is a combination of power density, affordability and durability. Think of it as the formula for global acceptance. All of the grants I have worked on considered ‘scalability’ to be a major factor in their decision making process as to which technology to invest in.
Scalability is the means by which to gauge a technology’s ability to grow in the marketplace. Take steam for instance. Converting water to steam is still considered one of the most powerful means by which to generate force. When the automobile first hit the road 100 years ago some were actually powered by steam. But it wasn’t very scalable in that application. In other words, the mechanics of generating work through extracting the heat energy from steam wasn’t good in that application.
Yet today steam produces better than 2/3rds of the electricity on this planet, and more so everyday. (Yep, it’s true; all coal and nuclear plants heat up water to make steam to drive turbines.) And even though we don’t use it to drive our cars it is still the power of choice to throw a 30-ton aircraft off the edge of an aircraft carrier (60 years after it was invented!). We discovered that the mechanics by which to generate steam AND convert it to electricity were very scalable. When you look at a coal-fired or nuclear power plant all you really see is a giant steam boiler. There’s no magic going on in there. And because water is an inexhaustible mechanical power source all we need is fuel to make steam.
Now we have come to realize that while the mechanics were very scalable, and that the mechanical power supply (water) was inexhaustible, the fuel to convert it is not scalable because the environment is overwhelmed by our ability to convert it and Mother Nature’s ability to replace it. A clever investor will discover that while carbon-based fuel is lowering the scalability factor [for steam power] efforts in solar power may be doing just the opposite. A good investor is also part soothsayer. Thomas Edison, in conversation with Harvey Firestone and Henry Ford, once remarked “I’d put my money on solar energy. I hope we don’t have to wait till oil and coal run out before we tackle that.”
In order to be scalable in today’s world an ‘energy conversion device’ (e.g. the hydrokinetically-powered electric generator or “HyPEG”) needs to achieve a ‘positive’ balance between the product (in this case electricity) with the mechanics (an underwater paddle wheel) and the energy source (river currents) as well as the environment (aquatic) in which it operates to achieve the desired scalability. Windmills worked great for grinding flour 400 years ago, but when the world needed more flour we had to abandon them because they weren’t scalable for what they were designed to do (grind flour). Here in the US, our forefathers ground flour with mills along streams. Now we no longer use either of those energy sources (wind and hydropower) to make flour but instead we use them to make electricity. When it comes to making a useful amount of electricity, and in a global environment, it is important to understand the scalability of the mechanics. For a layman and/or investor this can be tough to do, especially when you don’t see it in front of you (like you can with coal and nuclear plants). For the average investor this myopic vision becomes a ‘safe’ means to determine if a technology is scalable; the more you see the more we have made, therefore it must be scalable and a safe investment. While it may be a logical means by which to invest, it is not the smartest. I don’t imagine that the last investment banker which held the most stock in buggy whips is still around today, and the case of Ferdinand Graf von Zeppelin also comes to mind here.
Scalability needs to be looked at in a historical perspective to be understood. When we built dams we turned a blind eye to their effects on the river’s eco-system, thinking only about the scalability of large hydro-turbines and the economics of using them to make electricity. Now that the dams are too expensive (compared to other means of generating electricity) and mankind understands the negative impact they have on the environment, very few utility companies want to build them anymore (with the exception of those in China and Africa). But we did like the hydro-turbines; so many companies are designing new energy conversion technologies around them and many investors consider them a safe haven. However, not many are looking closely enough at the scalability of the hydro-turbine design.
Underwater run-of-river and ocean current turbines are a viable means of turning current flow into electricity, but considering that most of the usable current flow that we have access to lies in relatively shallow waters, turbines are not very scalable; to make a lot of power (more than 4 MW in 13 knots of current) you need a very large turbine diameter (30+ ft), so you need ‘deep water’ (more than 60 feet deep). There are not a lot of usable river currents that run that deep. We can put really big turbines along the bottom out in the deep ocean, but there is not much access to the grid along the coast so all of that power doesn’t do us much good. (T. Boone Pickens ran into this problem with his wind-turbine strategy.) Besides, large turbines need to stick up a long way from the bottom thus making them an even larger target for fish, dolphins and whales to run into. Rightfully so, you don’t see a lot of effort being put into those really large turbines because of their ‘scalability’ problems.
The technology exists to build smaller turbines for run-of-river electrical production, but you would have to build [literally] millions of then to even start to make a dent in world’s current demand for electricity. The idea of making millions of them may be appealing (from an investment point of view) but the problem is that they are not very scalable. They are expensive, not very robust, not very fish-friendly, and we would run out of rivers long before we could use enough of them to replace coal. Some states are even doing their best to steer clear of them for all of the reasons mentioned above. However there are other hydropower technologies out there that may not appear to use the latest in technology but do offer a design approach that is far better suited to larger scalability than some of the more familiar efforts. These are factors that need to be considered when investing in hydrokinetics.
Long term investment strategists that desire continuous high-yield results for years to come need to look forward and make decisions based on more factors than just what is popular (or what has been done before). Companies such as Emerson usually shun innovation, and only invest in proven technology regardless of its forecasted future. A shrewd investor can always make 15% on investments by doing this but [like Emerson] you’ll find your market-share dwindling over time. It can be a profitable pattern, but it is not usually a growth pattern; especially in transitional times like these. Companies like the kind that Henry Ford started were successful because he knew that even though the horse was responsible for over 90% of the personal transportation market it was not scalable beyond that market. He also knew the automobile could go beyond personal transportation. When asked “Why the automobile?” he responded “If I had asked them what they wanted they would have said ‘Faster horses’”.
Before you decide on what to invest in (and what not to invest in) first decide how long you are willing to let your investments grow. If the technology has a high scalability factor, then your investments in such will have not only have a high growth rate, but a growth rate that can be maintained for years and years to come. Think of ‘scalability factor’ as an investment potential in not only your children’s future, but your grandkid’s future as well. If that growth pattern is appealing to you, make the smart investment — not necessarily the popular one.
