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by Craig ShieldsPosted on Posted in Renewables - Business

PhotobucketHere’s more about shale natural gas:

Pundits in the US natural gas industry have revised supply estimates in last few years. In effect, some companies claim to be able to increase sustainable production over the long term.

Exxon is a big player in energy by any standards and the company’s halo effect is likely to bring about the positive change for the market participants including natural gas explorers, producers and transporters. The deal has overnight changed the sentiments for shale natural gas. In a recent deal, Carrizo Oil & Gas sold some of its stake in a Texas shale project to Sumitomo Corporation for US$15.7 million.
Onshore produced shale gas with lower transportation costs is likely to be used in electricity generating plants (replacing coal), heating and cooling our homes and power automobiles. However, it would be wrong to conclude that natural gas is the sure shot remedy to all our energy issues. ExxonMobil has some synergies to justify a 25 percent premium on XTO Energy. Besides being an oil giant, ExxonMobil has a chemical business and thus can use the feedstock in any of its chemical facilities.

In the US, shale gas resources are very large and relatively evenly distributed over several states unlike oil. Some analysts claim that the shale gas could contribute up to half of the US total gas production by 2020. Such a scenario would be highly satisfying for US with reduced dependence on not just foreign oil, but also from greener sources which are highly dependent on specific countries for key components (Read rare earth metals in China and lithium supplies in Bolivia).

A recent run-up in the stock prices of shale gas companies warrants for a caution. Like other times, it appears that Wall Street has underestimated the real cost of shale gas, and overestimated how fast its production can be expanded. Some studies point towards the overestimation of shale gas supplies by some companies. Also, there are some concerns regarding the long term viability of shale gas extraction in a lucrative manner.

Empirical data tells us that the production in shale formations drops off rapidly after two to three years of high production. However, it will be too early to write off this option only on the basis of high price, that also when a lot of other energy sources are getting federal grants for relatively expensive technologies. The competitive landscape is expected to become clear in next two to five years after the production of shale gas starts on a mass scale. In due course of time, we’ll come to know if all this hype is real or just fizz.

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by Craig ShieldsPosted on Posted in Electric Vehicles

PhotobucketEvery so often, I like to write a short article that gets us thinking about the rate at which electric vehicles will be assilimated into our culture and brought onto our roads, replacing internal combustion engines. Here are a few ideas to consider.

1) What does Big Auto think (or, at least, claim that they think) about EV production rates? Considering there are 230 million cars on the road in the US alone, the needle will not be moving in the short-term:

Nissan: Has pre-orders for 56,000 LEAF all-electric cars.

GM: Last year, had 50,000 expressions of interest in the Chevy Volt, though presumably that figure is somewhat larger now.

Mitsubishi: Bumped up its 2011 production schedule of the i-MiEV from 8,500 units to 9,000.

Better Place: Placed an order with Renault for 100,000 electric vehicles based on the Fluence ZE for its deal with Israel.

2) But is there any reason to believe anything coming out of Detroit?

Today, the population of Detroit is about half of what it was in 1950. The city has 33,500 empty homes and 91,000 vacant lots. A recent AP article asserts that vacant property totals 40 square miles. But Big Auto is not at all apologetic for the meltdown, and points out they couldn’t have foreseen the dynamics of oil prices that created sharp inflection points in the demand for fuel-efficient vehicles in favor of the Hummer and other gas-guzzlers. If this is false, they’re disingenuous; if it’s true, they’re incredibly obtuse. Either way, it’s hard to trust what they’re saying.

One thing for sure: there is nothing good in EVs for the big OEMs. They are happy to drag this transition out for decades, selling gas- and diesel-based cars and trucks as long as possible.

3) The Department of Energy apparently is not bullish on pure (battery) EVs.

Check out this report on the future of the automobile. Although the author sees lots of hybrids in our future, he really doesn’t see any pure EVs. Remarkable. I have to think this is simply a mistake.

4) Industry analysts are hedging their bets.

As reported in EV World, Accenture recently performed a survey that showed that six out of 10 consumers are more likely to buy a hybrid or electric vehicle “only when it is superior to gasoline-only models in every way.”

I understand that merely “being green” isn’t good enough for the vast majority of car buyers. But this report strikes me as the usual MBA malarky — a consultant who reads your watch and then tells you what time it is.  What about the other 40%? Isn’t that a substantial market? And what exactly does “superior in every way” mean, exactly? How will the typical consumer react to a value proposition that includes dramatically lower fuel cost and huge reductions of other pieces of his total cost of ownership?

My belief: Give me a freeway-speed battery EV with comparable fit and finish to a garden-variety 5-passenger sedan, a 75-mile range, and price tag under $25,000 after rebate, and you won’t be able to manufacture enough of them.

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by Craig ShieldsPosted on Posted in Renewables - Business

Whether it is head scratching politicians in Copenhagen or industry analysts predicting that peak oil has already happened in one of the past decades, the pointers aim towards a fundamental shift – the process of doing away with carbon-based fuels and looking for renewable sources of energy. The changes are partly triggered by environment concerns and largely by fear of all industrial progress achieved so far coming to a grinding halt.

Needless to say, renewables aren’t trouble-free. Two of the major renewable sources, wind and solar both cost more than gas or coal. Prices are coming down with advances in technology, but intermittent nature of the energy production from renewable sources adds another dimension to the problem and puts the total cost of generating one unit of energy way compared with the fossil fuels. Wind speed becomes optimum for operating turbines at the height of around 800 meters, but creating a tower that high isn’t feasible. Furthermore, current wind turbine installations require around ten times concrete and steel that is required for generating the same amount of nuclear power.

Similarly, solar energy isn’t always available and the solar energy to electricity conversion ratio is just around 25 percent in most efficient crystalline silicon technology. Thus, instead of just focusing on renewables, options including a blend of fossil fuels with renewable sources or less polluting fossil fuels are being considered.

And good-old fossils aren’t letting us down. Although considered most benign of the pack, natural gas only emits around half as much as coal. On a grid level, probably it makes more sense to promote natural gas instead of counting on renewable as instruments to knock coal. Natural gas turbines can accommodate round the clock electricity generation unlike renewable thus helping in bridging the supply and demand gaps.
Last year witnessed a rare confluence of triggers resulting in a year with one of the lowest economic activity since Second World War. Quite predictably (in the hindsight), manufacturers ran high inventory levels with significantly less demand. As it turned out, Solar panel prices nosedived and so did the prices of natural gas. Natural gas prices are still depressed with futures currently trading at around 60 percent below last year’s high in US.

However, looks like the sector is in for a makeover. Apparently, ExxonMobil is betting big on natural gas. The oil giant has made a US$31 billion bid to acquire US natural gas player XTO Energy in an all stock deal. In addition, the company will assume debts amounting to US$10 billion. XTO Energy is an unconventional natural gas play. XTO has rights to large reserves of natural gas in shale, coal bed methane and tightly compressed sands. Shale gas is natural gas contained in shales, a type of sedimentary rock with low porosities and permeability.
But the extraction of gas is both difficult and costly. The extraction process includes drilling of several thousand feet and horizontally drilling through the shale. The process also involves large quantities of water up to 2 -4 million gallon along with sand and chemicals to break open the rock and release the gas.

However, technological advancements such as formation fracturing and horizontal drilling have made it possible to extract gas in an economic manner. The market’s first brush with new technology came in 2004 when natural gas giant Range Resources drilled the first modern well in the Marcellus Shale, spread across Pennsylvania, Ohio and West Virginia.

More on this soon.

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by Craig ShieldsPosted on Posted in Biomass

To continue the discussion on biofuels, there have been a number of oil companies who invested in algae fuel. The major ones are:

Exxon

The big oil firm was looking for projects with high returns to exploit its industry knowledge and infrastructure. Exxon chose bio-fuels and geothermal energy. The company invested US$600 million in the sector through a partnership with Synthetic Genomics. While the company acknowledges that the real challenge is to create economically viable algae bio-fuel in large volumes which will require significant advances in both science and engineering, it remains positive about the investment.

Solazyme

The company is leading in terms of producing algae fuel at scale. Solazyme was founded in 2003 with US$80 million in venture capital backing. The company had one of the first development deals with Chevron. The company now expects to be able to commercialize its technology by 2012-2013, with a production cost target at US$60 to US$80 per barrel.

Chevron

Chevron announced a collaborative research and development agreement with the DOE’s National Renewable Energy Laboratory (NREL) to study and advance technology to produce liquid transportation fuels using algae. Chevron and NREL scientists are trying to identify and develop algae strains that can be economically harvested and processed into finished transportation fuels.

Shell

The company established a joint venture with bio-fuel company HR Bio-Petroleum in 2007. The joint venture, named Cellana is investigating different strains of algae, by cultivating them in ponds and seeks to process the algae into oil that can be used as a raw material for fuel.

ConocoPhillips

In July 2008, ConocoPhillips signed a US$5 million, multi year research agreement with the Colorado Center for Bio-refining and Bio-fuels (CCBB). CCBB is a joint venture of the University of Colorado at Boulder, Colorado State, Colorado School of Mines and NREL. Together they plan to develop new ways to convert biomass into low carbon transportation fuels.

BP

In February 2007, BP joined hands with University of California, Berkeley, the Lawrence Berkeley National Laboratory (LBNL) and the University of Illinois at Urbana-Champaign. The parties are developing technology to produce bio-fuels, including those made from algae. The collaboration formed the Energy Biosciences Institute (EBI), and BP has announced to support the Institute with a ten-year, US$500 million grant.

OriginOil

The objective of OriginOil is to break down the barriers to algae’s development at all the levels, that is, from plant growth to oil separation. The company has developed a novel, patented process for growing algae that introduces all the inputs — carbon dioxide, water, and nutrients — on a micron level. The company uses electric pulses to break down the algae cells and extract the oil using simple gravitational force. This system could save 90% of the energy used by traditional methods.

There are a lot of companies like the ones mentioned above who have already invested or are ready to invest in algae fuel. It is interesting to see big oil funds diverting towards research and development of an upcoming technology.

However, what’s noteworthy is that this is not the first time the oil companies are trying to wash away their much maligned image. For a long time now, oil firms are aware of the need to diversify the business portfolio as the market is likely to bet on renewable energy sources. Conspiracy theorists would be quick to point the possibility of the investments being made with the intention of sabotaging the technology. Chevron is still best known as the killer of the electric car in some circles by taking exclusive control of Nickel Metal Hydride (NiMH) battery licensing rights back in 1990s.

The principles that hold true for big oil firms as investors are equally true for other investors. Since the technology is in development phase and still not prime for applications in real world, investors putting their money into algae stocks might be risking their investment. The companies operating in this space might be garnering some brownie points such as Valcent Products’ vertical farming technology was named one of the best Innovations of 2009 by Time Magazine last month, but when it comes to hardcore financial numbers, companies don’t have anything else to offer except hopes of hitting it big-time. Some eventually might end up making superior returns, but 9 out of 10 companies look set for a shakeout. Who knows, big guys like Bill Gates and Exxon Mobil might be losing out on their investments in algae startups.

The option of perfecting a technology with long gestation periods doesn’t come without the risks. Almost invariably, the markets have managed to figure out replacements for the materials or technologies crossing their fair value. Algae fuel technology is running this risk and the long gestation period is already evident to be irksome for some investors. Vinod Khosla, one of the prominent cleantech investors maintains that he hasn’t found even one viable algae technology plan after looking at many options. “The economics of algae don’t seem to work” Khosla adds. What happened with the corn based ethanol technologies is matter of public knowledge now. These are still hay days for the technology, but the billions pouring into solar and wind energy could prove to be fatal for algae.

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by Craig ShieldsPosted on Posted in Biomass

With time ticking, the world is desperate to switch over to renewable sources of energy. And in a need to create one stable source of energy, all the options are being tried and tested. Thanks to the ongoing research, claims are being made of solutions replacing fossil fuels in one way or another.

In the light of the need to reduce in carbon emissions, there have been lot of attention to bio-fuels, especially those made from algae. There had been a flurry of venture capitalists (VCs), company investments and lots of attention from politics as well. Algae had been quite a promising option for preparing bio-fuels. It is assumed to be a low cost way to transform our current fleet so that they emit less carbon. The government is promoting algae fuel in a hope that it will cut down on the usage of mainstream fossil fuels.

Algae fuel production is a process in which during photosynthesis, algae and other photosynthetic organisms capture carbon dioxide and sunlight and convert it into oxygen and biomass. Up to 99% of the carbon dioxide in solution can be converted in large scale open pond systems.

Recently, the US Department of Energy (DOE) announced that they would offer up to US$85 million in funding for the development of algae based bio-fuels. The funding comes as a part of the funds released from the stimulus package, also known as the American Recovery and Reinvestment Act (ARRA). The objective of the fund is to bring together a group of leading algae and advanced bio-fuels. Scientists and engineers from both universities and private firms are attempting to bring new technologies and fuels to market in an accelerated time frame.

The technology has its share of criticism as well. Researchers argue that algae fuel would not reduce atmospheric carbon dioxide because CO2 taken out from the atmosphere by the algae is released when bio-fuels are burned. However, they eliminate the introduction of new CO2 by displacing fossil hydrocarbon fuels. Algae fuel, due to some high profile investments in the recent past, is now being given utmost attention. However, researchers warn that too much shouldn’t be read into the future as of now. Despite all the efforts, algae fuel lags behind in the economies of scale.

Tomorrow, we’ll look at what some of the major players are doing in this space.

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by Craig ShieldsPosted on Posted in Renewables - Politics

PhotobucketHere’s a follow-up post to what I wrote earlier about corruption. I had a series of meetings when I was back in Washington DC a few days ago with a top-level DoD (Department of Defense) executive. She told the group of which I was a part some spine-chilling tales, for example:

  • The US Air Force fought for years against the use of UAVs (unmanned aerial vehicles); they want human pilots. If they don’t have live pilots, they have fewer people overall, less appeal in recruiting, and ultimately fewer resources. Of course, they wouldn’t have pilot casualties, but that seems to be an unimportant ingredient in the overall equation.
  • Many years ago, the DoD said it wanted no more C-17s. But they continued to get them anyway — year after year, rammed through by Congress and the powerful Boeing lobbyists.

The Air Force wants human pilots, so they can put them in harm’s way? Congress spends billions of dollars on items that are specifically not needed or wanted?

The relevance of this is not simply to rant; it’s to point out that dirty politics will be very, very likely to play an ongoing role in the adoption of new forms of energy.  After all, if our leaders will do patently dishonest things for billions of dollars, what do you think they’ll do for trillions?

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by Craig ShieldsPosted on Posted in Sustainability

PhotobucketThe producers of a television show called “Going Green” interviewed me yesterday to determine if they would like to feature me on an upcoming program. As part of the conversation, the associate producer asked me what areas of education in “going green” are most required to get people up to speed in this area.

“It depends on what ‘people’ you mean,” I explained. “There are several diffferent constituencies that have markedly different needs with respect to knowledge.”

In discussing renewables, I’m amazed how people conflate the many different groups (consumers, corporations, utilities, government agencies, etc.) that, in fact, have completely dissimilar needs for information.  I gave the interviewer a few good examples off the top of my head, but after I hung up the phone, I realized that it might be a good idea to list the various segments and the topics which, in an ideal world, each would understand.  Here’s the list I put together:

Consumers

  • “Electric vehicle 101.” Pure EVs vs. plug-in hybrids. Trade-offs between EVs and internal combustion engines, for a each family’s unique driving habits. Considering NEVs (neighborhood EV), given the local driving conditions and traffic laws. State and federal incentives.
  • Recycling
  • Energy-efficient lighting, HVAC, and appliances

Corporate America

  • Intelligent building management. Light harvesting, integrated energy management.
  • Demand response, i.e., managing consumption of electricity in response to supply conditions, e.g., reducing consumption at critical times or in response to market prices
  • Incentives for carpooling and mass transit
  • E-commuting
  • High-efficiency vehicles (preferably electric transportation) on campus and in corporate fleets

Government Policy Makers

  • MSEV (medium-speed EVs) laws that foster use
  • Encouraging mass transit, bicycling, etc.
  • Eco-friendly community planning
  • Making use of the research performed by NGOs (e.g., World Resources Institute, Wilderness Society, etc.)
  • Incentives to consumers and businesses to reduce carbon footprint
  • Creating corridors for power transmission, using eminent domain law as necessary
  • Allocating stimulus money to organizations with demonstrable capability to deliver transformative change in energy generation and consumption
  • Stipulations to power utilities to increase purchase of energy from renewable sources
  • CAFE standards that drive increases in overall fuel efficiency
  • Intelligent placement of charging stations
  • Alternative fuelled vehicles in the government fleets
  • Laws mandating sustainable agricultural practices
  • “Internalizing the externalities,” i.e., forcing everyone to pay the complete costs of generating and consuming energy
  • Changing subsidies to create a level playing field for renewable energy

Power Utilities

  • Smart grid, i.e., delivering electricity from suppliers to consumers using two-way digital technology
  • Time of use metering, encouraging off-peak consumption (e.g., charging EVs at night)
  • Building out the grid in sync with increased demand for electric transportation
  • Efficient, long-distance power transmission using HVDC (high-voltage direct current)
  • Vehicle-to-grid (V2G), using energy stored in EV batteries to enhance delivery of electric power

Renewable Energy and Electric Transportation Companies

  • Making use of market research to gauge demand, establish the most appeal product/service features, set maximum set price points, develop effective positioning and branding, etc.
  • Writing clear and compelling business plans
  • Raising investment capital
  • Protecting intellectual property
  • Using public relations to generate large volumes of positive publicity

It sure will be a great day on Planet Earth when the majority of folks at all of these levels get their wits wrapped around each of the major issues.

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by Craig ShieldsPosted on Posted in Renewables - Politics

PhotobucketI’m back on the East Coast for a few days.  When I come here I normally stay with my parents (they’re in their mid-late 80s) at their home in Philadelphia — which happens to be an apartment in a very nice retirement community.  As it often does, the conversation this evening turned to politics.  But unlike many political discussions between parents and their children, it was not at all rancorous.   Through our talks, we try to understand why the US as a nation is having so much difficulty in gaining traction in solving its most obvious problems: wars, healthcare, financial reform — and, of course, creating a level playing field for renewable energy.

I pointed out that each of these is rooted in what I label generally as corruption, which I define as the supremacy of money and power over common sense and decency in creating and enforcing our laws.  I acknowledged that corruption is a harsh word, and that it applies more accurately in some cases than in others.  But I do think that if our leaders were kind and sensible people, uninfluenced by the power of money, we would have immediate workable answers for these and many other pressing issues.

Since we’ve so often discussed this idea of corruption as it applies to energy policy, and since healthcare is so omnipresent in a retirement community, let me use this latter as an example.  The 94-year-old lady living across the beautifully carpeted hallway from my parents’ place recently had a knee replacement, which was, of course, 100% paid for by Medicare.  We encountered her in the hallway; she still struggles to walk — which shouldn’t come as a surprise considering her age — and so they’re in the process of scheduling a second such operation.

Meanwhile, our nation has millions of people 60 years younger who happen to be uninsured and face untended illness or financial ruination — or both — because they can’t get health insurance.

While my heart goes out to the old lady, I point out a simple, if ugly truth: the only reason she’s receiving serial knee replacements is that they are profitable. She’s thin as a toothpick, horribly frail, and quite obviously has no prognosis under which she’ll ever be able to walk more than a few slow steps without terrible pain — regardless of how many times her knee is replaced.  Yet I caution you not to expect a change in healthcare legislation that might damage the profit stream generated by those surgeries she’ll be receiving — even if making such a change would free up huge amounts of cash that would more than pay the cost of insuring those who presently can’t find coverage.  The power of that money is so intense that such change simply will not happen — regardless of how compelling the argument — or how enormous the benefit to the public.

Do you have a better word to describe such a system than corrupt?  Can you introduce me to one honest, reasonably intelligent person who thinks that spending a fortune on knee replacements for 94-year-olds is a good, fair-minded idea while others who happen not to be able to get health insurance face catastrophic health conditions to which their pitiable complaints will be turned a deaf ear?

I know that the vast majority of the many millions of people working in healthcare are honest, decent, and incredibly talented.  I know dozens of them personally, and I respect them deeply.  But the fact remains that the medical industry is in place to make money.  And if you happen to be one of the lucky ones (like our friend above) who benefits from that profit motive, I urge you to consider it a bonus for which you should be profoundly thankful — because not everyone is so lucky.

So as not to ignore the energy industry entirely in this post, it’s clear that a similar argument could be made here.  As I’ve pointed out, the oil industry alone employs seven lobbyists for each of the 535 members of Congress.  Do you think Big Oil would be spending those hundreds of millions of dollars if they weren’t buying something of far greater value in exchange ? Sorry to appear cynical, but I’m convinced that the level playing field we’ve discussed here so frequently will come about when and only when we’ve found a way to disconnect our lawmakers from the powerful interests that buy their votes.

Corporate lobbying is an institution that is causing more harm to more innocent people with each passing month.  What’s the matter with simply abolishing it?  The framers of the Constitution wisely built in the right of the people to redress their government, but I think it’s pretty clear that they didn’t intend this patent dishonesty that’s ripping our civilization and its people slowly and painfully apart.  What’s the harm in simply saying that money should not buy legislative influence?

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by Craig ShieldsPosted on Posted in Renewables - Business

I wrote not too long ago about the huge, long-term role that the National Renewable Energy Laboratory (NREL), as part of the Department of Energy, plays in supporting the development of clean energy technologies.  Their work with solar energy leader Solyndra is a perfect example of a case in which this public support made it possible for a private company to raise critically important addition capital, by preventing their initial private investors from getting scared away.  At a certain point, new (very large) rounds of cash were required to get the company to its next level.   As I recall, NREL supported this effort to the tune of over $700 million — and this robust commitment showed investors that they weren’t alone in their belief that the company was on the right track. 

But not every company that asks for money receives any at all — let alone $700 million.  So exactly how does this process work?  How fair is it? What criteria are most important?  What types of companies are favored over others, and why?  Are more mature renewables technologies, like photovoltaics (in which Solyndra plays), favored over newer ideas?  (Solyndra has a very well proven breakthrough in deployment of CIGS (copper indium gallium (di) selenide), generating a significant leap in PV efficiencies and reduction in costs).

Unfortunately, it’s not clear.  I suppose it’s not supposed to be.  Take solar thermal/CSP (concentrated solar power) as an example of a new technology.  Technologies like PV and wind have a several-decade head-start over CSP.  When I interviewed industry leader Ausra‘s founder Dr. David Mills for my book on renewables, he told me that Ausra had gotten to the second round in one of these mega-contests in which the DoE selects its favorites to back, but that they didn’t make the finals.  When I asked if he resented their decision, he — perhaps simply out of good sportsmanship and professional courtesy — said that he didn’t, and told me that he’ll simply try again another time.

I can’t count all the people who have asked us for our insights at 2GreenEnergy on this matter — and I regret that all I can turn up are anecdotal incidents like these.  I ask readers to share their own experiences with this process so that all my learn.  Thanks.

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by Craig ShieldsPosted on Posted in Electric Vehicles

Reader Kate apparently thinks I’m hypocritical.  She writes:

Living in Santa Ynez must be really tough, getting around and all with those Bently’s and top-shelf jags/mercs and 6-digit priced horses. Pontificate on in the valley of the ultra rich.

How charming, Kate!  🙂  Let me make two quick points:

1) I drive a 16 year old car with 212K miles on it.  (I’ve sworn that my next car will be an EV.)  It’s likely that your refrigerator is worth more than my car. 

2) It’s true that there are some rich people around here.  But I believe the quest for renewables is a good deal for everyone at every socio-economic level.  It nauseates me when I read propaganda that clean energy will put more people out of work in an already-tough financial climate.  While it’s true that we’ll someday have a world without coal-miners, the net benefit in jobs in deploying renewable energy solutions and building clean transportation will be enormous.

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