Does Google know something about energy that the rest of us don't?

Dave Rochlin - www.climatepath.org

Google announced a large wind energy deal this week that reveals a lot about where they think energy markets are headed. Other big energy consumers should take notice.

Rather than simply buying renewable energy credits (RECs) and adding some solar panels to show their commitment to green, Google’s energy subsidiary signed a 20-year power purchase agreement with NextEra Energy. Google will begin buying 114 megawatts of electricity from an Iowa wind farm later this summer. Now of course Google doesn’t consume much of their energy anywhere near Iowa, but they can (and intend to) sell this energy on wholesale markets, and simultaneously buy energy where they do use it.

By buying the wind energy directly, Google has created a giant hedge against both rising energy prices and the future cost of compliance with emissions reduction mandates – either voluntary or mandatory. RECs are a way to separate out the actual energy from the credit for low emissions, and this direct investment locks in their costs for both.

Why would they want to do this? Aside from their intention on greening their operations, they believe it makes good business sense.

On the energy side, world demand keeps increasing. China recently overtook the US in total energy use according to the International Energy Agency, and India is poised to become a large importer of coal to meet their growing demand. While there is much debate about whether and when we’ll start to deplete fossil fuel reserves, it’s clear that higher demand and higher costs associated with the extracting future reserves (think of BP drilling a mile underwater for oil) will send energy prices upwards. And demand-wise, plug-in electric cars could undo some of the other energy savings that are slowing electricity use in the U.S.

On the renewables side, while the cost of solar, wind and other ‘clean’ sources will continue to fall and capacity continue to increase, a climate bill in the US could create a shortfall, sending the price of ‘clean energy’ (or at least the REC piece) up. With the senate climate bill stalled, and both carbon offset and REC markets showing weak demand, this may seem hard to imagine today. But in a few years, it could be quite a different story.

A group called NERA Economic Consulting has partnered with a very cool startup called Crowdcast to try and predict how this will all play out. They use ‘the wisdom of crowds' to come up with a consensus forecast, which Crowdcast claims is typically more reliable than individual expertise. Half 'the crowd' thinks we’ll have a senate bill by June of 2012, that it will require a 17% reduction in emissions, and that the price per ton of carbon credits (which can be used to make up for missed reduction targets) will rise above $10.

Google will be immune to both overall energy and emissions targets, and in fact might be in a position to sell their excess green energy for quite a tidy profit. My bet is that by 2020, Google will be – as usual – laughing all the way to the bank.

As they say “Through the long term purchase of renewable energy at a predetermined price, we’re partially protecting ourselves against future increases in power prices. This is a case where buying green makes business sense.”

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Photo: CC License via Flickr: Yodel Anecdotal

Unquenchable thirst: The many things we do with oil.

Dave Rochlin - www.climatepath.org

With BP's broken underwater well still leaking oil into the gulf at an alarming rate, there are many calls to reduce our dependence on oil of all kinds.

Animator Mark Fiore recently did a wonderful video highlighting the bizarre notion of using "dinosaur squeezings" to power cars.



But oil is used in a lot more than our gas tanks. Petroleum is in many other products, and we use it for many of our processes. We also rely on it to grow, cook, eat, and even enhance our food. This second video, featuring eco-man and badger girl (which I made with the cool web tool xtranormal), highlights this.



I'm no Mark Fiore, but you get the point, I hope. A fairly exhaustive web list of many of the everyday goods that come from oil is available here, courtesy of the Illinois Oil and Gas Association. The list covers everything from ballet tights to venetian blinds. It certainly is food for thought. The list isn't 1001 items long, but easily could be.

The website also quotes Jeane Kirkpatrick, former U.N. Ambassador for the United States.

"Oil is a product that arouses so much passion. A lot of people have a passionate fear, or distaste, or downright hatred almost for oil. There is no other product that so many people need so badly, yet so many people believe should be produced entirely without profits."

As long as we need it "so badly", there isn't much chance we are going to stop drilling for oil off our shores. While there is a lot of talk about alternative energy, it seems that we also need to reconsider the role of oil as an input for all the other things we consume.

Photo copyright TommL at istockphoto.com

President Obama calls for a price on carbon. Will it work?

Posted by Dave Rochlin - http://www.ClimatePath.org

In a recent speech at Carnegie Mellon University, President Obama called for a price to be put on CO2 emissions, in order to move us on the path towards renewable energy. He figures the market will help do the rest.

" ...the only way the transition to clean energy will succeed is if the private sector is fully invested in this future, if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed. And the only way to do that is by finally putting a price on carbon pollution."

A price on carbon has dual purposes:

• It raises the cost of energy, which should encourage conservation.
• It closes the cost gap between fossil fuels and alternative energy.

But will it work?

According to the most recent EPA greenhouse gas inventory, US greenhouse gas output is 7 billion tons a year. At a price of $25 per ton -- as envisioned in the Kerry-Lieberman American Power Act -- the total added cost if we priced all US emissions would be $175 Billion dollars per year, or about $1750 per household per year. Of course we won't be charging for all emissions....more likely just those above our 17% reduction cap, so the short term number (in grossly oversimplified terms) is really more like $350 per household....and that's only if we were not simply giving away all the permits. And in the long term? The senate bill targets an 80% reduction by 2050...but I'll believe that commitment when I see it.

I suppose this could show up as an additional $.25/gallon at the gas pump, or perhaps another $.01- $.02 per KwH for electricity. More likely, a lot of it would be buried in the cost of all the things we buy...carbon pricing by a thousand paper cuts!

When I talk about offsets (which I do a lot), I often have people tell me that a carbon tax is a much better answer, because it sends clear signals about the cost of consuming energy. So let's look at some major sources of emissions to see what pricing carbon might do:

Driving (roughly 20% of US emissions)
I really doubt that adding another $10 per barrel to the cost of oil is going to change driving habits or vehicle choices much. Demand only seems to change with massive ($30 or more per barrel) type price shocks, and even then only temporarily. If you don't like a Prius at $60 per barrel, you probably still don't like it at $70. Rather than carbon pricing, we either need to tax the real price of oil (including military expenditures, health costs, and deficit-related currency weakness) or simply rely on higher mandates on gas mileage, like the ones the EPA just enacted.

Flying (roughly 3-5% of US emissions)
Much of the cost of flying is fuel related, and this is an area where carbon pricing could have the greatest impact. While 10% at the gas pump does not scare drivers much, a 5% or 10% increase in the price of flying has a big impact on demand....there are plenty of pricing studies that confirm this. But even in this case, the drop in passenger miles would probably not hit the 17% reduction target. Of course airlines are already looking for exemptions to cap and trade in both the US and Europe. Perhaps we need some sort of mandatory fuel targets (per passenger) for airplane flights?

Electricity Generation (roughly 30% of US emissions)
For a home using 9,000 KWH per year, the carbon penalty would be around $15 per month. Most homes could easily save this much by using cold water for washing clothes and changing out a few lightbulbs, or shutting off vampire appliances and computers. And yet most of us don't. We don't seem to be that rational when it comes to electricity.

The utilities would look at both cost per kWH and capital expense, if it is a purely market based decision. Many uilities don't really compete, so any cost increases would simply be passed on anyway. This makes it rational to avoid new capital expenses, and stick with the old power plants. Emissions and renewable energy targets and other mandates (like additional scrubbers) could be much more impactful.

Industrial Energy Use (roughly 10% of US emissions)
Businesses have gotten smart about energy use in a big way. The more energy intensive the business operation, the more they are conserving in order to cut cost. But if they are taking action anyway, how much more impact will carbon pricing have? For those on the margin (less energy intensive businesses) some may start to care. But the big polluters are already paying attention to conservation. The senate bill also has some trade protections (carbon tariffs) so simply raising prices on goods and services ever-so-slightly is an option...no need to worry about foreign competition.

Agriculture (roughly 7% of US emissions)
This sector seems to be given a waiver: If so, the CO2 equivalent of agriculture related Methane (21 times that of CO2) and Nitrous Oxide (310 times that of CO2) will not be priced. Need I say more?

Another big issue is that the price on carbon - as envisioned in current climate legislation - will go right back into the pockets of US consumers, either in the form of rebates or in defict reduction that will keep both taxes and inflation down. So the more we reduce our consumption or switch to renewables, the less we get back in rebates....sort of a reverse incentive.

While I think capturing the true cost of energy is an important step, I am not all that optimistic that carbon pricing alone will change behavior. What are some other options? Here are a few I can think of:

Conservation Capital
There's a high ROI on energy reduction (which would be even higher if energy costs go up due to carbon pricing.) But many changes require upfront capital. How about a low interest or no interest capital fund or Fannie-Mae type system for businesses and households to fund conservation and energy retrofits? This scheme is already being considered for residential solar.

Hard Targets
We could simply set renewables and emissions targets, as has been done with automobiles. If the market knows that a utility needs to get to 20% renewables in ten years, the "ingenuity of entrepreneurs" that The President referred to will kick into high gear an compete vigorously for a piece of the pie, lowering costs and increasing innovation.

Cost Transparency
Better feedback on energy use and costs would lead to better decisonmaking. Let's hook those smart meters into our thermostats and iphones, so we can see at anytime how much we are spending on power. And instead of an MPG gauge on cars, how about a taxi-meter style read out that shows how much we are spending on gas as we drive? These sort of in-your-face mechanisms are more likely to change behavior.

Spend Intelligently and Holistically
While we are pricing carbon at $25 or higher, I can think of an amazing innovation that 'eats' carbon for $10 per ton, and has years of successful field trials. It's called a tree, and we are losing as much as 80,000 acres of them each day. Trees also can preserve biodiversity and provide income in poverty zones. Using less and cleaner energy is a worthwhile goal, but a planet covered with solar panels and turbines instead of trees is not the kind of future we should aspire to. It's all about balance.

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Original photo CC license http://www.flickr.com/photos/bdburton/ modified by ClimatePath. All rights reserved.

Coal Use and CO2 Emissions Projected to Rise By More Than 50% By 2035

Dave Rochlin - www.climatepath.org

The world's hunger for energy is insatiable, according to the most recent Energy Outlook published by The U.S. Energy Information Administration (EIA).

And if nothing changes, this will lead to an increase in coal consumption from 132 quadrillion Btu in 2007 to 206 quadrillion Btu in 2035, most of which will come from growth in India and China. As a result, annual Greenhouse Gas Emissions could rise from 29.7 billion metric tons in 2007 to 42.4 billion metric tons in 2035.

Things are generally flat in the OECD countries, as they move from manufacturing to service based economies, and focus on efficiency rather than growth in their transportation sectors. But as manufacturers locate factories in developing countries where wages are cheapest, and those wage earners increase their standard of living, the countries least equipped to invest in renewable energy and public infrastructure will be the most active in growing their energy and fuel use. So the EIA projects plenty of additional coal and oil consumption.

Policymakers refer to this as an issue of energy intensity of the economy (how much energy is used for every dollar of GDP) and carbon intensity of energy (the sources used to produce the energy.) Most of the projected growth is in countries with high energy and carbon intensity.

This good news is that this scenario is based on the reference case—which assumes that current laws and policies remain unchanged throughout the projection period. There seem to growing public and political will to make some changes. But while China and India have floated the idea of cutting their emissions intensity in half as a percent of GDP (primarily through improved energy intensity) growth in their economies and only small reductions in the carbon intensity of the energy will overrun these reductions. Before we start finger pointing, however, keep in mind that exports to the US and other OECD countries have been powering China's industrial growth.

In any case, the reference scenario is quite scary, and we have to do much better. A healthy dose of conservation and alternative/renewable energy is needed, both in OECD and non-OECD countries. This means supporting a strong and effective energy and climate bill in the US, and the completion of the UN climate work that was started in Copenhagen. It's going to take a global solution to tackle this problem.

Chart by U.S. Energy Information Administration (EIA) from The International Energy Outlook 2010.

Quiz: Is The Senate Climate Bill Right For You?

Dave Rochlin - www.climatepath.org

Is the recently released senate climate bill right for you? Take the quiz below to assess where you stand on the Kerry-Lieberman climate bill, AKA "The American Power Act", announced last week.

The bill's intent is "To secure the energy future of the United States, to provide incentives for the domestic production of clean energy technology, to achieve meaningful pollution reductions, to create jobs, and for other purposes."

It sounds like there's something for everyone, right? At almost a thousand pages, there should be! But opinions vary. In trying to placate enough constituents to get a viable bill, a lot of trade-offs have been made. Can you accept them? Take this handy quiz and find out....and tell us what you think and how you scored! If you don't want to do the math by hand, an interactive version is available here.

The Quiz:

1. I Believe 350 Is:
a. A great temperature for baking cookies.
b. A noble but unachievable goal.
c. The upper limit for a safe and just planet (e.g. 350 parts per million of CO2)

2. My View On Offshore Drilling:
a. States should be able to decide.
b. Three words: "Drill baby drill.
c. Two words: Deepwater Horizon.

3. Carbon Offsetting:
a. The best way to make an immediate impact on climate and support sustainable development.
b. A flawed tool, but with fixes should be part of the solution.
c. Is like paying someone else to not have an affair so you can.

4. Nuclear Power:
a. Three words: Fission baby fission.
b. Ugh. Painful to consider but necessary.
c. Think Chernobyl, and where exactly do you plan on storing the waste?

5. International Cooperation:
a. If China doesn't do their part, what's the point?
b. If we lead others will follow.
c. The free market will sort it all out.

6. Agribusiness:
a. US agriculture needs help, not regulation.
b. Paying farmers/ranchers to follow better environmental practices makes sense.
c. "Sustainable agriculture" does not mean subsidizing beef and big farms.

7. Climate Change and Jobs:
a. Green jobs are the future.
b. Climate legislation is a job killer.
c. The free market will sort it all out.

8. Pricing Carbon:
a. Let's discourage emissions, but without punishing consumers or businesses.
b. Fossil fuel is a sin...it's time for a sin tax.
c. The free market will sort it all out.


Your Results:

Give yourself 3 points for each "a" answer, 2 points for each "b" and 1 Point for each "c".

19-24 : This bill fits you like your favorite pair of blue jeans.
15-19 : Life's full of trade offs. You'll take the good with the bad.
0-14 : You take comfort knowing that the bill probably won't pass anyway.

If you scored 15 or more, you may want to encourage your senator to support the bill here.

More information on each question and how we based our scoring is listed out below.

How We Based Our Scoring:

1. 350: The bill seeks to cut emissions by 17 percent below 2005 levels by 2020 and by more than 80 percent by 2050. These goals are consistent with what was promised by the President in Copenhagen, but fall well short of both UN targets and what is necessary to reduce CO2 concentrations to 350 ppm.

2. Offshore Drilling: The bill encourages off shore drilling, but the states can opt out if it is within 75 miles of their coast. It gives states over 1/3 of the revenue to protect their coastlines, and money for land and water conservation.

3. Offsets: Up to 2 Billion tons of offsets could be used for hitting reduction targets, emphasizing forest preservation and carbon sinks, and waste/agricultural changes both domestically and internationally. Includes additional oversight for offsets.

4. Nuclear Power: A very heavy emphasis is placed on nuclear power. Increased funding for nuclear loan guarantees to $54 billion, and provisions for tax credits for construction of new facilities.

5. International Cooperation: The bill stipulates that, in the event that no global agreement on climate change is reached, an international reserve allowance program would be implemented. This would require that imports from other countries that have not taken action on emissions pay a comparable amount at the border in order to avoid "carbon leakage."

6. Agribusiness: Farms are exempted from mandatory action. The bill would create agricutural revenue through a domestic program that lets agricultural interests receive credits if they make reductions in emissions, which could then be sold into the offset/permit market.

7. Climate Change and Jobs: While proctionalism has been a concern, offshoring of emissions intensive industries (aka "climate leakage") is also a concern. If no global agreement on climate change is reached, the bill would require that imports from other countries that have not taken action on limiting emissions pay a comparable amount at the border. In addition to protecting domestic jobs from climate leakage, the bill proposed spending on retraining of workers and developing "emerging careers and jobs in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation, and climate change adaptation."

8. Pricing Carbon: The bill would set a price on carbon ($12-$25 per ton), but would give away plenty of permits to business, potentially send revenues back to consumers in the form of energy rebates (or use the money for defiect reduction), and protect low and middle-income families.

The full text of the bill can be found at http://kerry.senate.gov/americanpoweract/intro.cfm

You can support senate action at http://www.thepetitionsite.com/122/Support-the-climate-bill

Photo Copyright: Question marks from: http://www.flickr.com/photos/valeriebb/ / CC BY-SA 2.0 American Power Act logo from the office of Senator John Kerry. Combined photo work by ClimatePath, all rights reserved.

Wind Power for Everyone!?

by Dave Rochlin - www.ClimatePath.org

I recently posted on the Cape Wind project, which will be built in Nantucket Sound. If it's like most other wind projects, you'll still be able to buy the energy it generates, whether you live as far away as California, Florida, or even Germany.

Extra long distance transmission lines? No, not quite. With the help of renewable energy credits (RECs), even if your utility can't sell you wind generated electrical power, you can buy it anyway. In fact most utilities that claim to offer a"green energy" option are actually selling you the same old electricity bundled with RECS. Not everyone seems to be aware of this.

Renewable energy sources are typically more expensive, and not everyone wants to pay the premium, so the demand for renewable energy isn't always in the areas where it's produced. The simplest way to think of RECS is that you have the opportunity to buy the green energy that local buyers are not. As the EPA puts it: "RECs provide buyers flexibility in procuring green power across a diverse geographical area. This flexibility allows organizations and individuals to support renewable energy development and protect the environment when green power products are not locally available. "

Being a savvy wind buyer:
Utilities don't always make it easy to see where your support for the renewable piece goes or how much it really costs. The Con Ed utility in New York, for example will charges you an extra 2.5 cents per kWh for wind, because the power is generated 'locally'. It's actually sourced from wind farms in New Jersey and Pennsylvania owned by a utility group, energy marketer, and a recently liquidated Australian private equity firm. Sourcing nationally from third parties is typically cheaper (half the price or less), because the RECs supports wind projects where they are most cost effective (e.g. lots of wind, lots of land), and are replacing the dirtiest energy sources. My organization ClimatePath chose to offer RECs from a specific project in North Dakota (the Langdon Wind Farm), since North Dakota has the greatest wind generating potential of any state, but historically gets most of its electricity from coal. This makes it the ideal place to use wind power for the greatest impact. In our case, as for a few other REC providers, you also acquire the REC benefit via a non-profit, so it's a tax deductible transaction.

How much green?
Each power grid and utility has a different mix. 80% of your energy is already green in the state of Washington, but less than 20% in New York. If you are committed to green energy, you only need to buy RECs for the portion that your utility does not deliver. If you use 10 mWh per year, that means buying 8 mWh of RECs in New York, but only 2 mWh in Washington. State by state renewable information is available here.

Being a savvy consumer:
For individuals, buying green energy/RECS is simply stepping up and saying that "I value renewables enough to pay a premium." But for companies, it can lead to some mischaracterizations. One wind provider gave this advice about how businesses should talk about RECS to avoid 'greenwashing':

Do say:
We support wind power.
We are supporting the growth of renewable energy.
We offset 100% of our electricity with wind power.

Avoid saying:
We are wind-powered.
Our electricity is sourced only from renewable energy/wind power.
We use 100% wind power.

Good advice, but unfortunately this message often gets lost. Silk Soy Milk, for example, has been a leader in supporting wind energy via RECs. But their marketing department hasn't quite gotten the message about how to talk about it. A recent marketing piece I saw said "Silk is made using 100% wind energy". Unfortunately, this implies that Silk generates the wind on site. As a consumer, you should insist on more transparency and investigate claims from firms that use green in their marketing.

Is this all necessary?
Just as we need to encourage and fund rainforest preservation in Brazil and Costa Rica, we need to encourage wind and solar energy use where its practical to install it. We can either continue to wait for government solutions (which will cost you anyway) or use conservation, RECs, and offsetting to accomplish that goal. As the saying goes, if you aren't part of the solution, you're part of the problem.

Photo copyright: Adapted by ClimatePath from http://www.flickr.com/photos/shaireproductions/ / CC BY 2.0 All rights reserved.

There Once Was a Wind Farm From Nantucket: Rethinking Energy Production

By Dave Rochlin - www.climatepath.org
Originally posted on care2.com

The state of Vermont is poised to shut down the Yankee nuclear power plant, after months of underground tritium leaks, and misleading statements from Entergy's local management team.

A BP drilling rig explosion will lead to as much as 4 million gallons of crude oil leaking out into the Gulf of Mexico, threatening wide-scale coastal damage.

29 miners were killed this month in an explosion in a Massey Energy coal mine in West Virginia.

You would think that these messes would have the public - and especially environmentalists - running towards wind power as a solution...without even factoring in the climate change benefits of renewable energy. Yet in Cape Cod, some environmental groups and residents are fighting hard to overturn approval of the nation’s first offshore wind farm. The Cape Wind project will build 130 turbines covering 25 square miles of Nantucket Sound. As the New York Times reports, the offshore wind farm would lie about 5 miles from the nearest shore on the mainland, and about 13 miles from Nantucket Island. The tip of the highest blade of each turbine would reach 440 feet above the water.

Is anyone seriously more concerned about 400 foot towers 5 miles off shore than they are with oil spills and radioactive leaks ino the water tables? The answer seems to be yes.

As one resident put it, "I’m 100 percent for alternative energy, but just not in Nantucket Sound.” The movie The Age of Stupid also documented similar attitudes in the UK. The term for this is NIMBY (Not In My BackYard), a sort of reverse tragedy of the commons. The tragedy of the commons describes "a situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will ultimately deplete a shared limited resource even when it is clear that it is not in anyone's long-term interest for this to happen." In this case, the individuals will prevent a common resource from being created, but the outcome is the same.

If we're serious about renewables, this sort of thinking has to change. Dams, turbines, and solar panels visibly alter local vistas and ecosystems, so there is a perceived and visible negative impact to renewables. In contrast, most of us don't see mountain top mining, fossil fuel related CO2e emissions, or where spent nuclear reactor fuel goes to slowly die over thousands of years. It's also much more convenient for energy to be produced somewhere else and transported - inefficiently and at great expense - to where we use it. Everyone wants wind power, but not always the windmills.

My friend Rosie, who grew up in Nantucket, has a more enlightened view: "Cape Wind will certainly diminishes the vista, but that's the price we have to pay to get clean energy. It's better than an oil spill, a nuclear accident, air pollution, and war." She's actually more concerned with a second issue raised by opponents to Cape Wind: that a private firm - Energy Management Inc. (EMI) is developing the project, and plans to make money at it. But both Vermont Yankee and the leaky oil rig in the Gulf are also private enterprises. If cleantech is going to succeed, private firms will need to have the opportunity to make profits. A lot of speculative capital is needed to scale up new innovative approaches and the delivery of clean energy.

It's clearly time to change how we think of electricity production. When it comes to farming (roughly 1% of the US economy) we want to buy local, know where our food comes from, and support a vibrant private sector. Since energy expenditures are 6-8% of our economy, maybe we should be thinking along the same lines.

Photo copyright: http://www.flickr.com/photos/bossco/ / CC BY-SA 2.0