Thursday, September 15, 2011

It's WAY harder than it looks

One of the things that got edited out of Elegant Technology was my calculation that a conversion to a truly sustainable USA would take at least 50 years and cost at least 100 TRILLION dollars.  My editor argued that such a wild guesstimate would be too hard to support and be needlessly distracting.  So while frivolous books that proclaimed there were 50 easy ways to save the planet became best sellers, my book was stripped of one of the facts that were meant to demonstrate that environmental renewal meant nothing less than the completion of the Industrial Revolution—and this would be VERY difficult and very, VERY expensive.

As the years have gone by, the evidence has mounted that if anything, my scary estimates had been optimistic.

So now we have a new cautionary tale (Solyndra) brought on by the collapse of what the Obama administration hoped would be a poster child for the seriousness in converting to renewables.  So what will we learn?
  • Going green will require huge amounts of investment.  A LOT of this will be lost funding projects that don't work out.  Why? Because we don't know what we are doing and even honest people with sound intentions may simply be wrong.
  • Compared to what the crazy banksters have cost us, $500 million is pocket change.  And the examples of costly technology failures are positively common in the defense industry.  In light of this, picking on a green failure seems, at best, an example of Predator Class hypocrisy.
  • Because we have wasted so much time in USA, the green technology train may have already left the station.  Solyndra may have been developing some promising technology but since you can already buy fully-developed solar panels at Costco, getting a Solyndra's products into a developed market would require import-substitution strategies—something the USA hasn't practiced in nearly a century.
Obama administration agreed to Solyndra loan days after insiders foresaw firm's failure

White House committed half-billion dollars days after government employees warned solar firm would 'run out of cash'
By Ronnie Greene and Matthew Mosk 
At the September 2009 groundbreaking for Solyndra's new "Fab 2" plant" were Arnold Schwarzenegger (center, lighter suit) and Energy Secretary Steven Chu (to the then-governor's right). A $535 million taxpayer-backed loan helped pay for construction. The government agreed that in the event of default private investors could try to recoup losses before taxpayers.
On August 20, 2009, an Energy Department staffer examining a pending loan to a California clean energy start-up came to a startling conclusion: The company would run out of money by September 2011. The government would, in effect, be placing taxpayers on the hook for a business likely to founder. 
Still, things moved – and fast. 
Only 15 days after the staffer’s warning, the Obama administration announced its commitment to lend Solyndra Inc., a California manufacturer of rooftop solar panels, $535 million as part of the stimulus program to spark the nation’s sagging economy and put Americans back to work.

Energy Secretary Steven Chu attended the groundbreaking of Solyndra’s new Fremont, Calif., factory, to be built with the money. Vice President Joe Biden, speaking on a big-screen TV set up amid construction equipment at the site, noted the “unprecedented investment this administration is making in renewable energy” and asserted that “we are not only creating jobs today but laying the foundation for long-term growth.”

But the staffer had been right. 
Solyndra ran out of money, sure enough -- and in the very month foreseen. Some 1,100 workers immediately lost their jobs and creditors now are circling in bankruptcy proceedings, where taxpayers come second to private investors. The company that the Obama administration had helped catapult from relative obscurity to poster child for the green energy movement has instead become a symbol for critics to exploit of environmental and economic recovery policies gone awry -- and for assertions of cronyism. The company's prime investor had been a major fundraiser for President Obama's 2008 campaign. more
The suggestion that this is some example of political corruption can be found elsewhere.  From the Washington Post:
Solyndra loan: White House pressed on review of solar company now under investigation

By Joe Stephens and Carol D. Leonnig, Published: September 13

EXCLUSIVE | The Obama White House tried to rush federal reviewers for a decision on a nearly half-billion-dollar loan to the solar-panel manufacturer Solyndra so Vice President Biden could announce the approval at a September 2009 groundbreaking for the company’s factory, newly obtained e-mails show.

The Silicon Valley company, a centerpiece in President Obama’s initiative to develop clean energy technologies, had been tentatively approved for the loan by the Energy Department but was awaiting a final financial review by the Office of Management and Budget. more
And from The Atlantic: 
Solyndra Gets More Scandalous
MEGAN MCARDLE - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and the Economist. SEP 14 2011

Last week, I wondered if Solyndra, the bankrupt California solar panel firm, was going to be the first real scandal of the Obama administration. This week, I watched the Energy and Commerce hearings on the Solyndra decision, and there was some pretty fierce grilling going on, even though the Solyndra executives dropped out at the last minute. Meanwhile, though the White House has maintained that it did not intervene in the Solyndra loan, yesterday the Washington Post broke the news that the White House had pressed the Office of Management and Budget to greenlight the loan in a hurry. more
Of course, there ARE a few voices of sanity
I Find It Impossible to Give a ....
by anthony002 
Recently, Solyndra, a solar panel company in Fremont went belly-up, declared bankruptcy, and about 1,000 people were suddenly out of a job.

In a matter of days after the bankruptcy filing, the company's Fremont offices were raided by the FBI. House Republicans are now pushing for investigations into the federal loan guarantees that were granted to the company. You see, Solyndra was highlighted by the President as an example of the job-creating potential of green technology. Senior investors in the company are also strong financial supporters of the President. The company recieved over $500million in federal loan guarantees. Now that the company has declared bankruptcy, taxpayers are on the hook to pay it back.

House Republicans are asking questions as to whether the loan guarantee request was properly reviewed and vetted before it was approved. Apparently a House subcommittee had already gotten wind of Solyndra's financial difficulties several months ago, and already begun investigating. After several months, at this point, accusations might be made that the administration was sloppy or negligent, but there is nary a hint of any illegal action on the part of the Obama administration.

Let us assume the administration was grossly negligent in reviewing the loan application. In their haste and zeal to promote green technology, what if the administration did fail to conduct the necessary due diligence to insure that the company was fully qualified for the loan guarantee and was likely to pay it all back?

Call me jaded, or partisan or whatever other name comes to mind, but if the administration is truly guilty of nothing more than gross negligence that costs us $500 million dollars, I have to say that I don't really care. more
I was educated by Keynesians in the early 1970s.  So even though I rarely identify myself with the various manifestations of the Keynesians, I still have a bit of sympathy for them because I have warm and fuzzy memories of the great ones like John Kenneth Galbraith.  Then there is the little matter that something that requires massive investments like going green would seem a natural fit for Keynesian stimulus.

Unfortunately, the Keynesians lost their nerve / imagination when USA Peak Oil and the Arab oil embargoes trashed the USA economy.  Yes there are still folks who claim to be Keynesians but they aren't very imaginative and there aren't many of them.  This is how I remember it going down:
Yet by 1973, things had started going seriously wrong for the Keynesians. They had figured out how to balance consumption with industrial potential, but they never got around to dealing with the problems of how to value energy, waste, or other contributions of the natural order. For the first time in history, energy costs were set beyond the reach of their regulation. Cheap energy was at the very foundation of the prosperity the Keynesians liked to take credit for. The monetary prescriptions of Keynesians in response to the massive run-up in energy prices triggered a global outbreak of inflation. more
This little gem recalls the reason why Keynesians no longer dominate the economic debates.  If this guy is younger than 40 so could not have been around when the Keynesian impulse ran out of gas (literally), then he is a freaking genius.
Limits to Keynesianism

Last week in the FT Martin Wolf sounded a Keynesian battle cry, passionately urging governments to redouble their efforts to use cheap funds to raise future wealth and so improve the fiscal position in the long run:

It is inconceivable that creditworthy governments would be unable to earn a return well above their negligible costs of borrowing, by investing in physical and human assets, on their own or together with the private sector. Equally, it is inconceivable that government borrowings designed to accelerate a reduction in the overhang of private debt, recapitalise banks and forestall an immediate collapse in spending cannot earn a return far above costs. 
Mr Wolf is of course incorrect. It is absolutely conceivable that governments will not be able to earn a positive return on borrowing. Indeed, the United States has spent the entire previous decade borrowing money to invest in highway building and war. Mr Wolf also goes on to use the case of Japan, yet another country that spent 20 years investing in negative return public works projects. Or, as others have described it: paving the country over with cement. 
What has the United States won for itself, after a decade of Keynesian largesse and cheap money policy? Mostly, a further increase in poverty. As the Census Bureau reported this week, poverty in America advanced for a third straight year to reach its highest levels since 1993. While Keynesianism appears to have a benevolent, humanistic intent it is greatly disappointing that so many of its advocates do not also recognize its destructive aspects. Yes, free markets misallocate capital routinely. 
But Keynesianism as a policy also distributes capital unevenly, and unfairly. First receivers of government capital gain competitive advantages. First receivers of easy monetary policy also gain, and become predatory. The housing bubble was perhaps the most spectacular example of the destructive force of easy money, which resulted in a huge transfer of risk and wealth, recycled through society. 
But the greatest flaw with Keynesianism now is that, like the economy itself, it has run squarely into the energy limit. As the most recently updated data shows, 2011 will be the 6th year that world production of crude oil was unable to increase beyond the ceiling established in 2005. 
Oil remains the primary energy input to OECD economies. OECD economies are of course where the Keynesian experiment has flourished longest, first in Japan, then the United States and now Europe. It is hardly, hardly the case that the current financial crisis in the OECD is “simply a matter of accounting.” Instead, the crisis is one of systemic, structural growth now permanently limited by energy costs as OECD economies try to service debt loads that have escaped their ability to manage. Change all the digits, and the energy limit remains. more
Finally, here is a wonderful article on how the idea of an electric car will go over in Germany.  This is a country with perhaps the most influential Green Party, a car-buying public, and a highly-developed automobile industry.  If the Germans are confused about the way forward, we should all stand in awe at the incredible difficulty that building a green infrastructure really is.  Solyndra is not going to be so rare--even though all of us would like it to be.
A Slow Farewell to Fossil Fuels
Electric Car Revolution Remains a Distant Prospect
By Christian Wüst   09/14/2011

The Frankfurt Motor Show is devoting an entire exhibition hall to electric mobility this year -- but truly marketable electric vehicles are conspicuous by their absence. The technology is being developed more slowly than expected. It will be a long time before the world can bid farewell to the combustion engine.

Automotive Irrational Exuberance 
But the hall will also highlight the slow the pace of development for this type of drive system. It will still take years for the technology to become viable for the mass market. 
"To me, this electric hype is inexplicable," Fritz Indra, a doyen in vehicle development, recently told the trade magazine Automobil Industrie. The honorary professor at Vienna University of Technology and former head engine developer at Opel and General Motors still sees a good deal of "open questions" -- and no satisfying answers. 
The first electric cars that aren't DIY projects and offer acceptable crash protection have arrived in the dealerships. Most of them are no-frills mini-vehicles that cost as much as a mid-sized sedans and can only take you a short distance and back on a single battery charge if you're lucky enough to avoid heavy traffic. Of course, that's not the case in the winter, when energy-sapping interior heating significantly diminishes its range. And if it runs out of juice on the road, no jerry can will help. Your only option is to call a tow truck. 
With all the drawbacks of this type of car, you have to be a true believer in electric mobility to imagine that there really are one million people out there who want to have one. 
The Battery Bottleneck 
It's already been four years since advances in lithium battery technology electrified the auto industry and convinced more and more people that the future of the automobile was in electricity rather than biodiesel or hydrogen. In the wake of these advances came development projects and billions in investments that have been transforming conviction into certainty that the era of the electric car will really dawn -- though certainly not as quickly as the German government would like. 
The pace of development is set by the manufacturers of batteries. The question of how quickly battery-powered automobiles will be able to transport things in both a convincing and affordable way will be decided by the chemical interplay between the light metal lithium and some yet-to-be-determined substance. The leading firms in the battery field, most of which are based in Japan and South Korea, are placing their bets for this other substance on nickel, manganese and cobalt. 
A battery made of these elements that can hold a kilowatt hour of energy currently costs about €400 ($545) and weighs about 10 kilograms (22 pounds). Though that's already considerably better than where things stood just a few years, it's still far from being good enough. 
Krebs believes an electric car will have to be able to reliably travel more than 100 kilometers (62 miles) even under unfavorable conditions, such as rain, cold weather or extreme heat. To do so, it would have to have at least 25 kilowatt hours of power. That would require a battery that weighs somewhere in the range of 250 kilograms and costs €10,000 -- in other words, almost as much as a complete small car with a conventional drive system. 
Possible Ways Forward 
However, this technology is still in the research phase. Indeed, it might not be until well past 2020, if ever, that these kinds of batteries are sufficiently reliable and long-lasting to be suitable for use in cars. Until then, a fully satisfying car powered solely by electricity will remain little more than a dream. 
One compromise solution that seems plausible is hybrid drives, in other words, crossbreeds that have both types of drive systems. Together with General Motors, its parent company, Opel has developed the most spectacular example of this species so far. The Opel Ampera, which will become available on the European market this autumn, can travel roughly 60 kilometers (37 miles) on battery power. The driver doesn't need to worry about the batteries running down because the gasoline engine takes over when the car runs out of electricity.
This is the German version of the Chevy Volt.  Because the energy infrastructure is built to deliver gasoline, designing a car that can fall back on this infrastructure makes a lot of sense.  The REAL objection to the all-electric car is that there are just too many plausible scenarios where such a vehicle will not get you to your destination.  People are literally terrified of being stuck by the side of the road.  The Volt removes this objection which is why I think it will succeed.
The logic behind this concept is convincing: The Ampera can handle most everyday journeys with electric power while retaining the autonomy of a full-fledged car. But there might be one stumbling block: the price tag. The car will cost €42,900 ($58,500), quite a lot for an Opel. more

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