Wednesday, September 11, 2013

It's harder than it looks

The main reason I choose to write about the real economy is that I believe the transition from burning the earth's carbon capital to power our societies to running those societies on the income from the sun will be the greatest feat humans will have ever pulled off in their history—if we pull it off.  This will make everything from going to the moon to building the pyramids COMBINED look like child's play.

What the means is that all the preliminary groundwork, from convincing people this is necessary, to passing enabling legislation, to arranging the finances, is just so much wheel-spinning futility.  Because even when all those steps have been accomplished, you are still at step one of actually accomplishing any reductions in carbon gasses.  During all those preliminary steps, there will be no reduction in the amount of carbon atomized into the atmosphere.  Adding to the these problems is the fact that all this new infrastructure must be built in a world that is still running on the carbon capital AND the fact that this conversion has never been tried before.  So even though USA is still stuck at step one—admitting that climate change is being caused by human activity—I believe we still must address the nuts and bolts of how to actually accomplish this megatask in case we ever get off the dime as a country and start to move forward.  Hence, the themes of this blog.

This is why I believe that climate change is a physics and engineering problem while many of my readers believe it is a political, social, financial, and communication problem.  Of course it all of those things if failure in any of these areas prevents us from reaching square one of a solution.  But if and when we get to square one, it WILL be an engineering problem.

First up, we have a look at how the sudden and massive supply of inexpensive PV cells is threatening the business models of the typical power utility.  They didn't see this coming—even three years ago no one could imagine solar as anything but a tiny niche player.

America's Solar Revolution Is Twisting The Utility Industry Into Knots

ROB WILE SEP. 8, 2013

This week, we gave you two extremely bullish projections for the future of solar energy in America.

The focus was on distributed generation in both cases. This includes all solar installations — even small ones on your home rooftop.

Interestingly, the renewable energy revolution is being led by independent power producers and not mainline utility companies.

While net generation among the former has climbed 1,283% since September 2006, electricity from solar gained just 112% for the latter during the same period.

See the chart below:

Currently, solar still only meets less than 1% of U.S electricity needs. And it will stay that way for a while.

That's because some big utilities are actively resisting solar, arguing that the cost of net metering schemes — which allow renewable energy users to sell back excess power to — are often being paid by residents who can't afford solar.

Here's how Dave Gram of the Associated Press recently quoted a rep for a small utility in Vermont, which is being forced to roll back its net metering scheme:
Not collecting those costs from all members "results in a cost shift to those members without net metered installations," Washington's general manager, Patricia Richards, said in an email. "As a not for profit electric utility, which is owned by our members, our only recourse for recovering insufficient revenue is to increase rates."
At the same time, utilities are also recognizing that any kind of curb in renewable use is just a stopgap.

Long term, they're probably in trouble.

Here's the New York Times' Diane Cardwell quoting Clark Gellings of the Electric Power Research Institute, a utility industry association: "We did not get in front of this disruption...It may be too late."

And earlier this year, Bloomberg's Chris Martin and Noreen S. Malik quoted the CEO of Duke Energy, the largest utility owner in the country, that solar was truly disruptive.
"It is obviously a potential threat to us over the long term,” said Jim Rogers, chairman and chief executive officer of Duke Energy Corp. (DUK), the largest U.S. utility owner.
“There’s been a huge effort to build solar on the rooftop, both residential and commercial...All of this is leading to a disintermediation of us from our customers.”
“If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup.”
A knotty issue. more
Germany, which powered through the initial problems of solar and wind, now find themselves saddled with early-adapter technologies.  Even worse, after going through all the hassle and expense of figuring out how to mass-produce PV cells, the equipment makers promptly sold this now-sophisticed tooling to China—which then floods the market and drives the German PV makers out of business.  At one time, Thorstein Veblen fashioned a whole economic theory around the advantages of being second when it came to industrialization.  His prime example was of how Germany just blew by England between 1870 and 1914 by learning from England's mistakes in their first-generation efforts.  So now Germany is learning just how much fun it is to be first.

Germany's Energy Poverty: How Electricity Became a Luxury Good


Germany's agressive and reckless expansion of wind and solar power has come with a hefty pricetag for consumers, and the costs often fall disproportionately on the poor. Government advisors are calling for a completely new start.

If you want to do something big, you have to start small. That's something German Environment Minister Peter Altmaier knows all too well. The politician, a member of the center-right Christian Democratic Union (CDU), has put together a manual of practical tips on how everyone can make small, everyday contributions to the shift away from nuclear power and toward green energy. The so-called Energiewende, or energy revolution, is Chancellor Angela Merkel's project of the century.

"Join in and start today," Altmaier writes in the introduction. He then turns to such everyday activities as baking and cooking. "Avoid preheating and utilize residual heat," Altmaier advises. TV viewers can also save a lot of electricity, albeit at the expense of picture quality. "For instance, you can reduce brightness and contrast," his booklet suggests.

Altmaier and others are on a mission to help people save money on their electricity bills, because they're about to receive some bad news. The government predicts that the renewable energy surcharge added to every consumer's electricity bill will increase from 5.3 cents today to between 6.2 and 6.5 cents per kilowatt hour -- a 20-percent price hike.

German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country's most important future-oriented projects is acutely at risk.

After the Fukushima nuclear accident in Japan two and a half years ago, Merkel quickly decided to begin phasing out nuclear power and lead the country into the age of wind and solar. But now many Germans are realizing the coalition government of Merkel's CDU and the pro-business Free Democrats (FDP) is unable to cope with this shift. Of course, this doesn't mean that the public has any more confidence in a potential alliance of the center-left Social Democrats (SPD) and the Greens. The political world is wedged between the green-energy lobby, masquerading as saviors of the world, and the established electric utilities, with their dire warnings of chaotic supply problems and job losses.

Even well-informed citizens can no longer keep track of all the additional costs being imposed on them. According to government sources, the surcharge to finance the power grids will increase by 0.2 to 0.4 cents per kilowatt hour next year. On top of that, consumers pay a host of taxes, surcharges and fees that would make any consumer's head spin.

Former Environment Minister Jürgen Tritten of the Green Party once claimed that switching Germany to renewable energy wasn't going to cost citizens more than one scoop of ice cream. Today his successor Altmaier admits consumers are paying enough to "eat everything on the ice cream menu."

Paying Big for Nothing

For society as a whole, the costs have reached levels comparable only to the euro-zone bailouts. This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants -- electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project. Solar panels and wind turbines at times generate huge amounts of electricity, and sometimes none at all. Depending on the weather and the time of day, the country can face absurd states of energy surplus or deficit.

If there is too much power coming from the grid, wind turbines have to be shut down. Nevertheless, consumers are still paying for the "phantom electricity" the turbines are theoretically generating. Occasionally, Germany has to pay fees to dump already subsidized green energy, creating what experts refer to as "negative electricity prices."

On the other hand, when the wind suddenly stops blowing, and in particular during the cold season, supply becomes scarce. That's when heavy oil and coal power plants have to be fired up to close the gap, which is why Germany's energy producers in 2012 actually released more climate-damaging carbon dioxide into the atmosphere than in 2011.

If there is still an electricity shortfall, energy-hungry plants like the ArcelorMittal steel mill in Hamburg are sometimes asked to shut down production to protect the grid. Of course, ordinary electricity customers are then expected to pay for the compensation these businesses are entitled to for lost profits.

The government has high hopes for the expansion of offshore wind farms. But the construction sites are in a state of chaos: Wind turbines off the North Sea island of Borkum are currently rotating without being connected to the grid. The connection cable will probably not be finished until next year. In the meantime, the turbines are being run with diesel fuel to prevent them from rusting.

In the current election campaign, the parties are blaming each other for the disaster. Meanwhile, the federal government would prefer to avoid discussing its energy policies entirely. "It exposes us to criticism," says a government spokesman. "There are undeniably major problems," admits a cabinet member.

But this week, the issue is forcing its way onto the agenda. On Thursday, a government-sanctioned commission plans to submit a special report called "Competition in Times of the Energy Transition." The report is sharply critical, arguing that Germany's current system actually rewards the most inefficient plants, doesn't contribute to protecting the climate, jeopardizes the energy supply and puts the poor at a disadvantage.

The experts propose changing the system to resemble a model long successful in Sweden. If implemented, it would eliminate the more than 4,000 different subsidies currently in place. Instead of bureaucrats setting green energy prices, they would be allowed to develop indepedently on a separate market. The report's authors believe the Swedish model would lead to faster and cheaper implementation of renewable energy, and that the system would also become what it is not today: socially just.

Trouble Paying the Bills

When Stefan Becker of the Berlin office of the Catholic charity Caritas makes a house call, he likes to bring along a few energy-saving bulbs. Many residents still use old light bulbs, which consume a lot of electricity but are cheaper than newer bulbs. "People here have to decide between spending money on an expensive energy-saving bulb or a hot meal," says Becker. In other words, saving energy is well and good -- but only if people can afford it.

A family Becker recently visited is a case in point. They live in a dark, ground-floor apartment in Berlin's Neukölln neighborhood. On a sunny summer day, the two children inside had to keep the lights on -- which drives up the electricity bill, even if the family is using energy-saving bulbs.

Becker wants to prevent his clients from having their electricity shut off for not paying their bill. After sending out a few warning notices, the power company typically sends someone to the apartment to shut off the power -- leaving the customers with no functioning refrigerator, stove or bathroom fan. Unless they happen to have a camping stove, they can't even boil water for a cup of tea. It's like living in the Stone Age.

Once the power has been shut off, it's difficult to have it switched on again. Customers have to negotiate a payment plan, and are also charged a reconnection fee of up to €100. "When people get their late payment notices in the spring, our phones start ringing," says Becker.

In the near future, an average three-person household will spend about €90 a month for electricity. That's about twice as much as in 2000.

Two-thirds of the price increase is due to new government fees, surcharges and taxes. But despite those price hikes, government pensions and social welfare payments have not been adjusted. As a result, every new fee becomes a threat to low-income consumers. more

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