So after spending billions to subsidize the construction and operation of wind farms, Britain has discovered that their output variability is a problem and that they produce too much of their power at night (issues many of us predicted long before they were built). So now England is facing the policy choice of either a) paying wind farm owners to NOT product power or b) paying factory owners to switch their operations to night time. Seriously. For most areas, wind is among the worst possible electricity source.
Posts tagged ‘electricity’
Moore's Law on Steroids: World Computing Power for One Type of Calculation is Doubling Every Three Weeks
Over at Forbes, I wrote this week about Bitcoin mining. But don't be immediately put off. This is not yet another article by a crazed libertarian and Cryptonomicon fan on the miracle effects of digital currencies. Instead, I look at the crazy economics and absurdly steep capacity and technology curves of Bitcoin mining. An excerpt:
Let’t take an example, and consider the Cointerra TerraMiner IV, a 2TH/sec machine priced at about $6000 which if purchased today would be delivered sometime in February, or about 3 months from now. At current difficulties and exchange rates, such a machine would pay back its purchase price in less than a week, producing over $25,000 a month in Bitcoins.
A no-brainer, right? But Bitcoin mining difficulty has been going up of late by a factor of 10 every 3 months. Based on a mining difficulty ten times greater than today and current exchange rates, we could expect instead to be making at delivery something more like $575 a week. Three months later we would be making a tenth of that. If we factor in the costs of electricity, this machine will never cover its costs at current Bitcoin exchange rates.
I do not think I have ever seen a business technology obsoleted so quickly. Essentially, the next generation of mining processors will be virtually obsoleted between the time of its sale and its delivery 3 months later. Every three months one has to reduce his production costs by a factor of 10, in a business where cost reduction basically means throwing out all one’s existing capital assets and buying expensive new stuff.
In a realistic appraisal of the CVSR we should note the following:
· An investment of $1.6 billion 250 MW breaks down to an extravagant $6,400,000 per megawatt.
· The Solar Ranch covers 1,500 acres.
· The CVSR is projected to produce 482,000 MWh per year, implying an operating capacity factor of around 22%.
· Given a reasonable appraisal of the value of 482,000 MWh per year, it is not possible that the solar panels will be able to provide a return sufficient to pay back the $1.6 billion investment within their functional life (not even close), even when ignoring annual operating and maintenance costs. Hundreds of millions of dollars will be lost (see Updated CSVR Cash Flow).
A much more viable alternative to a solar generation facility, although not the only one, is a plant using natural gas. A natural gas combined cycle gas turbine (CCGT) facility capable of 250 MW would have required less than one-fourth the capital investment, would be capable of making four times the electricity per year at 88% capacity factor, and would fit on a single acre.
Also, a CCGT facility could have been located closer to the point(s) of actual use of the electricity, and could provide dispatchable energy which could be increased or decreased as demand fluctuates; something the solar facility is incapable of providing.
So why is this project even happening? Because most of the project was funded by a taxpayer-gauranteed loan. And then many of the players got direct subsidies and tax breaks. And finally the electricity from the project gets bought at an above-market subsidized rate.
In New Mexico, Forced Government Anal Probes are Way Better than Having Even One Person Smoke A Joint
Or so I am led to believe by the fine folks in Deming, New Mexico, who forced a man to undergo two forced X-rays, two anal probes, three enemas, and a colonoscopy under anesthesia because they worried that he might be hiding a smidge of illegal narcotics in his nether regions. Oh, and they made him pay the hospital bills for these procedures as well, sort of like billing someone's estate for the electricity used to execute them in the electric chair.
Update: Orin Kerr has a legal anal-ysis of the case (sorry, couldn't resist). His conclusion seems to be that the victim may be sh*t out of luck (sorry again) in seeking compensation. From reading it, he may even be stuck with the medical bills. I have come to expect cops to display this kind of excessive behavior. What is particularly disappointing is to see a doctor so eagerly cooperate and even, apparently, take the lead in escalating the intrusiveness of the search. It is depressing that Kerr believes the doctor may well enjoy qualified immunity for his actions. Thousands of doctors every day are successfully sued for malpractice over honest mistakes and differences in judgement, but this guy is going to walk?
Many of your know that my company operates public parks. So I see a lot of different approaches to park design and construction. Of late I have been observing a trend in "environmental sustainability" in park design that is actually the opposite.
The US Forest Service has built more campgrounds, by far, than any other entity in the world. For decades, particularly in the western United States, the USFS had a very clear idea about what they wanted in a campground -- they wanted it to be well-integrated with nature, simple, and lightly developed. They eschewed amenities like pools and playgrounds and shuffleboard. They avoided building structures except bathroom and shower buildings. The camp sites were simple, often unpaved with a table and fire ring and a place for a tent. They used nature itself to make these sites beautiful, keeping the environment natural and creating buffers of trees and natural vegetation between sites. I have never seen an irrigation system in a western USFS campground -- if it doesn't grow naturally there, it doesn't grow.
This has proven to be an eminently sustainable design. With the exception of their underground water systems, which tend to suck, they are easy to maintain. There is not much to go wrong. The sites need new gravel every once in a while. Every 5-10 years the tables and fire rings needs replacement, hardly a daunting task. And every 20-30 years the bathrooms needs refurbishment or replacement. The design brilliance was in the placement of the sites and their integration with the natural environment.
Over the last several months, I have been presented with plans from three different public parks agencies for parks they want to redevelop. Each of these have been $10+ million capital projects and each one had a major goal of being "sustainable." I have run away from all three. Why -- because each and every one will be incredibly expensive and resource intensive to operate and of questionable popularity with the public. Sustainability today seems to mean "over-developed with a lot of maintenance-intensive facilities".
What each of these projects has had in common are a myriad of aggressively architected buildings - not just bathrooms but community rooms and offices and interpretive centers. These buildings have been beautiful and complex, made from expensive materials like stainless steel and fine stone. They have also had a lot of fiddly bits, like rainwater collection and recycling systems and solar and windmills. They have automatic plumbing valves that never seem to work right. The grounds have all been heavily landscaped, with large lawns that require water and mowing, with non-native plants that need all kinds of care. Rather than a traditional sand pad for tents they have elaborate wooden platforms.
The plans for these facilities are beautiful. They win awards. In fact, I am increasingly convinced that that is their whole point, to increase prestige of the designer and the agency that hired them through awards. But they make no sense as a recreation facility. In 10 years, they will look like hell. Or sooner, since one agency that is in the process of spending a $22 million bond issue on 5 campgrounds seems to not have one dollar budgeted for operation and maintenance.
These things actually win awards for sustainability, which generally means they save money on one input at the expense of increasing many others. One design got attention for having grass on the roofs, which perhaps saved a few cents of electricity at the cost of having to irrigate and mow the roof (not to mention the extra roof bracing to carry the load). I briefly operated a campground that had a rainwater recovery system on the bathrooms, which required about 5 hours of labor each week to keep clean and running to save about a dollar of water costs.
The wireless electric vehicle charger. Sure it's cool. And convenient. But as I understand it, the main selling point of electric vehicles is their energy efficiency (I personally like the driving feel of a torque-y electric motor, but that does not seem to be the advertised selling point). If this is the case, then why the hell would one accept a 30% energy loss (wireless charging is generally considered to be about 70% efficient) because they were too lazy to plug in a cable?
This is against the backdrop of most electric vehicle owners having no freaking clue if they are actually saving energy and money or not (all they know is that they see the costs to fill their gas tank but don't see little numbers spinning when they fill their electric car). As I have written before, they likely are not saving energy vs. a similar size gasoline engine car but may be saving some money due to the lower cost of fuels like natural gas and coal (vs. gasoline) used in electricity production.
Frequent readers of this blog will know that I am enormously skeptical of most fuel and efficiency numbers for electric vehicles. Electric vehicles can be quite efficient, and I personally really enjoy the driving feel of an electric car, but most of the numbers published for them, including by the government, are garbage. I have previously written a series of articles challenging the EPA's MPGe methodology for electric cars.
In just a bit, I am going to challenge some numbers in a recent WSJ article on electric vehicles, but first let me give you an idea of why I don't trust many people on this topic. Below is a statement from Fueleconomy.gov, which bills itself as the official government source for fuel economy information (this is a public information, not a marketing site). In reference to electric vehicles, it writes this:
Energy efficient. Electric vehicles convert about 59–62% of the electrical energy from the grid to power at the wheels—conventional gasoline vehicles only convert about 17–21% of the energy stored in gasoline to power at the wheels
The implication, then, is that electric vehicles are 3x more energy efficient than cars with gasoline engines. I hope engineers and scientists can see immediately why this statement is total crap, but for the rest, here is the problem in short: Electricity has to be produced, often from a fossil fuel. That step, of converting the potential energy in the fuel to use-able work, is the least efficient step of the entire fuel to work process. Even in the most modern of plants it runs less than a 50% conversion efficiency. So the numbers for the gasoline cars include this inefficient step, but for the electric vehicle it has been shuffled off stage, back to the power plant which is left out of the calculation.
Today I want to investigate this statement, which startled me:
Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the [Nissan Leaf] puts $2,000 in my pocket."
Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says.
This implies that on a cost-per-mile basis, the EV is over 13x more efficient than gasoline cars. Is this a fair comparison? For those who do not want to read a lot of math, I will preview the answer: the difference in fuel cost per mile is at best 2x, and is driven not by using less fossil fuel (the electric car likely uses a bit more, when you go all the way back to the power plant) but achieves its savings by using lower cost, less-refined fossil fuels (e.g. natural gas in a large power plant instead of gasoline in a car).
Let's start with his estimate of $14.94. Assuming that is the purchased power into his vehicle charger, that the charger efficiency is 90%, and the cost per KwH in Atlanta is around $0.11, this implies that 122.24 use-able KwH are going into the car. Using an estimate of 3.3 miles per KwH for the Leaf, we get 403 miles driven per month or 3.7 cents per mile in electricity costs. This is very good, and nothing I write should imply that the Leaf is not an efficient vehicle. But its efficiency advantage is over-hyped.
Now let's take his $200 a month for his Ford Expedition, which has an MPG around 15. Based on fuel prices in Atlanta of $3.50 a gallon, this implies 57 gallons per month and 857 miles driven. The cost is 23.3 cents per mile.
Already we see one difference -- the miles driven assumptions are different. Either he, like a lot of people, don't have a reliable memory for how much he spent on gas, or he has changed his driving habits with the electric car (not unlikely given the shorter range). Either way, the total dollar costs he quotes are apples and oranges. The better comparison is 23.3 cents per mile for the Expedition vs. 3.7 cents a mile for the Leaf, a difference of about 6x. Still substantial, but already less than half the 13x difference implied by the article.
But we can go further, because in a Nissan Leaf, he has a very different car from the Ford Expedition. It is much smaller, can carry fewer passengers and less cargo, cannot tow anything, and has only 25% of the Expedition's range. With an electric motor, it offers a very different driving experience. A better comparison would be to a Toyota Prius, the c version of which gets 50MPG. It is similar in most of these categories except that it has a much longer range, but we can't fix that comparison, so just keep that difference in mind.
Let's look at the Prius for the same distances we calculated with his Leaf, about 403 miles. That would require 8.1 gallons in a Prius at $3.50, which would be $28.20 in total or 7 cents a mile. Note that while the Leaf still is better, the difference has been reduced to just under 2x. Perhaps more importantly, the annual fuel savings has been reduced from over $2200 vs. the Expedition that drove twice as many miles to $159 a year vs. the Prius driving the same number of miles. So the tradeoff is $159 a year savings but with much limited range (forgetting for a moment all the government crony-candy that comes with the electric car).
$159 is likely a real savings but could be swamped by differences in long-term operating costs. The Prius has a gasoline engine to maintain which the Leaf does not, though Toyota has gotten those things pretty reliable. On the other hand the Leaf has a far larger battery pack than the Prius, and there are real concerns that this pack (which costs about $15,000 to manufacture) may have to be replaced long before the rest of the car is at end of life. Replacing a full battery pack after even 10 years would add about $1200 (based on discounted values at 8%) a year to operating costs, swamping the fuel cost advantage.
Also note that a 2x difference in fuel costs per mile does not imply a 2x difference in fuel efficiency. Gasoline is very expensive vs. other fuels on a cost per BTU basis, due to taxes that are especially high for gasoline, blending requirements, refining intensity, etc.) Gasoline, as one person once said to me way back when I worked at a refinery, is the Filet Mignon of the barrel of oil -- if you can find a car that will feed on rump steak instead, you will save a lot of money even if it eats the same amount of meat. A lot of marginal electric production (and it is the margin we care about for new loads like electric cars) is natural gas, which is perhaps a third (or less) the cost of gasoline per BTU. My guess is that the key driver of this 2x cost per mile difference is not using less fuel per se, but the ability to use a less expensive, less-refined fuel.
Taking a different approach to the same problem, based on the wells-to-wheels methodology described in my Forbes article (which in turn was taken directly from the DOE), the Nissan Leaf has a real eMPG of about 42 (36.5% of the published 115), less than the Prius's at 50. This confirms the findings above, that for fossil fuel generated electricity, the Leaf uses a bit more fossil fuels than the Prius but likely uses much less expensive fuels, so is cheaper to drive. If the marginal electrical fuel is natural gas, the Leaf also likely generates a bit less CO2.
Over the last few days I have heard the same radio commercial three times, trying to raise awareness about hunger and poverty. A little girl's voice says that when she goes downstairs and looks in the refrigerator, she does not see any food. I too aspire to eliminating hunger from the world, but if our poor have electricity, refrigerators, and two-story houses, we must be doing something right.
In the past I have been critical of First Solar, like I have most solar companies, for having business models that were almost entirely dependent on huge government subsidies, particularly in Europe. When these go away, the businesses start to crash.
I have not had time to dig into their financials to look for shenanigans, and to parse out how much is still dependent in some way on either direct subsidies of solar projects or incentives that cause utilities to buy solar electricity at above market rates, but First Solar reversed their large losses to a profit in the last quarter. I am not sure if this is BS or not, but I like this attitude if true:
The company's cost per watt is the lowest in the industry, but it increased slightly during the quarter, to 72 cents per watt, because of the under utilization of its factories. If the factories had run more, the cost would have gone down, officials said.
Hughes said First Solar is making headway on its plan to target regions of the world with ample sunshine and a need for electricity, where solar power can compete without subsidies that make it cost-effective when compared with traditional energy sources.
Those places include Australia, India, the Middle East and other regions, he said.
That would be terrific. I would love to see a solar boom driven by real economics and not taxpayer largess.
The EPA allows plug in vehicle makers to claim an equivalent miles per gallon (MPG) based on the electricity powering the cars motors being 100% efficient. This implies the electric power is generated at the power station with 100% efficiency, is transmitted and distributed through thousands of miles of lines without any loss, is converted from AC to DC without any loss, and the charge discharge efficiency of the batteries on the vehicle is also 100%. Of course the second law of thermodynamics tells us all of these claims are poppycock and that losses of real energy will occur in each step of the supply chain of getting power to the wheels of a vehicle powered with an electric motor.
Finally! For months I have been writing about this and have started to believe I was crazy. I have written two Forbes pieces on it (here and here) and numerous blog posts, but have failed to get much traction on it, despite what appears to be near-fraudulent science. I wrote
the government wants an equivilent MPG standard for electric cars that goes back to the power plant to estimate that amount of fossil fuels must be burned to create the electricity that fills the batteries of an electric car. The EPA’s methodology is flawed because it assumes perfect conversion of the potential energy in fossil fuels to electricity, an assumption that violates the second law of thermodynamics. The Department of Energy has a better methodology that computes electric vehicle equivalent mileage based on real world power plant efficiencies and fuel mixes, while also taking into account energy used for refining gasoline for traditional cars. Using this better DOE methodology, we get MPGe’s for electric cars that are barely 1/3 of the EPA figures.
The linked articles provide much more detail on the calculations. As a result, when the correct methodology is applied, even in all-electric mode the heavily subsidized Fisker Karma gets just 19 MPG-equivalent.
Do you want to know the biggest energy advantage of electric cars? When you fill them with energy, you don't stand there at the pump watching the cost-meter spin, as you do in a gas station. It's not that the energy cost is lower, it's just better hidden (which is why I suggested the Fisker Karma be renamed the Fisker Bastiat, after the French economist who wrote so eloquently about the seen and unseen in economic analysis). It's why, to my knowledge, no electric car maker has ever put any sort of meter on its charging cables.
I don't really want to ridicule Kevin Drum here for thinking out loud. I really hate partisan Conservative and Liberal team-politics blogs, but I read a few to stay out of the echo chamber, and Drum is smarter and incrementally more objective (a relative thing) than most.
These two things together reminded me about an energy factoid that's always struck me as slightly odd: virtually every form of energy seems to be almost as efficient as burning oil, but not quite.
For example, on either a power/weight basis or a cost basis, batteries are maybe 2x or 3x bigger and less efficient than an internal combustion engine. Not 50x or 100x. Just barely less efficient. And you see the same thing in electricity generation. Depending on how you do the accounting, nuclear power is maybe about as efficient as an oil-fired plant, or maybe 2x or 3x less efficient. Ditto for solar. And for wind. And geothermal. And tidal power.
I'm just noodling vaguely here. Maybe there's an obvious thermodynamic explanation that I'm missing. It's just that I wouldn't be surprised if there were lots of ways of generating energy that were all over the map efficiency-wise. But why are there lots of ways of generating energy that are all surprisingly similar efficiency-wise? In the great scheme of things, a difference of 2x or 3x is practically invisible.
First, we have to translate a bit. He mentions power to weight ratios for batteries in the second paragraph. In fact, batteries have terrible power (actually energy storage) to weight ratios vs. fossil fuels, much worse than 2-3x for energy storage per unit of weight or volume. That is why gasoline is still the transportation energy source of choice, because very few things short of plutonium have so much potential energy locked up in so little volume. But I will assume he is comparing an entire electric drive system compared to a gasoline drive system (including not just energy storage but the drive itself) and in this case the power to weight ratios are indeed closer.
But here is the problem: in engineering, a 2-3x difference in most anything -- strength, energy efficiency, whatever -- is a really big deal. It's the difference between 15 and 45 MPG. Perhaps this is Moore's Law corrupting our intuition. We see electronic equipment becoming twice as powerful every 18 months, and we start to assume that 2x is not that much of a difference.
But this is why Moore's Law is so much discussed, because of its very uniqueness. In most fields, engineers tinker for decades for incremental improvements, sometimes in the single digit percentages.
The fact that alternative energy supporters feel like their preferred technologies are just so close, meaning they are only 2x-3x less efficient than current technologies, explains a lot about why we skeptics of these technologies have a hard time getting through to them.
It would be impossible to trace all the ways taxpayer money ends up in the coffers of solar manufacturers like First Solar. Most of First Solar's money has been made selling panels in Germany to solar plants that, by law, can rape electricity customers with prices 10-15x higher than the market price for electricity. First Solar also benefits more directly from direct subsidies, loan guarantees, "retraining" subsidies and even government Ex-Im Bank loans to sell panels to itself. While First Solar vehemently denies it is a subsidy whore, it is telling that when Germany began to cut its solar feed-in tariffs, First Solar's stock price fell from over $300 to around $20. Just watch day to day trading of First Solar stock, it does not move on news about its efficiency or productivity, it moves on rumors of changes in government subsidies.
Let's look at one subsidy. In 2010, the Obama administration gave First Solar a subsidy of $16.3 million, ostensibly to help open a new plant in Ohio. But it is interesting that this private company, which apparently could only raise the $16.3 million it needed by taking it by force from taxpayers, had plenty of money to pay its CEO. In the 13 months leading up to its $16.3 million taken from taxpayers, First Solar paid its new CEO $29.85 million!
Rob Gillette, the ousted CEO of First Solar Inc., earned more than $32 million in compensation from the struggling company for his two years of service, according to a regulatory filing Wednesday.
Gillette came to First Solar from Phoenix-based Honeywell Aerospace in October 2009 and was fired by the Tempe-based solar company's board of directors in October 2011....
Most of his compensation came in the three months of 2009 that he worked, when his total compensation, including salary, bonus, stock and options awards and other perks, reached $16.55 million. In 2010 his total compensation was $13.3 million, and last year he earned $2.46 million, which consisted of $763,000 in base salary and a $1.7 million severance.
Yep, they can't scrape up $16.3 million of their own money for a factory but they can find $30 million to give to an unproven CEO they eventually had to ride out on a rail.
By the way, I don't know Mr. Gillette, but I was once an executive at Honeywell Aerospace for several years. I can tell you that it's a great place to find an executive who is focused on process to manage large complex organizations in a relatively stable business where manufacturing, logistics, and schmoozing large buyers is important. It is a terrible, awful place to seek an executive for a fast growing business that needs to rapidly shift business strategies and where grinding through the process gets the wrong answer 12 months too late.
Professor Rizzo was keen that I check out the $12,000 solar picnic table at University of Rochester
Most kids use this to hook up their laptops. Here are a few assumptions
- 3 hours of use per day (heroic, I am pretty sure it is less than this)
- 65 watt draw from one laptop
- 160 days with sun (Rochester is apparently in the top 10 US cities for number of heavy cloud days)
- 10 cents per kw-hour
This means the table would produce 31,200 W-hr per year or 31.2 KW-hr per year. This yields an annual electricity savings of $3.12, giving the table a payback time on its investment of 3,846 years. If one assumes a cost of capital anywhere north of 0.026% per year, then the sun will go dark before this table pays itself off.
I don't often defend Conservatives but I will say that there is nothing much more useless to the public discourse that bullsh*t sociology studies trying to show that Conservatives are dumber or whatever (and remember, those same studies show libertarians the smartest, so ha ha).
In this general category of schadenfreude masquerading as academics is the recent "finding" that conservatives are increasingly anti-science or have lost trust in science. But here is the actual interview question:
166. I am going to name some institutions in this country. Some people have complete confidence in the people running these institutions. Suppose these people are at one end of the scale at point number 1. Other people have no confidence at all in teh people running these institutions. Suppose these people are at the other end, at point 7. Where would you place yourself on this scale for: k. Scientific community?
A loss of trust in the scientific community is way, way different than a loss of trust in science. Confusing these two is roughly like equating a loss in trust of Con Edison to not believing in electricity. Here is an example from Kevin Drum describing this study's results
In other words, this decline in trust in science has been led by the most educated, most engaged segment of conservatism. Conservative elites have led the anti-science charge and the rank-and-file has followed.
There are a lot of very good reasons to have lost some trust in our scientific institutions, in part due to non-science that gets labeled as real science today. I don't think that makes me anti-science. This sloppy mis-labeling of conclusions in ways that don't match the data, which Drum is ironically engaging in, is one reason may very scientific-minded people like myself are turned off by much of the public discourse on science. The irony here is that while deriding skepticism in the scientific community, Drum provides a perfect case example of why this skepticism has grown.
A few years ago I was asked to give a presentation in front of a group of Phoenix business leaders on climate and alternative energy. I can't remember what particular group it was, but it was some public-private group that was heavily invested in advocating for local subsidies to promote strategic businesses - the sort of local MITI that most large cities have, that has this delusion that they can ramp up the city's growth by focusing public and private investment into a few selected industries (that they select, of course).
I told them that I thought their focus on solar manufacturing was dumb. First, the whole idea that because Arizona is a good solar market meant that it should have some advantage in solar manufacturing made absolutely no sense. This only makes sense for products with high transportation costs or a particular input cost that can be gotten more cheaply in one particular area (the location of aluminum manufacturing near cheap electricity in the Northwest comes to mind). By the same logic all car manufacturers would be located in LA.
Second, I said that the whole solar business was completely driven by subsidies. If the subsidies were to go away, the heart of the business would go away faster than pets.com. I specifically mentioned First Solar in a positive context here, saying that though they where wholly dependent on subsidies for their revenues, they at least acknowledged as a corporate strategy they needed to get costs low enough to compete without subsidies. (Someday, solar will get to that point, I hope, but I am skeptical that current approaches will yield the breakthrough, but that is another discussion).
If you want to understand the financial problems First Solar is having, let me show you four items.
Geographic Risk. Our solar modules are presently predominantly sold to our customers for use in solar power systems concentrated in a single geographic region, Germany. This concentration of our sales in one geographic region exposes us to local economic risks and local public policy and regulatory risk in German.
This is way back in the notes on page 133. By the way, I took a whole course in business school on reading financial reports. Here is the key lesson for those not in the financial industry: read them from the back. Skip all the glossy crap at the front, go straight to the notes.
OK, here is the second bit of information. Here is a world map of solar insolation, which is essentially the total solar energy available to produce power in a location when adjusted for atmosphere, weather, latitude, etc.
See Germany? I won't insult your geographic knowledge by pointing at it, but much of Germany is in that yellow-green color which, for solar potential, means (in scientific terms) "it sucks." Let's zoom in, and compare it to the US to get a feel for it (combined from two charts here)
Apparently the better sites in Germany have the same solar potential as ... Seattle! The sliver of absolute best sites in Germany have approximately the same solar potential as Buffalo, NY.
So we have a company whose fortunes are dedicated almost entirely to selling solar panels into one of the most unpromising solar sites in the world. Why is Germany buying so much solar?
OK, here is the third bit of information. For years Germany had enormous feed-in tariffs (mandated above-market minimum prices) for solar electricity:
The German feed-in tariff scheme has been in operation since 1991 and is regarded as one of the most successful in the world. In Germany, feed-in tariff rates are differentiated according to the source of the renewable energy. Separate tariffs are determined for biogas, biomass, hydroelectric, geothermal, solar and wind energy sources. The tariff paid for solar generators varies between EUR 45.7c/kWh and EUR 57.4c/kWh, depending on the capacity of the system and other design features. The tariff is greater for generators that are attached to the roof of a building or structure and greater again for generators that are attached to another part of a building. In Germany, the feed-in tariff is paid for a period of 20 years
Note the language from several years ago where "most successful" is determined without references to costs.
0.574 Euros per kWh is equal to about $0.75 today and even more several years ago when exchange rates were higher. Remember this is a wholesale price, and should be compared to a $0.04 to $0.06 wholesale electricity price in the US (I use US numbers to as its not clear to me Europe has a particularly competitive wholesale market. The French have some sort of fixed price system set around $0.06).
However one wants to look at it, these are enormous subsidies. People putting up solar panels in Germany were getting paid 10-15x what a market price for the same electricity might have been.
Finally, here is the fourth piece of evidence leading to First Solar's woes. In 2010 and 2011 Germany, whose consumers began to balk at paying the highest electricity rates in the world in order to subsidize the method of electrical generation least suitable to Germany, began substantially cutting these tariffs. In 2012 they will cut them even further:
German Environment Minister Norbert Roettgen and Economy Minister Philipp Roesler are set to hold a press conference on Thursday to outline the government's new approach on subsidies. However, the indications are that the cuts will be heavier than the market has been expecting:
- a 30% cut in the feed-in-tariff (FIT) to 13.5 cents per kilowatt hour for new large solar installations
- and a 20% cut in the FIT to 19.5 cents for new small plants
The market has of course been expecting cuts in the German FIT system. However, this news is decidedly worse than expected and likely to continue to pressure solar stocks - particularly those such as Yingli (YGE) with a significant exposure to German solar demand.
From a peak of $0.75 per kWh, Germany will now pay $0.255 per kWh for smaller installations, still four times the market price for wholesale electricity but only a third of what they paid during First Solar's boom years. As I wrote yesterday, Germany was essentially paying $2 for milk from brown cows and $25 for milk from black cows. This can't be sustained.
If one assumes a wholesale electricity price of 6 cents, First Solar's German customers were getting a 92% subsidy. Sure, First Solar now faces other problems like Chinese competition and they have shot themselves in the foot on quality, but at the end of the day the only way they can survive is to convince some other government to turn on the taxpayer money spigot to keep them in business. I am hoping we in Arizona and the US will not be the suckers, but I fear that we will. One can argue the projects I discussed the other day, including the one where we taxpayers loaned First Solar the money to sell its solar panels to its own subsidiary, are evidence of this. My guess is that First Solar will be throwing a lot of money and time towards Obama, praying for his re-election.
Update: I found a bit more time to give some more background on First Solar and German feed in tariffs here.
If I had the time, I would love to try to research and list every subsidy recieved by a company like First Solar. Here are just a few:
First Solar is an Arizona-based manufacturer of solar panels. In 2010, the Obama administration awarded the company $16.3 million to expand its factory in Ohio -- a subsidy Democratic Gov. Ted Strickland touted in his failed re-election bid that year.
Five weeks before the 2010 election, Strickland announced more than a million dollars in job training grants to First Solar. The Ohio Department of Development also lent First Solar $5 million, and the state's Air Quality Development Authority gave the company an additional $10 million loan.
After First Solar pocketed this $17.3 million in government grants and $15 million in government loans, Ex-Im entered the scene.
In September 2011, Ex-Im approved $455.7 million in loan guarantees to subsidize the sale of solar panels to two solar farms in Canada. That means if the solar farm ever defaults, the taxpayers pick up the tab, ensuring First Solar gets paid.
But the buyer, in this case, was First Solar.
A small corporation called St. Clair Solar owned the solar farm and was the Canadian company buying First Solar's panels. But St. Clair Solar was a wholly owned subsidiary of First Solar. So, basically, First Solar was shipping its own solar panels from Ohio to a solar farm it owned in Canada, and the U.S. taxpayers were subsidizing this "export."
But this is just a few of them, even on this deal. For example, the Canadian solar farm very likely picked up federal and provincial subsidies from Canada, and even more likely gets some kind of subsidized feed-in tariff (meaning that an above-market wholesale rate is paid for its electricity). This sort of feed-in tariff, which is paid by electricity consumers, is wholly un-transparent and likely makes up the large bulk of solar subsidies. I know the state of Arizona threw a lot of money at First Solar as well (which is headquartered in the Phoenix area.)
During First Solar's boom years, the company was mainly supported by sales to Germany, probably one of the worst solar sites in the world after perhaps Seattle. But the German government mandated feed-in tariffs for solar that were five times (or more) the market price for electricity. It was like saying that, while milk generally goes for $2 a gallon, the government mandated that milk from brown cows could be sold for $10 a gallon, and what's more, consumers had to buy it.
Have fun resetting all those clocks this weekend. Sorry about the hour you lose.
PS- we have to have something to make up for Sheriff Joe, and not farting with DST eases the pain a bit. See my article here about why DST is an outdated concept that no longer saves energy -- it turns out that the nature of electricity demand has changed over the last 100 years since DST was first tried. Who would have thought? Anyway, this research essentially demonstrates that Arizona is at the forefront of modern, science-based environmentalism.
Apparently electric vehicle maker -- and recipient of lots of your and my money -- Fisker Automotive is struggling. Who would have thought that a company that could not fully fund itself privately and had to rely on political connections to use the coercive power of government to take money from taxpayers might be a bad investment?
As a reminder, Fisker's taxpayer largesse likely came at the behest of politically powerful Ray Lane of Kleiner Perkins. It is his firm's investment returns we taxpayers are supporting. So it should come as no surprise that Ray Lane says, in the video below, that he thinks Obama is the greatest public sector venture capitalist ever. What does he use as justification for this conclusion? Why, Solyndra! I kid you not, check it out.
By the way, if you did not see it, check out my Forbes article on how the Fisker Karma gets worse mileage than an SUV when you trace its electricity back to the power plant.
One thing that many green energy advocates fail to understand is the very scale of US energy demand in relation to the output of various green sources.
Let's consider wind.
The Keystone XL pipeline would have provided 900,000 barrels of oil per day, roughly equivalent to 1.53 billion kw-hr per day. A typical wind turbine is 2MW nameplate capacity, but at best actually produces about 30% of this on average. This means that in a day it produces 2,000*.3*24 = 14,400 kw-hr of electricity. This means that the Keystone XL pipeline would have transported an amount of energy to the US equal to the output of 106,250 of those big utility-size wind turbines.
Looked at another way, the entire annual output of the US wind energy sector was about 75 terra-watt-hours per year or about 260 million kw-hr per day. This means that the Keystone XL pipeline would have carried energy equal to over 5 times the total output of wind power in the US.
Of course, this is just based on the potential energy in the fuel, and actual electricity production would be 50-65% less. But even so, this one single pipeline, out of many, is several times larger than the entire wind power sector.
I started blogging because I was always frustrated in live arguments that I would remember the killer comment 5 minutes too late, so it is no surprise that I find live TV frustrating. Here is how I had hoped the interview would go this morning on Fox. In actual execution, I decided not to play the "2nd law of thermodynamics" card on the morning show just after the in-studio visit by a bunch of bijon frise's.
I'm confused, why are we we even talking about miles per gallon in an electric car?
- We measure how well traditional cars use fossil fuels with the miles they drive per gallon of gas, or mpg
- Of course, we can't measure efficiency the same way in an electric car since they don't use gas directly, though the electricity we use to charge them is mostly produced from fossil fuels.
- So the EPA came up with a methodology to show an equivalent MPG for electric cars so their fossil fuel use (way back in the power plant) could be compared to traditional carsAnd you think there is a problem with those numbers?
- It turns out the EPA uses a flawed methodology that overstates the electric car equivalent MPG, in part because they assume the potential energy in fossil fuels can be converted to electricity in the power plant with perfect efficiency, which doesn't happen in real life and actually violate the second law of thermodynamicsHow should they have done it?
- During the Clinton administration, the Department of Energy came up with a better methodology which uses real world power plant efficiencies and fuel mixes to determine how much fuel went into charging an electric car.
- Using this methodology, the Fisker Karma, even in all-electric mode, gets about 19 mpg equivilent, not 52. This means that it uses about the same amount of fossil fuels to drive a mile as does a Ford Explorer SUV -- the only difference is that the fossil fuel use is better hidden.
I had some fun yesterday, dashing off a quick note about the Fisker Karma electric car and just how bad the electric mileage is if you use the DOE methodology rather than the flawed EPA methodology to calculate an mpg-equivalent.
It was the quickest and shortest column I have ever written on Forbes, so of course it has turned out to be the most read. It has been sitting on top of the Forbes popularity list since about an hour after I wrote it, and currently has 82,000 reads (I am not a Twitter guy but 26,000 tweets seems good).
I wanted to add this clarification to the article:
Most other publications have focused on the 20 mpg the EPA gives the Karma on its backup gasoline engine (example), but my focus is on just how bad the car is even in all electric mode. The calculation in the above article only applies to the car running on electric, and the reduction in MPGe I discuss is from applying the more comprehensive DOE methodology for getting an MPG equivilent, not from some sort of averaging with gasoline mode. Again, see this article if you don’t understand the issue with the EPA methodology.
Press responses from Fisker Automotive highlight the problem here: electric vehicle makers want to pretend that the electricity to charge the car comes from magic sparkle ponies sprinkling pixie dust rather than burning fossil fuels. Take this quote, for example:
a Karma driver with a 40-mile commute who starts each day with a full battery charge will only need to visit the gas station about every 1,000 miles and would use just 9 gallons of gasoline per month.
This is true as far as it goes, but glosses over the fact that someone is still pouring fossil fuels into a tank somewhere to make that electricity. This seems more a car to hide the fact that fossil fuels are being burned than one designed to actually reduce fossil fuel use. Given the marketing pitch here that relies on the unseen vs. the seen, maybe we should rename it the Fisker Bastiat.
Are Private Entities Solely To Blame For Making Money Off Structural Problems Created by the Government?
This isn't the only case where news organizations consistently report as truth something that didn't happen, while failing to report what did. Another one that comes to mind is the California electricity crisis of 2001-2002. As some readers may recall, that crisis was caused by market manipulation -- and that's not a hypothesis, Enron traders were caught on tape telling plants to shut down to create artificial shortages. Yet "news analyses" published after the whole thing was revealed would often tell readers that excessive environmental regulation and Nimbyism caused the crisis, with nary a mention of the deliberate creation of shortages.
And as you'll notice, in both cases the imaginary history just happened to be one more comfortable to status quo interests.
I find it hilarious that Krugman is talking about imaginary history, since he plays the same game so often. In fact, the disconnect between many of Krugman's current political writings and his historical economic work are often jaw-dropping. Even the differences in Krugman's opinion on the same topic when a Republican vs. a Democrat is in the White House can be amazing.
But I wanted to address the California utility issue. Certainly Krugman is right, as far as he goes, in that Enron made a lot of money in the California electricity crisis creating some short-term artificial shortages. But what he leaves out of his brief comment were the structural rules the government had put in place that made Enron's actions possible. Enron's profits in the California electricity crisis could never have been made in a free market.
I am not an expert on the whole regulatory environment in which these events occurred, but there were three key regulatory facts that need to be understood:
1. California, due to the NIMBY and environmental concerns Krugman mentions in passing, want lots of electricity but do not want the electricity production near them. So they have exported the production to other states, and, more importantly, California utilities did not control the production of the electricity they needed. Thus a lot of California power, and all of its marginal demand, is satisfied by local utilities buying out of state power. As we will see next, Krugman is really putting up a straw man here, as this is simply background, the least important of the three government factors that drove the problem.
2. California deregulated wholesale utility prices, but not retail prices. The point of price deregulation is that suppliers and consumers can make better decisions because the information they get via prices is not distorted by government mandates. But price deregulation only makes sense if the ultimate consumers have prices that float with the market. But California consumers still had fixed prices. There were no changes to pricing signals to consumers that might cause them to conserve more when electricity was particularly short.
So, only wholesale customers saw their prices paid increase when electricity supplies ran short. This mainly applied to large California utilities that bought power they needed from out of state. Theoretically, when prices spiked, they could cut back their demand. This is more awkward for them than consumers, but could be done either with pre-determined shut down priorities or rolling brown-outs. At some point, one would assume the cost of power would be higher than the cost of service disruptions, but...
3. California utilities were effectively required by regulation to try to serve all demand. Right or wrong, they felt they were in a position that if power were available, they had to buy it no matter what the cost.
So step in Enron. Seeing this mess, they found they could corner the market at a few peak demand times and sell Calfornia power for a gazillion dollars a Kw. I would not personally have been proud to make money that way, but Enron jumped right in.
I have no problem giving Enron grief for the way they make money, but one has to ask themselves, why the hell were California utilities buying power no matter what the price, and why was it that when electricity was so dear, it was illegal to communicate this to end users via prices (as we do with any other product or commodity). The story here is a lot more complicated than Enron.
Update: Finem Respice took a more sophisticated look at this same issue a while back in a broader post about trying to close an open system.
On the retail side, just as California was patting itself on the back for "deregulating" in 1996 (via a bill that Pete Wilson created with complexities and exceptions for e.g., San Diego that make the special interest game in Washington look tame by comparison), it froze, just after reducing, retail electricity rates for five years. Add to this the fact that California had long depended on supplies from, e.g., the Northwest, which, for years, enjoyed a hydroelectric power generation surplus. As the surplus vanished with droughts and increased demand in the Pacific Northwest, so did the supply buffer California was so used to, and that it leaned on most heavily over the years to avoid building new generating capacity (new capacity being the bane of the progressively green environmental utopian-paradise that was (is) California energy politics). All this conspired to spike rates. Who is surprised?
It is somewhat unfortunate that Enron's shrewd manipulation of California's badly flawed and outright schizophrenic market scheme was so flagrant, and that unrelated accounting scandals at the company permitted the story to become one of deregulation evils and free market greed rather than the core issue: the political spinelessness exhibited by California officials and their ongoing attempt to insulate voters from anything resembling market prices for electricity
In these grim economic times, one U.S. industry has defied gravity. Not only is it growing, it's thefastest growing industry in the country. It now employs 100,000 Americans at 5,000 mostly small businesses spread across all 50 states. Unlike in so many others, in this industry the U.S. has a positive trade balance with China; it is a net exporter of high-tech manufactured products....
The startling counter-cyclical growth of this industry had been unleashed by a modest bit of economic stimulus: a cash grant program that helps project developers compensate for the crippling credit crunch. In contrast to the familiar tax credits -- which tend to go to large, mature companies that have enough profit to benefit from them -- cash grants help small, innovative, growing businesses that are plowing revenue into growth. In fact, a recent study found that they work twice as well as tax credits. In 2009, this cash grant program pulled in $4.50 of private capital for every public dollar it invested.
The cash grant program expires at the end of the year. Extending it for a single year could support 37,000 additional jobs over and above the industry's baseline. And here's the capper: Since the cash grant program is simply repurposing money that's already devoted to a tax credit program, it requires no new federal revenue.
So you'd think this would be a home run, right? At a time when jobs are at the top of every politician's mind, surely a bit of low-cost economic stimulus that doesn't increase the deficit and leverages tons of private capital and creates tens of thousands of jobs can serve as the rare locus of bipartisan cooperation. Right?
Except the industry in question is the solar industry. And because this industry involves clean energy rather than, I dunno, tractor parts, it has been sucked into conservatives' endless culture war. Rather than lining up to support the recession's rare economic success story, Republicans are trying to use the failure of a single company -- Solyndra -- as a wedge to crush support for the whole industry. Odds are they're going to succeed and the cash grant program (Sec. 1603) won't be renewed next year.
Do you see the basic assumption -- if we don't take money from taxpayers and give it to businesses in a certain industry, that means we don't like that business. Really? That means that there is not a single industry in this country that I like, since I don't support subsidies for any of them. Unless you believe the state is mother and father to us all, the fact that I don't support state subsidies does not mean that I don't like the industry somehow. Kevin Drum even goes so far as to say that opposition to solar power subsidies is an aspect of the culture wars. Huh? Oh and by the way, the politicization of this loan process is just amazing to me. More and more people at Solyndra seem to be fund raisers for Obama, and here is a story of how a cleaning products company turned donations to Democratic candidates into taxpayers subsidies for themselves.
It is interesting that he would mention tractor parts. Guess what, folks who don't like the solar subsidies probably don't support subsidies for tractor parts either. I was going to say something like, "guess what, we don't subsidize tractor parts" but in our screwed up corporate state, we probably do at some level, like with some special export program snagged by a John Deere lobbyist. But I can pretty much guarantee that we don't subsidize anywhere near the total value of the tractor parts industry like we do the solar industry.
In one silly passage, he says
"In addition to being successful, this industry is wildly popular with the American public, across regions, demographics, and political parties. It has been embraced by mainstream institutions from Walmart to the U.S. military"
I could say the same thing for iPods too, but no one is rushing to provide grant programs for their manufacture. If it is so wildly popular, why does its use require so many government incentives and subsidies. Because the author pulls the trick of looking at one narrow solar program, and attributing the entire solar industry growth to that one program. And then he says, see, look how much benefit we get from this tiny sensible expenditure.
But solar's growth (I don't have the data, but I am willing to be real money that his "fastest growing industry" claim is BS) is due not to just this tiny programs but to a plethora of federal, state, and local subsidies and mandates. The government gives money to capitalize companies, and then then provides tax credits for up to 30-50% of their customer's purchase, and then through public utility commissions enforce above-market feed-in tariff rates for solar power. One reason we export so much (the export market for US solar is nearly entirely to Europe) is that European governments have feed-in tariffs for solar power more than 5 times higher than the market rate for electricity. They are paying something like 70 cents a kilowatt for solar electricity.
So of course solar is growing. If the government were to buy small cars for $150,000 each, there would be big growth in car manufacturing. This does not mean the product makes sense -- in fact, the necessity for so many government supports at every step of the process means almost by definition that it does not make sense economically. Look at corn ethanol. Corn ethanol is the stupidest product ever, but it has grown like crazy due to the same combination of government subsidies, price floors, and mandates.
By the way, I am a huge fan of solar, in theory. I honestly think that solar will some day be the power system of choice in this country, as companies figure out how to roll solar sheets out of the factory as cheaply and quickly as carpet comes out of Dalton, Georgia. We are not there yet, and I am not at all convinced that the current approaches are anything but dead end technologies. Beyond wasting a lot of money, there is a real risk the government actually slow ultimate implementation of sensible and economic solar, just as I would argue they did by forcing manned space flight and the transcontinental railroad ahead of their time.
I was going to leave this topic behind, but I just couldn't resist after Krugman's bit of snark on the topic. Please see my new Forbes column here. One bit, actually off topic from the rest of the article, that I added as a postscript:
Perhaps the worst Administration decision of the entire Solyndra affair has yet to receive adequate scrutiny. Just 6 months before Solyndra failed, the Administration allowed Argonaut, the largest shareholder, to grab the senior debtor position from the US taxpayer in exchange for $75 million in new financing. The Administration’s argument was the loan was needed to buy time, but buy time for what? Solyndra’s relative cost position was getting worse, and it was experiencing a huge loss on every unit sold. No one involved has been able to say what the company was counting on to save it in the 6 months this loan bought it, except perhaps the opportunity to cajole another half billion out of the US taxpayer.
But the loan did accomplish two things. First, it gave Solyndra time to sell every liquid asset it owned that might have been of value to…. Argonaut. And once this bit of self-dealing was complete and the company was cleaned out, the bankruptcy process could be entirely controlled by Argonaut such that it will likely end up with all the assets, most important of which seems to be a $500 million dollar tax loss carryforward. If Argonaut can take advantage of these tax shelters, it will end up costing the US taxpayer an additional $150 million or so.
In short, the taxpayer got rolled. Again.
Update: Marc Morano:
'When we had (Gulf) oil spill, we immediately had moratorium on off shore drilling. The oil industry was demonized & literally shut down'
'But after the green energy debacle, they are being feted and rewarded -- $9 billion more is being sent out to 14 more companies...Solar power is less than 1% of our electricity, yet this is being feted'
President Obama wants a 56.2 mile per gallon standard for cars by 2025. Both advocates and opponents of this say the only way to make this is if everyone drives an electric car or plug in hybrid. But the fact of the matter is, even those don't get 56.2 mpg, except through an accounting fiction.
A while back I ran the numbers on the Nissan Leaf. According to the EPA, this car gets an equivalent of 99 MPG. But that is only by adopting the fiction of looking only at the efficiency in converting electricity to power in the wheels. But the electricity comes from somewhere (the marginal kilowatt almost certainly comes from a fossil fuel) and the new EPA methodology completely ignores conversion efficiency of fuel to electricity. Here is how I explained it at Forbes:
The problem is that, using this methodology, the EPA is comparing apples to oranges. The single biggest energy loss in fossil fuel combustion is the step when we try to capture useful mechanical work (ie spinning a driveshaft in a car or a generator in a power plant) from the heat of the fuel’s combustion. Even the most efficient processes tend to capture only half of the potential energy of the fuel. There can be other losses in the conversion and distribution chain, but this is by far the largest.
The EPA is therefore giving the electric vehicle a huge break. When we measure mpg on a traditional car, the efficiency takes a big hit due to the conversion efficiencies and heat losses in combustion. The same thing happens when we generate electricity, but the electric car in this measurement is not being saddled with these losses, even though we know they still occur in the system.
Lets consider an analogy. We want to measure how efficiently two different workers can install a refrigerator in a customer’s apartment. In both cases the customer lives in a fourth floor walkup. The first installer finds the refrigerator has been left on the street. He has to spend much of his time struggling to haul the appliance up four flights of stairs. After that, relatively speaking, the installation is a breeze. The second installer finds his refrigerator has thoughtfully been delivered right to the customer’s door on the fourth floor. He quickly brings the unit inside and completes the installation.
So who is a better installer? If one only looks at the installer’s time, the second person looks orders of magnitude better. But we know that he is only faster because he offloaded much of the work on the delivery guys. If we were to look at the total time of the delivery person plus the installer, we’d probably find they were much closer in their productivity. The same is true of the mileage standards — by the EPA’s metric, the electric vehicle looks much better than the traditional vehicle, but that is only because someone else at the power plant had to do the really hard bit of work that the traditional auto must do itself. Having electricity rather than gasoline in the tank is the equivalent of starting with the refrigerator at the top rather than the bottom of the stairs.
The DOE has actually published a better methodology, going from "well to wheels," creating a true comparable efficiency for electric cars to gasoline engine cars. By this methodology, the Nissan Leaf all electric car only gets 36 MPG! In fact, no current electric car would meet the 56.2 MPG standard if the accounting were done correctly. Which is why the EPA had to create a biased, inaccurate MPG equivalent measure for electric vehicles to artificially support this Presidential initiative.