Anger and fear are widespread, as the livelihoods and hopes of ordinary Americans are being destroyed.  Anger runs among the “99%” over economic injustices that favor the “1%”.  Fear, however, may run among 100% over this question: How do we live when economic growth fails? 

How Do We Live?  These three articles will briefly lay out our current predicament, and discuss ways we can cope.  Today’s post will cover four major reasons — dubbed here ”The Four Horsemen of the Economic Apocalypse” — why nothing seems to work anymore.  In the second post, next week, ”Out With the Old”, will cover the inevitable end to seven unsustainable practices.  The final post in this series, “In With the New”, will discuss seven ways of living which we can embrace in a world with failing economic growth.

If we act purposefully now as individuals and as a society, we may help to avoid the most chaotic and destructive effects of collapse.  First, we need to understand what has gone wrong – which we will discuss in today’s post.  The adaptations laid out in the next two posts represent ways we may find a “softer landing” — but we cannot expect a return to what we came to believe was “normal”. 

Three Years to Get Back to 2007 Levels.   After the close of 2nd Quarter 2011, the U.S. Bureau of Economic Analysis published its official estimates of U.S. Real Gross Domestic Product (GDP).  By the end of 2nd Quarter 2011 the U.S. economy was officially producing about the same as its end of 2007 peak — in other words, essentially no overall economic growth for 3 1/2 years.

Less Per Person.  Though the economy was no larger, U.S. population had increased, so as of the end of 2nd Qtr 2011 there was 3.5% less GDP to go around per person in the U.S. than at the end of 2007.  (By comparison, there was a 35% increase per person in China over this same period.)

Heading Into Decline Again?  Having just officially climbed back to 2007 GDP levels, it seems like a really bad dream the economy could once again start heading backwards.  Yet that is exactly the prediction experts are now making.  On November 7th, the Economic Cycle Research Institute, a group with a stellar record of predicting recessions, re-affirmed its recent call the U.S. economy is once again slipping into recession.  So that no one would mistake what that means, in its September 30 press release, the group said bluntly, “Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet.”  Also, on November 25th, Deutsche Bank revised it projections and is now warning of a “deeper” Eurozone recession.

Even Worse Than We’re Being Told?  As bad as the official numbers noted above may seem, the actual story is likely even worse.  John Williams of Shadow Government Statistics notes that government methods of counting inflation in prices have chosen to statistically ignore many price increases, and thus count a misleading share of observed sales as economic growth.  Calculating the same way the government previously used to measure the inflation rate, SGS shows a much higher inflation rate that is more in keeping with everyone’s experience of skyrocketing fuel and food costs, health premiums, etc.  With distortions removed, SGS estimates the U.S. economy has actually been stagnant or shrinking for most of the last decade.

Why Nothing Seems to Work Anymore: The Four Horsemen of the Economic Apocalyse.   The news that a bad economy is now expected to get even worse is particularly crushing with so many still out of work, and after so much money has been spent.  Leaders debate austerity or stimulus, but common sense says something more must be happening.

The ”Four Horsemen of the Economic Apocalypse” have been revealed by many astute observers.  Researchers and analysts such as Chris Martenson ( “The Crash Course” video course, and book) and Richard Heinberg (“The End of Growth“) have written extensively about the first three Horsemen.  The original Tea Party movement (which began as anger over government bailouts of Wall Street), and the Occupy Wall Street movement have focused attention on the fourth Horseman.  To know what lies ahead, we need to know what is wrong:

The Four Horsemen of the Economic Apocalypse

1.  Too Much Debt.  Chris Martenson has plotted a striking pattern of total private and public debt in the U.S. doubling roughly every 30 quarters since the early 1970′s — five doublings of total debt levels in four decades.  This might have been fine had our incomes grown that fast and we could support the extra debt – or if the debt had been used for investments that would now save us money.  Instead, like a teenager who ran to the mall with Mommy’s credit card, we racked up debts with no way to pay them back.  We were living high, but it was all phony, fueled by more, and more, and more borrowed money. 

Now, families, small businesses, local and state governments, and even the Federal government are reaching a condition of debt max-out.  Our incomes would need to suddenly grow much more rapidly than we have seen to be able to handle so much debt.  However, with everyone weighed down making burdensome debt payments, where are the customers who could kick-start economic activity and cause such increases to income? The Federal Reserve’s policy of encouraging people to consume by taking on even more debt is failing, as banks aren’t loaning to consumers and businesses who already have too much debt.

The day of reckoning has arrived.  Because our incomes are not rising fast enough to service this much debt, our spending must shift into reverse.  Running up the debt allowed us to spend more than our income, but now we have to cut our spending to less than our income if we are to pay back the money we borrowed
.  Many observers expect this “de-leveraging” process to take at least a decade. 

2.  Resource Limits.  If we had just run up a big credit card bill and now need to pay it off, that would be hard but perhaps possible as long as we still have our jobs.  Now, however, we literally may not be able to afford to fill our gas tanks to get to work.  Peak Oil — reaching the limit of world oil production — changes everything. 

Oil is just one example of how the economy is merely a way to channel real physical wealth.   Physical scientists regard the very idea of endless economic growth on a finite planet as ludicrous.  Growing the economy, after all, is just another way of saying we are going to keep converting more and more energy, physical resources and labor into more and more — and even more! – goods and services. 

What happens when there isn’t more?

Rapidly Increasing Prices for Key Resources.  The high consumer price inflation noted by John Williams is likely one sign of increasing resource prices recently noted by GMO, a major asset management firm.  GMO principal Jeremy Grantham’s April 2011 report Time to Wake Up: Days of Abundant Resources and Falling Prices are Over Forever plotted real prices for a mix of resource inputs to the global economy since 1900. 

Though the last century achieved huge increases in the use of natural resources, technology allowed an average 1.2% per year decline in real prices throughout the 20th century.  However, with massive new demands from China and other emerging economies, Grantham writes of resource prices ”they are now rising, and in the last eight years have undone, remarkably, the effects of the last 100-year decline!”.  With analysis indicating the trend of abundance has now reversed to scarcity, Grantham calls this “one of the giant inflection points in economic history”. 

The Wolf at the Door.  Hitting resource limits means that growth has a new limiting valve: escalating resource prices.  For instance, if companies begin to hire more workers, they will want to drive more and use more gasoline.  However, when we have reached physical limits on world oil extraction, more demand will drive up gasoline prices – for everyone.

The increased gas prices act as a  ”Wolf at the Door” to steal prosperity.  Paying more for gasoline means people must cut back on other purchases. The economy then sinks back into recession and many of the new jobs will be lost.

Traditional economics would argue the extra money we spend for gasoline should simply loop back and be spent again.  However, with increased energy needs to extract harder-to-get new oil sources such as deep ocean drilling and tar sands, much is literally burned “up in smoke”.  Also, the money we send abroad for imported oil has no guarantee of returning.

Peak Oil is just one example of limited resources curtailing our hopes of affordable expansion. There are now warnings of Peak Coal and limits to many other key resources.  For instance, dreams of a greatly expanded electric grid may be costly given short supplies of copper recently noted by Goldman Sachs.

3.  Destruction and Decay of Infrastructure.  Richard Heinberg has noted that destructive forces from climate change, oil and chemical spills, and other environmental effects of producing more and more goods are acting as a third major drag on growth and prosperity. 

If this sounds far-fetched, consider this: has New Orleans been fully restored?  What became of the homeowners and farmers, many who were uninsured, affected by massive Australian wildfires and floods?  What of U.S. communities affected by the record dozen billion-dollar-plus weather disasters so far in 2011?  FEMA is now essentially broke, and cannot provide enough assistance to help communities fully recover.  Looking ahead, how will major ports continue operations once sea levels begin to rise? 

The already inadequate responses to destructive events are highly visible. We are even in denial about basic maintenance.  As our cars jolt down decaying roads, we can ask ourselves whether we ever considered what it would cost to maintain all the roads, bridges, electric lines, satellites, schools and other critical structures we built on the run-up to where we now stand.  Will we repair our crumbling infrastructure and be able to keep building even more?

4.  Greed.  With average citizens deeply struggling, it is particularly galling that a powerful elite are stealing money, power, and hope away from the middle class.

In the last Great Depression and at least through the 1950′s, even the wealthiest saw the need to preserve a robust middle class, and a path for the poorest Americans to improve their lot.  This was not altruism but a pragmatic sense that customers who can afford to spend are the real “Job Creators”.  Today, however, the levers of power are jiggered to funnel contracts, bailouts and tax breaks to the most powerful, protected by enormous corporate bribes campaign contributions. 

The greatest harm done by this political corruption is our inability to address problems.  In the financial arena, the option of letting reckless banks fail and protecting depositors, rather than preserving banks and bonuses, was never seriously considered.  Regarding energy and climate,  the depths of avarice may be seen by campaigns to confuse the public.  Similar to the well educated cigarette lobbyists who knew perfectly well the real scientific evidence, today’s oil and coal lobbyists are willing that energy shortages, harmful pollutants, and climate disruption will inflict great suffering (even on their own grandchildren), merely to reap current profits.  

While the most pyschopathic behavior has been exhibited by an amoral few, we must also admit that any extreme “con job” is fueled by encouraging greed in the victim.  How many who are now burdened with debts they cannot repay, wondered at the time why the bank was willing to lend them so much money? &nbs
p;Too many of us succombed to bubble madness, and the desire to have more than we could afford.

Offering Nothing but “Blood, Toil, Tears and Sweat”?   The above four challenges point to a stark future with severe changes ahead.  It is long past time for someone to sound a wake-up call like Winston Churchill’s famous speech to the British House of Commons shortly after the outset of WWII.  We need such a frank talk that lays out the real prospects ahead, pulling no punches.  However, with the quality of today’s “leaders”, such truth won’t come from a politician.

Instead, the public must look to the experts themselves.  Gail Tverberg, Editor of Our Finite World, has just such a presentation, which she gave this year to her church group, posted at Energy Bulletin here.  By the time you read to the end, you feel a real sense of the onslaught of an entirely new reality.  She concludes “there is no real solution to our predicament”.  She might just as well have said, as Churchill, “I have nothing to offer but blood, toil, tears and sweat.”

Too Scary to Think About?  Though we can intellectually accept that resource limits will inevitably shut down economic expansion, the idea this is already happening is terrifying.  It is hard to contemplate without a deep fear settling in one’s stomach. Will I lose my job? Will my children ever be able to find work?  Will we be reduced, like Scarlet O’Hara in Gone With The Wind after the South’s defeat caused the devastation of her life, to scratching hungrily in the dirt for a lone turnip? 

Before We All Start Scratching for Turnips…  Before we allow our society to sink into a chaos of devastation and deprivation, there are many unsustainable practices we will jettison, and new ways of living we can adopt in a world with failing economic growth.

In the next two posts, we will cover these ”Out with the Old” practices that must end, and “In With the New” options — for individuals and for our nation.  We can and will adapt, which is what humans do best. 

Our prosperity – the ability to live comfortably in an advanced culture — will not long continue to be measured by owning more and more things, and living in bigger and bigger houses.

It will be much better than that.

Article originally published at www.EnergyEconomyOnline.com

A Practical, Affordable (and Safe) Clean Electric Energy Plan

by Craig Severance
March 14, 2011

The President of the United States has chosen to make the goal of 80% clean electricity generation by 2035 the first priority in his move to make America more competitive.  In his recent State of the Union Address, Barack Obama compared this project to the 1960′s moon shot program, noting we are at another “Sputnik moment” where we must innovate or be left behind. 

(Unexpected editorial note: In the midst of the current events surrounding the Japanese nuclear reactors, it will be helpful to know how we can devise a practical and affordable clean energy plan without new nuclear power. This article presents just such a plan — not because of safety concerns, but because new nuclear power fails the “practical and affordable” test. – CS)

Investment, or Runaway Spending?  While many applauded the President’s call for innovation and investment, “eyes were rolling” among many fiscal conservatives.  The President’s call for investment in the future was immediately labeled as simply a call for increased government spending.  This is a critical concern when we are already running a $1.6 Trillion U.S. budget deficit.

In my article from one year ago  I noted the problems of both deficit spending and high unemployment were “paralyzing the nation’s political life, as Americans are worried about both high unemployment and record deficits.”   I wrote the solution to this conundrum is investment – “to invest money now, into projects that when completed will help us individually and as a nation to save more“. 

The difference between investment and runaway spending is that investment pays for itself.  One way it can pay for itself is to help us spend less.  Another way it can pay for itself is to bring in more revenues — more sales to other countries, and more job creation.  

The Way to a Fail.  A profligate “Clean Energy Plan” that invests in very expensive technologies will fail.  Americans won’t save — we will be forced to pay more.  Also, other countries won’t be attracted to buy costly boondoggles — we must have something to sell that makes sense.

Past forays of the government into supporting specific energy technologies — such as corn ethanol — give pause that government can prop up exactly the wrong “solutions”.   Those with the best lobbyists and the most campaign contributions get the government gravy.   

A Clean Energy Plan for the electric power industry is an even bigger prize and will have lobbyists all over it.  If Democrats are not to be seen supporting high rollers, and Republicans are not to be RINO’s (Republicans In Name Only) wasting taxpayer dollars, then a practical and affordable Clean Energy Plan must be devised.    

Little or No Need for Government Subsidies.  This Clean Energy project is far too big to expect taxpayers to supply any substantial part of its funding.

Public opinion also opposes utility subsidies. The most popular item suggested for elimination in a recent WSJ poll was the Federal program that pays the loan payments for utilities who default on new nuclear power plants.

Rather than a subsidy program, the “80% Clean Energy” goal is in the mode of the Renewable Portfolio Standards   that have already been adopted by 24 states.  These are simply regulatory standards that must be followed for the privilege of operating as utilities.  When utilities select prudent projects, the costs can then be recovered through electricity rates.

If a Clean Energy Standard establishes a guaranteed new market for clean energy, why would any taxpayer subsidy be required?  The government should continue to promote basic research for innovation, but little else is needed from taxpayers.

What Electric Customers Need.   If electricity is to continue to serve us well as a foundation of modern life, it must meet three basic needs:

Need #1:  Affordable.  If electricity becomes too expensive it will place a significant burden on family budgets.  Home electric bills already average over $100/month, as electric rates increased 29% from 2004 to 2009 — over twice the 14% increase in CPI.  If these increases continue, over the next ten years average home electric bills will rise to about $180 per month. 

Image: NY Consumer Protection Board

It’s not like consumers have more money. With the ongoing destruction of the middle class, American workers are experiencing declining real wages. Retiring Baby Boomers will be living on fixed incomes   Will households be able to pay skyrocketing electric bills, and still buy prescriptions and groceries?

Consumers have supported clean energy standards that have price controls, such as Colorado’s 2%/year limit for renewable power rate increases above the comparable cost of fossil fuel power.  (See “Colorado Shows How It’s Done“.) 

If utilities ignore affordability, however, build-out plans can come to an inglorious end.  Utilities can learn a lesson from the Florida ratepayer revolt that effectively halted Florida P&L’s nuclear plans after it proposed drastic rate increases to fund the new nukes.

Need #2:  Always Available. &nbs
p;Americans expect their electric utility will always “keep the lights on”.  This will be increasingly important as our other energy sources such as oil begin to decline.  Our entire economy and indeed way of life is threatened by Peak Oil Coming Much Sooner Than Expected.

The economic disruptions from high priced oil will destroy millions of jobs if we have not prepared alternative ways to fuel our society.  An increased use of electricity for transportation — with electric cars, electrified freight and passenger trains, and increased use of electric transit — is a core solution to ending our addiction to oil.  Our electric grid must prepare to meet this national security challenge.  

Need #3:  Clean Power.  Protecting our jobs and homes from severe droughts, floods, sea level rise and other impacts of climate change can prevent literally trillions of dollars of economic losses.  

Americans support the prevention of activities that harm innocent victims as a legitimate role of government. Polls thus show overwhelming support for EPA efforts to cut harmful utility pollutants.  According to a recently released report from the American Lung Association, coal-fired power plants produce more hazardous air pollutants (including mercury, arsenic, lead, acidic gases, and dioxins) than any other industrial polluters in the U.S.

Photo: Wikimedia Commons

Electric utilities also currently emit 39% of total U.S. carbon dioxide emissions.  Because electricity can be generated from a myriad of clean sources, utilities have been asked to lead the way to achieve 80% of total projected carbon dioxide emission reductions by 2030. 

Reducing Unemployment.  While most consumers and businesses have maxed-out debt and cannot help the economy grow, utilities can still borrow money and invest in new job-creating projects.

Utility spending can thus help counter the current deflationary pressure from the collapse of the Consumer Credit Bubble.  Spending on U.S. productive capacity is also far better than cranking up money printing presses.

If American industries develop innovative solutions, we can also export technologies to other nations to help them clean up their power grids. 

Just How Big a Challenge is this Clean Energy Moonshot?  The graph below presents the most recent data from the Energy Information Administration (EIA), on the sources of electricity generation in the U.S., in 2010:

If one accepts the President’s definition of “Clean Energy” (though many do not especially in the wake of the Japanese nuclear accidents), the nation is already generating almost 54% of its electricity from qualifying sources — renewable energy, natural gas, and nuclear.  

To meet an “80% by 2035″ standard, therefore, would require a conversion of another 26% of the generation mix over the next 24 years — an average shift of 1.1%/year of total kWh’s generated. 

If U.S. kWh demand did not grow at all, this would require the equivalent generation of installing about 13,500 Megawatts (MW) of new wind farms each year in the U.S (after accounting for wind’s kWh output per MW, and transmission losses).  This is achievable — in 2009, the U.S installed 10,010 MW of new wind capacity, and “Clean Energy” will include more than wind.

Of course, if demand for electricity grows, even more new generation will be needed. If kWh use grows by 1% per year, by 2035 we will need about 30% more electricity. 

Challenges Facing Electric Utilities.  While consumers and politicians want utilities to supply affordable and clean power that is always available, there are major challenges facing electric utilities. 

Utility Challenge #1: Demand is Soft and Unpredictable.   Utilities are in the business of selling electricity, and must build new power plants to provide it.  However, customers can cut kWh use and leave the utility with no ability to pay for these new power plants.  

Electricity demand in the U.S. declined from 2007 to 2008, and further still in 2009.  While 2010 numbers show a rebound, total kWh use for 2010 was still lower than peak U.S. kWh use in 2007. 

The Great Recession is a major cause, and thus the overall macroeconomic risks from Peak Oil and other expected shocks to the economy must weigh heavily on utility planning.  Electricity is only a service to the general economy.  Will general economic growth collapse again? 

Utility Challenge #2: Consumers Can Now Walk Away.  In most parts of America, customers have still not implemented even the most basic of energy efficiency measures. The “low
hanging fruit” of energy efficiency has yet to be harvested.  When power bills get too high, even simple measures like a clothesline can drastically cut electricity use.

Electric customers can now “walk away” from their central utility not only through efficiency, but also by generating their own power.  As recently noted by Yahoo Finance, on-site electricity generation with solar panels is now reaching parity with retail electric rates.  Combined Heat and Power offers customers yet another cost-effective distributed power solution. The days of a captive customer base for central utilities are over.

The unspoken fear of all utility managers is the Death Spiral Scenario.  In this nightmare, a utility commits to build a very expensive new power plant.  However, when electric rates are raised to pay for the new plant, the rate shock moves customers to cut their kWh use.  The utility then has no way to pay for the new power plant unless it raises rates even higher — causing a further spiral as customers cut their use even more or “walk away”.   

Utility Challenge #3: Unused Capacity.   U.S. utilities currently have a large, relatively young, and highly-efficient fleet of natural gas combined-cycle gas turbines — that sit idle approximately 57% of the time.  Their power simply isn’t needed for large portions of each day.

Utilities also have impressive fields of zero-fuel-cost wind turbines – that generate a lot of inexpensive power in the middle of the night when it is not needed.  However, many wind farms don’t run much when their power is most needed, on hot summer days.  

On those summer days, even solar produces the most power at Solar Noon, rather than late afternoon when air conditioners are running full tilt.  

When those peak power times come, utilities must “pull out all the stops”.  Utilities use cheap-to-build but highly inefficient single-cycle gas peaker units, that provide some of the most expensive kWh’s on the grid, and emit almost as much GHG emissions per kWh as coal.

Even baseload power plants that run 24 hours per day are affected greatly by fluctuations in consumer demand for electricity.  Nuclear and coal plants run through the middle of the night — but they aren’t paid very much for that power.  An expensive baseload plant such as a new nuclear plant may need to charge about 25 cents for every kWh, but it can’t get paid that much for off-peak power so its economics don’t work.

Utility Challenge #4: Need to Replace Aging Power Plants.   The President’s challenge to the utility industry to move away from dirty power and toward clean power is actually a challenge the industry is already facing, due to the age of existing plants. 

The dirtiest parts of our power plant fleet are already quite old. The capacity-weighted age of power plants in the U.S. is now 38 years old for coal, and 30 years for nuclear plants.  Many if not most of the older coal plants will be retired by 2035.  In contrast, natural gas plants have a capacity weighted age of only 19 years, and wind plants only 6 years.  

Retiring Old Coal.  The 45% of our kWh’s now supplied by dirty coal must be drastically reduced.  If 1.1% of total current electric generation (2.5% of current coal generation) was retired each year and shifted to clean sources, and no new coal-fired power plants were built unless they were low-carbon, the 80% Clean Energy Goal could be met. 

This seems a tall order.  Over the next 24 years, we would need to see a retirement or conversion of some 60% of existing coal generation.  However, by 2035 the median age of the existing coal fleet would be 62 years old.  This is beyond the traditional retirement age for coal plants, so it is likely at least this number of of today’s old coal plants will be phased out anyway.   The opportunity will be to decide how best to replace today’s dirty and old power plants. 

Retiring Old Nuclear?  Our nuclear fleet is also quite old, and if it also has to be replaced before 2035, the challenge will be much greater.  Because of this, it seems likely (however one feels about it) the Nuclear Regulatory Commission will extend the licenses of most existing U.S. nukes somewhat beyond the 2035 timeline.  By then, we must already be on a path toward cleaner power, and can then take on that next wave of replacements.

While the NRC seems committed to extending nuclear licenses, this will be a massive experiment and reality will likely intrude.  Aging plants tend to require ever increasing capital expenditures to keep in operation, as happened recently with the Oyster Creek power plant in New Jersey, which will close 10 years earlier than its current license allows.  Public concern over radiation leaks, such as at the Vermont Yankee plant and the Japanese nuclear debacle, may also force nuclear plant shutdowns.

Utility Challenge #5:  New Power Plants Are Much More Expensive.  We are now obtaining over two thirds of our kWh’s from coal and nuclear plants built over three decades ago.  It should come as no surprise that as we replace these very old plants, newer power plants are going to cost more — a lot more — than old power plants built decades ago.

We’ve gotten used to driving the old paid-off clunker.  Now, when the old beater finally has to be retired, the shock to the pocketbook will come.  

How Much Money Will Need to Be Invested?  If we have to build brand new power plants to accomplish replacement of 60% of old coal plants, it’s going to matter a great deal what we choose to replace them: 

Gas and Small Hydro. Just replacing the existing kWh’s generated by those old coal plants is likely to cost over $250 billion in up-front capital costs (in today’s dollars) if we replace those old coal plants with about 130,000 MW of the cheapest choices for new power plants — small hydro such as “Run of River” power, or gas plants using landfill gas, Combined-Heat-and-Power, or traditonal natural gas power plants.

While the small hydro and CHP plants have zero or low fuel costs, natural gas plants may require paying significant life cycle fuel costs.  This used to make utility managers leery of natural gas.  However, natural gas fuel is very cheap today, and expected to stay cheap for the next couple decades, so central utilities are now moving primarily to build natural gas power plants. 

Natural gas plants are also compatible with wind and solar energy, as they can cycle on and off quickly.  As renewable power sources come on line, natural gas plants can cut their fuel costs.

Wind and Geothermal.  One step up in capital costs per annual kWh, but with zero fuel costs and therefore roughly comparable to natural gas in life cycle costs per kWh, are wind farms and geothermal power.  Building enough wind turbines and geothermal (and transmission lines for these) to generate the kWh’s from the retiring coal plants might cost about $600 billion — more than natural gas, but with no worries about fuel costs, and zero GHG emissions.  

Concentrating Solar Power.  Another step up in capital costs per annual kWh are the concentrating solar power plants — thermal CSP, concentrating photovoltaic, and Stirling Engine — now being built in the desert Southwest. These plants are competitive in their intended market –  daytime peaking power — but are currently more expensive per kWh than wind or geothermal.  (They will not be installed nationwide, so a comparative cost to replace all retiring coal plants is not appropriate.)

Large numbers of gas, hydro, wind and geothermal plants, and some CSP plants, have recently been built – so we know what they cost. The renewable capacity already installed and under construction dwarfs nuclear and CCS efforts.

Two new technologies, however, require much larger and more expensive power plants, and none have yet been built in the U.S.:

New Coal.  If we tried instead to build new coal-fired plants with carbon capture and storage (CCS) to replace the retiring coal-fired plants, the tally would likely be in the $700 – $850 billion range.  Unlike renewables, however, coal requires paying fuel costs that would grow over time. “Clean Coal” is thus a more expensive option — and we don’t really know how expensive, because CCS is still an unproven technology.  

New Nuclear.  On the highest end of the scale, another unproven cost is new nuclear power.  If we tried to build all new nuclear plants to fill this same generation need, the total bill to replace just those retiring coal plants would likely exceed $1.2 trillion dollars.

This Project is no Moon Shot — It’s Much More Costly.  President Obama used the example of the Apollo Moon Shot program in his Address as an inspiration for what we need to do today. 

However, perhaps a more fitting comparison may be the Marshall Plan, or the mobilization effort for WWII. 

The entire NASA Apollo Moon program cost  was approximately $190 Billion in today’s dollars. Much of this was for the development of new technologies — rather than the Clean Energy Plan’s implementation of primarily existing technologies.    

Replacing retiring coal plants will likely cost about $250 -$600 Billion if we build gas and renewable plants, but could cost over $1.2 Trillion if lobbyists get their way and convince Congress the most expensive power plants — CCS and nuclear — should be built.

Another cost multiplier is demand. To handle new demand, another 30% extra will be needed if there is 1% per year growth.  If instead growth averages 2.5% per year, the extra to handle the new growth would be 90% more! 

If we don’t control kWh growth, and we also let lobbyists push Congress to build the most expensive power plants – this will be no Moon Shot, this project will be more like 10 Moon Shot Programs!

At a time of both public and government austerity, it seems imperative to limit the cost of this Clean Energy Plan with innovative and practical solutions.

Innovative Strategies To Make Clean Energy Goal Affordable.  The practical strategies discussed below can keep the cost of meeting the Clean Energy Standard affordable to utilities and their ratepayers. 

These innovations address the electricity system as a whole.  If we do this right, the U.S. can take a leadership position to show the rest of the world how clean energy can be done economically.

Innovative Strategy #1:   Do Customer Level Projects First.  If the computer age had proceeded with the same mindset as the U.S. utility industry, IBM would have just continued building bigger and more expensive central computers.  There would have been no PC’s, and no Internet. 

I remember in the early days everyone was asking — “why would I ever want a computer at home?”  Today that question seems ludricrous — but only because the power of innovation was unleashed across hundreds of millions of distributed computers. 

Before electric rates are raised to fund hundreds of billions or even trillions of dollars in new centralized power plants, utilities must first “firm up” the demand for centrally-generated power so it is reliably known.  It would be a business disaster of monumental proportions to spend all this money on central power plants and then have consumers “walk away”.

Consumers must first be given every chance to reduce their use, and to generate their own power, to reduce demands on the central power grid.

This strategy recognizes the “low hanging fruits” of energy efficiency and distributed power have not yet be
en harvested.  

One “low hanging fruit” is the ability for utilities to tell electricity customers their current usage and offer them signals of what times of day electric costs are high or low.  If electric rates are set high at peak periods and low during off-peak, customers can switch the times they do things like run their dishwasher or charge their car.  The Smart Grid can even control smart appliances such as water heaters to save everyone money.

The reason customer level projects such as insulation and PV power have still not been done is that most utility customers have no access to the capital to finance these energy-saving and distributed power projects.

Utilities, however, can make money by providing 100% up-front financing through on-bill financing, folding these projects into the monthly bills of whomever lives in the property at any time. 

Customer-level actions can have dramatic results.  A study by the American Council for an Energy Efficient Economy (ACEEE) showed that simply implementing existing cost-effective strategies would flatten and actually reduce the Texas electricity peak demand curve (the orange area) for at least 15 years:

Utilities have for years been trying to control demand growth with “Demand Response” programs. Implementing both 0n-Bill Financing and the Smart Grid will be like “Demand Response on Steroids“.

If customers are given financing, and real-time feedback, opportunities will blossom for thousands of new vendors.  “We’ve got an app for that” will become the new motto for the electric power sector.
 
Innovative Strategy #2:  Storage to Allow Full Use of Idle Capacity, and Full Use of Wind and Solar.   This Strategy is a major money saver because it allows better use of existing combined cycle natural gas power plants that are now under-utilized.  Wind farms and base load plants that must now dump power for low revenue at times of low consumer demand would also benefit.   

If these already-built power plants can be better utilized, the high fuel costs from using expensive peaker plants can be avoided.  Also, by better utilizing existing plants, expensive new power plant construction can be deferred. 

Storage will also solve the problem of relying on intermittent power from the wind and sun – enabling these most-abundant energy sources to become our main power supplies.. 

Storage will allow utilities to serve customer needs at the times of day when consumers want to use electricity, with power generated from cheaper sources. 

This Innovative Strategy would install “Energy Storage Generators” as a first priority for new generation in every electric grid.

Utilities might get automobile owners to buy these Energy Storage Generators for them.  Electricity-using vehicles have large batteries and electronic control systems which can be designed for two-way charging and feedback to the grid.  They can be timed to charge during off-peak times, or even to know when extra wind-generated power is being produced.

If utilities or car makers warrant batteries for the extra battery cycling, and utilities offer tie-in incentives, many electric car owners may even feed power back to the grid during peak power periods.

Other economical examples of Energy Storage Generators include Compressed Air Energy Storage turbines, and Pumped-Hydro turbines.

     Example Diagram of Compressed Air Energy Storage

Image Credit: PG&E

Pumped hydro storage has been used for decades with lakes and dams, pumping water uphill and then letting it fall back through turbines.  Now, there are also pumped-hydro generators that do not require above ground landscapes, and which can be sited virtually anywhere.  These new designs use man-made drilled shafts to pump water up and down beneath the earth’s surface.  

Gravity Power Energy Storage Generator

Energy Storage Generators provide dispatchable generating capacity. Many cost little more to install than traditional gas generators, so they provide a new power generation option in the low to mid range of costs,  far less costly than Coal/CCS or new nuclear.   They can provide enormous savings on fuel costs and new power plant costs.
 
Most importantly, they provide the foundation for a legacy system to continue our civilization long after finite fossil fuels and uranium run out – a 100% Renewable electricity system.

Innovative Strategy #3:  Create a ”Legacy” Electric System.    We know that economical supplies of coal, natural gas, and uranium are going to run out, and actually quite soon.  If you really think much about it — it provides little comfort to believe we have perhaps 80 years left of uranium or 100 years of natural gas.  That’s no time at all.

Are we going to do the same thing with coal, natural gas, and uranium that we have done with oil – do nothing until the fuel supply shortages and drastic price increases hit?

By 2035, it will be starkly evident that coal, natural gas, and uranium are non-renewable fuels with impending finite limits.  Before any new power plants are built in that decade, business risk assessments will call into question whether any power plant that uses these non-renewable fuels will be able to operate economically for its full design life. 

Also by 2035 — or perhaps much sooner – climate change will either be disproven or have become very obvious.  It mattered not what people thought of Copernicus’ theory about the planets circling the sun.  It’s like that with scientific issues.  If they have no basis, they fade away.  However, if the concern is valid, it proves out.

By 2035 it will clearly be time to move to a clean, safe and 1
00% renewable-energy based power generation system.  

If we have followed Strategies #1 (efficiency and distributed power) and #2 (Energy Storage Generators), we will already know how to do this, and do it affordably.  We can continue to add more wind, geothermal, hydro, solar thermal, photovoltaic, biomass, and other renewable power generation without confusion about how to mesh these together in an electric grid.   

If, however, we choose to do politically motivated boondoggles, by definition these will fail.  We will have learned what doesn’t work — but not what does.

A country thrives by tapping abundant and affordable natural resources. If we go the right path the resources we can tap are enormous.  According to the USGS, geothermal resources  alone can supply roughly 550,000 MW (mean value of estimated resources) in the U.S.  A study by Navigant Consulting found over 400,000 MW of water power resources.  Solar and wind resources are even greater in magnitude.

This is personal.  My two year old grandson Ashton will only be 26 years old in 2035.  His generation will see the end of affordable natural gas, coal and uranium.   What are we leaving them?   There will be no end to the sun, the wind, the rain (hydro power), or the heat in the earth. 

We can build a practical Legacy System.  The time to start is now.

Article originally published at www.EnergyEconomyOnline.com 

Despair of the Defenders of JerusalemPhoto: Wikimedia Commons

Earth not waiting: While Washington has failed to act, the Earth is showing accelerating strains from our continued dumping of warming pollutants to the atmosphere.

The latest alarming news: the phytoplankton that produce 50 percent of all the Earth’s oxygen and form the base of the ocean’s entire food chain are now dying off. World temperature records continue to be set monthly in this hottest of all years and hottest of decades on record. Panicked scientists are frantically warning ”the urgent need to act cannot be overstated.”

When we see the iceberg it will be too late: We are as passengers on the Titanic desperately trying to convince the captain to change course. The iceberg isn’t yet in sight, so few believe us. When it finally looms into view and everyone rushes on deck with deer-in-the-headlight eyes, it will already be too late.

Hope in a Prison of DespairPhoto: Wikimedia CommonsIs there any hope? Action must be taken now. If Congress will not act, is there any hope in this Prison of Despair. Hope is here —  a light can still shine … Here’s how:

Push the “re-set” button: Climate activists have been pushing the economic “cap-and-trade” tool for a very long time — so long it seemed the One True Goal was to pass cap-and-trade.

Yet, this idea was merely an economic means to an end. The true end goal is not economic, it is technical.

Most emissions of warming gases come from our equipment and buildings. We need low carbon equipment and systems to heat and cool our buildings, produce and use electricity, to transport us, and to make our goods.

This is a tall order — we have to switch out, retrofit, or stop using almost everything. Yet, that’s the real task.

Why the economic method failed: The economic method was simply a way to encourage people to install this new stuff and stop using the bad stuff.

In the cap-and-trade proposals, actual physical caps on emissions were only envisioned for large pollution sources such as the utility industry. For the rest of us, a major part of the idea was to make fossil fuels too expensive for us to keep doing things the old way. 

OK, deliberately making something everyone now buys more expensive wasn’t exactly popular. Giving the money back might have worked. However, once Washington raises money, the money tends to get stuck in the middle — landing in the pockets of very powerful special interests. In the end, it seemed like everyone wanted to get the money (and of course nobody wanted to pay it in). If a bill was strong enough, it couldn’t pass. Yet, watered-down versions wouldn’t be strong enough to actually move people to make all those changes to equipment and buildings. A fine idea in economic theory died a very ugly death.

Now that Congress has rejected the economic tool, we need to remember what this is really all about: equipment and buildings.

The direct method: Setting a carbon price is not the only way to get better equipment and buildings. Instead, we could do something like directly requiring better equipment and buildings! Some examples:

Vehicle Efficiency Standards: President Obama earlier this year announced greatly improved fuel efficiency standards for new vehicles, including for the first time heavy trucks all the way up to 18-wheelers. “It’s possible in the next 20 years for vehicles to use half the fuel and produce half the pollution that they do today,” the president said.

Appliance and Lighting Efficiency Standards: While Congress debated climate and energy bills ad nauseum, the appliance industry and efficiency advocates have quietly advanced new efficiency standards for a wide variety of common appliances and lighting. On Tuesday, August 3, a major agreement was announced to advance improved Federal efficiency standards to achieve deep cuts in energy use. Many of the new rules can be adopted without Congressional action.

Renewable Portfolio Standards: Dozens of states have set requirements that electric utilities must generate a set percent of electricity from renewable energy. Colorado will achieve 30 percent power from renewables by 2020, while California achieves 33 percent. The fossil fuel industry is running scared, and is funding an initiative to revoke the California renewable standard. Citizens from around the country can defend California’s law, and work to strengthen their own state laws.

Efficiency Reduction Standards: The Arizona Corporation Commission is now leading the nation in energy efficiency, last month adopting a requirement that its electric utilities achieve a 22 percent reduction in electricity use by 2020. The bipartisan plan was adopted unanimously. It requires major Arizona utilities to help their customers retrofit their buildings, plant shade trees, install more efficient air conditioners and appliances, and cut peak load use.

EPA Regulation of Greenhouse Gases: A 2007 Supreme Court case mandated that EPA consider if global warming gases should be regulated as air pollutants. EPA is now finalizing proceedings under this Endangerment Finding. Pollution control regulations expected to emerge will likely prohibit the construction of any new coal fired power plants in the U.S. unless they capture carbon dioxide.

EPA Regulation of Sulfur Dioxide and NOx: EPA regulation of greenhouse gases may not touch older coal-fired power plants. However, EPA’s long-awaited toughening of traditional air pollutant standards such as sulfur dioxide, me
rcury, and nitrogen oxide are expected to push many utilities to retire older coal plants. This is already occurring in Colorado –see “Colorado Shows How It’s Done.”

New Building Energy Efficiency Codes: The single most effective measure in the House Energy and Climate Bill was the proposal to require all new buildings to be dramatically more energy efficient. Simply put — stop building things wrong. While Congress scuttled this idea (it wasn’t even in the Kerry-Lieberman Bill), states and cities can now pick up the mantle and pass these building codes.

Choose the right battlegrounds:

The U.S. Senate has proven to be the most entrenched center of power for special interests who wish to block action to solve our energy and climate crises. 

Having stormed this Fortress of Fat Cats and been rebuffed is not the same as losing the war. There are other battlegrounds where climate action can now be victorious:

States and Localities: As noted above, the most effective measures have been adopted at the state and local level. Perhaps because they cannot print money, these governments have adopted very practical and effective laws. Local and state governments will now be the major battleground for climate action moving forward, particularly new energy building codes and strengthened Renewable Portfolio and Efficiency Standards. 

The Courts: The EPA is now mandated to regulate greenhouse gases precisely because environmental groups pressed the issue successfully through the Supreme Court. The courts will surely be needed again to keep the pressure on and to clarify the areas which EPA must move to regulate.

Corporations: Corporations who adopt Climate Action Plans are not just socially responsible — they also save a lot of money. Putting green on the cover of the Annual Report as well as green on the bottom line is a winning strategy. 

All is not lost: In many ways, the failure of a bad climate and energy bill — the weakened and bedecked-with-favors Senate bill — may ultimately prove to be the best thing to have happened this year.

If the Senate had managed to pass a bill this year, it was clear it would have been watered down so far as to be ineffective.

In the end, the Senate bill would even have violated the “First — Do No Harm” principle, by taking the nation in the wrong direction by massively funding nuclear power.

Yet, the passage of even a bad climate bill would have been hailed as a major achievement. It would not have been clear that little or nothing had actually been done.

In the image above, Hope in a Prison of Despair is carrying a light. If there is to be Hope, there must first be the light of understanding to find our way. We see this light very clearly now, and it can lead us onward to effective actions.

This article was first published Aug. 4, 2010 at www.energyeconomyonline.com. 

It’s time we moved on to something else, or this is going to kill us. Not only are world oil supplies running out, but what oil is still left is proving very dirty to obtain. We need to kick our oil addiction now if we expect to preserve any hopes of economic prosperity, or unspoiled habitats.

“This is what the end of the oil age looks like.”

We have the Deepwater Horizon oil spill now precisely because the easy to obtain oil is already tapped. You don’t drill in mile deep waters if you have somewhere else you could go. The worst is yet to come. If we don’t kick oil now, we will see more disasters as oil companies move to the Arctic offshore, clear more forests for tar sands, and rape the American West to develop oil shale. Worldwide droughts, floods, and dead seas will also ensue from global warming caused from burning oil.

Richard Heinberg of Post Carbon Institute said it best: “This is what the end of the oil age looks like. The cheap, easy petroleum is gone; from now on, we will pay steadily more and more for what we put in our gas tanks—more not just in dollars, but in lives and health, in a failed foreign policy that spawns foreign wars and military occupations, and in the lost integrity of the biological systems that sustain life on this planet. The only solution is to do proactively, and sooner, what we will end up doing anyway as a result of resource depletion and economic, environmental, and military ruin: end our dependence on the stuff.”

I said in my recent peak oil article “The End of the World as We Know It” that we need to adapt to peak oil, but we can do that. This article explains how.

How do we use oil?

To know why we are addicted to oil and where we might most readily save it, we must know how we use it. The U.S. Energy Information Administration publishes data on oil use, yet typically in broad categories such as commercial, residential, industrial, and transportation. In a seminal 2002 work Ending the Oil Age consultant Charles Komanoff poured over thousands of lines of raw Energy Information Administration (EIA) data to get more detail on our actual end uses of oil, shown below:

Author’s graph from Komanoff data

What is no surprise in the above graph is that transportation — for air and land Passenger Travel (47 percent) and moving Freight (18 percent) — used 65 percent of all U.S. oil use in the year 2000, about the same as today. Our biggest challenge is clearly transportation, which I will discuss below. However, Komanoff’s detailed work showed there are big opportunities to cut oil use, where it simply does not have to be used at all.

Non-essential uses of oil

There are many ways to produce heat. In an oil-constrained world, we must move to other energy sources — natural gas, solar, and electricity — to heat buildings and water, provide industrial process heat, to generate electricity, and to run oil refineries. Komanoff found that in the year 2000, fully 15 percent of all U.S. oil use was oil burned to produce heat for these end uses.

Buildings. According to EIA, today there are still about 8 million homes, mostly in the Northeast, that use heating oil, as well as many older commercial buildings. This use of oil should be completely eliminated through conversion of all oil-heated buildings either to natural gas, or to efficient ground source electric heat pumps.

Over 30 years since the Arab oil embargo, these buildings have yet to be converted. Clearly, more direct action is needed — a requirement that buildings cannot be resold without conversion off oil. This conversion-off-oil requirement should be part of a broader requirement that all buildings must have an energy upgrade to implement life-cycle-cost-effective energy measures at time of sale. To finance these upgrades, lenders should be required to fund cost-effective energy upgrades without affecting buyer qualification. Saving on energy bills actually helps borrowers afford their loan payments.

Of course, if older buildings have to do energy upgrades, Congress must insure we stop building new buildings wrong. The House Energy and Climate Bill’s new energy building codes would do just that.

Energy savings throughout the economy, such as through better building codes, will be needed to free up natural gas and electricity resources. This can then allow oil users to switch to these other fuels without overly straining supplies and prices.

Process Heat. While industry has slowly reduced its use of oil for process heat, oil is still used extensively and hence there are still opportunities to eliminate this use of oil. Even oil companies have been open to using solar energy to provide high-temperature steam.

Electricity Generation. Today about 1 percent of total U.S. oil use is still burned to generate electricity. This is primarily in the Northeast, the Southeast, and Hawaii. Solar resources, which are well timed to shave peak demand, may cut oil used to generate electricity at peak times even in areas with no natural gas infrastructure.

We have met the enemy: oil used in transportation

EIA data show in 2007 the U.S. devoted over 2/3 of our oil usage to transportation, in the ways shown below:

Chart by author using data from EIA, 2007

It is us!

The lion’s share of oil use in the U.S. is for transportation, and the lion’s share of that is just to move ourselves around. The oil used for cars, pickups, and SUV’s is for moving people. Komanoff found that 85 percent of the oil used for air travel was also for people, as opposed to air freight. All told, therefore, about 70 percent of transportation oil use (not counting the heavy pickups over 8,500 GVW included in the “medium to heavy trucks” category) is our use of vehicles to move our bodies from one place to another. That’s almost half of total U.S. oil use. It really is us.

Good news and bad news

That’s good news and bad news. The bad news is that it’s personal — we have to change what we drive.

The good news is that it’s possible. It really doesn’t take a Hummer or F250 to move people around. We all know someone with a Prius who gets 50 mpg and loves their car. That’s about twice the average fuel economy of the U.S. passenger car and light truck fleet today, just using existing technology.

Super-efficient cars coming

Later this year, and not a moment too soon, GM will introduce its new Plug-In Hybrid Chevy Volt, and Nissan will begin delivering its all-electric car the Leaf. European automakers have also begun marketing efficient diesels to the American market. The sampling below shows a little of what is happening:

Town Car. The Nissan Leaf is a “town car”. It runs strictly on electricity, with a designed 100 mile range per battery charge, to calm trip anxiety about running out of battery power. It costs $32,780 before a $7,500 tax credit is subtracted. Some states also have electric vehicle tax credits to further reduce the cost of the car. Will it sell? Nissan just announced its first year U.S. model run of 13,000 Leafs is already 100 percent pre-sold.

Town & Country Car. The Chevy Volt is designed to go 40 miles on electric charge only, so most days drivers won’t use any gasoline at all. When the battery runs down, the gas engine kicks in to recharge it, so you can just keep going if you want to take the Volt on a trip. You pay more for this flexibility — the Volt’s price is expected to be over $40,000 before tax credits. Yet, a “town & country” car that averages over 100 mpg of gasoline is revolutionary.

Clean Diesels. As anyone who watched the last Super Bowl knows, German auto manufacturers have their own solution to increased fuel economy — super efficient diesels. For instance, the Audi A3 TDI featured in the Super Bowl “Green Police” spoof advertises 42 mpg highway mileage.

Errand Vehicles. The Zapcar is simply interesting. It is a 4-seater classified as a 3-wheel motorcycle. At only about $12,000 (minus half that in tax credits), this is a cheap car to own. I talked to the car’s owner, and she said her Zapcar will go 40 mph top speed, for about a 20 mile range. The rooftop solar panel actually contributes significantly to its charging. It has a small heater but no A/C. If you liked the original VW Bug, you might like this.

Standards to increase efficiency of U.S. vehicles

On April 1, the EPA announced increased Corporate Average Fuel Economy (CAFE) standards through model year 2016. On May 21, President Obama further directed the EPA to update standards for light duty trucks and passenger cars for later model years, and for the first time set fuel economy standards for new medium-to-heavy duty trucks.

If you’ve wondered how automakers have been able to meet CAFE standards but still sell giant pickups, consider the “Medium-to-Heavy” trucks which will now be regulated for the first time. This category includes not only 18-wheelers (which may achieve a 25 percent increase in fuel efficiency with current technology) but also “medium-duty” trucks such as F250′s and Hummers, which had been exempt from economy standards as they exceed 8,500 GVW.

Using normal turnover rates, these new standards have been projected to increase new vehicle efficiency by up to 30 percent by 2020 and up to 50 percent by 2030.

Will change happen fast enough?

The fuel economy standards are a minimum for new vehicles only. However, they may not bring change fast enough to stave off serious effects on the economy if world oil prices spike soon, and consumers do not replace their old vehicles fast enough.

The U.S. has a vehicle fleet of over 240 million cars and trucks, with sales of roughly 10 to 14 million per year. At normal replacement rates, older vehicles remain in use around 20 years.

Cash for Clunkers

One popular Idea to accelerate efficiency is a renewed “Cash for Clunkers” program. It can be powerful because it requires gas guzzlers to be scrapped. To be worth doing, a renewed program should require at least a 40 percent reduction in fuel use for the new vehicle compared to the scrapped clunker. Note that percentage reduction in fuel use (rather than mpg increase) saves more fuel, and would also leave higher-mpg older vehicles still in the fleet for used car buyers.

To pay for a renewed Cash for Clunkers campaign, a “Feebate” program might apply where new vehicles with lower mpg would be assessed a Fee based on poor fuel economy. All the funds collected from these gas guzzler Fees would be immediately Rebated — hence Fee-Rebate or “Feebate” — to buyers of more fuel efficient vehicles.

The “truck testosterone” factor

The wild card in reducing our personal oil use is the love affair Americans have developed with giant pickup trucks and SUV’s. Led by decades of advertising from Detroit, these vehicles have gained steadily in market share, vastly increasing our nation’s oil use.

There simply is no Prius Hummer or F350 Volt, nor is there likely to be. The laws of physics dictate against super-efficient mileage for such heavy vehicles.

The laws of the U.S. Tax Code, however, still dictate that business owners must buy a truck over 6,000 Gross Vehicle Weight to qualify for tax write-offs. This insanity in U.S. tax law must be fixed, as there are 25 million small business owners in America who often set the social norms for others. The “boss’ car” is now a heavy truck.

Those who don’t really need a big truck should do the patriotic thing and haul their bodies around more efficiently. Leave the big truck at the work site where it’s really needed.

What about the macho factor? A leather jacket and a hot electric motorcycle bring just as much respect from the guys, and you don’t have to ask an American soldier to die to fill your tank.

What next? These more efficient vehicles can help us get through the next couple of decades, but beyond that, we will need to move almost completely off oil for our transportation needs. Measures to combat global warming call for an 80 percent reduction by 2050 in our carbon emissions — and the peak oil supply curve looks to fall almost as sharply.

Start workin’ on the railroad all the live-long day

My generation (Baby Boomer) sits on a cusp of history. Within our own family histories, we can look back at a time before the Age of Oil, and look forward to see its end. It’s really not all that long.

My grandfather grew up in a world before air travel, and the affordable personal vehicle was unknown. Yet, steel rails connected the country, and the leaders of America’s largest cities already understood that a city needs a subway system to prosper. Almost all long-distance travel and freight hauling was by rail.

I look at my one year old grandson, and I realize he will see the end of the Age of Oil. He won’t need to ride a horse to get around, as we now have electric cars for local use. Yet, there won’t be any electric airplanes, and we need to save what little oil we will have left to use as feedstock for essential products, construction and farm use, national defense, and intercontinental air travel.

We will need the steel rails once again to perform virtually all long-distance freight hauling and travel.

Freight Hauling. It already makes sense to move long-haul freight off the roads and onto the rails. Federal Railroad Administration studies have shown rail freight is 2 to 5 times more fuel-efficient for the same routes as long-haul trucking.

Comparison of rail and truck fuel efficiency

Source: Federal Railroad Administration

We need to move the big trucks off the highways anyway, or we will all pay much higher vehicle registration fees and gas taxes.

Essentially all road damage other than weathering is caused by heavy trucks, yet the bulk of road costs are paid by drivers of personal vehicles. One 40 ton truck can easily cause as much damage to roadways as 60,000 cars. This has always been a massive subsidy from drivers of personal vehicles to heavy trucks — and it’s about to get worse.

It’s going to get ugly as we choose to use less fuel, because we now pay for road maintenance primarily with gas taxes. Highway officials nationwide are already calling for higher fees and gas taxes as they see we will now use much less fuel, or no fuel at all, for our cars.

Drivers need to stand up to this and insist that trucks pay the higher costs for the damage they do, If tolls are set, they should be levied on the vehicles that inflict the damage. This will change the economics to move more freight onto the rails.

There is no downside to ending the subsidy of truck freight — our roads will be safer and less congested, road maintenance costs will go down, and our nation will create jobs by saving on imported oil.

Rebuilding the Rail Network. Though we spent our nation’s resources to build the rail network, railroads have been ripping up track for decades as they were unable to compete with subsidized truckers.

When I was the finance manager of the Iowa Railway Finance Authority, Iowa worked hard to maintain its essential rail branchline network, as did many other states. However, many lines were ripped up across the nation, and we may now need to rebuild them. The highest priority will be improving and double-tracking railroad main lines, while branch lines to key areas may also need to be rebuilt or refurbished.

Electrifying the Rails. The rest of the world is in the process of electrifying their rail lines, yet the U.S. has barely begun this task. Railroads can be even more energy efficient with electrified lines, as locomotives can be lighter and more powerful. Regenerative braking downhill feeds electricity into the grid to help power locomotives climbing up the other side.

Most importantly, an electric railroad network would not be reliant upon oil. America’s own resources of solar, geothermal, hydro, and wind power can move it. Railroad rights of way could even work in concert with renewables, e.g. to provide transmission corridors and millions of acres which could be covered with solar PV.

High Speed Passenger Rail. There will be no electric airplanes, and the hydrogen fuel economy seems always to be 50 years away. In a few decades, it may even be hard to take a Prius or Volt on a long distance trip as oil supplies shrink.

Americans may be surprised to see how far behind the U.S. is compared to other countries. Nations who are spending hundreds of billions to implement electrified high speed passenger rail networks. include not only Japan and the European Union but also China, Argentina, South Korea, and Taiwan. Passengers travel in quiet and comfort aboard high tech trains zipping along at breathtaking speeds over 150 mph.

Truly high speed passenger rail is a challenge, because it typically requires its own dedicated tracks separate from freight rail lines and grade-separated from road traffic. High up-front costs mean government must be involved, as with all other transportation modes.

American high speed rail may finally be ready to roll out of the station, however, as the Obama administration stimulus package included $8 billion for several high speed rail projects. The Florida project linking Tampa-Orlando-Miami is the most “shovel-ready.” We need to fully fund — and complete — several U.S. projects now to prove HSR is real.

We have a long way to go, but the rail lines offer a secure path into the future if we keeping a-workin’ on them.

Adapting is what we do

Actions we take now to kick our oil addiction can help us adapt to a world of shrinking oil supplies. It will be very tough, as we have waited far too long, complacent with the way we now live.

The way we now live, however, is destroying our world, as the BP oil disaster has shown. The next shoe to fall will be peak oil, which will slam our economy to the ground if we remain oil-dependent.

Those whose vision of the future assumed that everything would continue the way it has been, will not get what they want. Yet, we can adapt — that is what humans do best.

We just need to remember the famous motto of adaptation: You can’t always get you want, but you can get what you need.

This article originally posted at www.EnergyEconomyOnline.com.

A storm is quickly approaching, and the world is not ready for it.

The permanent end of the era of cheap oil is coming as soon as next year, according to a raft of official reports that have made their way into energy media over the last few months. Governments are now beginning to acknowledge the looming crisis. Yet, perhaps because they waited too long to prevent it, leaders are not yet alerting the public.

The entire world economy is built on cheap oil. A permanent oil production shortage will thus lead to The End of The World (As We Know It). What will come on the other side of this — will it be good or bad?

Public unaware

Except for a few stories in financial pages such as London’s Financial Times, this earth-shaking news has yet to reach the Mainstream Media. While “Peak Oil” researchers have long warned of approaching oil shortages, the difference now is these dire warnings are being validated by the highest government and oil company officials. Yet, no political leader has had the courage to make a major announcement to prepare the public for what lies ahead.

This public blindness is tantamount to the isolationism that gripped the U.S. in the years preceding WWII. While the highest government leaders did their best to prepare for inevitable war, they were hamstrung by the resistance of a public unable to accept what really lay ahead. Similar to today, some politicians advanced their own careers by feeding on the public’s desire to believe no coming storm could ever reach them. Yet, the storm came anyway.

Graph: Peak Oil PrimerThe limits of oil

The looming crisis we now face is often referred to as “Peak Oil” — a status where global oil production will reach a plateau, then begin its irreversible decline.  

Oil fields follow a production curve where output increases at first, then reaches a plateau or “peak,” after which a steep decline occurs. Because existing oil fields decline, oil companies must continually develop major new finds just to maintain existing production. If these new projects do not exceed the decline of existing fields, it becomes impossible to maintain oil production, let alone grow oil output to fuel economic growth.

The problem in recent years is that new oil finds have been smaller, deeper, and in more difficult to reach places. Cheap oil prices simply won’t support the investment needed to develop them, so oil companies have not invested heavily enough to keep up with demand. Lester Brown of Worldwatch Institute notes that major oil companies, awash in cash, have instead spent billions buying up their own stock, aware their existing reserves will soon increase greatly in value.

Did global oil production permanently peak in 2008?

Until 2008, world energy forecasters had always assumed global oil production would keep up with economic growth. According to classic economic theory, as world economies grew they would demand more oil, and oil companies would respond by investing in more exploration and development. “Peak Oil” was considered decades away.

Beginning around 2005, however, world oil production began to hit a brick wall, and by 2008 global oil demand actually exceeded supply. With only a 2 percent shortfall of supply compared to demand, oil spiked to $147/barrel, and U.S. gasoline prices soared to over $4/gallon.

That same year, the International Energy Agency for the first time published a “bottom-up” oil analysis, evaluating each of the world’s major oil fields to see if production actually could continue to increase.

After looking at the oil field data, the IEA revised its forecasts of future oil production downward, yet still took a very optimistic official view, by using rosy projections of as-yet-undiscovered oil fields.

Independent researchers, however, using IEA’s same “bottom-up” data, have now stated the IEA was wildly optimistic. The Global Energy Systems Group has concluded the world actually reached Peak Oil in 2008, and global oil production will now begin to decline. Investment alone cannot fix the problem as the decline rates of existing fields are accelerating.

Significantly, though IEA’s official forecasts remained rosy, IEA’s Chief Economist Dr. Fatih Birol began urgently telling anyone who would listen the era of cheap oil is over, and “we have to leave oil before oil leaves us.” If we do not “leave oil” behind us fast enough, economic growth may be choked off as oil prices rise to unaffordable levels.

From “tin hat” theory to “crikey!”

In the last few months, there has been a sea change in attitudes about global oil supply among top officials. The U.K. government, the U.S. Department of Energy, and the U.S. Joint Forces Command, among others, have begun to acknowledge the seriousness of the situation.

On March 25, the French publication Le Monde reported on a semi-private U.S. Department of Energy Roundtable held in April 2009, where top U.S. DOE energy analyst Glen Sweetnam presented the graph below summarizing prospects for world liquid fuel production vs. demand:

 Graph: Sweetnam, DOE, April 2009 [PDF]

The chart includes all known sources of supply, including undeveloped projects and “unconventional” sources such as tar sands. It politely labels the expected gap as “unidentified projects.” The gap occurs very soon (beginning in 2011) and is very large — roughly 10 million barrels/day by 2016. To put this in perspective, 10 mbd is roughly equivalent to the entire output of Saudi Arabia, and is well over 10 percent of total world demand. (Recall $147/barrel in 2008 occurred with only a 2 percent shortfall.)

DOE still avoids any use of the words “Peak Oil,” instead talking of an “undulating plateau” of oil prices and production. Shortages will lead to higher prices and more investment, spurring more production and lower prices. However, oil price volatility discourages new investment, so production plateaus. Richard Heinberg of Post Carbon Institute asks “What’s the difference?” in “Quacks Like a Duck …“

Whatever you call it, there is now a growing official consensus the world faces serious oil supply shortages beginning in the 2011-2015 time frame and continuing. Rick Monroe of the staff of Energy Bulletin has provided links to the growing list of official warnings here.

Peak oil analyst Jeremy Leggett, who participated in a closed-door U.K. government summit on oil supply on March 22, summarized the recent awakening of official realization: “Government has gone from the BP position — ’40 years of supply left, the price mechanism works, no need to worry’ — to ‘crikey.’”

The end of “as we know it”

The coming oil descent can be seen as both a crisis and an opportunity.

The end of cheap oil will be the end of living life ”As We Know It.” Those who try to continue doing things in the old ways that depend on cheap oil will experience severe hardships.

Yet, there will be opportunities. Those who prepare now will be better able to weather the storm, to see the rainbow on the other side.

The end of … gas guzzlers

To win WWII, Americans had to give up buying new cars, as auto factories were converted to weapons production. The opposite will now be true — we will need to buy different vehicles that use little or no gasoline or diesel.

Think back to 2008. When gas prices hit $4/gallon, families with gas guzzlers suddenly found they were paying $400/month for fuel. Prices for very nice SUVs and heavy trucks plummeted — you couldn’t give them away. Meanwhile, buyers lined up to buy hybrids. The time to unload your gas guzzlers and buy something else is now.

The end of … cheap food?

I love my big burgers, but this too may come to an end if corn-fed beef gets too pricey. To replace a paltry 6 percent of U.S. gasoline, we already feed one-third of the entire U.S. corn crop to the corn ethanol industry, with impacts worldwide on crop prices, conversion of rain forest to cropland, and ocean dead zones from fertilizers. Ethanol corn use is projected to increase to one-half of the entire U.S. corn crop by 2015 under congressional mandates.

If you actually had to raid your refrigerator to fuel your car, you would see the obscenity of feeding food to machines. Yet this is exactly what we are doing. One of the worst decisions ever made was to build the infrastructure to convert food crops to fuel, because we have now directly tied the price of food to the price of fuel. As oil prices rise, so will the price of food.

Even if we were not directly feeding our food supply to our machines, our very production of food is heavily dependent on petroleum. There may be hope — a study just released by Iowa State University shows farmers could be just as productive using half their present fuel use. Yet, lower fuel use depends on crop rotation away from fuel-intensive corn, a move unlikely to happen if corn prices are tied to skyrocketing oil prices.

It is unlikely Congress will find the sanity to eliminate taxpayer subsidies of ethanol. Therefore, a switch away from gasoline to electric vehicles may be the only way to keep food prices affordable.

My big burger days may soon end — but at least my waistline could be better for it. Those whose waistlines are already too thin — the billions of hungry people in the world – will feel the impact of higher grain prices much more. In 2008, food price riots broke out worldwide the last time oil prices skyrocketed. We must stop feeding food to cars.

The end of … globalization?

Higher oil prices mean the world is about to get a lot smaller, as the cost of transporting goods halfway around the world will no longer be cheap. Jeff Rubin, former chief economist at CIBC World Markets, argues “a lot of long-lost jobs are going to be coming home.”

Rubin has written a book Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization. He notes that already in 2008 high oil prices began to make U.S. steel and furniture producers competitive again. Rubin expects China’s economic growth to be fueled more by growth in their own consumption.

Wal-Mart may once again carry products labeled “Made in USA.”

The end of … pristine wilderness?

Millions of us are now viewing once again the movie Avatar – James Cameron’s wonderously beautiful tale of a pristine world. This time, however, we are not magically transported to Pandora in a theater by the magic of 3D. Instead, we may notice ourselves driving a small DVD home from the store in a 3,000-pound vehicle, to view it on our big-screen TV.

If we truly look at ourselves, we will see that we are the voracious society in search of our own “unobtanium.” Our unobtanium is oil, and shouts of “Drill, Baby, Drill!” have shown there are those among us who are willing to do anything, and destroy anything, to acquire it.

As oil becomes scarce and prices skyrocket, these shouts will grow louder, coupled with skapegoating tactics to lay blame for the oil crisis at the feet of those who wish to preserve our most precious natural areas.

There will once again be pressures to open to drilling Alaska’s pristine wilderness, the Arctic National Wildlife Refuge. If this is done, it will not solve the crisis, as EIA projected that ANWR would likely reduce oil prices only 30-50 cents per barrel (about a penny per gallon of gasoline). Yet, hunters take note, a wildlife area critical to scores of species of North American migratory birds would be violated.

Despite the British Petroleum oil gusher in the Gulf of Mexico, expanded offshore oil development in all U.S. coastal waters will likely be approved. Whether another Deepwater Horizon event occurs may be determined by whom we elect – those most beholden to the oil companies, or those willing to strictly regulate them.

Canada has already begun the rape of its northern forests to exploit tar sands, the surface mining of which results in a landscape of complete devastation. Similarly, there will be calls to utterly devastate the forests and water resources of western Colorado to exploit oil shales.

Only a move away from oil as quickly as possible can save these pristine areas from the destructive forces of a desperate society.

We can do it 

Though Americans resisted the recognition that WWII was coming, once it came they rose valiantly to the call to action. A similar can-do spirit is needed now for the transition to a post-oil world.

This crisis is coming soon. It is too late to prevent it, so we simply need to get used to it. Peak Oil is happening.

We will need to adapt – but we can do that. 

We must repeat this to ourselves, as we face the challenging times ahead:

It’s the end of the world (as we know it) –  and I feel fine.

Unemployment vs. deficit “conundrum”

As former Treasury Secretary Henry Paulson said Saturday on National Public Radio, “we as a nation save too little and we borrow too much, both individually and the government.” In Paulson’s new book On the Brink, he argues that Americans’ relative lack of savings helped to propel the financial crisis.

However, Paulson acknowledged to NPR host Scott Simon, the “conundrum” is that to spur the economy, we now need to spend more and create more jobs. Paulson did not offer a solution to this impasse.

Indeed, this contradiction is now paralyzing the nation’s political life, as Americans are worried about both high unemployment and record deficits. The Obama administration and Congress are now walking a tightrope between these anxieties.

Investment as solution

The solution to this jobs vs. savings conundrum is to invest money now, into projects that when completed will help us individually and as a nation to save more.

For instance, an investment now into energy efficient buildings would create desperately needed construction jobs, but pay for itself with increased energy savings.

Investments in an advanced electric grid using renewable energy will create the engine to power the economy, without skyrocketing fuel costs.

Investments to wean our cars and trucks off imported oil can stop the transfer of wealth of trillions of dollars from the U.S. economy that is now building the economies of oil exporting nations, many of them hostile. These dollars can instead remain in the U.S. to build our own economy.

Measures which spur investments that help us to save thus meet both the urgent need for more jobs and make structural changes to help America thrive through thrift.

Private sector key

It is neither desirable nor possible for government to put everyone back to work with public works projects. While some investments must be made to make government operations more thrifty, the biggest savings must come in the private sector. More efficient operations will help the entire economy to thrive and compete.

The challenge, then, is to find ways to spur these private investments.

Cap-and-trade in jeopardy

The mechanism favored by economists to spur private investment in a more efficient economy is the cap-and-trade approach. A “cap” on emissions is set, but polluters can “trade” by paying someone else to cut their emissions if it is cheaper. The overall emissions limits spur investment in new technologies, and those investments create jobs. This approach is the centerpiece of the House energy and climate bill.

However, very effective “cap-and-tax” media campaigns by large polluters and Tea Party-style activists, have placed the cap-and-trade concept in serious jeopardy. cap-and-trade is not a tax but in fact is the lowest-cost means to set a pollution limit. Opponents have nevertheless loudly condemned cap-and-trade as a tax-like economic levy. Both Democrats and Republicans remember well the 1994 mid-term election debacle after Bill Clinton proposed what was deemed a “BTU Tax.” Republicans have vowed to use cap-and-trade as a hammer against its supporters in this November’s elections.

Climate bill “lite”?

Some Senators are now pushing an approach that would accomplish only a handful of key measures. For instance, one proposal would require action only by electric utilities. While any progress is welcome, the failure to achieve significant greenhouse gas emissions reductions would doom the ability of the U.S. to negotiate with other countries for a world climate deal. As global warming is by definition a worldwide problem, the failure to achieve agreements with other countries would mean the U.S. would still suffer the effects of catastrophic worldwide climate changes.

As global warming is by definition a worldwide problem, the failure to achieve agreements with other countries would mean the U.S. would still suffer the effects of catastrophic worldwide climate changes.

While Kansas might install efficient wind farms, it would be of little help if worldwide global warming proceeds unabated and turns Kansas into a region stricken by a Dust Bowl style permanent drought, destroying its agriculture.

Five key energy and jobs measures

If we assume for the sake of discussion that a limited jobs and energy bill this year won’t include either cap-and-trade or new taxes, what measures are are critical? Could substantial greenhouse gas emissions cuts still be achieved? What must proponents of a good bill insist be included? The following five key measures could begin to spur investments in private job creation and greenhouse gas reductions across multiple sectors of the economy:

1. Better energy building codes: Buildings account for almost 50 percent of total U.S. energy use and 70 percent of our electricity use. This makes new energy building codes the single most effective energy saving and emissions reductions measure available. The jobs created would be in the severely distressed construction industry.

The group Archictecture 2030, comprised of the nation’s most prominent architecture and building firms, has estimated the new energy building codes contained in the House jobs & climate bill would save six times more greenhouse gases than could be saved by a fleet of 100 new nuclear reactors. By the year 2050, the new energy building codes would by themselves reduce building sector CO2 emissions by 49 percent below 2005 levels. Since the building sector accounts for almost half of total U.S. energy use, the new building codes could achieve a reduction of almost one quarter of total U.S. energy-caused greenhouse gas emissions.

The new building codes adopt standards whose cost as part of a mortgage payment must be less than the cost of the energy saved — so they cannot be required unless they save money.

Building better buildings also creates more construction jobs. Doing the things needed to make buildings more efficient — better caulking, insulation, etc — are low tech and highly labor intensive.

If builders had a way to move most of the money consumers are spending on utility bills, and instead buy better houses with this same money, they would shift those monies tomorrow. Better energy building codes accomplish this.

We already know how to build more efficient buildings. It just makes sense to stop building things wrong so we don’t have to go back and fix them later.

2. Energy saver home tax credit for new and retrofit homes: To provide an immediate jobs boost to the construction industry and ease the transition to more energy efficient homes, Congress should revise the Homebuyer Tax Credit. The current Homebuyer Tax Credit expires April 30, 2010. As the housing industry is still severely depressed, it is a sure bet there will be calls to extend it.

However, studies have shown the current Homebuyer Credit is not creating many jobs. Simply selling homes does not require hiring construction workers. Homes need to be newly built, or retrofitted, to create new construction jobs. An Energy Saver Home Credit could implement an effective requirement for job creation. As it would be more targeted, it could pay for itself through economic multiplier effects.

Architecture 2030 has estimated that a similar measure to promote new and retrofit home energy efficiency would create 4.5 million job years if only 2.2 percent of homes participate.

To receive a credit for purchase of a new home, the new Energy Saver Home Credit would apply when the new home meets energy standards at least 20 percent better than energy building codes. For instance, if mandatory energy building codes require a 30 percent savings compared to 2006 codes, the new Energy Saver Home Credit would require a 50 percent savings. This would reward builders who do the extra work (and hire the extra workers) to make the home more efficient than required.

To receive an Energy Saver Home Credit for the purchase — or refinancing — of an existing home, an energy retrofit achieving at least a 20 percent energy reduction would be required. Thus, as existing homes are purchased, or refinanced, there would be a strong incentive to bring those homes up to more efficient energy standards.

3. Economy-wide new equipment and transportation efficiency standards: Another key provision to stop building things wrong is to enact improved energy efficiency standards for lighting, appliances, and heavy trucks and transportation equipment. The House energy and climate bill contains these provisions to require cost-effective changes to how new equipment is built.

These new lighting, appliance, and equipment standards would bring into effect savings across all sectors of the economy — industrial, commercial, residential, agricultural and the critically important transportation sector. As new energy efficient technologies are available that become cost-effective, new equipment would need to be manufactured to these more efficient standards.

This provision would create jobs by helping the U.S. economy run more efficiently and competitively. It would also create a significant export opportunity for the U.S. to design and manufacture energy-efficient equipment to the world market.

4. Renewable Energy and Efficiency Standard (REES) for electric utilities: Energy Information Administration modeling [PDF] of the House energy and climate bill has indicated that under that bill’s provisions, over 80 percent of the actual reductions in U.S. greenhouse gas emissions by 2030 would be implemented by electric utilities. This is because, as shown in the EPA chart below, electricity generation accounts for the lion’s share of U.S.direct CO2 emissions. Most importantly, conversion of electric utilities to low-carbon sources is readily workable, whereas other sectors of the economy such as transportation may take longer to reduce emissions.

A majority of states now require increasing percentages of kWh’s to be generated by renewable energy. California has a 33 percent by 2020 standard, and Colorado is now moving to adopt a 30 percent by 2020 standard. (Colorado is particularly noteworthy as it began with over 2/3 of its electricity generated by coal in 2005) Overall, 29 states have adopted minimum requirements [PDF] for renewable generation and 4 have adopted “goals.”

The public has embraced this approach as it focuses on adoption of new technologies rather than economic measures.

The House climate bill contains a flexible Renewable Energy and Efficiency Standard (REES) requiring utilities to obtain 20 percent of their kWh’s from a wide selection of energy efficiency and renewable energy sources by 2020. That standard also gives credit to utilities who choose to meet part of their kWh’s using Carbon Capture & Sequestration (CCS), new hydro, or new nuclear power.

A report [PDF] prepared by the Chicago consulting firm Navigant has recently estimated that a standard requiring 25% of the nation’s electricity to be supplied by renewable sources by 2025 can create 274,000 new jobs. The report’s sponsors noted that meaningful requirements for renewables are critical for the U.S. to compete with China in attracting renewable industry manufacturing facilities.

While the House bill’s REES standard stopped at only 20 percent, the bill ultimately used cap-and-trade to require electric utilities to achieve much greater reductions in emissions — roughly 50 percent by 2035 and over 80 percent by 2050. If cap-and-trade is not adopted, however, a continuing “ratcheting upward” of REES levels might instead be used to achieve similar electric utility emissions reductions.

If a REES requirement at high levels is adopted, it should also include power plant efficiency conversions. Natural gas power plants and efficiency tune-ups can also help utilities lower emissions. To allow more flexibility at lower cost than a strict renewables-only requirement, REES levels above 20 percent should include improvements to generator efficiencies (e.g. fuel-shifting to natural gas from coal, or overall efficiency upgrades) as a qualifying REES energy efficiency measure.

To complement a Federal REES, the bill must include strong Federal transmission siting measures to insure needed transmission lines from new renewable power plants can be built.

5. Agricultural and Local Governments Offsets programs: The House climate bill creates a special “offsets” program to allow polluters subject to its cap-and-trade measures to instead pay to help farmers reduce greenhouse gas emissions. These USDA-administered programs might include carbon sequestration through better pasture management, conversion of crop residue (straw) to biochar, or paying for a dairy farmer to install a methane generator.

While technically this program is something like a “trade” provision in a “cap-and-trade” bill, its separate administration by USDA would allow it to be included in a new bill even without an overall “cap-and-trade” scheme. For instance, electric utilities might be allowed to purchase some agricultural offsets from USDA as one means of meeting their REES levels.

If the USDA program proves successful, another special-purpose Offsets program might also be developed, for local governments. For instance, EPA might advance a program to fund methane capture and usage at municipal waste treatment plants and landfills.

Some measure of success

The inclusion of the above five measures in a jobs and energy bill this year would accomplish many of the job creation and greenhouse gas emissions reductions that might have been included in a more comprehensive jobs and climate bill. Almost all sectors of the economy would be touched, but directly rather than through cross-funding mechanisms.

Nothing to call a “tax”

A limited jobs and energy bill enacted this year might not include any requirements for oil refineries or natural gas distributors to meet “caps” on their sales or purchase “allowances,” and “offsets.” Hence, it is unlikely voters would see such a bill as imposing any kind of levy that opponents could label a “tax.”

No new money raised

None of the above measures require adoption of major new funding mechanisms. (The Energy Saver Home Credit requires funding, but it is proposed as a more effective replacement to an existing Homebuyer Tax Credit.) All other measures are regulatory in nature and only require administration. They are funded by the private sector (e.g. electric utility bonds, and home mortgages) and adopt measures which will pay for themselves through lower fossil fuel costs.

Many programs not possible

With no new funding mechanism, no new money would be raised. Therefore, measures which require significant funding might not be adopted. These include proposed funding for new state energy office programs, increases in low income weatherization, funding of advanced automobile research and development, rebates to impacted electric and gas local distribution companies, funding of international projects that reduce greenhouse gas emissions, funding of loan defaults to investment bankers by utilities who build new nuclear power plants, or a proposed $60 billion in new funding for carbon capture and sequestration (CCS) technology.

Many of these additional programs might also create jobs and significantly reduce greenhouse gases. Some may be critically necessary to achieve an international climate agreement. Many are demanded by regional lobbies to ease the perceived costs of converting to cleaner energy. Some are simply demanded by powerful lobbies who want Federal funding.

However, they are not included in the five measures above, because there would be no way to pay for them.

Trading may yet come

If Congress wishes to fund these additional efforts, adoption of a more comprehensive bill including cap-and-trade is likely to be required. Such an act, if structured as economists recommend such as in the House bill, would require all polluting industries such as oil refineries, factories, and natural gas distributors to purchase pollution allowances if they wish to continue to emit greenhouse gases or to sell to end users who would burn their fuels. Industries could choose to reduce their emissions, or pay for allowances and offsets for someone else to reduce emissions. Prices for such fuels as gasoline, diesel fuel, and natural gas would rise slightly if consumers do not reduce total usage below the emissions “caps.”

Polluters would not pay one dime for any allowance or offset, however, unless it was cheaper to buy than to reduce their own emissions. Many industries will ask Congress for this option, so a “trade” may yet come to pass in any climate pollution-capping bill.

Half-assessed?

Sen. Lindsey Graham (R-S.C.) has maintained his strong support for a comprehensive jobs and climate bill, because he sees the need for enacting many of these other efforts. He has recently been quoted as saying anything less than a comprehensive bill is “half-ass..d”.

Ultimately it will not be sufficient to adopt just the five measures above. Global warming is real. China is racing ahead of us now, and we need strong action to compete. In other words, in many ways Sen. Graham is right.

Enacting any kind of bill without the five measures above, however, is also “half-ass..d.” To fund nuclear power loan defaults, CCS, and offshore oil drilling and not do the measures that create the most jobs would ignore our best opportunities. Other countries will move ahead and steal the lead.

America’s jobless deserve better than that. Congress needs to move now to adopt a jobs and energy bill that will put Americans back to work.

As the world meets this December to set plans to halt global warming, it is expected America and other industrial nations will commit to a daunting task: reduce CO2 emissions 80% by 2050. In just 40 years, a complete revolution in how we use and supply our power must happen, or the world will face catastrophic effects of runaway climate changes.

As a new power plant typically lasts 40-50 years, many scientists are now arguing we must simply stop building new power systems that use significant amounts of fossil fuels. They argue we must move to a high reliance on the wind and the sun for our electricity.

Abundant Power. The U.S. has enormous wind resources, capable of generating over 20% of U.S. electricity from wind by 2030 (PDF), according to the U.S. Department of Energy.

The sunlight falling on our deserts, parking lots, and rooftops has even more power — enough to supply 69% of U.S. electricity by 2050 according to published studies.

Other renewable power sources — such as geothermal energy, municipal waste-to-energy, and biomass — will also play a role, but they pale in size compared to the gargantuan resources of wind and sunlight.

How We Use Energy vs. How Nature Provides. Though nature provides all the energy we may need, there is a problem. We demand power literally “at the flick of a switch”, not just when the wind is blowing or the sun is shining.

This basic fact about how we use power versus how nature supplies clean energy has caused many to discount the idea that wind or solar power can ever supply more than a small fraction of our electricity. Critics of renewable electricity call it “intermittent” and “unreliable”. They say we can’t “catch the wind”, nor can we command the sun to always shine.

These critics see two possible choices for the future. We can develop more stable supplies of renewable energy by coupling wind and solar projects with storage. Failing that, they argue we should give up on renewables as a primary source of electricity, and instead build more nuclear power.

The flaw in the nuclear path, beyond its tremendous cost, long lead times, and imported fuel, is that nuclear is not actually “dispatchable” power. Nuclear plants are designed to run all the time at fairly steady output — meaning nuclear power cannot provide the “peaking power” now provided by gas turbines. Thus, a nuclear path would still rely heavily on fossil fuel power plants to “ramp up” on a daily basis to provide the power needed during these daily swings.

A truly dispatchable system providing over 80% reductions in carbon emissions, therefore, must rely on some form of energy storage. The energy storage can allow us to fully utilize wind and sunlight as our main power sources — supplying both “base load” power and dispatchable daily peaking power with energy from these inexhaustible supplies.

Energy Storage and Today’s Grid. Despite critics, wind farms and solar photovoltaics are already feeding zero-fuel-cost power into today’s electric grid with little or no energy storage. At current levels, the fluctuations in wind and solar output are backed up by the same “load-following” and “peaker” natural gas power plants that already must handle wild fluctuations in customers’ demands for electricity. Indeed, the DOE’s “20% Wind by 2030″ scenario modeled how wind could supply this very significant portion of U.S. electricity needs even with no storage of the wind power.

As long as natural gas remains cheap and acceptable to use, many argue that developing ways to store wind or solar energy may be a case of “a solution in search of a problem”. They note natural gas peaking plants are cheap to build and don’t need to operate much more than they already do, to provide firming power to renewables.

“Different sectors like to associate with wind power,’ the NY Times quoted Robert E. Gramlich, policy director at the American Wind Energy Association. “But we don’t want to give anyone the impression that storage is needed to integrate wind. Even growing 20-fold, storage isn’t needed.”

A Better Way. Though wind and solar can be integrated without storage for a long time to come, energy storage proponents argue that coupling wind or solar power with utility scale energy storage is a “Better Way”. If stored wind or solar energy instead of natural gas plants can be used to generate power when the wind is not blowing or the sun is not shining, less natural gas will be burned to provide dispatchable power.

Though storage will cost money, burning less natural gas will save money on fuel costs. Also, there are now times when excess wind farm kWh’s have been sold onto the grid at extremely low prices or even given away, because they occurred in the middle of the night when there was very low demand for power. Storing that wind energy, for sale of kWh’s the next day when prices are higher, would generate more revenue. While less dramatic, solar power production can also be shifted to higher-demand periods, from solar noon to late afternoon/early evening when utilities typically experience maximum summer peak demands.

The most important motivator, however, to find a “Better Way” is the need to achieve phenomenal reductions in CO2 emissions. While it may take until 2030 to reach a 20% contribution to the grid, what then? Going beyond this level will require dispatchable renewable power. Twenty years is within the lifetime of any new power plant built today, so storage proponents argue we should already be building to achieve minimum levels of fossil fuel use.

Compressed Air Energy Storage (CAES). A proven technology, ready to use now, for economical storage of massive amounts of renewable power is to compress air at very high pressures, and store this compressed air in large underground caverns, depleted wells, or aquifers. When the wind turbines and solar plants reduce output, and power is needed, the compressed air is released and run through turbines to generate power:

Source: Scientific American

Because the caverns or aquifers are so large, hundreds of hours of output can be stored, providing the ability to cover very long “doldrum” wind periods or stretches of cloudy days. Most CAES turbines can also run in natural gas-only mode in the extreme event the cavern becomes fully depleted. A reliable, fully dispatchable electricity generation system is provided.

CAES has a well established track record at scale. A 280 MW plant in Hunthorf, Germany has run since 1978, and a 110 MW plant at McIntosh, Alabama has been in continuous operation since 1991.

CAES systems use gas turbines almost identical to normal natural gas peaking turbines. However, they only use about 1/3 the natural gas, because 2/3 of the natural gas energy in a regular turbine is used to compress air before it enters the turbines, and this compressed air would now be supplied by the stored air. Natural gas would still be needed to heat the air before it enters the turbines.

CO2 Reductions. While not a 100% carbon free power system, a wind or solar coupled CAES power plant system can achieve >80% reductions in fossil fuel use. A baseload CAES/wind system (designed to provide at least 85% Capacity Factor power to the grid) would typically provide half of its total power directly from the wind farm to the grid, without cycling through the CAES plant. The other half of kWh’s supplied to the grid would come from stored energy in the CAES, at about 1/3 normal fossil fuel use. Total fossil fuel use per delivered kWh would thus drop to roughly 1/6 of a normal fossil fuel plant, an over 80% reduction in CO2 output.

A carbon-free electric system is also possible, with CAES plants fitted with thermal storage. The thermal storage would store heat from compressing the air, for later use to heat the air going to the turbines. Known as “adiabatic” CAES plants, the stored thermal energy replaces the need for natural gas, causing the entire system to run on renewable power alone. Because thermal storage is costly, it is not expected CAES plants installed in the next decade will include it. However, a regular CAES plant can later be retrofitted with thermal storage, when it becomes more economical or society demands zero-carbon power.

Geological Formations Suitable for CAES. A nationwide network of CAES plants could use the same types of geological formations, and depleted gas wells, as are currently used to store most of the nation’s natural gas supplies. Wide areas of the U.S. — most notably the wind-rich central states — have these formations and depleted wells:

Source: Coha and Louks (1991)

Cost of Renewable/CAES Power Systems. Because the caverns, aquifers, and wells are already there, CAES offers very economical energy storage.

Estimates for CAES plants range from $750/kW of generating capacity up to about $1,200/kW, with the difference being primarily the number of hours of energy storage. A wind farm/CAES system (taken as a whole) capable of providing baseload capacity factors of 85% could be built for around $5,900/kW of equivalent baseload capacity, including the wind farm itself and the CAES facility. While this is far more than a natural gas plant, it is comparable to a new coal fired power plant and at least 1/3 less costly than the same capacity if added through nuclear power.

Unlike a nuclear or coal plant, the CAES plant would be fully dispatchable power, able to increase and decrease its output along with fluctuating customer demand. This flexibility is a major advantage for usefulness to the electric grid.

Total costs/kWh from this system would also be competitive. Estimates indicate that if the wind farm is built with the 30% Federal Tax Credit (still available through 2012), a total wind/CAES system could deliver baseload power to the grid at about 10.5 cents/kWh. This cost would rise to about 13.0 cents/kWh without the wind Tax Credit. (Effectively, the Tax Credit if used wisely could pay for the CAES plant to convert an intermittent wind farm into firm, dispatchable power.)

Though more expensive than kWh’s from a new baseload natural gas power plant (which would probably be about 9 cents/kWh), a wind/CAES system would be well protected from future fuel cost increases. Also, at 10.5-13.0 cents/kWh, the baseload wind/CAES system would only be about half the cost/kWh from a new nuclear power plant.

Pump Water Up and Let it Fall Back Down. Pumped hydro-electric storage is just that simple — when you want to store energy, use electricity to pump water to a high level. Then, whenever power is needed, let the water fall through hydroelectric turbines to generate power. You don’t get all your electricity back (about 22% is lost), but you get it when you need it. This enables you to accept power from renewable sources when not needed, and store it for use later.

Pumped hydro storage is the largest utility energy storage method in the world, with 20,800 MW already in use in the U.S. However, its use has slowed because of limited sites for hydroelectric power dams.

Enter Riverbank Power Corporation, with its simple idea: combine two well-established technologies into one. First, use standard deep mining techniques to create a large cavern 2,000 feet deep, under a body of water such as a river or abandoned quarry. Then, install 4 gigantic 250 MW hydroelectric turbines at the bottom of shafts, for a massive 1,000 MW power supply available on demand. When power is needed, let water fall down the shafts and generate power. When renewable power is available, pump the water back up.

Source: Riverbank Power

Riverbank Power is now actively exploring 15 sites in the U.S. and Canada, for selection of its first five 1,000 MW pumped hydro (Aquabank^TM) facilities. Wiscasset, ME is high on the list, where Riverbank has already performed successful bore hole tests of the underlying rock. The Wiscasset site is very symbolic, as it is the home of the former Maine Yankee nuclear power plant, decommissioned more than a decade ago. A boon to Riverbank Power is the site is still set up to connect directly to the transmission grid.

Costs. Because Riverbank Power has to dig out its own cavern, its cost to construct is significantly higher than a CAES plant — estimated at $2 Billion for the 1,000 MW facilities, or roughly $2,000/kW. Also, instead of dozens or hundreds of hours of storage, Riverbank plants are designed to run for 6 continuous hours before the water would need to be pumped back up. The timetable is good for hour-to-hour or minute-to-minute fluctuations but not long stretches with no wind or sun.

Riverbank is confident of its business plan, and is not asking for taxpayer or utility dollars. Its turbines use no fossil fuels, and the facility should last 100 years. The company plans to buy power at cheap prices, and sell power when it is needed more, at a higher price.

If it does that for 100 years, the Company feels it should pay for the initial $2 Billion investment many times over, while creating jobs and giving green energy developers a solid market for their power.

Batteries to Store Power When and Where Needed. While both CAES and pumped hydro storage plants hold the promise of very large scale economical storage, they both require special siting. CAES requires an available underground cavern, well, or aquifer, while pumped hydro requires a water resource. Batteries, however, can go virtually anywhere, and take almost no lead time compared to the larger projects.

Xtreme Power is a company out there today, already selling product, by identifying customers who have needs and who are willing to pay for solutions. The company has a systems approach employing modular battery packs that can be scaled to provide Mwh of power storage, together with power electronics control systems.

Xtreme Power can shift 4 hours of power to a later time, for roughly 5-10 cents/kWh. In many electricity markets, the difference in value between different times of the day can more than pay for this cost.

The company has some large scale systems going in before the end of this year, and plans to deliver at least 75 – 100 Mwh of power storage in 2010, with more that can be delivered. Most of its customers are large solar and wind developers, who are eager for a solution and ready to pay for it now.

NGK Insulators

Sodium Sulfur (NaS) Batteries. Another battery solution which is also already commercially available is sodium sulfur. Xcel Energy has a 1 MW NaS battery installation underway from NGK Insulators to store up to 7.2 Mwh (in other words, over 7 hours of power), of wind energy for use when most needed. The system will be adjacent to an 11-MW wind farm owned by Minwind Energy LLC, in Luverne, Minnesota.

Let’s Not Store These Ideas For Later. When renewable energy was still a long way off, the solution to energy storage seemed to be the unattainable “Holy Grail”. It was always to be found, yet never found.

Now, however, the answers are actually here, and they are simpler and plainer than we expected, Store air. Pump water. Use advanced batteries. Like Indiana Jones in his Last Crusade, we need to know when the true Grail is right in front of us.

As Michael Breen from Xtreme Power told me, “Let’s stop jabbering about it … We just need more demonstration units so the industry can talk about this more intelligently.”

This is now happening. Is the Holy Grail finally found?