The Bear, the Volt, and the Saint Bernard

The bears have it figured out.

Their diet consists of berries, shoots, grasses, honey, squirrels, salmon, and the odd unfortunate hiker. Though these foods are plentiful in the warmer months, they become scarce to non-existent in winter. But bears don’t starve when the snow falls. In late summer and fall they gorge themselves, storing up reserves of fat, and then settle down in a convenient den to sleep away the lean wintertime.

Like bear food, renewable energy sources such as wind and solar are not available all the time. Sometimes the wind does not blow. Sometimes the sun does not shine. Like bears, we can adjust our electricity consumption to match when it is available, but only up to a point. We need to power our hospitals, public transit, roadway lighting, and innumerable other non-negotiables.

For now, this isn’t a problem. Wind and solar are merely the garnish on the edge of our collective energy plate. The mainstays of our energy diet are hydroelectric dams, nuclear reactors, and thermal plants which produce electricity by burning fossil fuels.

However, this is a passing state of affairs. Most significant sources of hydropower have already been tapped. Nuclear is prone to massive construction cost overruns and rare but catastrophic accidents, and carries a near-perpetual liability of radioactive waste storage. Fossil fuels – coal, oil and natural gas – grow more expensive and scarce, and will inevitably price themselves out of the market. More troubling is the local acid rain and global climate change that they cause.

Sooner or later, all of our energy will have to be renewable. If we are to avoid massive collapse of world ecosystems under the weight of runaway global warming, it had best be sooner rather than later. But before that can happen, we will have to smooth over the difference between the pattern of generation and the pattern of consumption. That means finding methods to store energy on a huge scale.

What are we going to do, build a massive rechargeable battery?

No. But we are going to build a whole bunch of little ones.

Some of these rechargeable batteries won’t be so little. Pumped storage, like the 400MW facility proposed in Marmora, Ontario, uses cheap off-peak electricity (picture wind turbines spinning madly on blustery nights) to pump water into an elevated reservoir. Then, when rates are high, the water is allowed to flow back down into a lower reservoir, turning turbines and generating – well, re-generating – electricity.

The other rechargeable batteries are actually the solution to two problems. Nearly every mode of transportation – be it the plane, the train, or the automobile – relies on combustion of fossil fuels. But like fossil fuels, the internal combustion engine’s days are numbered. The transition to post-gasoline transportation began in 1997, with the advent of Toyota’s hybrid gas-electric Prius, and continues today with the plug-in hybrid Chevy Volt and its brethren.

Eventually internal combustion engines will go the way of the electric typewriter, electric cars will reign supreme, and a sizeable rechargeable battery will be parked in every driveway. These will charge up at night, when both electricity demand and electricity rates are low. When the sun rides high, and electricity rates do likewise, and the car is just sitting in a parking lot anyway, some of that stored energy will be fed back into the grid. And the owner will get credit for it.

That brings us to the third column holding up the temple of the new energy economy.

The price we pay for electricity is like a fixed-rate mortgage. We know exactly how much our payment will be each month. It’s predictable. It’s easy to understand. And, in the long run, it’s also a lot more costly than a variable-rate mortgage.

Our electricity prices are fixed through government regulation. The electricity utility has to deal with a spot price that moves all over the place in response to the laws of supply and demand. However, we as consumers never see that. We are insulated from the harsh reality of fluctuating electricity costs. We are protected. And, just like with a fixed-rate mortgage, that protection comes at a cost.

Early in the previous decade, various jurisdictions flirted with the idea of removing this protection. Let the price that consumers pay reflect the cost to the utility, and people will make sensible economic decisions about such things as when to run their air conditioner, dishwasher, and clothes dryer. Ultimately that should drive costs down, right?

The problem was that it was a case of too much, too soon. Consumers were not used to adjusting their electricity usage to reflect the spot price, and they were not given time to adapt. Their appliances did not offer automation to make this adaptation any easier. And the mechanism to supply price information to customers was also flawed.

Our electricity grid is like a Saint Bernard – big, dumb, and not agile in the slightest. It can cope with a small number of high-output generating stations, but not with a huge number of tiny ones. It is ill-equipped to power a panoply of high-tech devices that react badly to random voltage fluctuations – fluctuations that were inconsequential at the time that the grid was designed and built, when people were only plugging in such comparatively insensitive devices as electric lights and toasters. It can figure out how much electricity each customer uses, but not – at least until recently – when that electricity was consumed. And it cannot cope with the meter running backwards, which is what will happen when rooftop solar panels and electric car batteries are feeding power back into a needy grid.

The technology now exists to match up supply and demand in real-time. It allows for appliances to become smarter about when they start up and shut down, avoiding peak usage periods. It allows for electricity to be generated everywhere, instead of solely in massive centralized plants. It allows metering of electricity being fed in as well as being drawn out. And it allows one part of the grid to isolate itself from another during a fault, preventing massive cascading system failures like the Northeast blackout of 2003. These technologies are referred to collectively as the smart microgrid.

Renewable energy, electric vehicles, and the smart microgrid are the three key technologies that will deliver us from the dead-end energy world of today into the living, breathing, and clean energy world of tomorrow. But technology is only part of the solution. Next week I’ll discuss the people and political side.

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Power to the people

Something very exciting is happening. Something that was once discussed only by highly trained experts is now the talk of ordinary people. Something that was once the exclusive preserve of huge corporations is now within the reach of small business and middle-class individuals. Something that everyone once had to buy, they can now make for themselves.

It’s like the advent of democracy all over again. But it’s not political power moving into the hands of the citizenry. It’s electrical power.

All across Ontario, people are discovering that electrical power can be like vegetables. With a bit of effort, investment, and TLC, you can grow your own – a few solar panels can bring your net electricity bill down to zero, or even earn you a few extra shekels. And like homegrown veggies, homegrown power encourages people to take a fresh look at the commercial alternative. Is it produced in a way that doesn’t harm people or the ecosystems on which people depend? Is the supply as reliable as it could be? Is the price fair?

People are learning that the answers to these questions are no, no, and no.

Most of our energy comes from fossil fuels or nuclear power, which present a host of threats to our environment and our society. The link from fossil fuels to global climate change is well established. Our economy’s dependence on often hostile and frequently unstable petro-dictatorships presents a threat to national security. Nuclear power plant construction projects suffer from chronic cost overruns as high as 250%. Nuclear accidents have poisoned crops and public opinion, and the problem of how to store and protect nuclear waste for tens of thousands of years remains unsolved.

Solar energy, on the other hand, is comparatively benign. Photovoltaics are manufactured using traditional energy, with all its warts. However, a day will come when solar panel manufacture is also solar panel powered.

Our electricity grid has remained largely unchanged since it was built fifty years ago. Back then it didn’t matter if the power went out for a second or two. Nowadays, a tiny outage like that can cause untold damage to computer systems, and can result in the loss of vast amounts of precious data. The unreliability of the grid led to the creation of an entire sub-industry, producing a product called an Uninterruptible Power Supply (UPS). No server room worthy of the name would be without one. But why do electricity customers accept the fact that a UPS is a must? Why do they not demand twenty-first century reliability from their local utility?

Solar power, coupled with local energy storage (for when the sun isn’t shining, or isn’t shining enough) as well as advanced fault-tolerant electricity supply management devices, will help mitigate the reliability problem. Some industry commentators and researchers point to electric cars as the ideal energy storage device. You won’t have to pay for a UPS when sitting in your driveway (or company parking lot) is all the necessary capacity to handle a temporary dip in supply. And you won’t have to worry about the wires going dead when you can isolate yourself from the fault by temporarily establishing your own “microgrid”. Bob Galvin, former CEO of Motorola, has extolled the virtues of such a system in his book Perfect Power, and continues to promulgate the idea through his Galvin Electricity Initiative.

Then there’s the price. Historically, utilities were rewarded for building more and more generation capacity just to meet peak demand. Many of the power plants would only be brought online during peak times; they would sit idle (or nearly so) the rest of the time. The price you pay would reflect the cost of all those plants, whether they were running or not. Even more nonsensical, if the plant cannot be throttled back during slack times – as is the case with nuclear plants – the utility actually pays customers to use up all the excess power.

Today, at least, the utilities have woken up to the fact that with proper price signals, people can be encouraged to make more economical decisions about electricity use. Hence, time-of-use pricing and smart meters. Instead of having to invest in more power plants, the utility just has to shift usage from peak to off-peak times. Solar energy generation goes hand-in-hand with time-of-use. Solar panels generate the most electricity at high noon – the exact time when demand is highest.

With Ontario’s Green Energy Act, anyone can get into the solar game. If you have a roof, you can buy a solar array and start generating electricity. If you don’t, you can buy stock in a company like Canadian Solar Inc. that produces the panels, or buy a share in an organization like the Hall’s Pond Solar Cooperative. It’s even more democratic than voting – you don’t even have to be of the age of majority to get in on it.

Solar energy is already helping to cultivate a new breed of informed electricity consumer. Such consumers will demand that their electricity utility deliver a service with a level of quality appropriate to the twenty-first century. They will demand that their energy expenditures stop funding hostile regimes and environmental degradation. They will demand the ability to influence their own electricity bills by adjusting their usage to reflect the cost.

Solar energy is helping to bring about an era where electricity is clean, reliable, and fairly priced. And produced not solely by a remote, hidebound, and unresponsive corporation, but rather by people like you and me.

Green is good for business

Green energy, in particular the Green Energy Act, has become the central issue in the Ontario election campaign. This is of critical importance to the renewable energy industry across Canada, since no other province – and certainly not the federal government – has gone so far to support the inevitable transition from fossil fuel and nuclear energy. Tim Hudak, leader of the Ontario Progressive Conservative Party, has taken aim at the GEA and decried the fact that electricity bills in Ontario have increased since the GEA went into effect.

Whether the GEA is to blame for increased electricity prices is another matter. It is definitely true that participants in the FIT (Feed-In Tariff) and MicroFIT programs are paid a higher rate for the electricity they produce than, say, Bruce Power (operator of one of the three nuclear plants in the province). The citizens of Ontario are paying two prices for energy – one for traditional nuclear or thermal energy, and one for renewable energy. The price for renewable energy is higher.

I used to work for an accounting firm. The standard jibe at accountants is that they know the cost of everything, and the value of nothing. The campaign rhetoric from GEA opponents suggests that the price of renewable energy is higher, and there could not possibly be any defensible reason why this might be. Hence, the cause for the higher price must be rooted out and eliminated.

Could it be that renewable energy has a higher price because it is worth more?

Let’s say you have a business, and that business requires you to lease a car. The leasing company has two options. Plan A has a monthly lease cost that is guaranteed to increase over time. That doesn’t sound too attractive. But the bad news doesn’t end there. The price is also subject to incredible spikes that may mean your payment today is double what it was last month. And Plan B? The price is higher, but it is guaranteed to drop. And unlike Plan A, the price has no random jumps.

Which would you pick?

Businesses thrive on predictability. So do households. Companies like Direct Energy have made lots of money selling contracts that guarantee a particular rate for natural gas or electricity. The customer pays more in the long run, but the price is fixed, and there’s comfort in predictability. Whether you’re a business or an individual, when one of your most significant bills can fluctuate like mad, it wreaks havoc on your ability to plan. You either have to sock away precious cash in a rainy day fund, or pay the price of borrowing the money when the nightmare bill is due. Multiply that by every business and household, and you have a huge drag on economic growth.

Non-renewable energy is Car Lease Plan A. All fossil fuels have been trending upward in price in the long term. All of them took a huge spike upwards in 2008. The per-barrel price of West Texas crude oil fluctuated around the US$20 mark from 1986 to 2000, and then it started a relentless climb to today’s price of around US$83. That’s a fourfold increase in only eleven years. Along the way, it took some eye-popping spikes; its 2008 peak price topped US$130.

Natural gas has seen similar volatility. The current price is close to a ten-year low, but its 2008 peak was nearly double that figure. Coal is selling for nearly twice what it was five years ago, and its 2008 peak was nearly double today’s price. Even uranium, which admittedly doesn’t account for a significant portion of the cost of providing nuclear power, is five times what it was five years ago and hit a 2006 peak of two and a half times the current price.

The price of renewable energy is relatively high, but it is dropping. It is also relatively stable – it doesn’t bounce all over the place.

The reason for this is simple. Renewable energy, with the exception of biomass, is all about the technology. The input is free, and always will be – sunshine, wind, waves, or falling water. So the price is directly related to the technology; as the technology improves, the price drops. But the technology only improves when it has customers. So if you want to see green energy become cost-competitive with brown energy, you need to encourage customers to buy in. The more customers that buy in, the more rapidly the technology improves, and the more rapidly it approaches what energy wonks call “grid parity” – the energy nirvana, where green is actually cheaper than brown.

If I could lease a car for my business at a nice, predictable price, and I knew that price would drop rather than rise over time, that’d be great news. I could make plans for growing my business, maybe hiring another employee, secure in the knowledge that I wouldn’t suddenly see my bottom line going into the red because one of my bills went through the roof.

It’s time we got down to the business of eliminating the drag that volatile fossil fuel prices place on our economy. It’s time we invest in green energy. And it’s time that the Ontario PCs realize that the Green Energy Act is not just good for renewable energy businesses, but for all businesses, and for all households.

Not a great leap forward

Until now, with its Green Energy Act (GEA) of 2009, Ontario was the only jurisdiction in Canada with a genuine renewable energy program. This week, Nova Scotia is taking its place as the second such province. You’d think that would be good news for green energy. You’d think that means that the country is finally getting some momentum in the fight against climate change and overdependence on unreliable energy imports. You’d think that an NDP government would take the boldest steps of any major Canadian political party, other than perhaps the Greens. Think again.

Compared to the GEA, Nova Scotia’s Renewable Electricity Plan (REP) is like alcohol-free beer. It has taken the best renewable energy technology – solar – and effectively excluded it. And, it has taken the most promising program participants – businesses and individuals – and excluded them too.

Wind, biomass, hydro and tidal energy are the only technologies that may be used to generate power under the ComFIT (Community Feed-In Tariff) component of the plan. The larger-scale FIT program applies only to tidal energy. Although the province is not, in fact, perpetually shrouded in darkness, solar is not eligible. Oh, you can install a solar array and connect it to the grid, but you’ll only get paid the going retail rate for the electricity you supply. Power is cheap enough in Nova Scotia that only a financial illiterate or an off-the-deep-end tree hugger would bother. The program website shows an image of a rooftop solar array, but don’t expect to actually see any appearing in the province any time soon thanks to the REP.

To keep power generation profits from departing the province, applicants must be a “community”. Private individuals and businesses, the most promising sources of investment dollars (and the overwhelming majority of participants in the Ontario FIT and MicroFIT programs), have been turned away. Instead, the hope is that such famously flush-with-cash entities as First Nations band councils, universities, municipalities, and nonprofits will step up to construct wind turbines and biomass-fueled CHP (Combined Heat and Power) systems. I want to believe it will work. But I want to believe in flying saucers, too.

As an added bonus, the program looks to be suffering from crass political manipulations. At the last minute, some definitions were changed in the legislation that effectively ruled out one wind turbine manufacturer in favour of another. The change had nothing to do with the public interest. When the government sets up one company to be the monopoly supplier, it reeks of political patronage.

In other words, Nova Scotia has brought its track star to the starting line with much fanfare, and tied a cinder block to each ankle.

I grew up on Cape Breton Island, and I still maintain a certain irritation with Upper Canada perpetually being in the driver’s seat. I’d love to see the Maritimes stand up and take the lead while the rest of the country sits up and takes notice. I was hoping to see a paragon of policy innovation and courage, but Nova Scotia’s REP ain’t it. The Ontario GEA remains the Canadian gold standard for green energy legislation.

Best of a bad lot

Democracy is about majority rule. The candidate with the most votes wins the election. A newcomer to the whole idea of democracy – a school child, for example – might infer that the winner is best candidate: the most qualified, the most experienced, the most popular, the most effective, or some or all of the above.

It doesn’t always work out that way.

Oftentimes during election campaigns, you realize that you don’t particularly like any of the candidates. In fact, you actually detest one or two of them. When you head to the polling station, you aren’t actually voting for a particular person. Instead, you’re voting against all of the candidates except one. You’re voting for the least bad alternative.

It’s like that with solar energy.

Don’t get me wrong. Solar energy has many terrific selling points. With minimal capital investment and a rapid installation process, you can start producing power. Solar arrays are completely scalable, and can be sized precisely to the application – from a single panel powering a roadside sign, to a multi-megawatt solar farm covering several hectares.

Solar energy can be generated right where it is used, eliminating the construction cost, maintenance overhead, and losses inherent in long-distance electricity transmission infrastructure. Once installed, photovoltaic systems produce zero emissions. They have no moving parts, and so are extremely reliable and require minimal maintenance. Panel manufacture is energy-intensive, but the panels generate many times more energy than that during their usable life.

All is not sweetness and light, however. The manufacture and end-of-life disposal of solar panels suffer from the same environmental perils as the semiconductor industry. The production process uses toxic metals that must be handled carefully to keep them from leaking into rivers and other water bodies. And like consumer electronics, clapped out solar panels are nasty things if not disposed of properly. Fortunately more and more manufacturers are offering recycling services, and third parties are getting into the act – one man’s trash is another man’s treasure.

Then there’s the cost. At present, solar cannot compete with most other energy sources on an installed cost-per-watt basis. However, this is mainly because most traditional energy sources carry costs that aren’t included in the price. They appear cheap, but the price you pay is only the first installment; there are more costs hidden in the fine print, and they’re brutal. Economists call this an “externality”. More on this below.

So solar is not perfect. But let’s look at the alternatives.

In Ontario, Canada, the three main sources of energy are hydroelectric, nuclear, and thermal. So let’s focus on these three.

At first glance, hydroelectric power is pretty sweet. It’s always been expensive to construct a dam. But once it’s built, the water is free and maintaining the turbines is cheap.  However, the best locations for large-scale hydro projects are already tapped. Further, hydroelectric projects can wreak havoc on river ecosystems, and the flooding when a river becomes a reservoir has displaced entire communities. The cost of managing these social/environmental impacts is rising, and may even kill some projects outright.

Next up is nuclear. It’s reliable, and it doesn’t produce greenhouse gases. But it is incredibly costly. Nuclear plants are the most expensive of all, and the costs don’t end with the construction. Uranium mining is an unpleasant business. Operating the plants always costs more than the builders anticipate. Spent fuel rods remain incredibly dangerous for thousands of years, and that’s a horrible legacy to leave our descendants. Even the low-level waste from refurbishing or decommissioning reactors is a hazard, and a tempting target for terrorists seeking to build a dirty bomb.

Then there’s the risk of accident. Three Mile Island, Chernobyl, and now Fukushima Daiichi all loom large in the mind of the public, and currently China is the only country with plans to build new plants. Germany is getting out of the business entirely. Few private companies are willing to accept the risk associated with nuclear plants, so often state agencies or corporations have to assume the risk instead. That means that when things go wrong, it’s the general public that foots the bill. This is an externality, as mentioned above – the price you pay does not reflect the total cost.

Thermal power plants generate power by burning fuel – usually the non-renewable kind, like coal or natural gas.  Their main attraction is that they are one of the few methods of power generation that can be brought online in a pinch to deal with spikes in demand that happen when, for example, everyone cranks the air conditioning during a heat wave. They cost a fair chunk of change to build, but the fuel is cheap and that means the power is too.

However, the thermal power party may have the biggest hangover of all. Burning fossil fuels produces greenhouse gases, and this leads to global climate change. That is yet another externality. When a hurricane wipes out New Orleans, the companies that run coal-fired generating plants and gas station chains aren’t presented with the bill. Instead, the population at large gets nailed with higher taxes and insurance rates.

So solar’s competitors suffer from many disadvantages. They generally cost a bundle just to get into the game, and the investment earns no return during the long period of construction and startup. That’s a huge financial risk. Nuclear and thermal require fuel, and the price of that fuel varies, which presents another short-term financial risk. Since there’s only a limited amount of fuel in the earth’s crust, the long-term price trend will always be upward; that’s not even a risk, that’s a certainty.

Finally, the power is usually generated a long way from where it is used, so there’s a big infrastructure cost to get the power to market. If you want to compare apples to apples, the sunk cost of high-voltage transmission lines should be included when evaluating competing energy sources.

That’s why developing countries will likely leapfrog us – when they electrify outlying villages, they will likely skip over central power generation completely and jump straight to on-site generation with wind and solar. This is analogous to the way that they have largely skipped landline telecommunications, and jumped right to mobile phones.

Solar does have its downside, make no mistake. But when you make an honest, thorough comparison, it’s the best of a bad lot.