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Corporate/shareholder value, energy market and global warming

Updated: Renewable Germany bailing out Nuclear France

I just read the following in an article by a Mr. Bill McKibben and thought it to be an interesting perspective on why climate change/global warming is being so vigorously denied.

If we spew 565 gigatons more carbon into the atmosphere, we’ll quite possibly go right past that reddest of red lines. But the oil companies, private and state-owned, have current reserves on the books equivalent to 2,795 gigatons — five times more than we can ever safely burn. It has to stay in the ground.
Put another way, in ecological terms it would be extremely prudent to write off $20 trillion worth of those reserves. In economic terms, of course, it would be a disaster, first and foremost for shareholders and executives of companies like ExxonMobil (and people in places like Venezuela).
If you run an oil company, this sort of write-off is the disastrous future staring you in the face as soon as climate change is taken as seriously as it should be, and that’s far scarier than drought and flood. It’s why you’ll do anything — including fund an endless campaigns of lies — to avoid coming to terms with its reality.
Never thought of the resistance to moving away from carbon fuels as an issue of having to write off company value in order to save the planet. As shown with the housing bubble, writing off inflated value (inflated for what ever reason) is a rather difficult thing to do. I mean, when you have so much down stream of that artificial value dependent on it (think currency based on oil), the engineering challenge is like playing Jenga only no one will be laughing if you fail and the tower falls.  Also, you have a timer running in this version of Jenga.

I believe Mr. McKibben refers to the issue as a bubble in that the current price of raw carbon fuel is based on the idea that fuel in general is becoming less available. But fuel or energy is not less available. It is only one source of fuel that is becoming less in quantity. The only means to keep this conflation of less carbon based energy means less energy fuel in total is to deny the application of science in the energy market place as it relates to a competitor product. It is artificial price manipulation via psych-ops.
In other words, the only way to keep the carbon energy market alive is to not have a free energy market. Part of assuring not having a free energy market is to deny the need for a free energy market, thus, deny climate change do to human extraction of carbon from the ground and it’s ever increasing rate of conversion to a gas of CO2. It is artificial price manipulation via psych-ops.
Let’s take the write off issue one step further. How does the value of a company such as Exxon/Mobil which is based on ever rising price do to ever declining product with ever increasing demand keep this model for valuing the company if the product becomes essentially limitless? Now we’re up against our entire paradigm as to how we understand free market value and thus construct value.
Carbon based energy is currently view as land. No new land is being made and demand is rising thus ever increasing value. The proper model for carbon fuel is that of a market where over time the product becomes obsolete. This I think is the fault in thinking that has created the aberrant paradigm which lead to the bubble Mr. McKibben sees. Our entire energy market, viewed in this way is a complete illusion as seen from the owners side of the energy equation and a complete delusion as seen from the market economist side of the energy equation, though I would say the economist delusion has lead the owners to create their illusion.
Just one more problem with running an economy based on the efficiency of money as oppose to the efficiency of people.


From Real Economics I read an article from Der Spiegel regarding France struggling with electricity shortages do to the cold spell. Seem France, not normally experiencing cold winters uses electricity for heating homes. This year they needed 7000 megawatts per hour more power. 100 gigawatts one evening was need, the equivalent of 80 nuclear power plants. Germany was sending them a net 3000 megawatts/hour because:
It is interesting, said the federal environment minister, that Germany, especially in these days with a very high demand, can even export power—thanks to photovoltaic and wind energy. “We had in the last days a capacity of up to 10,000 megawatts of solar power, which corresponds to the output of ten nuclear power plants, and up to 11,000 megawatts of wind power,” said Röttgen.
Read another take here at Lenz Blog.
This is significant, because back in May of 2011 all the rage was how France was bailing out Germany after Germany announced its nuclear generation shut down. As with Jonathan Larson at Real Economics, no one is saying this means we can scrap all other power generation tomorrow as this Spiegel article notes the lack of solar generated power in Germany during a spell this winter and the need to import electricity.
The January article (not pro solar at all) notes:
Until now, Merkel had consistently touted the environmental sector’s “opportunities for exports, development, technology and jobs.” But now even members of her own staff are calling it a massive money pit.

How quickly fortunes can change. All the more reason to view carbon based energy in the energy market as a product that can be made obsolescent.  You know, a true free market with competition which purpose is to serves the efficiency of people and not money. Maybe then even Germany would not be so reactionary when their plan stumbles.  Heck, it took the Wright Brothers over a 1000 flights, just to learn how to fly!  Over 200 wings and airfoils!  They did not concern themselves with the issue of scaling it up for use by a planet of 6 billion people.

Stick to your plan Germany because you have the correct intention.

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A boom in shale gas? Credit the feds.

A boom in shale gas? Credit the feds.

 By Michael Shellenberger and Ted Nordhaus (hat tip to Barry Ritholtz)

Since the high-profile bankruptcy of Solyndra, the solar company that received $535 million in federal loan guarantees, many have concluded that government efforts to promote energy technologies are doomed to fail. Critics cite the abandoned synthetic fuels program, attempts to capture carbon pollution from coal plants and next-generation nuclear reactors as further proof of this conclusion.
Many often point to the shale gas revolution as evidence that the private sector, in response to market forces, is better than government bureaucrats at picking technological winners. It’s a compelling story, one that pits inventive entrepreneurs against slow-moving technocrats and self-dealing politicians.
The problem is, it isn’t true.
While details vary, the story is basically the same for nuclear power, natural gas turbines, solar panels, and wind turbines — pretty much every significant energy technology since World War II. That’s because the private sector alone cannot sustain the kind of long-term investments necessary for big technological breakthroughs in the midst of volatile energy markets and short-term pressure to produce profits.
No doubt, government energy innovation investments could be made more efficiently and effectively. But it would be a mistake to imagine that we’d be better off without them.

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Weekend Reflection Points

The lead article in the current AER is available here (gated, apparently, though the link isn’t working; h/t Tom Bozzo [on FB] and Brad DeLong; I was using the paper copy). The most interesting part so far: the authors only considered the documented costs of air pollution—not land, not water—in deriving the (embarrassingly negative) ROI figures for coal and oil.

As Cousin Lucia and Tom Zeller, Jr., note today, the cost of water pollution makes oil power plants an even worse option.

In such a context, Europe in general and Germany (the top maker of solar panels until China recently passed them) in particular rubs in our faces that they’re winning on the alternative-energy sources front (h/t Barry Ritholtz):

The 15 mile-per-hour winds that buffeted northern Germany on July 24 caused the nation’s 21,600 windmills to generate so much power that utilities such as EON AG and RWE AG (RWE) had to pay consumers to take it off the grid.

Rather than an anomaly, the event marked the 31st hour this year when power companies lost money on their electricity in the intraday market because of a torrent of supply from wind and solar parks. The phenomenon was unheard of five years ago.

Meanwhile, back in the U.S., it is no secret that Brad and Robert Waldmann are on one (affirmative) side of the TARP-was-a-success argument, and I’m on the other.* But even the Success crowd may pause to wonder if the short-term “profit” was a good long-term strategy:

Some large U.S. banks would have stronger capital bases to better deal with today’s market stresses had regulators not relaxed bailout repayment criteria in late 2009, a new government audit showed on Friday.

Bank of America (BAC.N) Citigroup (C.N), Wells Fargo (WFC.N) and PNC Financial (PNC.N) were allowed exit the Troubled Asset Relief Program without raising as much equity capital as initially prescribed by the Federal Reserve, the TARP Special Inspector General said in the report.

Following bank stress tests earlier in 2009, the Fed gave several banks guidance that they must raise $1 in common equity for every $2 in TARP bailout funds repaid — a formula meant to enable them to withstand future stresses.

But this standard — which was never previously made public — was quickly relaxed, allowing Bank of America, Citi and Wells Fargo to repay taxpayers nearly simultaneously in December 2009,** raising a combined $49.1 billion in equity capital.

Enforcement of the $1 in equity for every $2 repaid guidance would have required $57.5 billion in equity capital to be raised by the three institutions. PNC was later allowed to exit TARP under similar relaxed guidance. [emphasis mine]

The most recent SIGTARP report (28 July 2011), uses the word “Bailout” only once in its 304 pages—and that’s in the title of testimony by Sheila Bair, ““Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on The Changing Role of the FDIC before the Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs; Committee on Oversight and Government Reform, U.S. House Of Representatives.”

Noted for the record: Patch uses the same article (with minor customization) in multiple locales, highlighting it as a “local” piece. I defer to Felix as to whether this is in keeping with the rest of their “business model.”

As Dan Becker can tell you, the small business “ownership society” is not for the faint of heart. Nor, as anyone who thinks about it for more than three seconds can tell you, is it a primary driver of employment growth. Yet when the most visible and successful Management Consultancy in the United States thinks about growth, its two primary points are “take monies from the government” and “expand small businesses.” But give them credit for recognizing a point that is often obscured by H1-B trolls technology firm leaders such as Meg Whitman:

[I]t’s not just the young who can help fill the skills gap; older, experienced workers can play a part, too. In the US aerospace sector, 60 percent of the workforce is over 45. A practical response would be for governments to remove barriers—particularly those related to the provision of health care and to benefits rules—that prevent older workers from staying in the workforce longer. Germany and the Netherlands raised the participation rate of the 55-to-64 age group by 21 and 24 percentage points, respectively, between 1990 and 2009. In the Netherlands, there were significant changes to pensions and welfare benefits to improve incentives to work longer, coupled with initiatives to change public perceptions, improve employability, and reduce discrimination against older workers. [emphasis mine]

It’s nice to see McKinsey endorsing Medicare For All.

*As a general rule, the Econ-first analysts are affirmatives, the finance-grounded ones are negative. If you have to think about why that would be: one group makes its living finding $100 bills on the sidewalk that the other one swears cannot exist. As the Mark Thomas of the world would note, the issue of priors might need to be addressed.

**The reason December 2009 is important is that it meant that monies that otherwise would have to have been used to shore up capital were instead paid out as bonuses by the now-uncontrolled banks, or, in Reuterspeak, “keen to escape executive compensation restrictions associated with the bailout funds.”

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CGI 2011 – Developing Green Technology

Van Jones of Rebuild the Dream introduces the two presenters by noting that we are in the “post-Whale oil” strategy for liquid fuels; using algae and biomass technologies. Jonathan Wolfson, CEO of Solazyme, Inc. opens by thanking his investors and then stating,  “We make oil.”  He declares that oil is not going away, and is not going to be replaced; the choice is what type of oil we are going to use of the three types: petroleum, plant, and animal.

It’s fairly easy to figure out where he is heading.  As Van Jones noted, we tried animal, and we’re using petroleum now.  Peak oil is past or, at best, demand for petroleum is going to outstrip supply even if we find and refine more and more of it.

Wolfson notes that the developed world uses oil for everything, with a concomitant increase in price as demand rises and the world becomes more developed.  He dismisses the inorganic alternatives without even bothering with environmental concerns: natural gas, fracking, and coal liquefaction are all non-renewable, and therefore doomed as an alternative.  Working on renewable oil: biomass conversion, plant sugars, photosynthesis and microalgae to convert sugar to oil.  Does not require changes in current processing system; renewable oil is fungible with the dinosaur-based creation.  Have created a hearty-healthy oil that is similar to olive oil in other ways; have an alliance with a French company.

Solazyme told potential private-sector partners that their technology could produce $1.50/gallon oil. Response was always: don’t talk about costs until you can show us you can scale. So made a deal with the U.S. Navy, and are delivering “the promise of advanced biofuel.”

Following Wolfson is his major investor, Deputy Assistant Secretary of the Navy for Energy Thomas Hicks. Hicks is well-versed in the Total Cost of Ownership:  “The Navy simply relies too much on fossil fuels…degrades our national security…and ultimately endangers our planet.” We have young men and women in Afghanistan protecting fuel convoys that begin in Pakistan. Multiple convoys per day; for every 50 fuel convoys, we have one Marine who is killed or wounded. “That is too high a price to pay for fuel.”

Hicks is leveraging the Marine Corps is reducing that dependence, through demonstration in Quantico. Took the winning technologies and moved them into combat zone in May—and then in September into Afghanistan. Solar tents, solar blankets, LED lights—resulted in a 30-90% reduction in fuel use.  Patrols able to travel three weeks, not two days, without a Battery Resupply. Now equipping all units in Afghanistan, with a payoff timeframe of six months.  Still looking for more, but it’s a great start.

Admits ongoing operations in “Afghanistan, Iraq, and Libya.” Additional cost for fuel last year ($38/barrel increase) was about $1B ($1,000,000,000)—which comes out of the extant fuel  budget, not as an additional appropriation.  (In this manner, the U.S. Navy is like a family.) The price volatility of the fuel has a direct impact on ability to engage in efforts, including support.

So the Navy has started an effort to move to 50/50 use of renewable/biomass fuel and oils at a price comparable to that of petroleum.  If they can do it, why cannot—has not—private enterprise??

The Navy intends to lead an energy revolution; they have a $1B RFI out, closing at the end of the month, in their continuing attempt to find alternative fuels. “Together we can build a new energy future, a new energy economy.”  Again, why do I have to hear this from the Navy, when everyone tells us that the private sector is the leader?

Hicks and Wolfson agree that have a climate that is built for technological innovation. Hicks notes, again, that it worries him that the Navy, not the private sector, is out in front on alternative energy exploration. Speaker from the floor notes that there has been a paradigm shift since a single person took out the power grid in CA and AZ.  Energy efficiency retrofitting will put people back to work (as it does in NYC). Will launch a career some time in 2012—not on Earth Day, but on a day—with 50/50 blended fuel all through, including the backup generator. By far the largest purchase, excluding ethanol., in history, per Mr. Wolfson.

Are you certain the extant energy company leaders—and, yes, I am including Jim Rogers of Duke Energy, who has been talking this game for at least twenty years—are really “job creators”?

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CGI 2011 – Plenary on Climate Change (AGW)

President Clinton introduces the panelists, noting that there is a UN discussion of Libya scheduled for 10:00 a.m. and that they will have to leave quickly.  First up is Mexican President Felipe Calderón Hinojosa, about whom President Clinton is enthusiastic.

Calderon is less vibrant, but presents an impressive array of detail on Mexico’s unilateral reduction in carbon usage, noting that 26% of the energy used in the country now is from renewable sources.  Part of this has been accomplished by the simple things: a concerted consumer campaign toward replacing old refrigerators and light bulbs with modern ones.

President Calderon notes that much of the problem in developing countries has originated with cutting down the extant trees.  The Cancun meetings resulted in a new international agreement.  Today, we have a new challenge: continuing the Kyoto Protocol.  “Most important agreement and most important instrument”—saying this in front of President Clinton—needs leadership and mobilization of public opinion.

President Clinton notes that the countries that have been putting major effort into climate change have outperformed the United States in jobs, growth, and reducing income inequality.

President Jacob Zuma, President of the Republic of South Africa, notes that “we all agree that climate change is a danger” and that “we need to work together to address the challenges.”  The people on the ground—the voters—see this as a direct matter of life and death; it is the leadership that is needed in Durban.

Jens Stoltenberg, the Prime Minister of the Kingdom of Norway, says that he would not have believed you if you had told him ten years ago that emissions trading in Europe would be possible. Need to have legal agreements, not just a Durban-style reiteration of Kyoto and Copenhagen. (Those of us who were talking about trading energy and weather derivatives twenty years ago probably should be less amazed at this statement than I am.)

President Clinton asks how to work toward energy use reduction in developing countries. The Prime Minister of Grenada, Tilman Thomas, addresses this, mostly by noting a “moral responsibility” to the people of his country. President Clinton notes, repeating what he said last night, that of all of the Caribbean countries, only Trinidad produces any of the carbon-based energies—all other countries have to import oil and natural gas at great cost.  If there were financing available, could expand alternative sources: solar, hydro, and sugar-ethanol, for instance.

The Prime Minister of Slovenia, Danilo Türk, notes that there is Global Governance taking place without global government. Carbon tax would be good because it makes costs predictable. “Very fundamental long-term development challenge,” need to find the “appropriate public funds for transformative technologies now,” following the German solar precedent.

(President Clinton noted that the sun shines in Germany “as much as it does in London.”  I take this to mean that it is not a bright, cheerful country.)

Bangladeshi Prime Minister Hasina echoes the sentiment expressed by several others:  there needs to be a legal requirement. She notes that 20% of the land of her country will be eliminated as the current trend runs.  President Clinton adds The Maldives and even Afghanistan to the list of places that will have to do more and more with less and less (land and resources).

Prime Minister of Mali Cissé Mariam Kaïdama Sidibé notes that one of the biggest problems facing her country is “brain drain” to the United States and Europe.

European Commission President José Manuel D. Barroso notes that many countries have taken individual steps, but that much more is needed to reach the 2 degrees C target—currently on target for only about 60% of that.  “Transparency is key.” Have two very important alliances: science, which is on our side, and public opinion, which should be.

President Calderon has been leading in reforestation; planted about half (500MM) of the trees U.N. Secretary General requested—and collaterally made Mexico City a better place to live.  Tells a story about Tanzania, in which a village grew trees for carbon credits: and gave back more than half of that to get more people in the village a better life.  (I suspect this is an example of what David Graeber is talking about when he notes that communal obligation has always preceded—and generally superseded—economic theory.)

President Clinton also notes that the U.S. Senate is now only 50% “global warming deniers.”  He apologizes for that, but notes that it is progress from the 95-0 vote against the Kyoto Treaty.

I believe that is also the only time the phrase “global warming” was used in the entire discussion.  It was almost as if people were afraid to note that the changes are of our own doing, not just the Earth getting mad.

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Japan May Have Reached Point 7

I give up. It was perfectly obvious what was happening at Fukushima on Saturday afternoon, when I posted bullet points at Skippy: there was going to be a major cleanup cost and the live reactors were not salvageable, but nothing fatal to many was loose in the atmosphere yet.

Which is why I followed up here on Sunday with “use saltwater as the best option.” Once you accept that you’re doing damage control, do it efficiently and don’t worry about the sunk cost.

But evacuation and problems with all three plants that were offline at the time of the earthquake moves to stage seven, which was summarized by Pink Floyd:

Though even that may be pessimistic; Al Jazzera English (via their Twitter feed) reports that the heroes of this entire episode—the unnamed workers who are trying to avert serious leakage into the environment—are back at work after having temporarily been evacuated to a bunker.

Medicins Sans Frontiers (Doctors without Borders)


Global Giving

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CGI, Day 4 – Clean Technology and Smart Energy: Deploying the Green Economy

Moderator is John Holdren, Science and Technology Advisor to President Barack Obama and Director, White House Office of Science and Technology Policy. Participants are:

Ms. Al Dossary is introduced as one of the few, if not the first, female business leader in Saudi Arabia. (See her comments later for a variant opinion,)

Mr. Holdren opens by speaking of the three levels of technology adoption:

  1. Barrier Busting: “overcoming obstacles to the use and diffusion of technologies” that are available today.
  2. Incentivizing: changing the economic or the regulatory landscape to make socially- and environmentally-attractive technologies more attractive.
  3. Inventing and Improving: R&D demonstration that makes technologies with improved characteristics and lower costs.

Mr. Hattem, whose duty is “to direct capital to people and places that are currently outside of the economic mainstream,” means that his attention focuses on rural areas, and works with a data focus to ensure that the returns are realized.

Ms. Al Dossary, an English Literature major who is very fond of Disneyland, found herself moving the business into new directions, concentrating on “the carousel of progress,” and noting that she has often failed but ends up ahead.

Mr. van Oostrom moved primarily into green building technologies after meeting with Al Gore. Discovered that there was abundant information about how to build green buildings, and moved to that space.  Decided to make buildings “for half the money, in half the time, and completely carbon-neutral” after finding abundant support for the transition within his firm—middle and upper managers enthusiastic about being at the forefront.

Mr. Hattem notes that the emphasis on building development has to be on energy efficiency. (He points out that NYC is relatively energy efficient even now)  Concentrated on the transition in lending and investment practices in NYC and applied the information gained there to developing structures and investments in green technology.  Seeing even residential buildings being developed with expectation of cutting energy demand by 30% or more through technology such as using solar panels to provide hot water.

Ms. Al Dossary emphasizes that it is necessary to link green technology with people’s interests, not the glories of the technology. We are presenting it as reducing electricity and water bills and providing a better environment for your kids. Competition abides: the more competition in the marketplace, in the presentation of the products, improves results.

Mr. Holdren notes that Ms. Mumpuni has been working from the ground up, and her effort has often been more successful than the governments that have been pushing from the top.  Ms. Mumpuni takes a “community-based approach”; what has worked have been to utilize the local resources—especially water—with local people developing and maintaining (and therefore having a sense of ownership of) the microhydro technology.  One of the things she noted is that the microhydro technology leverages the existing environment—maintaining the local forests instead of cutting them down enabled leveraging the existing terrain without having to engage in destruction, creative or not—and therefore makes adaptation easier.  She has been expanding and adopting this practice into the rest of the Asia-Pacific area and Africa.

Ms. Mumpuni re-emphasizes that development and dissemination of Green Technology must be done on a community basis.  This is, she says, essential to the small (ca. 1,000 household) villages that are attempting to move to greener technologies.  She is later asked what effect those community developments have on the larger utility companies in Indonesia.  She noted that the initial reactions—once the communities became prominent enough—was that the large companies had government support to force the communities to buy power they did not need.

However, as a woman, she was able to outwait the system.  Over the next four years, she got the government to start buying power from the communities, and the result over time was that the government and the utility companies (which no longer needed to maintain so many long, “technologically inappropriate” power delivery lines) realized that the “creative destruction” (not her phrase) could be good for everyone. (AB readers note especially: the restriction in this case was first supported by the so-called “private enterprise.”)

Mr. Holdren notes that in many cases the pitch for alternative energy is “you will have to pay more, but the externalities are worth it.”  Conrad van Oostrom notes that “the real economics” (Mr. Holdren’s phrase) works well for new buildings, where you can (for instance) “bring forward” the energy savings over the next ten years. (Businesses understand Present Value.) We are seeing that many new cities in China and India are being built using green technology.

The difficult part is retrofitting buildings, where there have to be multiple negotiations with existing tenants. Even there, though, it is much less difficult to do that when you can give them “a real guarantee” that their future energy costs will be reduced by 30-50%.

Mr. Holdren then asks Gary Hattem to provide a macroeconomic perspective on what retrofitting and green technology development is and will be doing for the job market.  Mr. Hattem notes that they are doing detailed studies of how the ARRA dollars generally and are working to align policies to workforce training for where the jobs actually will be.

Mr. Holdren asks Ms. Al Dossary if she, as “a business leader and a woman,” is an inspiration to other women in Saudi Arabia and the Middle East. Ms. Al Dossary notes that women in Saudi Arabia and the Middle East are “not really interested in [being on the] media that much. There are so many successful stories for women.…I’m just in front of the TV; that’s the difference.”

António Guterres, the UN High Commissioner for Refugees, asks about the “Small is beautiful, big is necessary” conceit, especially the last part. He notes that they had a very successful experience installing solar energy in a refugee camp, but did not see any expansion of solar into other areas; no one overcame the institutional and cultural issues.

Ms.Mumpuni notes that they need to create trust be able to address the needs of the community.  She always tells them in advance that there must be continual community participation, from the planning to the maintenance, or her organization cannot risk its reputation on working with them.  Effect is that the community has customization and ownership, which goes a long way to overcome those issues.

Remy Chevalier of the Environmental Library Fund asks about the lighting of green technology buildings. Mr. van Oostrom notes that, in Western Europe, the issues of heating and cooling have been solved entirely for purposes of a “green building.”  The issue is lighting.  There has been some progress from the use of smart glass technology.  One thing that has helped in their buildings is to automatically have the lights go off at 6:30pm in the commercial buildings, while allowing people to press a button to relight the area. (I’ve worked in buildings that were set up that way in the U.S. as well.)  This simple move cut electricity costs by about 20%.  Mr. Hattem notes in that context that 1.6 billion people in the world do not have access to electricity, and that solar has become “an access point” for both the technology and distribution.

Ms. Mumpuni is asked about costs.  She notes that production via microhydro costs depend on geographic situation: from about $800 per Kw installed to as $4,000 per Kw installed.  But again there have been breakthroughs that are reducing that cost steadily: now producing a “community hydro” that produces ca. 500 Watts –enough energy to power to run five (5) to ten (10) houses—for about $1,500.

Ms. Al Dossary—asked to discuss possible obstacles to expansion into the “new clean energy” in Saudi Arabia—notes that, “Nothing is everlasting, not even water” and urges people to investigate all types of alternative energies, even as the Saudis are.

An audience member asks about the best retrofit idea.  Mr. Hattem notes that the best innovation is not going to come from the technology, but from the users and the culture.  “Technology is there now.”  Mr. van Oostrom says that it is “all about business models” now; the technology is there and ready; have to convince current residents to do things.

Ms. Mumpuni notes that in the developing world, the people need the technology: lights for children to read, to be able to cook (see the Cookstoves Initiative announced on Day 2; for a dissenting view of that initiative—though not the idea that people need energy to cook—see this guest blog at Bill Easterly’s Aid Watchers).  In that context, people use energy as they need it, not because it is accidentally left on.

Mr. Holdren notes that about one-third of what we need to do in the next twenty years is such “low-hanging fruit” that we should be able to realize it.  Putting a full price on carbon emissions would reach the next third.  It is the final third—new innovations,

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Goldman Does Something Good

The lower the fee, the more money raised by the IPO that actually goes to pay back the taxpayer.

Doesn’t change that Michael Moore’s analysis of GM is likely much more true than not (especially the likely reasons for the abrupt sidelining of Ed Whitacre), but every little bit helps.

In related news, it’s Economists (and the NYT) 0, Market 1 (h/t for the latter link, Don Marron).*

*I don’t believe Andrew was the only economist gulled by Niedermayer’s tripe. For instance, Brad DeLong also linked to it, and was an early detractor of the plan for it. But it should be noted that Niedermayer’s ignorant review was thoroughly dissected by “melly mel” long before Andrew discovered that he had “missed” it.

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Industrial policy is not just green technology or an electric car…

The New Yorker gives us a small look into policy in china other than the currency peg:

The Problem Statement

U.S. manufacturing’s competitive status is increasingly challenged by other economies. Established industrialized nations such as Japan, Germany, Korea and Taiwan are developing state-of-the-art technologies, which range across all areas of manufacturing from electronics to discrete parts. Products based on technologies that originated in the U.S. economy, such as semiconductors and robotics, are increasingly both developed and produced elsewhere.

Emerging economies, such as China, are acquiring manufacturing capability through modest R&D intensities, tax and other incentives for foreign direct investment, and intellectual property theft. This second group then competes through low-cost labor and the use of exchange rate manipulation along with tariff and non-tariff barriers.

However, emerging technology-based economies have the long-term goal of attaining world-class status as innovators, which means they are not content to operate at the low-technology, labor-intensive portion of manufacturing. China already is producing 30,000 patents annually and its patent application rate trails only the United States and Japan.1 Finally, event the huge U.S. lead in biopharmaceuticals is now under attack, as an increasing number of economies invest in supporting science and technology infrastructures and provide financial incentives for foreign direct investment in this rapidly expanding technology.

The combined long-term impact on the U.S. economy of investments by both established and newly industrialized economies has been the offshoring of substantial portions of U.S. manufacturing supply chains—first the labor-intensive industries but now the high-tech ones, as well.

In the years that followed, the government pumped billions of dollars into labs and universities and enterprises, on projects ranging from cloning to underwater robots. Then, in 2001, Chinese officials abruptly expanded one program in particular: energy technology. The reasons were clear. Once the largest oil exporter in East Asia, China was now adding more than two thousand cars a day and importing millions of barrels; its energy security hinged on a flotilla of tankers stretched across distant seas. Meanwhile, China was getting nearly eighty per cent of its electricity from coal, which was rendering the air in much of the country unbreathable and hastening climate changes that could undermine China’s future stability. Rising sea levels were on pace to create more refugees in China than in any other country, even Bangladesh.

In 2006, Chinese leaders redoubled their commitment to new energy technology; they boosted funding for research and set targets for installing wind turbines, solar panels, hydroelectric dams, and other renewable sources of energy that were higher than goals in the United States. China doubled its wind-power capacity that year, then doubled it again the next year, and the year after. The country had virtually no solar industry in 2003; five years later, it was manufacturing more solar cells than any other country, winning customers from foreign companies that had invented the technology in the first place. As President Hu Jintao, a political heir of Deng Xiaoping, put it in October of this year, China must “seize preëmptive opportunities in the new round of the global energy revolution.”

A China born again green can be hard to imagine, especially for people who live here. After four years in Beijing, I’ve learned how to gauge the pollution before I open the curtains; by dawn on the smoggiest days, the lungs ache.

David Sandalow, the U.S. Assistant Secretary of Energy for Policy and International Affairs, has been to China five times in five months. He told me, “China’s investment in clean energy is extraordinary.” For America, he added, the implication is clear: “Unless the U.S. makes investments, we are not competitive in the clean-tech sector in the years and decades to come.”

China is already buying and installing the world’s most efficient transmission lines—“an area where China has actually moved ahead of the U.S.,” according to Deborah Seligsohn, a senior fellow at the World Resources Institute. In the next decade, China plans to install wind-power equipment capable of generating nearly five times the power of the Three Gorges Dam, the world’s largest producer.

The prospect of a future powered by the sun and the wind is so appealing that it obscures a less charming fact: coal is going nowhere soon. Even the most optimistic forecasts agree that China and the United States, for the foreseeable future, will remain ravenous consumers. (China burns more coal than America, Europe, and Japan combined.) As Julio Friedmann, an energy expert at the Lawrence Livermore National Laboratory, near San Francisco, told me, “The decisions that China and the U.S. make in the next five years in the coal sector will determine the future of this century.”

When Albert Lin, an American energy entrepreneur on the board of Future Fuels, a Texas-based power-plant developer, set out to find a gasifier for a pioneering new plant that is designed to spew less greenhouse gas, he figured that he would buy one from G.E. or Shell. Then his engineers tested the Xi’an version. It was “the absolute best we’ve seen,” Lin told me. (Lin said that the “secret sauce” in the Chinese design is a clever bit of engineering that recycles the heat created by the gasifier to convert yet more coal into gas.) His company licensed the Chinese design, marking one of the first instances of Chinese coal technology’s coming to America. “Fifteen or twenty years ago, anyone you asked would have said that Western technologies in coal gasification were superior to anything in China,” Lin said. “Now, I think, that claim is not true.”

The Obama Administration is busy repairing the energy legacy of its predecessor. The stimulus package passed in February put more than thirty-eight billion dollars into the Department of Energy for renewable-energy projects—including four hundred million for ARPA-E, the agency that Bush opposed. (It also allocated a billion dollars toward reviving FutureGen, though a final decision is pending.)

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It’s Not Just the Foreign Conservatives

Once of the things that was clear at CGI this week is that the power companies that have looked into alternative energy sources have quickly realised they are not only good publicity but profitable (i.e., lower cost when used to scale). Florida Power & Light (discussed here) expanded an already major commitment, mostly in FL and CA. Jim Rogers of Duke Energy—a man who, since at least 2001 at Cinergy, has been going around saying things like “I cause 1% of the carbon put into the atmosphere. What are we going to do about that?” (It’s much more since Duke Energy acquired Cinergy) and therefore is described in the business press as eco-friendly. (See here or here, for example.)&mash;was all over the place, announcing commitments and partnerships. And those are just the CEOs who were most visible at CGI this week, even ignoring the ExxonMobil people. (I looked for BP, but didn’t see anyone. Probably next year.)

It should come as little surprise that the energy and power companies want to do something about Anthropogenic Global Warming: they went through the spike in oil prices a couple of years ago as well, and saw the customer reaction. If there was any doubt that it’s not just a good idea but good business as well, $150/barrel and home heating oil spikes that flood the complaint lines and see the orders decline only solidified the idea. (Not to mention that they employ many of the people who will be leading the R&D of those alternative sources, from OTEC to solar to the newer, safer generation of nuclear plants.)

And now, we have utility companies making a sane decision: don’t work with people who actively work against you. As Buphonia notes, Pacific Gas & Electric and PNM Resources of New Mexico have both decided to pull out of the U.S. Chamber of Commerce.


We find it dismaying that the Chamber neglects the indisputable fact that a decisive majority of experts have said the data on global warming are compelling and point to a threat that cannot be ignored. In our opinion, an intellectually honest argument over the best policy response to the challenges of climate change is one thing; disingenuous attempts to diminish or distort the reality of these challenges are quite another.

PNM Resources:

“At PNM Resources, we see climate change as the most pressing environmental and economic issue of our time. Given that view, and a natural limit on both company time and resources, we have decided that we can be most productive by working with organizations that share our view on the need for thoughtful, reasonable climate change legislation and want to push that agenda forward in Congress.

As a result, we have decided to let our membership in the U.S. Chamber lapse when it expires at the end of this year.”

Somebody tell Joe Conanson. For an Aussie Conservative perspective, see here.

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