Archive for October, 2007

I’ve written before that I’m very skeptical of polls. It seems to me that poll respondents give themselves far too much credit for being well-informed or magnanimous, relative to what they actually know or what they will do when making real decisions that really affect them. Accordingly, I’m always bothered when pundits use poll results as a basis for what policy ought to be.

However, this past summer, a poll conducted and reported by New Scientist magazine did seem to offer some useful insights that policymakers ought to consider.

The reported highlights of the survey were that there was substantial public support in the U.S. for carbon limitations, that the public preferred outright standards to cap-and-trade or (egads!) carbon taxes, and that the desired focus of carbon reductions should be on the electric power sector than on vehicles (don’t tread on SUV!)

In my view, the most illuminating finding was the weakness of support for carbon limitations if they induced any significant economic pain. In other words, respondents were fine with climate legislation - as long as it really didn’t cost much. On the other hand, when asked if they would support carbon emission requirements that would increase energy prices significantly - which is likely to be the case to achieve the magnitudes of emission reductions that are widely viewed necessary to have meaningful impact in protecting the planet - support evaporated.

This is one of the few instances where I actually believe what the poll results say, without any bias. I take from this finding that to avoid catastrophic climate change during the balance of this century, either we need to quickly develop a zero- or low-baseload carbon energy source that costs essentially no more than conventional coal generation, or that we quickly need to increase substantially U.S. political will and courage to endure economic sacrifice. Either will be tremendously challenging. Failing on both counts could doom the planet.

Earlier this month, here in Ohio, the fuel cell developer Technology Management Inc. announced that it had succesfully operated its 1kw solid oxide fuel cell stack on vegetable oil from soybeans. It has been said that this is the first instance of a solid oxide fuel cell running on vegetable oil, and that this development could break open the market for fuel cells in the developing world.

This does seem to be an innovation of merit. I have no reason to doubt the assertion, but I’m curious if any of our readers know of other examples of biofuels in fuel cells.

Recently, the Washington Post published an extraordinary editorial. The essence of the piece was, “Save me from myself: I can’t stop emitting carbon. Unless the government changes the rules to induce me to stop, I will kill the planet.”

The author of this plea was David Crane, the CEO of NRG Energy, the 10th largest power generation company in the U.S. In effect, he is saying that his company is willing to undertake major changes to reduce emissions - but only if competitors do so, too, because NRG would be disadvantaged in the marketplace to take proactive action on its own.

I am very sympathetic with Mr. Crane’s argument. It’s a fine thing if people want to engage in emission reductions voluntarily. As for me, I admit that I’m not enthusiastic to unilaterally making changes that I otherwise don’t prefer in order to reduce my carbon footprint. My rationale is that my miniscule contribution to solving the climate problem is individually meaningless, and I don’t want to be just one of very few parties incurring costs or inconvenience without having any macro-scale impact anyway.

Put another way, I’ll do what it takes without complaining if everyone else is in the same boat, but I’m not going to be put out if most people aren’t. I don’t mind sacrificing, but if I’m going to sacrifice, it’s only just that the sacrifice must be shared.

This is where public sector leadership comes in, which in turn is based not only on courageous voting by citizens but also by visionary companies that demand a new world order. I’ll gladly pay the price if everyone else does, and I’m eager to change the rules of the game so that we all bear our share of the burdens - and it looks like NRG is of the same opinion. With more corporate leaders committed to taking the same stand, maybe we’ll finally get somewhere with sound climate policy in Washington.

Last week, as reported on Yahoo!, the chief economist of the investment bank CIBC went on record saying that “we’re in a world of triple-digit oil prices for the foreseeable future,” beginning sometime in 2008.

Increasingly, I’ve been hearing prognostications of $100/barrel oil. I put a lot more weight on CIBC’s view than on Hugo Chavez’s. Why? Based in Canada, CIBC prides itself on being a banker of note to the huge Canadian oil and natural resources industry. Besides, Canadians in general seem less prone to hyperbole than we Americans (or Venezuelans). As a result, I expect that a firm such as CIBC doesn’t put out such statements very lightly.

What does $100 oil mean? By my calculations, each additional $10/barrel increase in oil prices translates to about $0.40/gallon in gasoline prices (assuming no changes in oil transportation costs, oil refinery economics and oil taxation).

So if we’re seeing gasoline close to $3.00/gallon today with oil at $80/barrel, I would expect almost $4.00/gallon with $100 oil.

Higher prices for motor fuels should provide further support for the emergence of biofuels markets, both ethanol and biodiesel. Although biofuels continue to receive lots of public sector push and mass-market discussion, the economics of biofuels have suffered recently, as feedstock prices (for corn and soybeans, respectively) have been bid up by surging demand for biofuel production. The price spreads between feedstock and fuel have become so narrow that biofuels producers now have little opportunity for profit. With higher prices in motor fuels markets, there is more prospect for investment in new biofuel production to be profitable, and for existing biofuel producers to return to reasonable profitability.

Perhaps more interestingly, higher oil prices will provide greater impetus - both from the government and from private sector investments - for the development of next-generation biofuel technologies (e.g., cellulosic ethanol, algae-based diesel), coal-to-liquids and gas-to-liquids projects, oil shale retorting approaches, and the hydrogen infrastructure. These are very capital-intensive and long-term opportunities that many parties are leery of pursuing, in the fear that oil prices will fall back to lower levels and render the efforts uncompetitive and therefore wasted.

If we are truly going to wean ourselves off of oil, we really need high oil prices for a long duration in order to provide ongoing economic sustenance and continuing urgency for the development of these new energy technologies. The forecast of triple-digit oil prices should therefore not be something to dread, but rather something for economic opportunists to seize.

In the early 1990’s, before deregulation, the big issue for electric utilities was demand-side management (DSM), often pursued in the context of least-cost integrated resource planning efforts, to help customers reduce energy consumption in ways that were financially beneficial to the utility as well as the customer.

Alas, with the move to competitive markets, energy efficiency largely got lost in the shuffle. Utility expenditures on DSM plummeted.

It appears that utility activism on energy efficiency has returned. Last month, the Edison Electric Institute (EEI), the trade association for the electric utility industry, announced that it was creating a new institute for electricity efficiency. Last year, several utilities (and other energy industry leaders) launched a National Action Plan for Energy Efficiency. Duke Energy is increasingly vocal about its view of energy efficiency as the “fifth fuel” – after coal, natural gas, nuclear and renewables. PG&E runs its Pacific Energy Center in San Francisco to educate building professionals on energy efficiency technologies.

Renewables might be sexier, and in the long-run extremely important, but there’s little that offers greater impact to address our energy and environmental challenges in the near term than energy efficiency. Thankfully, we now seem to be getting the utility industry back on-message.

Want to learn more? A good one-stop shop on energy efficiency is the aptly named American Council on an Energy-Efficient Economy.

A few months ago, the renowned eco-architect Bill McDonough came to Cleveland to speak to an audience convened by one of our area’s most distinguished organizations, the Cleveland Clinic.

Upon hearing his talk, I felt guilty that I had never read McDonough’s seminal book (co-authored with Michael Braungart), “Cradle to Cradle”.  So I finally got around to reading it – and what an interesting read it is!

One of the key points of “Cradle to Cradle” is that it is critically important to adopt an entirely new design philosophy for products and buildings in which all of the intrinsic materials have a valuable post-life use. Put another way, given our planet’s finitude, nothing is really disposal, so the materials that things are made from must ultimately have many uses over many life cycles.

As McDonough argues, this is a bigger idea than recycling or efficiency – which he calls merely doing “less bad,” not good enough for the long-haul.  Rather, McDonough’s proposed approach is more revolutionary, fundamental and profound. It requires a much broader way of thinking during the design process, expanding beyond solely customer considerations in narrow “use” contexts.  The supplier needs to become the de facto owner of the thing for not only its service life, but for after as well.  In other words, this mindshift compels the designer to ask, “What can the thing be used for after the customer no longer uses it?”

In some ways, materials companies may be uncommonly well-positioned to employ what McDonough terms “eco-effective” design principles. Integrators may actually be “too close” to the customer to see, understand or frankly care about the post-customer experience. On the other hand, materials companies are in the business of developing materials with superior functionality. This functionality can not only be characterized by parameters associated with direct product uses, but also by parameters relating to re-usability.

McDonough’s message should have found an interested audience in Cleveland, given our region’s long-held pre-eminence in materials science and development. Many local corporations – such as Ferro, RPM, Sherwin-Williams, and Lubrizol– generate billions of dollars of revenue based on expertise in materials. Companies such as these should acutely recognize the large long-term opportunities afforded by developing “eco-effective” materials, and products/buildings based on those materials.

Let’s hope that leaders from these companies were in the audience that evening a few months ago when McDonough came to town. Or, at the very least, that they have since read a copy of “Cradle to Cradle.”