Energy Revolutions and Other Good Ideas

Using the theory that we should never let a good crisis go to waste, I thought I would weigh in with my wish list of energy stimulus projects.  “Go get a day job”, you say—“and quit running off at the mouth.”  You sound just like my wife, but hear me out before you kick me out.

  • We Get It Already with Global Warming! The endless looping of Al Gore speeches about global warming now morphed into climate crisis has raised the awareness of the issue and made it a cause célèbre’.
  • But We are NOT Paying More for It! While Americans are eager to embrace renewable energy as clean and environmentally responsible only 1 in 5 of us is willing to pay more for it—and that includes carbon taxes.
  • From ‘In Your Face’ to ‘Push-over? While we generally support the fresh approach of the Obama Administration to global climate change and other policy issues we worry that the Obama Doctrine of make nice, sound good and do little of substance isn’t going to be the kind of change we can believe in long term.
  • Drunken Sailors Spent like Scrooge compared to Obama! Is there really that much money is the world and how are we going to pay for all this stimulus and bailout and government motors?

These conflicting sentiments and pressures and the recession that is driving them are causing us to rethink almost everything we accepted as conventional wisdom.  The good news is that the recession is abating and it will end with or without the governments TARP and other handouts.

Thomas Jefferson once said that a little revolution now and then is a good thing so let’s get revolutionary.  Here is my list of energy transformations to save the planet and stimulate the economy to new growth and prosperity:

  1. Invest in Diamonds
  2. Franchise Nuclear Power Plant Construction
  3. A Race to Coal conversion
  4. Make Efficiency the First Fuel through Retail Access
  5. Be Unconventional

Invest in Diamonds

No, not those bright shiny things your spouse wants on her ring finger.  I mean invest in creating a true North American power grid transmission system designed to synchronize the three existing fragmented interconnects, build HVDC transmission corridors east and west, link renewable energy production with markets, and reposition the power grid for a distributed energy future.

Building a series of diamond shape National Interest Electric Transmission Corridors (NIETC) would improve grid reliability, expand the market potential for renewable energy without endless subsidies, and enable the scaling of efficiency and demand response as ‘first fuel’ supply options for many players—and the return on investment would be much better than TARP!

Where are these NIETC diamonds?

  1. Alberta-California-ERCOT-Chicago Transmission Diamond Lanes. A diamond shape HVDC grid addition would transform the power business forever and enable investment in a wide range of domestic energy sources including oil sands and access to nuclear power to produce it and assure a stable, reliable, clean base load generation supply for North America.  It would connect wind production in West Texas, Iowa, Wyoming and elsewhere with the markets in Houston, Dallas and Austin, in California and throughout the Eastern Interconnect—yes, I read the Pickens Plan.  This diamond shape HVDC backbone system would move power East and West—something that is very hard to do today.  It would use the most advanced technology to reduce line losses and improve power electronics.  It would enable more reliability and natural redundancy in the grid and facilitate the development of scalable markets for efficiency and demand response as well as distributed generation such as Arnold’s dream of a million solar rooftops.
  2. Ontario-New England-Florida-TVA Diamond Lanes.  Creating a second HVDC grid supplement to connect the major nuclear power facilities in these quadrants of the Eastern Interconnect achieves the same objectives in the East.

Franchise Nuclear Power Plant Construction

This is one thing the French got right and we should admit it, copy it, and improve upon it.  Learn the lessons taught by the French experience in standardizing nuclear power designs, construction and operation and use them to create a state of the art nuclear power plant factory with the major merchant nuclear plant operators, TVA and the National Labs to mass produce a modular, fast to build, standardized nuclear fleet for the 21st century.

The goal would be to build enough emissions free nuclear energy baseload capacity to assure achievement of the emission reduction goal offsetting the existing coal fired generation base load in service. The lessons learned from the competitive power market experience divesting nuclear plants is that performance goes up and costs come down when private sector owners with a profit motive have opportunities to sell into competitive wholesale power markets.  Use it to rapidly scale the nuclear fleet among a series of competitive merchant players all using the same standardized designs, methods, systems and operating best practices.

A Race to Coal Conversion

America’s large installed base of coal fired generation capacity is a great asset that has served us well over generations.  As we build the transmission diamonds and construct the nuclear fleet proposed we will continue to rely upon coal to meet our energy needs. But we need a new deal for the coal industry.  My suggestion is a competition among coal generators to earn market share in the supply mix of the future.  It would work like this:

  1. Competition for Supply Stack Placement. Once the emissions reduction goals are set by Congress, the race begins between all sources of supply including efficiency and demand response to meet that goal using a least cost/best fit yardstick for competitive placement in the dispatch cycle.  New supply/demand options would be able to complete for a place in the supply stack based upon their overall cost including a carbon tax set for each ton emitted.
  2. No Free Allowances.  There would be no free rides for carbon emission allowances but challengers would not be able to displace an existing generator until their project actually comes online.  This also gives coal generators time to clean up their act as much as possible and forces new projects to go to market before they realize any payment. This approach also ends the Bernie Maddoff worthy scam of “buying allowances” to fund environmental projects in Far-off-istan which really is a giant wealth transfer.

This will likely accelerate consolidation in the coal industry and among utilities, but also could ignite a race to speed the R&D on clean coal technologies and carbon capture and sequestration or other alternatives sufficient to win a place in the supply stack for coal.  Let the race begin.

Make Efficiency the First Fuel through Retail Access

Efficiency improvement and the reduction in energy intensity have been substantial.  Here California is a genuine pioneer in appliance and building efficiency standards adoption years ago that now put California’s energy consumption per capita substantially lower than the national average. Some of that gain is due to the off-shoring of a large segment of manufacturing, but improvements in lighting, appliances, buildings and other areas is material and should be encouraged.

How do we do that?

We all know the answer to it, but fear the unintended consequences and ratepayer complaints.  The answer is to move from average pricing to real-time pricing of energy as a first step in creating an economic incentive for consumers to conserve.  On a date certain set by Congress, energy pricing should shift to real time pricing in all states.  This is an essential intrusion into the traditional state utility regulatory authority to create a scalable national market potential for renewables and efficiency.

The regulatory bureaucracy will want rulemaking out our ears to do the social engineering many will demand.  There is a balancing of interests that must be worked out in this I have not attempted in this revolutionary kicking of the can.  Somewhere in the swirl of marginal cost pricing, appropriate allocation of costs of service, and regulatory supervision is that balance—-but truth is that a move to real-time pricing will lead to bundling of services where commodity energy will be just one of the components in that bundle.  The regulatory challenge will be to assure that consumers can judge the cost and benefits of a bundle offered transparently.

But a shift to real-time pricing alone is NOT sufficient to achieve the objective. We need real retail competition to go along with real-time pricing of commodity energy.  And we need to create a scalable market so that a vendor can aggregate customers and hedge their risks across markets.

Be Unconventional

On the natural gas side of the business a funny thing happened in the race to build LNG.  Technology improvements and higher natural gas prices spurred a drive to explore and develop unconventional sources of natural gas—the gas deposits often passed over because they were not a profitable to produce.  Now technology improvements of horizontal drilling and #D seismic technologies has revolutionized both oil and gas production.  And guess what?  There is plenty of that unconventional gas right here in North America in the Rockies and elsewhere. Who would have imagined that one of the fastest growing oil and gas producing regions is now North and South Dakota as a result.

The growth in unconventional gas has been so pronounced that is has threatened much of the LNG project construction in this country and demonstrated the energy security potential we have in the US and North America if we are only willing to develop it.

Natural gas is extremely important to the electric power future because combined cycle gas fired generation is still the fuel of choice and technology of choice for most new power plant building because it is proven, fast to build and less capital intensive or regulatory constrained than almost anything else.

So when we’re building those NIETC diamond corridors—save room for gas pipelines and fiber optic cable will ya?