Rich Mignogna's Energy & Technology Blog

Saturday, May 26, 2012

Recognition for Ground Source Heat Pumps -- the little g in Geothermal

Over the years, proponents of some forms of geothermal energy have suffered from a bit of an identity crisis. There is, of course, Big G which generally refers to hydrogeothermal resources of the type that create geothermal electrical generation common to northern California, Nevada, Indonesia, etc. and shown below in the new Hudson Ranch I system that recently went online in the Salton Sea of California.

Big G also commonly refers to geothermal resources used for direct use as in hot springs resorts and the district heating system in Pagosa Springs, Colorado.

Then there is "little g" which refers variously to geothermal heat pumps (GHP), geoexchange, or, more appropriately, ground source heat pumps (GSHP) -- a fundamentally different energy resource and technology than Big G. It doesn't help that both Big G and little g, and which both suffer from a bit of a Rodney Dangerfield complex, are often discussed at the same conferences which only further confuses the two. Rather than a resource for electrical generation or direct use heating, ground source is better looked at as an energy efficiency device that can provide both heating and cooling for space conditioning (I won't go into the details here. Interested readers might want to start out with the Wikipedia entry).

The basic problem with ground source is the high first cost of installing the loop field. While improving technology has increased the efficiency and cost effectiveness of the heat pump component of the system, there has been little improvement in the cost of installing the loop (see the excellent article by Tom Konrad in Forbes here). Thus, for residential systems in particular, GSHP remains at a competitive disadvantage -- especially in light of low natural gas prices.

I have long argued that ground source deserves more recognition in utility demand side management/energy efficiency programs, most of which focus on weatherization programs (good) and nothing more sophisticated than rebates for kitchen appliances and compact fluorescent light bulbs (questionable). Some states have enhanced their renewable energy standards with new thermal energy standards. These have tended to focus more on solar hot water heating and, occasionally, biomass... still not much recognition for the only technology that provides both heating and cooling.

During this legislative session in Colorado, a group convened to attempt to foster greater recognition for ground source in a thermal energy standard that was being discussed. Unfortunately, the single paragraph that discussed geothermal or ground source in what became Senate Bill 12-180 was lost in what morphed essentially into a biomass/forest conservation bill. That the bill was introduced late in the session and was tagged with a large fiscal note did not bode well for its prospects and it was soon killed in committee. That was probably just as well since the bill was a mess and the best it would have done would have been to create a thermal energy working group. In the present economic environment, and with little support for new incentive programs, I suspect that ground source is going to have to continue to rely on technological advance and new financial innovations (similar to the PPAs that have fostered greater PV adoption) to reduce the first cost to consumers so that it can compete with more established space conditioning technologies.

Saturday, May 19, 2012

World's Largest Concentrating PV System Goes Hot in Colorado!

Fans of utility-scale solar PV are likely aware of the world’s largest highly concentrating PV (HCPV) system that has been under construction in the heart of Colorado’s San Luis Valley. On May 10, Cogentrix Energy, LLC (a unit of Goldman Sachs) announced that it has achieved commercial operation at its 30MW HCPV project which will provide solar energy to Public Service Company of Colorado (PSCo) for compliance with the utility’s wholesale DG obligation under Colorado’s Renewable Energy Standard. The Amonix MegaModule® assemblies that form the heart of this system rely on Fresnel lenses to concentrate solar irradiation 500 suns onto triple junction solar cells originally developed by SpectroLab (a Boeing company) as part of the US space program. Looking like something out of the movie Transformers, the project consists of over 500 60kW (nominal) dual axis trackers on approximately 225 acres approximately 14 miles NW of the southern Colorado town of Alamosa (click here for a Google map).

Truly an impressive facility, this project was bid into the 2009 All Source Solicitation conducted as part of PSCo’s 2007 Electric Resource Plan (Colorado PUC docket 07A-447E). Electricity from the plant, estimated at approximately 75,000 MWh for the first full year of operation, is provided to PSCo under a 20-year PPA. Financing for the approximately $145 million project was facilitated by a $90.6 million loan guarantee from the US Department of Energy proving that not all DOE-backed funding necessarily had to result in Solyndra-like failures (in fact, there is a fundamental difference between providing a loan guarantee for an energy development project such as this and a manufacturing facility such as Solyndra). The one downside, albeit a significant one, is that the Colorado PUC exempted this project along with another 30MW project in the San Luis Valley developed by Iberdrola Renewables from the 2% rate cap in Colorado's renewable standard. As I’ve pointed out previously, compliance with Colorado’s RES has been achieved, and even exceeded, but at a cost far greater than the 2% rate cap stipulated in the statute.

Back in October 2011, I had the opportunity to tour the facility with Cogentrix VP Jef Freeman while it was still under construction. Below are a handful of the pictures I took at that time.

Approaching the plant from the southeast, it is difficult to get a true appreciation for the scale of the facility.

Looking closer, it isn't clear if this is a solar facility or a spaceport!

Loading the Amonix MegaModule panel assemblies onto the pedestals.

Look close and you might see the workers attaching the panel assembly to the pedestal from below.

To get a feel for the scale, check out the pickup truck in comparison to the trackers. The Solectria inverter on each tracker can be seen in the foreground.

When not tracking the sun, or stored due to high winds, the panels will remain horizontal as shown here.

All photos Copyright Richard Mignogna, 2011.

Wednesday, April 11, 2012

Discrepancies in Colorado Energy Land Use Policies

There is a discrepancy playing out in Colorado’s energy landscape and energy regulatory policy that may be poorly understood by officials and consumers alike. It has to do with local control versus establishing statewide standards for siting energy facilities of all types.

This legislative session has seen the introduction of a number of initiatives to enhance local control over the siting of oil and gas drilling activity largely intended to allow local jurisdictions to restrict the proximity of drilling activity to residential developments. These initiatives were opposed by, among others, the Hickenlooper administration and its cognizant regulatory agency, the Colorado Oil and Gas Conservation Commission (COGCC). The argument essentially put forth by COGCC was that there needs to be uniform standards for siting drilling activity and that it is the agency best qualified to monitor and regulate the industry and to establish and enforce such standards. As a hoped-for solution to the dispute between factions seeking local control versus statewide control, the administration has convened a task force and charged it with an ambitious agenda of reconciling local concerns with state agency control in only a few weeks time.

In contrast, consider the regulatory regime governing the siting of electrical generation facilities. While the state agency of competent jurisdiction most closely associated with the development of electrical generation facilities is the Colorado Public Utilities Commission (CPUC), with the possible exception of transmission line siting, it wields little influence in the siting of electrical generation facilities be they coal fired, natural gas fired, solar, wind, or otherwise. Rather, satisfying environmental concerns, economic concerns, building permits, and land use issues for facilities outside of municipalities rests solely in the hands of county commissions through what is known as the 1041 permit process. One of the areas in which the discrepancy between state control of oil & gas development versus local control of power generation has become most obvious is the siting of wind and solar renewable energy facilities, and one of the cases that has received considerable recent attention is the 1041 permit process for a concentrating solar power facility near the San Luis Valley town of Center in Saguache County.

The Saguache County project, proposed by California solar developer Solar Reserve, posits the development of two concentrating solar electric generation facilities known as “power towers.” A number of groups expressed environmental, wildlife, view shed, and quality of life concerns with this proposal to construct two 656-foot towers smack in the middle of the Valley on land that is presently dedicated to agricultural use. In a 2 – 1 decision, the Saguache County commissioners recently approved the Solar Reserve 1041 permit application. In its decision, the County Commission eschewed the aforementioned concerns in favor of the promised economic impact that the development would have. If you’re having difficulty envisioning what this project entails, consider that the development would create an industrial facility encompassing approximately six square miles, the central focus of which would be two towers that are only 50 feet short of the tallest building in downtown Denver. It is difficult to envision how such a project, with the Sand Dunes National Park and Sangre de Cristo Mountains to the east and the San Juan Mountains to the west, fits into the character of what is largely a pristine agricultural area.

A similar issue concerning the state’s abrogation of its siting authority to local officials can be found in the siting of wind turbines. Here too, the absence of any statewide siting rules is troubling. Apparently, it is acceptable for state officials to take a hands-off approach to the construction of a massive 400-foot wind turbine with a life expectancy of 20 years or more 300 feet from your back door, leaving the decision to local officials, but only a state agency may weigh in on the drilling of an oil or gas well the same distance away. This certainly seems inconsistent. To be fair, COGCC at least maintains a database of all such drilling activity, issues permits, and monitors each well while CPUC in particular, and the state in general, seem strangely disinterested in regulating any aspect of the construction of wind or solar facilities having at least as great an impact. Moreover, the public would likely find troubling the fact that CPUC does not even maintain a list or require the most minimal registration for any renewable energy generation facility, be it a $400 million wind farm or a $50,000 solar installation. Sadly, attempts at requiring CPUC to maintain such information in the past were met with resistance by public officials, utilities, and developers alike.

The concern here is not whether oil and gas development should fall under local or state jurisdiction. Nor should this be construed as an argument in favor of limiting additional renewable energy development, as some will undoubtedly assume. What is of concern is that there is a troubling inconsistency in the regulation of different energy sources based, apparently, on little more than political agenda.

Thursday, January 26, 2012

An Insider’s Perspective on Colorado's Renewable Energy Standard – Some Critical Thinking about Colorado's "Successful" RES

As indicated in Mark Jaffe’s article, Power Surge Slows (The Denver Post, January 22, 2012), Colorado’s Renewable Energy Standard (RES) has in many respects been one of the more successful ones in the country. With rare exception, such as California’s 33% by 2020 goal, it is certainly one of the most ambitious. But, there is more to understand before we declare it an unqualified success. Importantly, the slow-down described in the article did not have to occur if only the state’s principal utility, bolstered by lax regulatory oversight, had acquired renewable resources in a more fiscally responsible and sustainable manner.

Among the benefits derived from the RES is that Colorado has attracted a handful of big name manufacturers such as Vestas and General Electric in wind turbine and solar panel manufacturing, respectively. Hopefully their local operations will prosper in spite of a difficult economic climate and tenacious competition from abroad. Colorado also has had, until recently, a thriving small solar installer industry but its success was predicated on too-generous incentives that broke the Ratepayer Bank while the Public Utilities Commission was late in recognizing the severity of the problem. Mark Jaffe’s article noted that Xcel Energy’s renewable fund – known as the Renewable Energy Standard Adjustment (RESA) account – is $51 million in the red and headed for worse before it gets better. What is less well known is that the utility earns its Commission approved rate of return on this deficit – a great deal if you can get it.

Xcel has asserted that it has already met Colorado's 30% RPS clear out to 2028. On the surface, that sounds great. But let’s come back to that RESA deficit. What achieving compliance with the renewable standard a decade early really means is that ratepayers have been on the hook for resources that were not needed for compliance or to serve load. As the PUC Staff warned more than once, Xcel was purchasing “too much, too soon, at too high a cost” and that, especially with regard to the small solar program, this would lead to the same boom and bust that has afflicted myriad other solar incentive programs that over-compensated solar customers. One needn’t have been prescient to predict this outcome. Rather than stage its acquisition of renewable resources commensurate with the ramp-up in the RES, and in so doing take advantage of the rapidly declining cost of renewable energy in the process, Xcel spent future receipts from the renewable fund driving it deep into the hole until the deficit became so severe that even the most ardent supporters of renewable energy had to take notice. It was at that point that Xcel came to the PUC with a drastic plan to cut back on the incentives it was doling out to solar customers. Xcel and its customers were not alone. The same affliction befell the state’s other investor owned utility (IOU), Black Hills Colorado Electric, though at a much smaller scale. The result was inevitable – a boom and bust that did not have to be and one that the Commission’s staff warned about as early as 2007. Moreover, the slow-down described in Mark Jaffe’s article extends to the development of utility scale projects as well as the small solar market.

Xcel has argued that, while it has exceeded the goals for the renewable energy mandate, it has stayed within the 2% cap established in the enabling legislation for the RES. This misrepresents the true situation due to the convoluted and opaque rate cap formula used in Colorado’s RES which makes it difficult to discern the actual rate impact. Xcel argues that it is only charging an additional 2% on each customer’s bill. That is true, but it does not consider the accrued liability in the hemorrhaging RESA deferred account nor does it include the cost of resources for which the PUC has granted a “waiver” from the rate impact calculation. As demonstrated in numerous PUC Staff analyses, when all of the costs are accounted for, the actual costs of renewable energy penetration in Colorado have far exceeded the 2% rate cap by any reasonable, common sense definition of the term. Unfortunately, the IOUs have been allowed to redefine the plain meaning of 2% in a way that masks the true cost of renewable energy in Colorado. Were this not the case, and had the PUC under the prior administration exercised proper oversight of the regulated utilities' renewable expenditures, the small solar industry in Colorado would not now be decrying the drastic, but necessary, reductions in incentive payments available to their customers.

A sufficiently skeptical observer might ask why a utility that fought the imposition of the renewable standard so vigorously back in 2004 would later reverse course and spend more than necessary to blow the compliance targets away and brag that it has met its compliance obligation more than a decade early. Many observers believe that it is because the utility figured out how to make money at it! Bear in mind that the utility has invested none of its own money in renewable energy and is promised full recovery of every dime – often plus interest – of consumer funds that it does spend. In my post on the 12th of January, I wrote about the PUC's rejection of Xcel's attempt to profit unconscionably from this behavior (Click here for that column).

The evidence from multiple PUC proceedings is that Xcel has acquired renewable resources (primarily wind energy) that it does not need either to serve load or for RES compliance so that it can profit from the sale of the excess renewable energy credits (RECs) to other utilities. As I wrote in testimony in Xcel’s 2010 Amended Resource Planning proceeding, this provides the utility with a perverse incentive to acquire more RECs than needed, bought and paid for with interest by Colorado ratepayers, allowing the utility to profit on both ends of the transaction.

Not surprisingly, the utility has gone to great lengths to prevent the disclosure of this fact – something that the PUC's own Staff has warned about for several years now. But, the data do not lie. Fortunately, with a new governor and under the leadership of new PUC Chairman Joshua Epel, the Commission is now taking steps to right the ship. But it's a big job and it will take a while to pay down the deficit in the renewable energy accounts. Thus vigilance by an informed public is still needed.

Unfortunately, balancing the renewable budget now will not mitigate the boom and bust I spoke about earlier or the need to transition to clean energy in a sustainable manner as the utility, in its current resource planning docket, has made it clear that it has very modest needs for additional renewable generation for some time to come.

So, how do we move forward from here? Clearly we need to restructure some of the details of the RES including, most importantly, the way it is administered. Obviously, the widely discussed tax incentives available to renewable developers, including the soon to expire production tax credit for wind energy, are important, but the individual states have limited ability to influence that. So, here is a short list of things that we may want to consider:

Modify the liberal REC banking rules, i.e. the shelf life of RECs, in the Colorado RES. At the present time, a REC may be used for compliance for as long as five years beyond the year in which it was generated. Restricting the bankability of RECs would more closely tie actual renewable generation to current compliance obligations and discourage making expenditures far in advance of requirements.
Consider a different mechanism for funding renewable energy development – perhaps a Public Benefits Fund paid into by all utility customers in Colorado with investment in renewable projects flowing back to the areas in approximate proportion to their level of contribution. As all the rest of us must do, set a transparent, firm budget and manage to it.
Increase the renewable compliance targets for the state’s rural electric coops and municipal utilities (presently only 10% by 2020) to something akin to that for the two investor owned utilities. The obligation for compliance with the renewable standard should be shared equally by all of the residents of Colorado, not just the 55% who are customers of the state’s two IOUs. Furthermore, it seems unfair for the availability of consumer benefits, such as solar incentive payments, under a statewide program such as the renewable energy standard to be solely a function of your address.
Perhaps the most important change would shift responsibility for administration of the renewable standard away from the utilities and into the hands of a public agency (perhaps the PUC or the Governor’s Energy Office) or a non-profit third party administrator. The state’s investor owned utilities, upon whom the bulk of the obligation for compliance with the renewable standard has fallen, have not shown themselves to be good stewards of the public’s investment in renewable energy.

There are many people, including me, who would be willing to pay more than 2% to aid the transition to a clean energy infrastructure – if the money is spent responsibly. But, a promise made to the voters to limit the cost impact should be a promise kept. With proper management and guidance, compliance with the RES could have been achieved in a responsible manner and at reasonable cost. Unfortunately, you cannot build a sustainable energy infrastructure on the back of unsustainable economics.

Thursday, January 12, 2012

Consumers go 2-0 in recent decisions at Colorado PUC

Consumers went 2-0 in important decisions at the Colorado PUC this week in cases involving the state's dominant utility, Xcel Energy. One decision, yesterday's rejection of Xcel's request for interim "rate relief" (right, not really sure who is in need of the relief but that's what they called it) made the papers and the blogosphere this morning. The other, an equally if not more important decision on Tuesday concerning the utility's request to keep 40% of the proceeds from the trading of what are known at Hybrid RECs (docket 11A-510E), received little if any notice because a) it is far more difficult to understand and b) the impact is less noticeable to consumers.... note, I said less noticeable, not less important.

So, let's start with the 510E docket. As I've written about here previously and in testimony before the commission as well as some other public arenas, the PUC has allowed Xcel to acquire "too much, too soon, at too high a cost" with the ultimate impact that the 2% rate impact limitation in the renewable standard statute has been circumvented by the adept use of misdirection, accounting chicanery, and political decision making. But, why would a utility that fought the imposition of the renewable standard so vigorously then turn around and spend more than necessary to blow the compliance targets away and brag that it has met its compliance obligation more than a decade early? There is no way to fully explain the volumes of PUC Staff analysis and testimony in this small space, but the bottom line answer is that Xcel (aka Public Service Company of Colorado or PSCo) has figured out how to make money at it! Keep in mind that the utility has invested none of its own money (zero, nada) in renewable energy and is promised full recovery of every dime -- plus interest -- of consumer funds that it does spend. The unfortunate impact has been that consumers are being saddled with costs in excess of the statutory 2% rate cap. Another impact that only a few understand is that, as I explained in testimony way back in the 2007 RES Compliance Plan docket, it would and -- and indeed has -- lead to a boom and bust in the Colorado renewable energy market.

Hence, being flush with more RECs than needed for compliance under any scenario, Xcel saw an opportunity to sell its excess RECs to utilities in California that were having difficulty complying with that state's RPS. The term "hybrid REC" came about because California, ever hungry for electricity, required that RECs generated outside the state be bundled with energy from another source that could be imported into the state. In the process, the company has made an obscene profit from the sale of these excess RECs that have been bought and paid for by Colorado consumers with interest. In return for employing its "skill" in effectuating such transactions, Xcel thought that it should be allowed to retain an astonishing 40% of the proceeds with the remainder being used to buy down the deficit in its renewable accounts (known as the RESA deferred account) so that it could.... you guessed it.... acquire even more RECs at consumer expense for it to sell at a profit using OPM (that's Other People's Money). Keep in mind that we're talking about margins well into the eight and approaching nine figures here (that's without the decimal point) so this was not exactly pocket change (OK, that's tens and approaching hundreds of millions of dollars in play). This was about as close to a perpetual motion money making machine as I've ever seen.

The PUC's staff, the Office of Consumer Counsel, large industrial customers and others did recognize that the company should be credited with some finder's fee for identifying these trading opportunities but nowhere near 40%. They also differed on the mechanism through which the customer share should be returned to ratepayers. On Tuesday, after volumes of testimony submitted by all sides and aborted settlement negotiations that failed to yield an acceptable outcome, the commission deliberated and made its decision. Where did they come down?

The ultimate decision awarded Xcel even less than the 20% share proposed by the PUC staff and most of the other intervenors. The outcome was that Xcel could retain 20% of the first $10 million in margins, 15% of margins greater than $10 million and up to $30 million, and only 10% of margins beyond $30 million -- proof that it doesn't pay to be greedy. These sharing percentages are to remain in effect through 2014 after which the PUC could reevaluate the situation. As to the mechanism for returning the customer share, here is where the PUC could have done a better job. Concerned about the deficit in the RESA deferred account that is well into the tens of millions of dollars (see my RPS rate cap presentation posted elsewhere on this blog), the commission elected to first use the proceeds to pay down the RESA, but I am a bit less concerned about that now that the commission has indicated its intent to keep a closer eye on this. As is typical we'll have to wait for the final written decision, to be followed by the inevitable RRR (that's application for rehearing, reargument, and reconsideration) before we're fully comfortable with this outcome. And, unfortunately, none of this completely mitigates the boom and bust I spoke about earlier or the need to transition to clean energy in a sustainable manner as the utility, in its active resource planning docket, has made it clear that it doesn't need any more renewable generation for some time to come.

As for Xcel's application for interim rate relief (docket 11M-951E) that was rejected by the commission on Wednesday, Chairman Epel said it best when he noted that without some showing of adversity, "there is no need for rate relief." Though their reasons differed, the three commissioners came down on the side of rejecting the interim rate hike. Commissioner Tarpey noted that the company is already close to its authorized rate of return and Commissioner Baker was the closest to granting the request noting that "regulatory lag could be considered a form of adversity." Fortunately, neither of the other two commissioners bought that argument. And, while this is encouraging, Xcel still has before the commission its request for a $142 million rate increase (docket 11AL-947E) which has yet to be adjudicated. All this decision did was prevent the utility from collecting the lion's share of that request prior to a final decision in that case. Thus, continued vigilance by the public is still necessary.

Back after a hiatus: A Chat About RPS Costs and an Unconventional Solar Array

Folks, you can probably tell that it's been a while since I've kept this blog up to date. I now hope to do a better job of keeping it current. But in the time I've been away, the technology has marched on and Blogger has made a number of modifications to its system. So, to get back into the swing of things, I thought I might just lob myself a softball to get started.

In the presentations widget in the right hand column is an image of a presentation that I gave at the State/Federal RPS Summit in Washington, DC back in October as part of a panel discussing how states are attempting to manage the costs of compliance with their renewable standards. The gist of that presentation was that Colorado has not done a very good job in that regard. The state's major utility, Xcel Energy, has bragged about having already met Colorado's 30% RPS clear out to 2028, but this has come about because the utility has "acquired too much, too soon, at too high a cost." The result is that the actual cost to ratepayers has been far in excess of the 2% rate cap that is also a part of the RPS. Not unexpectedly, the utility has gone to great lengths to prevent the disclosure of this fact -- something that the PUC's own Staff has warned about for several years now. But, the data is what it is. Fortunately, with a new governor and a new, more cost conscious PUC Chairman, the Commission is finally trying to get these cost overruns under control. But it's a big job and it will take a while to pay down the deficit in the renewable energy accounts. Still, a recent decision by the Commission will go a long way in achieving that aim. More on that in my next column.

Finally, a few days ago, the Wall Street Journal carried a story about a 13-year old boy in Northport, NY who, for a school science project, developed a new way of arraying solar panels to emulate leaves on a tree in the hope that this configuration would yield a greater output than the conventional 2-dimensional rooftop array (see A Youngster's Bright Idea is Something New Under the Sun, WSJ, 05Jan2012). Well, the so-called experts interviewed for the article were divided on whether or not young Aidan Dwyer's idea had merit and some questioned whether his measurements were valid. One of these "experts" criticized the experiment for measuring voltage contending that he needed to calculate power. Sorry, but that's wrong too. He needed to record energy (as in kWh as opposed to kW). More importantly, however, is that all of this is irrelevant. What is relevant is that Aidan's curiosity led him to hypothesize a solution to a problem and devise an experiment to test it. And that recognition by a 13-year old is more important than whether or not his tree array was more productive than a flat panel array. Either way, the young scientist is to be commended.

Wednesday, July 21, 2010

Why Feed-In Tariffs are Not FiT for Colorado

It seems that the renewable energy literature lately has been replete with calls for feed-in tariffs (FiT) to promote renewables, in general, and solar PV, in particular. It is as though because feed-in tariffs have been the incentive of choice to promote renewables in many European countries, we necessarily should adopt them here too. It is true that, if capacity expansion were the only figure of merit, FiTs would be the incentive of choice. But cost, and who pays, is an issue that advocates seem totally unconcerned with. And, serious students of renewable energy generation understand that FiTs have had a decidedly checkered history virtually everywhere they have been adopted. Spain nearly bankrupted its energy infrastructure with an overly generous and poorly conceived FiT and even Germany, often touted as a model of support for solar PV capacity incentives, recently recognized that it was overcompensating developers and quickly moved to reduce its feed-in tariff compensation.

In contrast, the renewable portfolio standard (RPS) approach adopted by many states in the US offers an alternative mechanism for supporting renewable energy capacity expansion that is better suited our regulatory structure. Through market-based REC prices, it also does a better job of recognizing the economic burden that high cost renewables place on ratepayers. An in depth comparison of the two incentive structures would take more space than we have available here, but suffice it to say that some of the important differences concern ratepayer impact, the difficulty of developing a tariff structure that incentivizes generation while not overcompensating developers, market responsiveness (or lack thereof), consideration of cost reductions due to technological advance, and legal restrictions.

In the summer and fall of 2009, the Colorado PUC conducted a comprehensive survey and analysis of existing and proposed feed-in tariffs around the world. Our conclusion was that FiTs were problematic due to the concerns expressed above. It also questioned whether a FiT would prove superior to the very successful renewable and solar programs that Colorado has implemented under its RPS. That study, entitled The Application of Feed-In Tariffs and Other Incentives to Promote Renewable Energy in Colorado can be downloaded from the PUC website. Our investigation into FITs continued this summer with our own internal analysis of the legality of statewide FiTs based on FERC preemption concerns and PURPA restrictions. That analysis concluded that there are very limited circumstances under which a statewide FiT may be implemented by a state regulatory body or legislature. And, some of those circumstances are even more problematic in Colorado due to the Colorado Taxpayer Bill of Rights commonly known as the TABOR amendment. I should point out that individual utilities as well as coops and muni utilities are free to implement a FiT as they desire. What is at issue here is whether or not a state body may order a FiT for any class of utilities. Our assessment of a state's limited authority to implement a FiT was, coincidentally, affirmed by a recent FERC decision pursuant to a California PUC case. A fact sheet describing the essential elements of that case is available here.

Perhaps more important than the legality of FiTs is whether or not they are the most effective and efficient way of fostering renewable energy generation. It is clear to me that they are not. Aside from the concerns with ratepayer impact and market responsiveness already discussed, markets in which they have been implemented have been subjected to boom and bust cycles (the highly touted Gainesville, FL program is a prime example). FiTs are simply not the way to develop a sustainable renewable industry. From a policy perspective, one must determine if the goal of an incentive program is to guarantee a rate of return to a generator (as with FiT programs) or to simply compensate renewable generators for their above market costs of doing the right thing. I would argue that the latter approach is more considerate of the additional costs being shouldered by ratepayers.

It is also clear that the guaranteed RoR provided by a FiT fails to motivate the technological advance needed to bring renewables to grid parity and economic sustainability. And I am not alone in this belief. Tech entrepreneur and Sun Microsystems cofounder Vinod Khosla writes:

"Every time there is a carve-out for some technology or deployment method, a market is being warped, and suddenly the chosen technology doesn’t need to compete and minimize cost in order to ‘win’ (case in point, solar feed-in tariffs in Europe, and more recently, Oregon). Consumers lose and excluded technology development slows down.” (Greentech Media, 16Jul2010)

Dr. Petri Konttinen also writes that FiTs are “successful in the short term but risk creating false and unsustainable markets vulnerable to speculators.” (07Jun2010)

The bottom line in this message should be that you cannot build a sustainable energy infrastructure on a foundation of unsustainable economics.

Unfortunately, proponents of FiTs seem totally unconcerned with any of the difficulties I've discussed. I was recently invited to participate in a panel discussion of feed-in tariffs to be held in Boulder, Colorado on July 22 organized by a California based advocacy group called the FIT Coalition. Though initially reluctant, I was convinced to participate by the panel moderator because he felt that I could bring some balance to the discussion, particularly with regard to the regulatory and legal considerations. It turns out that my initial reluctance was well founded as the workshop organizers ordered the moderator to "uninvite" me because they did not want an opposing viewpoint. The FiT intelligentsia, it seems, can be every bit as despotic as the antirenewable orthodoxy they condemn. Whether they simply fear alternative viewpoints or are defending a pecuniary interest, I'm not sure. Probably both. So, given that I won't have an opportunity to give the brief presentation I developed, I am posting the slide presentation here for you to view. Of course, you won't have the benefit of the comments that expand on the bullet points, but for the most part you can probably read between the lines.

Colorado's Tiered Electric Rates

Since the start of the summer when Xcel's new two-tiered rate scheme went into effect in Colorado, the PUC customer complaint line has been ringing off the hook. And, really, it's no wonder to anyone who has given this rate structure more than a modicum of thought. In the PUC propaganda promoting its decision approving the two-tiered rates, the PUC Chairman proclaimed that "For years, consumers have advocated 'the more you use, the more you pay' for electricity." Really? I wonder what consumers he's been talking to?

But, truthfully, this is a serious topic and those who complain about the tiered rate schedule are not all wrong, even though some may not artfully express their dissatisfaction. I agree with the sentiment that those who impose the greatest load during peak times should perhaps shoulder the greater incremental cost. But, if the average use is, as Xcel noted, 657 kWh per month, then the 500 kWh threshold at which the higher rate goes into effect seems exceedingly low. Does that imply that the average user is wasteful? What about the unfortunate person who is on an oxygen generator that by itself consumes over 300 kWh per month? Or the person who installed a ground source heat pump in the name of efficiency and is now being penalized because the electric pumps for those systems run much more often. And, those respondents who noted that Denver water users were so successful in heeding the Water Board's call for conservation that rates had to increase because revenues fell so drastically expressed a very valid concern. So much for the argument about efficiency saving consumers money. The same could easily happen here.

From a societal standpoint, I am not convinced that average rates (what we have traditionally had) are not in the best interests of the community as a whole. After all, we're not talking about a luxury here but a necessity. And, that is why the monopolist is regulated. If you want to place a luxury tax on the commodity, then increase the threshold for the more expensive tier to something that is truly reflective of luxury use rather than necessary use. Moreover, Xcel's two-tier rates for June-September don't seem particularly targeted at peak loads, just aggregate demand by individual users. If we want to fiddle with rates to promote energy conservation, then TOU rates would be better than a naive two-tier rate that does not provide adequate discrimination between uses. TOU rates would at least allow many of the consumers who have a valid use to shift it to lower cost times. We need a tool that can be applied with more precision than a sledge hammer.

Of course, TOU rates would require new, so-called "smart meters" which Xcel would be only too happy to foist on ratepayers. But the problem there is that the PUC and Colorado legislature seem only too happy to jump into palliative, partial solutions without considering all of their ramifications. While the PUC does have open a couple of "investigatory dockets" into matters such as data privacy and cyber security, one would think that it would address those issues before entertaining utility applications for cost recovery of its Boulder Smart Grid City experiment.

It seems a particularly perverse notion of technological innovation in which the goal is to increase the cost of a commodity necessity to the end user. If the computer industry had adopted this model of innovation you'd still be reading your morning paper on newsprint and blogs would be handed out on street corners as they were in colonial days. Rather than coercing users to use less of what has been called the "master resource," shouldn't the focus be on making its production more efficient, with less environmental impact, AND at lower cost?

Thursday, December 10, 2009

It's Just Good Engineering....

It's rather interesting that on the heels of the Climategate email controversy the World Meteorological Organization publishes a report stating that the decade from 2000 to 2009 was the warmest on record. No, I don't think that this was intended to deflect the public's attention from the controversy although it may seem that way to some. It is, however, seriously disappointing to learn that some climate scientists apparently suspended their belief in true scientific discourse in favor of manipulating data that conflicted with their advocacy.

One of the most cogent arguments that I have seen in favor of dealing with climate change was recently published in a New York Times op-ed column by Thomas Friedman entitled Going Cheney on Climate. Frankly, he could have made the point about the need to plan for low probability, high impact events quite well sans the Cheney analogy, but I suppose it made for a good headline. Aside from the fact that it is simply prudent to plan for such events, he notes that there are several benefits that society would realize from transitioning to clean energy, not the least of which would be greater innovation and energy independence.

But, beyond that, I look at it another way. My engineering training tells me that it is simply good engineering to make the most efficient use of the inputs to production. Why exhaust depletable resources for energy production when there are nondepletable alternatives available? What I'm suggesting here is that there may be a higher economic use of petroleum than setting fire to it (such as creating plastics and other high tech materials). This all comes back to the multiple reasons for promoting renewables and energy efficiency that seem to have been lost in the global warming debate: technological advance, economic development, conservation of scarce resources (including water), etc. This is not just about CO2, or shouldn't be.

In my last column, I noted that climate change was not the only serious issue facing society, and that is still true. But, it doesn't mean that we don't begin to work toward dealing with it, and whether or not there will be a catastrophe in 2050 or whenever is beside the point. We should be good stewards of the only planet we have to live on. That is just good engineering. But, in terms of the contradictory evidence, it is far from clear to me that there are not other natural events beyond our control that may suddenly raise or lower the temperature of the earth more than our actions. For instance, it has been theorized since the mid-1960s that sudden small changes in the orbit and tilt of the earth were the principal cause of successive periods of glacial advance and retreat. If true, all of our mechanations to strictly maintain the temperature of the earth at the levels known in the short time span of recorded history may be for naught. Perhaps adaptation would be a better strategy. Nonetheless, logic and good engineering should tell us that we cannot significantly alter the composition of the atmosphere without some impact. And, while it seems clear that human activities have resulted in a dramatic increase in CO2 within a relatively short time span, the presumed correlation between CO2 and temperature and the notion that it is irreversible is less clear. The fact that one of Kevin Trenberth's emails in the climate controversy noted that it is a "travesty that we can't account for the lack of warming at the moment" illustrates that point.

I have written previously about the religious fervor that permeates the debate on global warming, renewable energy development, and related issues. What I expect from scientists is that they will pursue new knowledge regardless of the direction it leads them. When scientific skepticism and inquiry is replaced by advocacy in pursuit of a largely political agenda, that is when scientists lose credibility. And, we cannot afford that because there are more than enough advocates of one agenda or another espousing their beliefs and publishing studies in support of their position.

One final thought about the continuing discussion of cap and trade and the supposed incentive that it provides as a mechanism to reduce greenhouse gases. This approach merely promises to enrich those that trade in allowances and offsets and the inevitable derivatives that some smart guys will devise to take advantage of the opportunities. In another op-ed piece in the New York Times entitled Cap and Fade, James Hansen identifies the problem well:

"Because cap and trade is enforced through the selling and trading of permits, it actually perpetuates the pollution it is supposed to eliminate. If every polluter's emissions fell below the incrementally lowered cap, then the price of pollution credits would collapse and the economic rationale to keep reducing pollution would disappear."

Let's come back to the basics of regulation. If greenhouse gases are to be considered a criteria pollutant, simply tax or restrict their emissions. Period. And, if you think that offsets are a helpful component of cap and trade schemes, you may be interested in a somewhat tongue and cheek website on this topic called Cheat Neutral.

So, in summary, the science is not settled and the proposed market based solutions are a wrong-headed approach to dealing with the issue. It comes down to just doing the right thing, and that is just good engineering.

Friday, December 04, 2009

Some additional thoughts on renewable energy and rationality

While taking a look back at some of the presentations from the Solar Power 2009 Conference in Anaheim last October, I started thinking about solar industry consolidation, recent issues with transmission, Climategate, and other matters. Overwhelmingly, there is far too much whining over who is getting what subsidy. If you get your costs down and become competitive, this issue goes away. As I've noted elsewhere, this is a matter of technology and economics, not religion. And, if nothing else, the recent issues with Climategate point out the dangers of turning it into a matter of religion. Certainly the revelations from the East Anglia emails demonstrate how the global warming theocracy and its ecclesiastical followers have subverted scientific inquiry and discourse.

Driven partly by the recession and partly by the competitive pressures that virtually all industries eventually experience, the solar industry is now experiencing significant consolidation. Thin film, which seemed destined to be the clear cost leader not so long ago, is now being challenged by cost reductions in crystalline silicon that threaten its growth. And, though it seemed unlikely only a short time ago, some PV manufacturers and suppliers are actually laying off workers. Others are moving production from the US offshore. This competition is precisely what is needed to make solar energy competitive and we should welcome it. Increase the value and everything else will follow.

Transmission is another area that has succumbed to a dogmatic theology. The argument that transmission is a limiting factor on renewable generation is simply a red herring. Virtually all states have some renewable energy potential, whether it be wind or solar or biomass, etc. -- some in more than sufficient quantities. But, do we really need to power the entire U.S. from a 75-mile square portion of the Mojave Desert or from mega wind farms in North Dakota? We need to analyze the trade off between the cost of high capacity factor resources that are dependent on transmission to move the energy and lower capacity factor local resources that don't require it. Moreover, we are now beginning to see resistance from some environmental groups and land owners who do not believe that high voltage transmission lines are necessarily the highest use of pristine land. Thank you.

But, while distributed generation (DG) has its place, it too is not the solution to all of our energy needs. There are tremendous opportunities for the creative and more efficient use of space to deploy renewables -- unused roof tops and awnings over parking lots to name just two. And these don't need to be unattractive if designed well. But the notion that we must deploy black panels along every highway right of way or wherever there are a few square feet of vacant land is also nonsense. The line of thought that if some is good, more is better has unfortunately become the canon of the solar theocracy. I am looking forward to more creative uses of thin films and new technologies in BIPV designs.

If nothing else, consolidation in the solar industry, the turmoil over Climategate, and debates over transmission lines and land use promise to return some balance and rationality to discussions of energy and climate change. That will be a welcome change.

Friday, August 28, 2009

Making a Case for Rationality in [Renewable] Energy Deployment

It has become increasingly evident that there is a serious need for some clear thinking in the energy debate. As I have often said, the sum total of all of the vested interests (utilities, environmentalists, renewable energy advocates, etc., etc.) does not equate to the public interest. In an earlier blog on the Western Wind & Solar Integration Study, I noted that we are becoming increasingly adept at operating the electric grid with greater amounts of intermittent renewable resources. But there are many proponents who are becoming positively irrational about this. It seems that some of the policy makers who are closest to the problem are the farthest from reality. To some I would grant the benefit of the doubt and suggest that they simply know no better. Other proponents would clearly subjugate the public interest to their own economic and/or political self interest. Unfortunately, the result is the same.

As anyone familiar with this field knows, California's renewable standard will likely soon require major utilities to provide one-third of their energy from renewable resources by 2020. It seems to matter little whether or not this is an attainable goal. And, I used to think that California was on the right track in requiring that these renewables actually deliver renewable power into the state in order to qualify. But as the likelihood of meeting this ambitious goal becomes increasingly problematic, the policy makers and stakeholders seem willing to make tradeoffs that will dilute the effectiveness of the goal.

Let's start with an article in the Sacramento Bee describing how the various stakeholders are debating the sourcing requirements for renewable energy to comply with the standard (see Utilities, groups at odds over sources for renewable energy). Utilities are now claiming -- perhaps rightfully so -- that they cannot meet this aggressive standard unless they are allowed to procure resources from out of state, and a California PUC analysis supports this contention. So, if you were in California, which would you find to be the more rational approach: a standard that cannot be met and which encourages utilities to procure out-of-state resources, often at exorbitant costs, or a more reasonable ramp-up in renewables that fosters in-state development at reasonable cost? Would California ratepayers benefit more from sending their utility dollars out of state to essentially purchase RECs or keep that money in state to develop local projects? They may as well propose to get solar energy from a satellite! Oh, sorry, they're proposing that too. And then everyone laments the high contract failure rate in renewable energy.

The lesson seems to be: Set a standard that you cannot achieve and then simply change the way you measure compliance to make it appear that you did. This situation has become so bizarre that Colorado's major utility has now hatched a scheme to combine brown power from unspecified sources with its excess RECs and sell the bundle to California utilities as green power to comply with the standard that they cannot otherwise meet. Of course, the Colorado utility in question hopes to profit handsomely from the sale of these RECs which, incidentally, were already paid for by Colorado ratepayers. What makes this possible from the Colorado utility's perspective is that it has acquired too many RECs, too soon, at too high a cost. This is beginning to look like a zero-sum game. The same amount of renewables will ultimately be developed, the only question is where? Call me old fashioned but how about a scenario in which each utility develops its own renewable resources to serve its own local needs?

I mentioned that the Colorado utility had acquired too many RECs, too soon, at too high a cost. I made this comment back in 2007 when I showed that the utility proposed to purchase more solar RECs than it needed for compliance in an environment where solar costs were projected to diminish rapidly, thereby saddling ratepayers with higher costs than they would otherwise have to pay. This prevented the utility from taking advantage of the inevitable cost reductions that were sure to result from technological advance and deployment experience. But it is this myopic belief that if some is good, more must be better that is responsible for the irrational behavior that is inflicting policy makers with regard to renewable energy. As stated in a recent op-ed piece on cap-and-trade by Paul Gerlach in the South Florida Sun-Sentinel, this "preoccupation with setting unrealistic targets for renewable sources has blinded policy makers to the almost unlimited opportunities for technological breakthroughs in the production and use of conventional fuels..." and, I might add, in the deployment of renewable energy technologies.

Tuesday, August 11, 2009

Geoengineering redux - aka Climate Engineering

Scroll down a bit in this blogspace and you'll find a blog I wrote on Geoengineering as a response to climate change (or, just click the link). It is nice to know that this potential fix is drawing increasing attention in legitimate research circles. Today's NY Times contains an article entitled The Earth is Warming? Adjust the Thermostat which provides an excellent concise discussion of this issue from both sides. The proponents of such solutions rightfully cite the decreasing likelihood of getting worldwide agreement on emissions reduction strategies and note that it may require affirmative action on the part of a few to avert the crisis. This is the assertion I made in my earlier blog post on this topic. Skeptics point to problem of unintended consequences that may result from such activities and they too are correct. Spraying aerosols into the atmosphere to simulate a volcanic winter is likely to have many other adverse effects. Pick your poison.

It is also true that simply adjusting the thermostat, so to speak, won't reduce the amount of CO2 in the atmosphere and thus problems with ocean acidification still remain. That is why I still believe that the best approaches to geoengineering (now referred to in some circles as climate engineering) are those that essentially scrub the atmosphere of CO2 rather than those that simply mask the problem by putting more junk into the atmosphere.

Interested readers should also consult work being done at the Copenhagen Consensus Center which is publishing a series of perspective and analysis papers on climate change and approaches to adaptation and mitigation. It is an excellent resource for those who wish to be more fully informed on the range of solutions that may exist. In my earlier post, I noted that we should definitely take prudent measures now to avert a calamity in the future. But, I also noted that we must begin a serious investigation of the more active approaches to mitigating climate change and its first cousin, ocean acidification, now so that those technologies may be suitably developed if and when we need them.

Sunday, August 02, 2009

Corporate Right of Passage -- A Note to Techies

Today, I'd like to offer just a short mention and recommendation to read an interview in the Sunday NY Times with Cisco CEO John Chambers (see In A Near-Death Event, A Corporate Right of Passage). In this interview, Mr. Chambers discusses how Cisco's near brush with failure made it a better company. He also discusses how capitalizing on modern modes of communication -- video blogs, distributed communication, and relationship building -- is increasingly important to success in today's world.

Mr. Chambers also mentions something else that I found interesting. In this interview, he notes that "when there’s an accident happening, that’s when you’ve got to be the calmest. And yet that’s when most people are not." This made me think back to a blog I posted on July 15 (see Geoengineering) in which I questioned Eugene Kleiner's assertion that "There is a time when panic is the appropriate response." In contrast, Mr. Chambers goes on to say "So I’ve learned when something with tremendous stress happens, I get very calm, very analytical." Nice to know that I'm not alone in that regard.

There is one other important learning point in the Chambers interview and that is the ability to admit mistakes and failures. Unfortunately, such candor is anathema in the utility and regulatory environment that I am presently part of, especially with regard to renewable energy and public policy. Apparently it borders on sacrilege to question the all knowing legislature, Commissioners, and executive branch policy makers. But, we're learning as we go and their credibility would go much farther if they could only admit "Well, we screwed that one up. Let's fix it and move on." I'm hoping for too much.

Saturday, August 01, 2009

Western Wind & Solar Integration Study

On Thursday, July 30, NREL hosted the Western Wind & Solar Integration Study (WWIS) Stakeholder Meeting in Denver. Great attendance (probably 80 to 100 or so) and some really interesting updates on this work that began in 2007. If you're not familiar with this study, you can find more information on the NREL WWIS website. Generally, the goal is to assess the feasibility of adding as much as 35 percent wind and solar generation within the WestConnect footprint (WY, CO, NM, AZ, NV, and northern CA). Relying on some gi-normous datasets (e.g. 30,000 30MW wind sites in the footprint with data every 10 minutes for 3 years), this has been an extraordinarily computationally intensive exercise. Unfortunately the solar data has been considerably more sparse.

We'll talk about a few of the observations from this study -- some predictable and others not so much. The bottom line, however, is that having 35 percent renewable energy penetration (30% wind and 5% solar) appears technically feasible although operation of the electric grid would have to be dramatically different than it is now. Essentially, instead of the large number of small control areas that presently exist, it would require a larger, more geographically dispersed control area that could balance the intermittent contributions of wind and solar generators. And, as anyone familiar with this field is aware, transmission (or the lack thereof) is an issue. But the extent to which it is an issue appears to be a function of whether we rely on fewer megaprojects located in the best wind and solar resource areas or a larger number of smaller dispersed projects (albeit with lower capacity factors) sited throughout the footprint. Hence, there is a trade-off between transmission costs and the higher cost of renewable energy from lower quality resources.

One of the very interesting outcomes from the analyses conducted thus far is the relationship between total load and renewable generation. As the General Electric folks conducting the modeling noted, "The bad actor is the wind." There are times in the spring when the wind is high and there may be more total wind and solar on the system than load. This presents great operational difficulties for system operators. Alternatively, there are times in the early morning when load is ramping up sharply just when the wind is ramping down.

These types of issues highlight the importance of forecasting to system operators. From a market perspective, it was found that with a perfect forecast, increasing renewable penetration drives spot prices lower (since there is no fuel cost). But, with an imperfect forecast, the forecast error drives spot prices back up because operators would commit insufficient capacity and have to turn expensive peaking units back on. Furthermore, it was found that at renewable penetrations exceeding 20 percent, coal units would begin to be impacted. However, the greatest impact was found to be on combined cycle gas plants being backed down. Overall, the value of wind energy rose with a perfect forecast and dropped with an imperfect forecast. Not much of a surprise there, I suppose.

The study also found that generator total revenues fell with increasing renewable penetration (as noted above, spot prices decreased). But, the total revenues for nonrenewables fell at a steeper rate for two reasons -- they generated less energy and spot prices fell. There were two other particularly interesting outcomes presented. The first concerned the cost of unserved energy and the important role that demand response could play in mitigating this problem. The second was that the role that hydro, and especially pumped storage hydro (as well as other large scale storage), could play is less than commonly believed.

Researchers found that higher wind penetration also resulted in greater amounts of unserved energy, due largely to over-forecasting of the wind. But, discounting the wind forecast has the effect of driving spot prices down because you're carrying more gas, resulting in less unserved energy. Thus, there was a very high cost to reducing the unserved energy by discounting the wind forecast. It was found to be far more cost effective to get the load to be responsive rather have the system make up the shortfall to the extent that a couple of thousand MW of interruptible load was found to be cost effective.

Lastly, we discussed the operational impacts of increasing renewable penetration on hydro operation. Hydro needed to be scheduled in response to the wind forecast while increasing wind penetration also increased the variation in hydro scheduling. There was found to be a large operating cost increase if you did not shift hydro commitments in response to the wind forecast -- obviously hydro has the flexibility to move while wind does not.

With regard to pumped hydro, it was found that if you have it, the system will use it, but there was no incentive to add more. This seemed counter to the conventional wisdom so much of the ensuing discussion focused on this topic. The researchers reported that increasing pumped storage increased overall costs. As you increased renewable penetration, the storage ran more. As you forced the storage to run more, it drove costs up. It was found that, even with 30 percent wind penetration, the WestConnect footprint has sufficient pumped storage and no more is needed. Exploring this further, the group concluded that the pumped hydro may be more useful in a smaller footprint. In a larger area, it was preferable to use the system as storage. As part of this discussion, one participant from Ireland noted that studies on their system demonstrated a similar result and that pumped storage was not needed until renewable penetration reached as high as 50 percent. There, it was found that the capacity cost of pumped hydro displaced other capacity costs. But, it only provides capacity if you fill it. Thus, you need to reach the higher wind penetration levels before the pumped storage pays out.

So ended a valuable update to this important research initiative. The day concluded with some discussion of next steps and areas of focus as the project moves forward. One shortcoming, as noted earlier, is the dearth of solar data. To model increasing photovoltaic penetration, the project needs more one-minute PV data. Presently, the only one-minute PV data available to the project is from the 4 MW Springerville project in Arizona. Though there are two larger PV projects currently in operation -- notably Nellis AFB and Alamosa, CO -- this data is apparently not being made available to this study. Why?

Tuesday, July 28, 2009

Can Machines Outsmart Man? Human Intelligence vs. Artificial Intelligence

In an article in the New York Times on July 26 entitled Scientists Worry Machines May Outsmart Man, reporter John Markoff notes that a "group of computer scientists is debating whether there should be limits on research that might lead to loss of human control over computer-based systems..." He goes on to note that "Their concern is that further advances could create profound social disruptions and even have dangerous consequences." While I acknowledge that advanced technology creates many new opportunities for its malevolent use, I believe that the concern about machines taking over is overstated.

Ever since the dawn of the field of artificial intelligence, there has been speculation about machine intelligence surpassing human intelligence and somehow reversing the master-servant relationship. It is not that I have some overwhelming faith in humanity's ability to prevail (though for the most part I do). I believe that the problem is not one of technological capability but rather one of the inappropriate human exploitation of that capability. This makes it not a technological problem but a societal one.

The computer scientists mentioned in the article expressed the concern that "technological progress would transform the work force by destroying a widening range of jobs, as well as force humans to learn to live with machines that increasingly copy human behaviors." While I'm not certain about the copying of human behaviors, which if true could turn out to be AI's Achilles' heel, I fail to see how such human adaptation is any different from that which has occurred for hundreds if not thousands of years. Moreover, this concern sounds very similar to that once expressed about another emerging technology:

"_________________, if they succeed, will give an unnatural impetus to society, destroy all the relations that exist between man and man, overthrow all mercantile regulations, and create, at the peril of life, all sorts of confusion and distress."

What was this writer speaking about? Television? Radio? Internet? No. This quote was from an English magazine editor in 1835 discussing the coming of the railroad. Perhaps we haven't learned as much as we think we have. And, as great as our advances in computational ability have become, one should not confuse this with intelligence.

A simple definition of intelligence is the ability to acquire and utilize knowledge, especially toward some useful goal. In his Multiple Intelligences Theory, psychologist Howard Gardner identified seven different types of intelligence: Linguistic, Logical-Mathematical, Bodily-Kinesthetic, Spatial, Musical, Interpersonal, and Intrapersonal. AI researchers, on the other hand, have developed a completely different classification of intelligence types -- one based more on machine abilities. And while science has made great advances in these areas of machine hosted AI, the ability to mimic human behavior and intelligence is still limited.

Another recent NY Times article, In Battle, Hunches Prove to Be Valuable describes how the most high tech gear "remains a mere supplement to the most sensitive detection system of all -- the human brain." It describes how a soldier's experiential knowledge, depth perception, and focus creates an almost uncanny ability to perceive and respond to dangerous situations. In spite of the many advances in machine knowledge, AI still does not have the ability to mimic this sensory perception and decision making capability, partly because we cannot fully explain it either.

With that said, at the end of the day, the danger seems not so much that machines may outsmart man. Rather, the danger is that man may deploy technology inappropriately, thereby outsmarting himself.

Thursday, July 23, 2009

The Green Roadway Project IP Auction

No sooner does the federal government entertain serious climate change legislation in the form of the Waxman-Markey bill than some opportunistic entrepreneurs develop a way to capitalize on it. In this case, I am referring to The Green Roadway Project, a scheme by inventors Gene Fein and Ed Merritt to promote a portfolio of patents that purportedly will give the acquirer the rights to install and grid-connect wind, solar, and other technologies along thousands of miles of public right of way.

Perhaps you've already heard of this venture. It's been featured in a number of newspapers across the country including the New York Times. I first heard about it when I was contacted by representatives of the project who suggested that the state should submit a bid (reserve price of $500K for Colorado, $1.5 million for California). So, tomorrow, July 24, 2009, is auction day -- the day on which these entrepreneurs will attempt to auction off a license to their IP on a state by state basis for six figures plus... each.

I have to wonder if these folks seriously believe that state governments will bid on this IP. That simply isn't the way that states would promote such development. Moreover, the schemes that they are promoting (e.g. micro wind turbines turning in the breeze generated by passing automobiles, etc.) are years from being practical, if ever, save possibly for projects such as the Oregon solar highway which is really just conventional PV in an open area near a highway intersection (and which apparently does not infringe on these entrepreneurs' IP). Also, not mentioned is the small issue that not included in these auctions is the right to public rights of way, generally controlled by various state highway departments.

So, while some of these technologies are interesting, no one has yet shown that they will work either at scale or in the harsh, real-world environment (think winter snow storms, snow plows, etc.). We'll see what the auction brings tomorrow but I would guess that they would have greater success offering a nonexclusive license to all takers, that is if they really have IP that will be difficult to work around. But it could be that they simply hope to strike while the iron is hot and capitalize on the Zeitgeist.

Friday, July 17, 2009

Largest Green-Power Program Stumbles

So, from recent articles in the NY Times and the Austin American Statesman we now learn that Austin Energy's vaunted green power program is only 1 percent subscribed and that all ratepayers may have to shoulder the cost of the renewables added to the system for the program (See articles in the Austin American or in the NY Times).

They wonder why the program is so under-subscribed. Someone must be kidding. Has anyone looked at what they're offering? From the Austin Energy website:

“An average residential customer consuming about 1,000 kWh per month will pay about $43.50 per month more if opting for a 5-year subscription or $58.50 per month more if opting for a 10-year subscription.”

First, this is a huge surcharge for renewable energy. We're talking a 63% increase if you sign up for the 10-year plan. Second, the pricing is upside down. A higher unit rate for a longer subscription? The NY Times should try selling its newspaper with that type of pricing strategy and tell me how well they do. Moreover, with renewable portfolio standards expanding throughout the country, more ratepayers are beginning to pay the costs of adding renewables to the electric grid. But, at least they share this cost equally... and so far the percentage increase is only in the single digits. Done well, the cost of adding renewables to the electric system does not have to short circuit customers' wallets.

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