I’ve been quite busy tending to a biofuel startup these past few months. Little time for blogging. But as I’ve been sitting down here in Southwest Florida watching the gulf oil slick grow to the size of a small state, the doom and gloom has grown with it with very little mention of concrete solutions to pin a hope to. Until now.

There’s nothing like a big, heavy low tech solution to provide a shot of optimism that a mile deep gusher can actually be brought under control. So here it comes. A 125 ton (250,000 pound) reinforced concrete house that you plant over the gusher, connect a 5 mile pipe to its chimney and route all that crude up to surface ships for processing, storage and shipment ashore.

You now what? That might be big enough, heavy enough and low tech enough to actually work. I sure hope so. I really do.

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BP Plans to Deploy Subsea Oil Recovery System in 6-8 Days, Weather Permitting

3 May 2010    (article from Green Car Congress)

Concept of the subsea oil recovery system. Not to scale. Click to enlarge.

BP is working to deploy a subsea oil recovery system over the largest leak source in the Transocean Deepwater Horizon Rig that it hopes will capture up to 85% of the oil rising from the sea floor following the sinking of Deepwater Horizon on 22 April. This will mark the first time such a system will be used at this water depth (5,000 feet / 1,524 m).

The system is designed to collect hydrocarbons from the well and pump them to a tanker at the surface, where they will be stored and shipped ashore. This effort is one of several BP is attempting to mitigate the leakage or the effects of the leakage at the source (including the application of underwater dispersants) prior to being able to shutting off the flow.

The underwater recovery system with “mud flaps” on the sides. Click to enlarge.

Last week, BP identified a third leak in the wreckage of the riser of the deep underwater well, and NOAA pushed the estimates of the leak rate up to 5,000 barrels (210,000 gallons US) per day, although the rate could be higher given the uncertainty in ascertaining the actual flow. (Earlier post.) (The Oil Drum has posted a technical backgrounder on oil well pressures, blowout preventers and theDeepwater Horizon spill.)

The subsea oil recovery system will use a 125-ton, 14′ x 24′ x 40′ structure that will be set on top of the largest leak source. This leak is located at the end of the riser, about 600 feet from the wellhead. Equipment at the top of the system is connected to a 5,000 foot riser that will convey the hydrocarbons to the Floating Production, Storage and Offloading (FPSO) surface ship, the Deepwater Enterprise.

The FPSO will process the captured hydrocarbons and separate oil from water and gas. The oil will then be temporarily stored before being offloaded and shipped to a designated oil terminal onshore.

Approximate oil locations from April 29, 2010 to May 3, 2010 including forecast for May 4 based on trajectories and overflight information. Produced May 3, 2010. Source: NOAA. Click to enlarge.

The Deepwater Enterprise is capable of processing 15,000 barrels of oil per day and storing 139,000 barrels. A support barge will also be deployed with a capacity to store 137,000 barrels of oil.

To develop the system, BP located existing structures that had previously been used as coffer dams in shallow water recovery efforts after Hurricane Katrina. These structures had been lowered over damaged wellheads to allow divers to repair wellheads. BP engineers have worked closely with the firm Wild Well Controls, Inc. to convert these structures for use in deep waters.

Because of the weight of the structure and the muddy conditions at the sea bottom, “mud flaps” have been added to the sides of the structure. These flaps enable the structure to settle into the sea bottom and complete the enclosure.

The system is being fabricated in Louisiana and will be transported to theDeepwater Enterprise. Once on site, the system will be lowered to the seabed. ROVs will monitor the installation and will complete connections to the riser.

NOAA has restricted fishing in federal waters of the Gulf of Mexico threatened by the BP oil spill from the mouth of the Mississippi to Pensacola Bay. The closure will be in effect for at least 10 days.

The state of Louisiana has already closed vulnerable fisheries in state waters within 3 miles of the coast. NOAA is closing areas directly adjacent to the area closures enacted by Louisiana, and is working with state governors to evaluate the need to declare a fisheries disaster, which would facilitate federal aid to fishermen.

In a recent post, I discussed why the US needs, on average, 15,000 additional megawatts (“MW”) of new power plant capacity – each year! – just to keep up with the growth in domestic demand for electricity. How many new power plants have to be built to accommodate this national thirst for energy?   Two power plants a year? Five? Ten?  And what  if all of that new power had to come from renewable energy – say solar – as so many in the green community suggest it should, or more urgently, demand it must!? Is it even technically feasible to satisfy our annual electrical demand growth from solar alone?

Of course, the number of new plants (or generating units) needed to supply 15,000 MW of new capacity each year depends on your technology of choice.

• 15 – Large scale 1,000 MW coal fired or nuclear power plants
• 30 – Medium sized 500 MW natural gas, coal fired or nuclear power plants
• 7,500 – Utility scale 2 MW wind turbines
• 75 million – 200 Watt solar panels.

In reality, 75 million solar panels a year isn’t enough. It’s too low because solar panel manufacturers rate their panels DC whereas our electrical grid uses AC power. Using an approximate conversion factor of 0.85, the real number would closer to 88  million – each year. Are we done? Install 88 million solar panels each year instead of 15 large coal or nuclear plants? Hardly.

There’s the pesky matter of cloudy days when a solar plant can’t produce at full power. That’s the rub with most renewable power including both solar and wind. It’s intermittent and you can’t count on all of it being there when you need it.  On average, a typical solar power plant might have a capacity factor rating of roughly 20%; even lower in locations with less abundant sunlight.  Said differently, you could build a 100 megawatt (“MW”) AC solar facility but on average you could only count on 20 MW (20%) being available on any given day. But there’s a niggling problem with that that word “average”. On a bright, clear sunny summer day that solar plant might  produce 100 MW (100%) power during midday. But on a cloudy day in winter it might only produce 5-10% of peak output. In fact, it might rarely ever produce at exactly the 20 MW average. And then there’s mornings and early evenings when the sun is waxing and waning and only a fraction of the 100 MW nameplate rating is produced. Finally there’s that inconvenient daily event…..called night….when the output of  a solar plant is nil, nada, zip – all night long.

Follow this to its logical conclusion and you might want to have some backup power plants that can fill in for the solar plants when the sun doesn’t shine (or shines less than needed for solar output to meet the electrical demand).  And these backup plants had better be ready when you need them – the very definition of “firm capacity”. Today, firm capacity comes from fossil (mostly natural gas and coal) and nuclear plants. By now you might also be tumbling to the fact that 100% of our electrical needs cannot be met with intermittent renewable energy like solar and wind. Simply stated, until we figure out how to store massive quantities of electrical power economically, we need the kind of firm capacity that can only come from fossil and nuclear power plants.

Please don’t misunderstand me. I’m a big fan of renewable power and solar in particular. I think solar has… (forgive me) a sunny future! However, green energy proponents who oppose all forms of fossil power may be the greenest of green advocates but all too often appear willfully ignorant of the realities of delivering reliable electricity 24×7 to consumers.

Today, regulated utilities, independent power producers, regulatory authorities, politicians and rate payer advocates are all engaged in a healthy debate over what percentage of renewable power is practicable.   There is broad consensus that at least 25% of the our electrical power demand can be met with renewable sources. The “25 by ’25″ resolution recently passed by the House Representatives expresses the sense of the Congress that by the year 2025, at least 25 percent of total U.S. energy will come from renewable, domestically produced sources. Since we’re at approximately 9.5% today (source EIA), if enacted into law, we would need an incremental 15.5% over 16 years.

Let’s assume for a moment that all of this incremental renewable energy were to come from solar (admittedly unrealistic but bear with me here). The US currently produces/consumes approximately 4.1 billion megawatt-hours of electricity annually. 15.5% of this is about 615 million megawatt-hours. Assuming 99% reliability and a 20% solar fleet capacity factor, this would translate into 431,050 megawatts DC of newly installed solar panels. Assuming 200 watt DC panels, we’d need approximately 2.2 billion new panels to hit the 25 by 25 target.  If we built one large 431,050 megawatt DC solar power farm, we would need 3,368 square miles of land (assuming 10 acres per megawatt). To put this into perspective, that’s a square parcel of land 58 miles by 58 miles or approximately 0.1% of the total US land area excluding water bodies. You could circumnavigate this solar plant in roughly 4 hours driving at 60 mph. Imagine this facility being located in the hinterlands of the greater southwestern US. Not too hard to imagine, no?

Ok, so we meet our national mandate of 25 by 25 with a 60 mile square swath of solar panels (of course in reality never all at one location and not with 100% solar). I don’t know about you, but I still want electricity at night and on cloudy or rainy days. So lets talk about backup power for the 25% of energy coming from solar. Backup power would only need to operate at night and partially on some, but not all, days during daylight. This intermediate load resource would have to be the lowest cost to build while also not costing too much to operate. Nukes are VERY expensive to build, difficult to finance,  although cheap to run – not the best fit for  backup. Coal plants are relatively less costly than nukes but more costly to run (and getting costlier if you assume carbon taxes or carbon capture/sequestration) plus they have an enormous carbon footprint that threatens their viability. Just try to permit one today. Good luck. That leaves simple and combined cycle gas turbines burning  natural gas. Least cost to build, much lower carbon footprint than coal, financeable, easily permitted and reasonable cost to operate provided natural gas supplies remain abundant and reasonably priced. The good news is that the long-term natural gas supply picture has improved greatly over the past 2 years and prices have come down accordingly.

So there you have it. Solar, wind and other renewables generating at least 25% of our energy backed up mostly by natural gas and maybe a few more nukes. As coal plants retire, a mix of new renewables and gas fired plants will take their place. The renewables mandate may even increase towards 50% or higher over time. A diversified mix of solar, wind, geothermal, and biomass may even require less backup power than initially thought especially if the electrical grid is expanded. Should large scale power storage becomes feasible, the days of fossil fired power may eventually fade.  Until then, fossil based power generation is going to be part of the mix. Welcome to the future of our electrical supply – real or imagined?

In 1968, Garrett Hardin published an influential article in the journal Science called “The Tragedy of the Commons“. The gist of his argument is that individuals acting independently in their own self-interest can ultimately destroy a shared limited resource even when it is clear that it is not in anyone’s long term interest for this to happen.

Hardin’s example is a community of cow herders sharing a common parcel of land (the “commons”), on which they are all entitled to let their cows graze. Each herder decides it’s in their best interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. However, if all herders make this individually rational decision, the commons are destroyed and all herders suffer.

The evidence for this all too human behavior is abundant. As mankind grew in population, our hunter and gatherer ancestors eventually overwhelmed the local wild game and edible plants. Eventually, our species mastered farming and animal husbandry and enacted laws to protect wild flora and fauna from our most destructive proclivities. No doubt more than a few hunters and gatherers were dragged kicking and screaming into this new reality. Fast forward several hundreds of years to recent times. During our lifetimes we’ve been witnessing a similar phenomena only this time it’s the collapse of our marine fisheries.

It took far longer to overwhelm the marine commons but then again the ocean is a big fecund place relative to land. As with land, hitting the aquatic sustainability wall has led to the rapid rise of fish farming along with tougher laws governing the commons of our wild waters. Few fishermen are happy about this because access to their traditional “commons” have become highly restricted and a threat to both their livelihood and lifestyles. Plus it’s not a level playing field since many countries have yet to restrict access to marine commons to the extent the U.S. and E.U. have. So far, the rest of us are only mildly bothered by all of this since we somehow continue to find all the fish we want at the local grocery store.

The traditional antidotes to the tragedy of the commons have been privatization and regulation. Private ownership of land and associated natural resources turns out to be a far more effective approach than relying on our collective stewardship of the commons. People are reluctant to destroy a limited resource if they own it and are dependent on it for food, shelter and income. Effective up to a point, privatization is not a panacea. Eventually all private property adjoins either someone else’s private property or the remaining commons. Thus, the second antidote to the tragedy of the commons has been the passage and promulgation of laws and regulations protecting the remaining commons; a manifestation of collective stewardship enforced by the taking of your money, or even your personal liberty, should you fail to comply.

Perhaps inevitably, we are now overwhelming the mother all commons – the natural machinery of our global climate. Only this time it’s not a special interest group like a few hunters with bows, gatherers with bags or fishermen with boats that are overwhelming the commons. This particular commons knows no physical boundaries, obeys none but natural law, and is not mindful of our wants, needs, property rights or regulations. It  is the very stuff in which we all exist. Scientists, have raised the alarm that we need to collectively change our ways or else suffer horrendous hardships, loss of property, and economic dislocation. We are further being advised that the cost of doing nothing (business as usual) will be far greater than doing something (reducing greenhouse gases). The worst of it hasn’t been visited upon us yet so skeptics bark and there’s an air of unreality to it all. Not surprising, there’s a lot of kicking and screaming going on and not just a little denial.

Social psychologists who study human behavior have observed that when we humans experience more than 5% cumulative change in our lives each year, we don’t handle things well. We start to resist, deny and assign blame. First and foremost, we attack the messenger. In the case of climate change, the messenger is the PhD scientist; arguably the most apolitical, rational and fact-oriented amongst us. Unfortunately, scientists have neither wealth nor political power. Also unfortunate (and wildly ironic) is that Americans have actually grown increasingly ignorant of science over the last few decades even as technology touches our lives more intimately every day. So when the scientific community rises out of obscurity and delivers a hugely politically unpopular, albeit urgent, message that will likely require more than 5% change, not to mention a lot of money in the near term, the urge to roast the nerds runs strong and deep. Not surprisingly we’ve ridiculed, stalled and have even hired other “better” scientists to obfuscate and find contrary evidence. For a familiar historical example of this process at work, look no further than the tobacco industry and the infamous shenanigans of Phillip Morris et. al.  Let’s face it. Scientists are lousy marketers and don’t do public relations worth a damn, never mind that their one and only product is highly structured and rationally derived truth.

In response to these Paul Revere’s of climate change, a very noisy contingent of culture warriors would have us believe that almost all of these PhD educated climate geeks are dead wrong. Not just wrong per se as in having made an honest mistake. Wrong as in committing a pernicious guilt-ridden tree-hugging liberal attack on the American way of life. Red meat fodder for the AM radio talk shows hosts, climate change has even found itself lumped in with the evolution vs. creationism debate and refuted with similar arguments such as: there’s inadequate evidence, the evidence is contradictory, there’s no consensus, models don’t work and can’t be trusted, prediction is impossible, and we can’t be sure. Ostensibly reasonable arguments to the lay person, they are nothing less than an assault on science itself disguised as rational debate. For the less rabid who grudgingly concede that climate is indeed changing, these arguments shift to ….it’s happened before and is part of natural change, it’s not caused by CO2, the effects are good-minor-normal, it’s too late to stop it anyway, it’s not our problem to solve, and lastly, it’s economically infeasible to mitigate and would lead to disaster if we tried.

By its very nature, climate is not cultural, philosophical, religious, political or dependent on a belief system. Albeit complex, climate change is a physical phenomenon driven solely by the nondenominational laws of physics which adhere to no party. Try as you might, you can’t “believe”, or for that matter, not believe, in climate change. While genuine arguments over climate change specifics do exist, such disagreements exist largely in the realm of reason and data, backed up by some wicked hard mathematics. Inotherwords, we can rationally “know” climate change.

Most of the misinformation and resistance surrounding climate change has been worn away by the growing weight of scientific evidence and the projected economic downside of continuing to do nothing. The debate has shifted from broad denial to more practical questions of alternative courses of actions and their associated cost-benefit economics.

Climate scientists have accumulated a sufficient body of knowledge through evolved models and robust data collection to arrive at a significant majority consensus with a high confidence interval of certainty. Today, over 90% of the world’s leading climate scientists are certain that climate change is happening, that it’s a manmade phenomena, and that failure to mitigate it will likely be catastrophic to future generations. The ultimate tragedy of the commons is on our doorstep, it’s not going away by itself, and cannot be mitigated by sale to the private sector. We are, uncomfortably, wholly dependent on our politicians and political system for a solution.

Perhaps most challenging of all is that mitigating actions taken by a single nation, even one as large and influential as the United States, will amount to a small drop in the large global bucket if other nations don’t follow suit. If we react unilaterally, we may be taking on economic burdens and subjecting ourselves to competitive disadvantages only to find the rest of the world beating us senseless with our own climate change policies. This is a very tough political pill to swallow. Swallowing it anyway is called leadership. In this case, a brand of leadership that would demonstrate that the U.S. is indeed a truly global power.

On Friday, June 26, 2009 the U.S. House of Representatives passed H.R. 2454, the “American Clean Energy and Security Act,” by a vote of 219-212. Among other firsts, it marked the first time the U.S. Congress voted for mandatory reductions of greenhouse-gas emissions. It could easily have been titled the “2009 Tragedy of The Commons Avoidance Act”. Let’s hope the U.S. Senate finds the courage to put aside politics as usual and also pass this critical legislation. Passing this act isn’t the journey but it’s a necessary first step. Nothing less than avoiding the tragedy of our ultimate commons is at stake.

Human Behavior – Past Is Prologue

If you accept that past is prologue when it comes to human behavior then we have all the data we need to know, and not just guess at, how much additional power we will need – each year -  over the next couple of decades if not beyond – 15,000 megawatts (“MW”) as it turns out. Let’s break that down.

The graph below tells us that over the past 58 years, the addition of new generating capacity has been essentially (and surprisingly!)  linear with time. What makes this particularly interesting is that the annual rate of increase in capacity has slowed over time (otherwise capacity would have increased exponentially).

The slowdown in new builds from the late 70′s through the late 90′s (when capacity growth actually went briefly negative) is also noteworthy. It was over this same period that deregulation of the power industry unfolded and the independent power producer (“IPP”) flourished. Deregulation led to a flurry of new IPP plants while many traditional utilities deferred new builds in the face of uncertainty. Eventually supply didn’t keep up with demand. Ultimately, a correction took place that peaked around 2000-2002.

Remember the rolling blackouts in California around this same time and all the political hoopla about Enron and others gaming the deregulated power market? Those with supply prospered and those with demand (especially CA ratepayers) paid out the nose until enough new plants were built to correct the imbalance. Supply and demand at work – a beautiful thing. Of course, far easier for politicians to go on a corporate witch hunt than admit  their failure to enact rationale public policy.

15,000 Additional Megawatts A Year

The figure below shows the same data as above but expressed in terms of the incremental power plant capacity built each year between the same 1949 and 2007 period.  Despite the peaks and valleys, this data clearly tells us that the US has, on average, added between 10,000-20,000 MW of power plants each year for the past 58 years. The long term trend line shows a gradual increase in this rate over time, but an average of 15,000 MW per year is a highly reliable historical guide.

Note that the spike in construction in the early 70′s represented a wave of mostly coal-fired plants whereas the even bigger spike in the early 2000′s was almost entirely due to new natural gas-fired plants.

Power To We The People

So what accounts for this steady 58 year demand for additional supply of electricity? The answer is sex and procreation. As evident in the graph below, the U.S. population has been growing 1-2% per year for most of the past 100 years and has steadied out at around 1% per year for the past 30-40 years. You don’t have to be a statistician to see the close correlation of population growth with the growth in power generating capacity shown above.

Every Baby Requires ~2.7 Kilowatts Of Additional Power

We knew kids were expensive but today each child also needs its own additional 2.7 kilowatts of power generation. Sixty years ago you’d only have needed 0.5 kilowatts per bundle-of-joy. The good news is we seem to have reached a plateau during the 80′s and 90′s and we might even be witnessing a slight reduction in per capita electrical demand.

So as we debate what forms of power generation will be acceptable, let alone needed, in a carbon constrained future, then unless we stop having sex or otherwise change our basic human behavior, we’re going to need 15,000 MW of additional power plants each and every year far into the future. Safe bet is on the megawatts.

Being an energy wonk, I try to stay current on the debate over national energy policy.  Lately, I find doing so to be hard on the soul. What passes for debate these days looks more like a messy shoot-out over half-truths and misinformation within a broader culture war that often resembles a cartoon. The Meanies versus the Greenies.

The Meanies being the entrenched myopic carbonites hell bent on destroying the planet in defense of God, profit, and nostalgia over a shinier bygone American brand. The Greenies being the godless insurgent stewards of Gaia marching us down a carbon free road to a doubtful sustainable future and the certainty of a wrecked economy. The reality is we’re all in uncharted waters and we’d do well to maintain a skeptical watch while keeping an open mind.

For the moment, it would appear the Greenies are indeed gaining ground as the conservative Meanies continue to self-marginalize. The signs are numerous. The topic of global climate change comes up with increasing frequency in the media, political speeches and corporate communications. The debate is no longer about climate change being “real”, but is about understanding the consequences, and above all, what we’re going to do ….or NOT do… about it.

The job that Gore lost in 2000 over hanging chads freed him up to become an Oscar and Nobel Prize winning warrior for climate change awareness proving once again that elections do indeed have consequences. Eight years later, humorous yet pointed ads mocking the oxymoron of “clean coal” flow into our living rooms almost every evening. A dry squinty-eyed good-ole-boy wearing jeans and work boots walks out of a mom and pop diner into a whirl of windmills giving us the “straight talk” about it being time to repower America with renewable energy. In Washington, cap-and-trade carbon regulations are getting traction up and down the halls of Congress while a national mandate for a targeted percentage of electricity from renewable sources is closer than ever to becoming a reality.

Meanwhile, those of us involved in the production and use of coal are definitely not feeling the love. Permitting of new surface coal mines, especially those involving mountain top removal in the Eastern US, has slowed to a crawl if not a complete stop. With few exceptions, the development of new coal fired power plants is being successfully blocked nationwide. Even Obama’s support for clean coal seems lukewarm compared to the administration’s clear enthusiastic support for renewable energy. Coal may indeed provide nearly 50% of our electricity today but the safe bet is coal is on a long term downward trajectory domestically even while countries like China and India are in a non-stop frenzy of building dozens of new coal plants each year.

The Meanies use this last point to highlight the futility of our moving away from fossil energy, at great economic cost and risk to ourselves, while the rest of the world ramps up cheap, carbon intensive energy, more than undoing any good we might have done, plus they’ll use it to beat us senseless in the competitive global marketplace.

You have to admit, the Meanies do have a point there. Should their argument prevail, a solo march by the U.S. into a green future, no matter how noble, could amount to nothing less than complete unilateral economic disarmament. Followed some time later this century by universal hardship brought on by abrupt nonlinear shifts in the global climate. Or we can skip the unilateral economic disarmament and just wait for the universal hardship.

Or, and here’s the long shot option, we can launch a global campaign led by the U.S. to bring the entire world into a greener, and far less meaner, future. In a quieter moment, in our guts, most of us probably believe this last option is the right thing to do. But in the next moment most of probably also believe……fat chance that’s gonna happen. We’ll see.

In the absence of mandates  people don’t build capital intensive power plants that produce electricity at costs that are higher than current market prices. That’s the biggest reason why utilities aren’t rushing towards solar and most other renewables. High cost is also a big part of why we don’t have a real clean coal plant operating or even under construction – yet.

So if you don’t have a mandate, go get one.

One example took place recently in Delaware where NRG Energy supported state legislation that expressly favored gasification – a clear nod towards clean coal. The law mandated that the local utility solicit proposals and purchase the winning bidder’s power under a long-term contract.  Even though the solicitation indirectly favored clean coal, and NRG did indeed bid a total clean coal package including carbon capture and sequestration,  everything changed when another developer proposed a massive offshore wind project along Delaware’s pristine southern shoreline. In a liberal and largely agrarian coastal state like Delaware, the green giant ended up slaying the clean coal dragon – legislation favoring dragons notwithstanding. But when it came time for Delaware authorities to approve the final deal on the offshore wind project, the state’s decision was to make no decision. In short, they punted.  Why? Because that big,  green and windy offshore giant was just  too damn expensive.

The boys at Tenaska took a different tack and got their mandate from the State of Illinois instead. Smart move if you ask me. If you want to get clean coal done, go to the state with the most coal in the Eastern US. In fact, the energy content of Illinois coal is greater than that of all the oil in Saudi Arabia and Kuwait combined. Unfortunately, Illinois coal is high sulfur coal and the downstate Illinois economy has taken a beating ever since the Clean Air Act of 1990 put the squeeze on sulfur emissions. But clean coal technology can handle high sulfur and virtually eliminate it from its emissions profile. So when Tenaska rode into Springfield with a plan for a clean coal plant in downstate Illinois, the legislators were all ears.

On January 16th, 2009 the now notorious and recently impeached Illinois Governor Blago signed Senate Bill 1987 ushering in the first ever Clean Coal Portfolio Standard (“CPS”).  lllinois took a page out the renewable energy playbook and rewrote it for clean coal. The CPS mandates that 5% of all electricity in Illinois must come from clean coal sources by 2015, increasing to 25% by 2025; values comparable to current renewable energy portfolio mandates in many states including California – although the timing is 10-15 years further out for clean coal. To qualify as a Clean Coal plant under the CPS, a plant must capture and permanently store (sequester deep undeground) at least 50% of its CO2 emissions and also have an emissions profile at least as good as any modern plant burning natural gas.

As soon as this legislation was passed by the Senate, Tenaska (a highly experienced power project development company based in Omaha) announced that its clean coal project in Taylorville, Illinois had secured its air permit (authority to construct) from the Illinois EPA and that it intended its Taylorville IGCC (Integrated Gasification Combined Cycle) plant to be the first project to qualify under the new CPS.  Taylorville is dubbed a hybrid IGCC project meaning it can produce both electricity and synthetic natural gas (“SNG”).

A key feature of the Illinois CPS is that the state’s electric utilities (Ameren and Exelon) are obligated to purchase power from qualifying clean coal projects under long term power purchase agreements. But only if each resulting contract doesn’t increase the price of power to Illinois rate payers too much. With the Taylorville project already reportedly costing north of $3 billion for a 500 MW project – a capital cost per MW that actually exceeds that of most large solar projects today – it’s far from a done deal. Perhaps thats why Tenaska is building in the optionality of producing natural gas at its Taylorville plant instead of  only electricity; just in case the State balks at the price tag for clean coal power.

Portfolio standards (clean coal or renewables) are enacted to achieve public policy goals. The idea of a Clean Coal Portfolio Standard is a good one just as its counterpart has been for renewables like wind and solar. Without these mandates utilities will default to the lowest cost solutions and the unavoidable fact is clean coal and most renewables are not the cheapest sources of electricity. At least not today. As in Delaware, when the capital cost of a mandate exceeds the political cost, mandates with safety valves have a habit of losing their teeth.

Yet we live in a time when the issues of climate change, environment, national security and clean energy have become forever joined at the hip and are eclipsing the conventional metric of getting the most BTUs per buck. When this has happened in the past, the issue at hand takes on a moral imperative.  A good example is the federal worker safety laws enacated early in the last century when morality finally trumped the argument that worker safety would cost  too much – we finally just did it because it was the right thing to do.  Such moves requires federal action.

For real change to happen on energy policy, we need federally mandated energy portfolio standards, including one for clean coal, with big teeth and no safety valves. It will cost what it needs to cost in order get clean energy and we’ll all adjust to this new reality accordingly. Our newly minted President Obama has arrived in Washington at a time in our history when the country is open to changes, even big changes.

Time will tell if the man from Yes-We-Can can turn his mandate into a Yes-You-Will for the energy industry.

Given the volumes of print, video and chatter on  climate change, the evils of coal (including those mythical  “clean coal” types) and the panacea that is renewable energy, the average person could be forgiven for wondering why on earth the people who are in the business of producing and selling electricity aren’t running – instead of crawling or being dragged – towards something as reliable, clean and universal as solar power.  Notwithstanding some movement towards solar in states like California and to a far lesser extent New Jersey and Connecticut (the majority of which is small distributed roof-top projects), the vast majority of U.S. utilities have barely budged towards adopting solar in any meaningful way. Not that they aren’t aware of solar or aren’t sudying it mind you. They just aren’t buying into big megawatts of it. Why is that?

If you’re a rabid environmentalist the usual suspects are “big oil” and similar dark industries with sinister motives that are effectively blocking renewables while the earth withers.  If you’re a coal miner, you’re hoping like hell that those same suspects are effectively blocking those tree-hugging renewables and protecting us from destroying our domestic economy and electricity supply system as they tear the top off another Appalachian mountain for another layer of coal.  At least this is the general impression you get from reading most blogs and the conventional news media.  So of course it must be true.

Or maybe not.  Our friends at the Solar Energy Power Association (SEPA) decided to take a more direct approach and simply asked the utilities about their views on buying solar power.  SEPA just released the results of its Utility Procurement Study entitled ”Solar Electricity in the Utility Market”.  Not exactly light casual reading, this 117 page report gets high marks for being candid, clearly written, and a surprisingly comprehensive overview of how power, especially renewables, have been purchased by utilities over the years. And then of course there are the conclusions.

1. Solar is just too damn expensive and so far utilities can get all the power their customers  need from lower cost sources
2. When utilities do buy solar, they buy it because they’re made to do so by state laws and regulations that say buy it anyway, price notwithstanding (thus their collective asses are covered by regulatory mandate as they pass on these politically acceptable higher costs to their rate payers)
3. But utilities really do like the non-price features of clean,  no emissions, no-carbon solar energy ……really, they do….a lot….it’s on the top of their like list
4. The solar developers need to suck it up and stop bitching about the tough terms and conditions of the power purchase contracts
5. The solar developers need to learn how to make firm price bids and then stick with ‘em – just like all the other developers – sure, all you solar guys are special but you aren’t that special
6. The utilities need to chill some and start offering kinder, gentler long term power purchase agreements that weren’t written by lawyers from hell (hope springs eternal!)
7. Utilities need to take some 400 level courses on solar and the solar developers need to supply the instructors and coursework
8. Utilities just aren’t very impressed with the on-peak aspect of solar and wish the developers would stop harping about it – and developers have a hard time believing this for good reason
9. The cost of solar energy needs to come down and when it comes down far enough the utilities will run….not walk….towards solar. Depending on who you talk to this is 2-5 years away from a tipping point.

So there you have it. Mostly solar costs too much. The report goes into much more detail of course but it more or less makes many variations on the above points albeit with dryer language.

Notice the absence of big oil or other dark sinister actors? Unless you consider the uitlity business to be inherently dark and sinister. But really, utilities just want to keep the lights on, the politicians happy, and the regulators off their backs while they earn a 10-15% return on invested capital. Is that asking too much?

Bottom line on solar energy and most other forms of more expensive renewable energy is this:  If we’d all agree to accept paying twice as much for our electricity then we do now, then solar, and renewable energy generally,  would explode and over the next 10-20 years coal would slowly recede. Who’s ready to sign up for doubling their power bills?  Don’t all raise your hands at once.

Alternatively, the feds could lead with a nationally mandated renewable energy portfolio standard with painful consequences for non-compliance by the load serving utilities. See item #2 above for clarification. Either way we would end up paying much much more for the cleaner energy we need – say maybe twice a much.

It’s really not much more complicated than that.  Call or write your state utility commissioners and state representative and tell them that it’s ok to double your electrical bill if that’s what it takes. And you won’t bitch or hold it against them during the next election. Promise!

Now and then I will post items written by others because they are articulate, visionary and compelling and above all informative and practical. A few years back I had the pleasure of working for David Crane at NRG Energy where we pursued real clean coal development in the Northeast – IGCC with carbon capture and sequestration.  In many respects these efforts were ahead of their time and the politics and apparent economics proved too hard to overcome – at least for the moment.

For those of you unfamiliar with NRG, it’s one of the largest independent power producers in the country.  David Crane is NRG’s President and CEO.  David has been unwavering in his commitment to coming up with a practical and rational response to climate change and was one of the first leaders within the power industry to recognize that we are moving towards a carbon constrained future. 

But while many today agree on the general direction we’re headed in,  there continues to be widespread disagreement on how to get there and what policies are needed both in the near term and over the long haul to get there. 

David’s is a voice of reason and common sense in a time of change, worry and significant national challenges.  With leaders like David and a newly energized and pragmatic administration under Mr. Obama, I believe we have reason to be hopeful.  Below is a recent speach given by David. 

_____________________________________________

 Putting the Common Sense into Sustainability

David Crane, President & CEO – NRG Energy, Inc.

Platts 2nd Annual Lecture December 3, 2008

All of us know that we live in the most perilous of economic times, but as the Energy Industry, it is the most unusual of times as well. A financial crisis-not of our making-nonetheless has descended upon us, impacting us directly in the form of a precipitous decline in the price of all of our core commodities at a time when Wall Street, our traditional source of investment capital, is lying flat on its back, hooked up to the iron lung of the United States Treasury Department. And these two phenomena – falling commodity prices and no access to new capital are all the more jarring – have occurred hard on the heels of a period of sustained record commodity prices and easy money from Wall Street. 

Fortunately our company, and many other energy companies, with the excesses of our industry from early in this decade still firmly planted in our minds, resisted the temptation to over leverage during the period of easy money and, as a result, we find ourselves financially well-prepared for the current downturn and well-positioned to proceed in a business-asusual environment. But even apart from the current financial crisis and economic recession, our industry is by no means entering a business-as-usual period. In fact, it is here and now that our industry needs to respond forcefully and proactively to meet – what I call – the Transcendent Dynamics of our era: Sustainability and Climate Change. I call them Transcendent because their core objectives are moral and absolute. They are not negotiable. And, of course, the proponents of Sustainability and Doing Something about Climate Change, now have a forceful Champion heading to the White House.

But even with his electoral mandate, widespread public support and impassioned activism spearheaded by the next generation of Americans, President Obama cannot do it by himself: He cannot use his executive order authority to mandate that all Americans pursue a sustainable lifestyle. Nor will the passage of federal greenhouse gas legislation itself decarbonize the earth’s atmosphere. 

The challenges of Sustainability and Climate Change are so daunting and so comprehensive that the new President needs to effectively harness the dynamic strength of American capitalism to address these issues if he is to succeed.

Under any circumstances, climate change and sustainability would be a historic challenge but of course the irony is that, six months ago, when the price of all fossil fuels were at historic highs and capital markets were still open,  all of us were much better equipped to foster sustainability and combat climate change than we are right now.   

So it is incumbent upon us that we find a way to work constructively with the Obama Administration to inject the common business sense needed to ensure that we utilize the strength of our free market system to achieve the sustainable decarbonized future that all of us seek for ourselves and our children without suffering severe economic dislocation along the way – dislocation that might lead to a failure of popular or political will and a counterproductive end result.

Since I am talking about a capitalist, free market solution, let me talk not only about achieving a social good, but also about the economic opportunity. Having had a taste of $140/barrel oil and $15/mmbtu gas earlier this year, our customers are ready to begin the transformative shift away from fossil fuels. The economic opportunity embedded within that shift is enormous. Remember that primary energy, worldwide, is a $6 trillion/year business.  

If you like to think in historical terms, think of the fortunes made by those individuals and those companies who were on the right side of the shift from the horse to the internal combustion engine. Think of the fortunes lost by those who continued to make horse whips and buggies. It will be the same here: over the next few decades, fortunes will be made by those who lead the way to a decarbonized world; and fortunes will be lost by those who don’t adapt. My intent certainly is to put NRG in the former category. This is what I plan to speak about today.

Let’s start with the basic fact – there is no rationally attainable definition of Sustainability that will NOT require the global energy industry to produce a lot more energy over the coming decades.  If we set for ourselves the target of pulling the 6 billion poorest people on the earth today up to the average lifestyle of the 1 billion richest, energy consumption will need to triple.

If energy consumption is to triple from today’s levels with greenhouse gas emissions being cut dramatically in absolute terms that means both a lot less fossil fuels as a percentage of total energy supply and the fossil fuels that continue to be used being used in a manner that prevents their carbon content being vented into the atmosphere.

To achieve this, it is going to take an energy plan. It has become quite popular again in intellectual and public policy circles in the United States to decry the absence of a long-term national energy plan. I think the problem is not that there is no energy plan: but, in fact, that there are too many energy plans, championed by everyone from Al Gore to Boone Pickens to almost every think tank in Washington. 

Since I only have an hour, I will spare you the “Crane Plan”, but I would like to mention two absolutely critical elements that I find missing from almost every plan – and that is the critical elements of timing and regional differences.

And that is the thing that about most energy plans, they fail to differentiate between what we can do right now – which in energy terms means the next 3-10 years – versus where we can hope to get to by 2030-2050. My focus is on the here and now because we simply don’t have a generation to spare in terms of addressing climate change. We all need to focus on decarbonizing solutions that can be deployed here and now.

My “here and now” Energy Plan would take the first steps towards a national energy grid but with a relentlessly regional focus and technological solutions which are ready for large scale deployment immediately. Energy Plans, like Healthcare Plans, tend to be long and complicated so I am going to give you my energy plan in just 31 words:

• The West gets the Sun
• The Midwest gets the Wind
• The South gets Nuclear
• We as a Nation pursue “Clean Coal” as a national priority;
• And we all buy Electric Cars.

The West gets the Sun. Al Gore’s vision of a Sonora Desert covered in a 90 sq mile sea of solar thermal mirrors powering the entire country is admirably aspirational, but as a starter, let’s focus initially on a solar powered California. California certainly provides sufficient scale, its electricity demand is co-incident with peak solar and it is only 250 miles from the Sonora desert into the heart of the southern California load pocket – 50 miles if you use the Mojave desert.

The Midwest gets the Wind. While wind currently is the predominant true renewable in the United States for it to be a major factor in the energy mix going forward we need to solve the intermittency issue and we need to tap into the currently stranded wind resources of the upper Great Plains states. For some reason, to date, the wind focus on the Great Plains has been on getting their wind resources from places like southeastern Wyoming to California. Instead, I say let’s take wind from the Dakotas and feed it into the Chicago load pocket. It is 1200 miles from Cheyenne Wyoming to Los Angeles but only 500 miles from South Dakota to Chicago.

The South gets Nuclear. Public policy-makers in the Democratic Party, with their laser beam focus on wind, solar and efficiency, need to recognize that the South, still one of the most dynamic growth areas of the Country, lacks suitable wind and solar resources. Even in the case of clean coal, the geology of the South is not well-suited for long term carbon sequestration. On the other hand, the populace of the South (and that includes Texas) is generally comfortable with nuclear power and its incumbent utilities are deeply experienced with nuclear operations. So let’s think of Nuclear as the “Renewable of the South.” 

And we all Work on Developing and Deploying Clean Coal. We must set as a national priority – perhaps a “national project” – the demonstration and large scale deployment of “clean coal.” All of the zero carbon regional solutions described above, if forcefully

implemented, could have a meaningful impact on US carbon emissions, but only “clean coal” can have the necessary impact on carbon emissions from China and India. As I always remind people,

“If you do the math, you will learn that you cannot solve global warming through clean coal alone, but without clean coal, you simply cannot solve global warming.”

These four components of the “Here and Now” energy plan will both demonstrate and deploy sustainable technologies and lay a foundation for a national electricity solution, complete with a national high voltage transmission grid, should one of the regional solutions emerge as clearly superior in terms of cost, reliability and safety. 

While right now there is no reason or basis to choose solar, wind, nuclear or clean coal for mass national deployment, I think particular attention needs to be paid to the nuclear renaissance. Given its much greater scale and reliability than the others, and that advanced nuclear technology is fully proven, we need to consider the importance of new nuclear power in the context of the transportation industry’s considerable contribution to the greenhouse gas problem.

The 240 million cars and light trucks in the United States emit about 17% of our country’s greenhouse gas emissions. If all 240 million of those vehicles were converted to plug in hybrids – the reduction in emissions would be very meaningful and doubly so if the electricity “fueling” those plug-ins was generated by zero emission nuclear power. 

And this is an area where we don’t have to appeal to the American consumer’s better environmental instinct; we can appeal also to their economic interest. Based on the projected cost of our new nuclear plant in Texas, we expect to be able to fuel electric cars for a cost equivalent to 97 cents/gallon. The prospect of 97 cents/gallon will sell a lot of electric cars. 

So the nuclear renaissance begins, and as I suggested before, it will begin in the South. NRG expects to be on the point of the spear in the nuclear renaissance. We were the first to file a COLA application with the NRC last year; the ultra heavy forgings for our reactor pressure vessels are being fabricated in Japan as we speak; and we expect to be the first to pour safety-related concrete and the first to achieve commercial operation at our South Texas site.

We are highly confident that we will succeed with our project and we believe that a couple other projects sponsored by utilities in the Deep South will succeed as well, but there is a big difference between getting three new nuclear projects pushed across the line in the latter part of the next decade and a sustained move toward a nuclear power solution. 

In other words, “three nuclear plants is a good start, but does NOT necessarily constitute a nuclear renaissance.”

A national energy plan would need to include a master plan to bring successive waves of nuclear plants on line, ideally in coordination with a timetable for the mass conversion of our light transport sector to the electric car.

For a true wave of new nuclear plants, we need more sites for nuclear plants. That means, potentially, more nuclear plants on federal land, particularly at or near existing federal nuclear facilities, more ability to site at refineries and other heavy industry facilities away from population center. We need a domestic supply chain that does not require all long lead time equipment orders to be funneled through one steel-making foundry in Hokkaido, Japan. Creating that supply chain won’t necessarily be easy but it will mean “green jobs” and a step towards revitalization of our industrial base on a scale and in a sector that America needs.

In short, within a national energy plan, the nuclear renaissance needs its own chapter.

Role of Infrastructure Funding.

The Energy Policy Act of 2005, passed in October of that year, well before the current financial crisis, recognized that the first wave of new nuclear construction in the US, after a 29 year hiatus would require some Government assistance.

Now, the Government is on the verge of considering a much broader, more immediate and possibly much bigger role in infrastructure funding.  When Congress returns in 2009, it is likely that the first item on their agenda will be passage of a massive financial stimulus package. As a major part of that Stimulus, the Government may allocate as much as $50-200 billion to “infrastructure” projects in an effort to have a component of the Stimulus which is both immediate and sustainable in its effect.  

That the Government should invest in infrastructure, and that infrastructure investment properly done, is itself sustainable in the sense that jobs are created and physical assets are built which should make a positive contribution to society for 30-50 years. On these points, I am sure that all of us can agree. 

But how are we to make sure that massive infrastructure investment is “properly done”? How are we to ensure that an infrastructure stimulus does not become the biggest piece of pork barrel legislation in the history of the United States with the end result being not one “bridge to nowhere” but a whole load of “bridges to nowhere” – projects which are neither economic in their own right nor in sync with what hopefully will be a national energy plan?

My view is that we all need to focus, and focus now, on how an infrastructure stimulus would be implemented. I respectfully suggest that to guard against these pitfalls, President Obama should create a new public corporation to be a recipient and dispenser of the infrastructure stimulus funds. That corporation would be Government-owned but operated on strictly private sector principles (like the profit motive) ideally by experienced business

professionals – somewhat similar to the infrastructure funds set up by KKR, Macquarie Bank and the like.

The key investment principle of a public infrastructure corporation would be that it would piggyback on projects deemed economically viable by the private sector by only co-investing in projects that the private sector is itself willing to invest in. In other words, if the project sponsors are not willing “to put their money where there mouth is”, than neither would the Government.

The advantages of an Infrastructure Stimulus implemented through an Infrastructure Corporation are many:

1. First, the private sector can deploy capital quicker and more effectively than the Government and with a relative minimum of political interference.  
2. Second, the investment will be managed prudently by the project sponsor who is seeking at all times to protect its own investment; and
3. Third, the economy will benefit from an investment multiplier effect since the Government’s Infrastructure Stimulus will be unlocking private sector investment that otherwise would not occur in the current environment;
4. Finally, if the Corporation invests on economic principles and with private sector hurdle rates, it will be investing in projects that make good money. After a certain hold period, the Federal Infrastructure Corporation could choose to sell down its interest or it could choose to reap the recurring revenues as they are earned. In either case, the program ultimately will become a self-sustaining source of future infrastructure investment.

 In any case, it probably is inevitable that even if President Obama and Congress were to elect to channel the Infrastructure Stimulus through a public corporation, that the public corporation would not be allowed to operate purely on the profit principle. Almost certainly the infrastructure corporation would be tasked with pursuing a socio-environmental agenda centered around sustainability and climate change. To me, that is not a problem. We are ready for the large scale demonstration of various technologies aimed at keeping greenhouse gases out of the atmosphere. My only point is let us not let the socio-environmental goal overwhelm the basic business principle. If we do, we will end up as we did with the Synfuels Corporation in the 1980s, when the immediate crisis passed, the Government moved on to other financial priorities and, unable to make a go of it in the private sector economy, the Synfuels Corp went bust.

Whatever funding role the Government is going to take in infrastructure sector going forward, we need – above all else – long term continuity over multiple four year election cycles.

And we need input. While I am very encouraged by the first steps of the next Administration, let me tell you one thing that concerns me. Given that it seems inevitable that the

Government – now running the banking system and soon to be running our automotive sector – is going to be increasingly in the business of American business – not just as a regulator, but also as lender and equity investor – than we as business people need to do our part to ensure that Government involvement occurs in a sensible way. But what is to be our avenue of communication with the next Administration? 

While the President-elect appears to have made very strong choices in the nominations that he has identified thus far, what has been noteworthy to me is the apparent absence from consideration of any business person for any position – even for Secretary of Commerce.

So if Business is to have to influence from the outside, are we to rely on normal channels. I fear that the traditional channels of the American business community – the Business Roundtable, the U.S. Chamber of Commerce, the National Association of Manufacturers – rightly or wrongly, are so closely identified with the Republican Party in Democratic eyes, that it is difficult to imagine them being accepted as a constructive influence by the Obama Administration. For my part, I hope that new groups which have emerged out of American business in recent years, openly embracing a progressive agenda with respect to energy and the environment, like the US Climate Action Partnership, can be influential in imparting common business sense to the Administration without seeking to compromise or obstruct the Administration’s progressive goals.

It has been fashionable in recent years to call for an “Apollo Project” aimed at this entire realm of energy independence, climate change and sustainability and what is notable to me is how many powerful and influential policy-makers have called for an Apollo Project and how few steps have been taken in Washington towards actually creating one. Perhaps this is because there is a view that great national projects can only be “lead from the front” and that requires the President of the United States, utilizing the full resources of his office and the full stature and authority of his position, to undertake such an endeavor.

Certainly that has been the case in the past, not only with John Kennedy and Apollo, but also with Teddy Roosevelt and the Panama Canal and Dwight Eisenhower and the Interstate highway system. And just as certainly, the current President has not been willing to lead from the front on the issues of climate change and sustainability; much less call for a great national endeavor to defeat the former and enshrine the latter.

Without question, President-elect Obama will act but how quickly and how boldly. As we all know, the United States at present has many very substantial and very pressing needs and, by recent historical standards, relatively few available resources to apply against those needs.

President Obama will seek to lead, but will we as a Nation have the Will to follow? Somewhere, over the past couple decades, as a Nation, we seem to have lost our ability to set a long term objective for the Country and to see it through to a successful conclusion even if it involves some short term sacrifice in order to achieve the longer term gain.

Turning back to John Kennedy and Apollo, American school children learn the words from his speech to Congress in May, 1961 when he declared:

“I believe that this Nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth.”

What I find most remarkable about President Kennedy’s words that day are the thoughts that he went on to express in the very next sentence. In referring to his lofty objective, Kennedy went on to acknowledge:

“No single space project in this period will be more impressive to mankind…and none will be so difficult or expensive to accomplish.” 

Even President Obama with his ability to inspire, his audacity of hope and his ability to “call to action” a new generation of young people in this country has not yet gone where John Kennedy went on that day in 1961 – he has not yet asked the American public to accept some short term sacrifice so that the next generations of Americans can reap the long term benefit. And decarbonizing the economy and establishing sustainability as the prevailing ethos of our consumer society will require that the American public feel some economic pain from their high carbon lifestyles. 

In fact, President Obama obviously is very good with words, but if he is to call for a national effort with respect to climate change and sustainability, I am not sure he could improve upon what Kennedy went on to say to the American people that day: 

“This is a commitment to a new course of action, one that will last for many years and carry with it a very heavy financial burden. If we are to go only half way or retreat in the face of difficulty, in my judgment, it would be better not to go at all.”

I think of Apollo these days not so much in its technical application to the present challenges we face but in what it meant to us individually. Next month I turn 50, and as such the Apollo program was a fundamental part of my experience growing up in America. As a young boy, Apollo imbued within me a sense of the endless promise and limitless possibilities of both my country and of myself, as an individual. 

That unbridled sense of optimism I felt then, we need to feel again today. Thanks to the technologies that are emerging, and the dawning of a new political age in the United States, for the first time in my adult life, we stand poised to take a significant step forward in addressing our nation’s energy needs in a manner that does not mean a step backwards in terms of our stewardship of the global environment.

So as we go forward as an Industry, let us recognize that as we confront these two great transcendent dynamics of Climate Change and Sustainability, Let us remember that fundamental change is more often borne of necessity than of convenience.

Let us present ourselves, and the companies, financial resources and professional expertise that we represent as an essential part of the solution, rather than the problem.

Let us say to the new Administration, “yes, we can …but let’s do it this way” rather than “No you don’t!”

Above all, let us not get depressed at the economic wreckage around us. Let us, instead, savor where we site astride this pivotal sector in this pivotal moment in our history

I want to leave you with the words of, in addressing another great societal challenge of his era, Dr. MLK said: 

“History will record that the greatest tragedy of this period is NOT the denials and obfuscations of the bad people, but the appalling silence and indifference of the good people. Our generation will have to repent not only for the words and actions of the children of darkness, but also for the frightening apathy of the children of light.”

As the Electricity Industry, it should be easy for all of us to identify with Dr. King’s quote. WE ARE THE CHILDREN of LIGHT. Let us go forward now and show the way.   

Is clean coal a fiction or half-truth that forms part of an ideology, i.e. a myth? As with most things, it depends on your point of view and your own ideology. If building a clean coal power plant is simply a matter of a fat check book, willpower and a room full of engineers, an event that simply hasn’t been achieved as of today, does that make clean coal a myth?  If every design aspect of clean coal is fundamentally proven and doable and yet we haven’t put it all together, then is it real or imagined?

Arguably, clean coal is more real today than landing a man on the moon was in the early 1960’s or building an atomic bomb in the early 1940’s. Yet even as the urgency for both energy independence and clean energy grows, the term “clean coal” is being portrayed as the mother of all energy related oxymorons – practically an outright lie.

For those aligned with all things green and renewable to the exclusion of all else, clean coal represents nothing less than a dangerous distraction. Greenpeace calls clean coal “an attempt by the coal industry to try and make itself relevant in the age of renewables.” They portray clean coal as a cynical public relations strategy – the ultimate greenwashing of the dirtiest energy source on earth. You may have seen the add below that is being run by therealnews.com on numerous cable channels. Created by the Reality Coalition whose members include the Alliance for Climate Protection, League of Conservation Voters, National Wildlife Federation, Natural Resources Defense Council and Sierra Club, the viewer is shown a clean coal plant that, well, does not exist. Not surprisingly, advocates for clean coal are crying foul and calling the ad a complete distortion of the truth.

As always, truth can be an elusive commodity. Truth is, no clean coal power plant exists today. Truth is, clean coal technology is real and ready and every part of it exists today. These truths coexist in parallel worlds for a number of reasons.

Clean Coal – When Worlds Collide: When it comes to making electricity, the term “clean coal” is effectively synonymous with “integrated gasification combined cycle”. That mouthful of technical jargon is more commonly referred to by its acronym – IGCC.

Right off the bat, this topic runs smack into a level of  technical complexity that makes having an informed discussion especially challenging for those outside of the energy industry – and even for some of those on the inside. IGCC is a marriage of two technologies that might as well come from two different worlds. One is the world of petrochemicals and refining ruled by chemical engineers – the land of “big oil”. The gasification component lives in this world. The other world is that of power generation or what most of us refer to as the “utility” business. This world is ruled by mechanical engineers who make electricity for a living using fossil fuels, steam turbines and gas turbines – often in a “combined cycle” or “CC” configuration. The CC in IGCC lives in this world.

It’s quite rare to find a utility guy with any real experience with gasification. It’s not just a matter of training and competence. Utilities burn fuels to make steam or fire natural gas directly in gas turbines. That’s what they know. It’s all they’ve needed to know. And since the culture of making electricity is extremely adverse to risk, no sane utility manager goes looking for unknowns like gasification unless compelled or otherwise incented to do so.

Until the early 1980’s the entire industry was a collection of monopolies under the thumb of 50 different state regulatory commissions. Historically, those commissions protected each utility franchise from normal competitive forces in exchange for guaranteed rates of returns as long as they kept the lights on and generally acted prudently. This is largely true even today. As any economist will tell you, innovation is glacial and risk takers are rare in the ossified world of a regulated monopoly . Even after 25+ years of utility deregulation and the emergence of independent risk takers, the idea of designing, building and operating a chemical processing plant (gasifier) as part of making electricity is a daunting prospect for even the most stalwart of U.S. power companies. Of course the petrochem boys, who like to think they can eat power plants for breakfast, would have no problem pulling this off. But they have much bigger fish to fry turning oil and gas into every chemical concoction they can think of for fun and profit. There’s good money in it. It’s what they know. They have no interest in getting into the electricity business.

Thus, the people who know gasification have no interest in the power business and the people who know power have no interest (or qualifications) in owning and operating a complex chemical plant.

Gasify This! Gasification is the “G” in IGCC. Leaders in gasification include Shell, ConocoPhillips and more recently GE (which acquired its technology from Texaco). There are almost 20 major gasification plants in the U.S. and hundreds around the world. Gasification has been around for a 100+ years.

Gasification is about as far away from being a myth as you can get. But what is far less common is the deliberate integration of gasification with gas turbines to make electricity. This integration is the “I” in IGCC. Nevertheless, there are at least 15 IGCC plants operating around the world today with a combined capacity of roughly 4000 megawatts (most new conventional power plants today are 300-600 megawatts each). Two of these IGCC power plants exist in the U.S. – one in Florida owned and operated by Tampa Electric and the other located in Indiana owned and operated by a private independent. Both were built around the mid-90’s with significant federal support from the DOE’s clean coal technology development program. I’ve personally visited both plants. The one in Florida is Tampa Electric’s most profitable (lowest marginal cost) plant.  (If you want to dig deeper into the technology, gasification.org is good place to start.)

So if IGCC is synonymous with clean coal, and the “G” in IGCC is for real, and the “CC” in IGCC is for real, and there’s ample evidence that we can “I” them together, then how can “clean coal” be called a myth?

It Ain’t “Clean Coal” Til You Put It In A Hole! The “myth” argument is all about CO2. What makes a clean coal power plant a true “clean” coal plant is the capture and permanent storage of the CO2 that would otherwise be released into the atmosphere.  Such permanent geological storage of CO2 is referred to as “carbon sequestration”. To date, gasification is the only technology that lends itself to reasonably affordable capture of CO2. CO2 capture is a fully proven add-on to the gasification process. In the extreme, nearly all the carbon can be removed leaving almost 100% hydrogen gas to be burned in the gas turbines to make electricity. And the only byproduct of hydrogen combustion is water! The “captured” CO2 is compressed and injected underground into suitable geological formations thousands of feet in the ground where the CO2 is permanently “sequestered”.

This brings us to the bloodied front line of the clean coal war. Developers of new coal fired power plants are being effectively attacked. Opposition groups are stopping new coal plants because most utilities are not including carbon capture and sequestration in their designs. They haven’t because they haven’t had to, it raises costs substantially, and frankly there’s no cost effective way (yet!) to capture carbon from conventional coal plants.  Those bold enough to mush ahead with IGCC and sequestration are then bombarded with arguments claiming permanent underground storage of CO2 is unproven, dangerous, and too expensive. And indeed, electricity from such a plant would cost between 50-100% more than from a new conventional coal plant. But then again so would solar but that’s another story for another day. Not surprisingly, this sends utility commissioners running for the hills.

In retaliation, clean coal defenders fire back with the Dakota Gasification Plant in North Dakota. This plant gasifies coal into a synthetic natural gas, captures the CO2, and sequesters it in depleted oil fields to help squeeze out some additional oil production. Right behind Dakota comes Norway’s offshore CO2 injection at Sleipner where Statoil started injecting CO₂ in 1996. At Sleipner, geologic sequestration has proved to be an environmentally sound and financially prudent disposal option for CO₂. To which the renewables-only-brigade counter with cries of too small scale compared to the amount of CO2 we’d need to sequester, claims of insufficient proof, and the dropping of the “what if the CO2 escapes and kills us all” fear-bomb (CO2 is heavier than air and if released quickly in large quantity could blanket the ground and suffocate populations in low lying areas)? To be fair, each army in this war has large arsenals including numerous “weapons of mass deception” but more on that some other time.

I’ve had some exposure to sequestration and the geologists who specialize in this area. When asked why they think permanent sequestration of CO2 is technically viable the answer is quite simple and compelling. Did you ever wonder about all that oil and natural gas we’ve been drilling for and releasing/pumping up the past 100 years or so? No matter how it was formed way down there, certain geological formations are quite capable of keeping gas trapped deep underground for millions of years until we drill a hole to let it out. Why can’t we find similar geology, drill a hole and pump down CO2 so it stays put just like natural gas? In fact, we can. It gets better! Geologists also point out that over a few decades CO2 eventually solidifies into mineral deposits thus further mitigating concerns over the integrity of long term carbon sequestration.

Git ‘er done! Perhaps the most vexing of all facts staring back at clean coal advocates is, that despite all the arguments in favor of real clean coal power generation, no true clean coal power plant exists today. This vexing reality is why the Reality Coalition folks are doing the happy dance over their televised advertisement of the non-existent clean coal plant. This is where culture, politics, finance and the risk-adverse power utility industry come together in a Gordian knot that needs cutting.

A clean coal plant is big, expensive, complex and frankly a bit intimidating for the utility industry to take on alone without some protection. Only the federal government has a big enough knife to cut that knot. Some would argue that that is reason enough to run, not walk, away from clean coal as fast as we can into the arms of an all-solar-and-wind-all-the-time renewable energy world. The reason we haven’t yet is the all-renewables alternative is either as costly, if not more so, than clean coal plus we haven’t yet figured out how to keep the lights on when the wind stops or the sun goes down. I’m all for responsible clean energy of all types but I’m also a big fan of keeping the lights on. We have to be pragmatic about this. We’re going to need to lean on coal for at least another generation so let’s make it as clean as we can.

In the near term, the key impediment to clean coal is mostly political and not technical or financial. All the pieces needed to make a clean coal power plant a reality exist today except the political will to overcome any remaining obstacles. We are far better prepared to build clean coal plants today than we were putting men on the moon.  A comprehensive national clean energy program, including clean coal, is about real national security – economic, environmental and homeland. What we have here now is a failure to launch. Only this time it’s something far more urgent and necessary than sending a man to the moon.

The last weekend before the recent presidential election, a San Francisco Chronicle interview found Mr. Obama stating, “Build the coal plants if they want, but it will bankrupt them if they do.” Not surprisingly, the conservative herd quickly wolfed down this final slab of red meat and lept to the conclusion that the Obama administration intended to literally bankrupt coal plants and more broadly the entire coal industry. Insofar as the electorate was concerned, that dog didn’t hunt. Still, many of my Republican acquaintances continue to insist that the coal industry will be in the next administration’s crosshairs.

Is bankrupting coal plant operators and coal producers a credible threat? Let’s start with where our electricity comes from today. As shown in the pie chart below, we currently derive almost 50% of our electricity from coal! Yes, coal. So let’s be realistic. No sane administration is going to shut down almost 50% of the nation’s power supply overnight.

Even under an accelerated national moon-shot style rebuild program, it would take a decade or more to replace the existing fleet of coal plants. It takes 3-5 years to build a single large complex traditional power plant. Coal plants produced over 2,000,000,000 Megawatt-Hours of energy last year. Let’s break that down. Divide by the number of hours per year (8760) and we get 228,310 Megawatts worth of running coal plants each hour. Figure an average coal plant size of 500 Megawatts and that gives us about 457 plants. But since they all can’t run 24x7x365 we need some extra plants. Using an 85% capacity factor we end up with 537 plants. Published numbers run closer to 600 so we’re in the ball park here. At a nominal replacement cost of $2,000,000 per Megawatt (very optimistic!), we’d need to invest 537x500x2,000,000 which equals roughly $500 billion (half a trillion) dollars.

The real price tag could easily be double or more – say an even $1 trillion.  And since we’d be building all these plants almost simultaneously, the demand for steel, concrete, engineered equipment, contractors, and design/construction labor would skyrocket so figure at least a 50-100% premium so now we’re pushing $3-4 trillion. But maybe clean coal plants aren’t so clean. So let’s say we replaced them with nuclear plants. Ka-ching! Now we’re up to $4-6 trillion and counting. No nukes you say! Ok, then let’s go green and replace those coal plants with a combination of wind and solar. Adjusting for higher costs and lower operational availability puts us somewhere in the land of $6-8 trillion. Add in the obligatory cost overruns and we could see $10 trillion. Now we’re talking real money. About equal to the current national debt! And we haven’t even touched on the cost of upgrading the national electrical grid.

Oh, and let’s not forget that while we’re busy bankrupting the coal business and replacing the existing coal fleet these past 20+ years, our national demand for additional power supplies is projected to increased by 30% so let’s throw another $3 trillion dollar green log on that fire. Warm yet? Does bankrupting the coal business sound realistic? Hardly.

So what was Mr. Obama driving at with his comment? I believe he was simply being realistic by suggesting that building the next conventional coal power plant may prove to be an imprudent investment. Coal plants have been popular amongst utilities because until very recently coal fired power has had the lowest apparent cost. Why apparent cost? Because coal produces low cost electricity provided you ignore what economist refer to as “externalities”. An externality occurs when an economic activity causes external costs or benefits to third party stakeholders (in this case all living organisms) who do not participate in the economic transaction. Global warming has been ranked as the #1 externality of all economic activity in terms of the magnitude of potential harm yet remains largely unmitigated and unaccounted for in consumer electricity prices.

Many, including Mr. Obama, believe that carbon emissions, in the form of either a carbon tax or cap-and-trade program, will soon become a reality. The Northeastern Regional Greenhouse Gas Initiative that kicks in starting in 2009 is a prime example. And since coal is the most carbon intensive of the three fossil fuels (natural gas, oil & coal), the costs to emit carbon will fall hardest on coal plants. After all, that’s the whole point of climate change regulation; impose a tax (whether directly or indirectly) on the worst offenders in order to change behavior. Those emitting the least carbon pay little or nothing. Properly applied, these regulations will eventually tip the playing field in the favor of greener low/zero carbon sources of electricity like wind, solar and biomass that would otherwise lose out to coal because they are currently more expensive when the cost of externalities are not included. Politically, this is tricky business of the first order because it’s a sure bet the voter will end up paying more for electricity – some would say we’d finally be paying the “real” price.

Moving away from traditionally lower cost electricity derived from coal goes totally against the political grain; especially in coal states. Nevertheless, widespread opposition to new coal plants has become fierce. Even though carbon regulations have barely entered the picture, the belief that such regulations are inevitable, if not imminent, are changing the politics of electricity. Some regulators are already aligned with Obama’s views. Just last month, the Wisconsin Public Service Commission unanimously denied Wisconsin Power and Light’s plan to build a new 300 MW coal-fired electric generation in part because of uncertainty over the costs of complying with future possible carbon dioxide regulations. The fact that the new state-of-the-art coal plant had a nose bleed price tag of $4,200 per kW ($1.25 billion for 300 MW) was no doubt also a big factor. So much for low cost electricity derived from coal.

But even as we begin to wean ourselves off of coal, the question of what to replace it with goes largely unanswered. We need new baseload generation – the kind of power plants that can provide power whenever we need it – day or night. Natural gas is the default solution but T. Boone Pickens says we need to funnel natural gas into transportation fuel. Wind and solar can’t provide baseload power – at least not today or until we have some phenomenal breakthrough in battery/storage technology that could prove as elusive as nuclear fusion. Ironically, as new coal plants are becoming politically radioactive, nuclear power is seeing a potential resurgence; albeit very slowly. Now if can only solve that nasty spent nuclear fuel problem we might get somewhere – in 20 years or so. Meanwhile, coal will be with us for at least another generation, Obama’s statements notwithstanding.