Clean Infrastructure

UPDATE: Michael Moynihan's new policy paper, Electricity 2.0: Unlocking the Power of the Open Energy Network, is now available online. 

This morning, readers of the San Francisco Chronicle opened to page A-10 and saw this op-ed from NDN Green Project Director Michael Moynihan:

To get clean energy, upgrade to Electricity 2.0

While clean energy has captured the imagination of everyone from Silicon Valley venture capitalists to President Obama, it has yet to fulfill its job-creation promise. Non-hydro renewable power accounts for just 3.5 percent of electricity in the United States, compared with 28 percent in Denmark, a leader in the transition to renewable energy. In a study released today, I examine why progress has been so slow in the electricity industry - the network at the center of the wider energy network. The answer turns out to be that our highly regulated system, uniquely complex by global standards, is blocking progress.

Put simply, only by upgrading from Electricity 1.0 - the closed, highly regulated network created a century ago - to Electricity 2.0 - an open, distributed network - can America unlock the potential of clean technology and experience a renewable energy revolution.

It is often said that an inadequate electric grid is slowing the rollout of clean renewable energy. But why is the grid inadequate? Because the regulatory regime of Electricity 1.0 guarantees the current state of affairs. While the industry research consortium, Electric Power Research Institute, has done an outstanding job in improving the reliability of the network, utilities do virtually no research and development. Laws bar them from trying new business models, innovating and taking risks. This bias against innovation prevents utilities from purchasing technologies developed by others. Thus, entrepreneurs find the gates of the network closed. It should not be surprising that a highly regulated industry cannot lead a revolution.

So, how can America upgrade to Electricity 2.0? As with telecom reform, Electricity 2.0 will require nothing less than a Big Bang that includes federal legislation as well as close cooperation with the states to harmonize rules of the road. Partial reform, such as has taken place in Texas and California, is a start, but it is not enough. What's needed is an entirely new plug-and-play architecture that opens the grid to everyone, making connection the norm not the exception.

Read the full piece.

For more on Moynihan's compelling vision for Electricity 2.0, join NDN at 12pm today for a presentation of the paper. Copies of the paper, entitled "Electricity 2.0: Unlocking the Power of the Open Energy Network," will be available for distribution. 

Electricity 2.0: Unlocking the Power of the Open Energy Network
Thursday, February 4, 12 p.m.
NDN: 729 15th St. NW, 1st Floor
RSVP 

If you are unable to join us in person, a live webcast will begin at 12:15 p.m. ET.

Clean energy has captured the imagination of people from Silicon Valley, who invested $5.4 billion in the sector last year, to President Obama, who highlighted it in his State of the Union Address. However, it has yet to fulfill its economic promise and displace legacy fuels in America’s electricity sector, especially when compared with the significant progress made in other countries. Today, non-hydro renewables account for just 3.5% of electricity in the US.

This Thursday, NDN and New Policy Institute Green Project Director Michael Moynihan will release a study examining the electricity industry – the network at the center of the wider energy system – to understand why progress has been so slow. He argues that the answer lies in the outdated and complex structure of Electricity 1.0, a closed, highly regulated network created a century ago, fundamentally incompatible with clean technology and renewable power. 

Moynihan will argue that America must upgrade to Electricity 2.0, an open, distributed network, or there will be no clean energy revolution, no explosion of wealth, and no creation of millions of jobs. But if we do make this shift, America can unlock the potential of clean technology and experience a renewable revolution.  

On Thursday at 12pm, Moynihan, a former Senior Advisor on E-Commerce to Treasury Secretaries Summers and Rubin, will describe the transformative power of Electricity 2.0 and will outline the steps America needs to take to achieve this vision. Copies of the paper will be available for distribution, and lunch will be served. If you are unable to join us in person, the event will be live webcast beginning at 12:15pm, and copies of the paper will be posted on the NDN and New Policy Institute websites later in the afternoon. 

Electricity 2.0: Unlocking the Power of the Open Energy Network
Thursday, February 4, 12 p.m.
NDN: 729 15th St. NW, 1st Floor
A live webcast will begin at 12:15 p.m. ET
RSVP  :  Watch Webcast

I look forward to seeing you on Thursday for this important presentation. 

For more on this topic, please see:

Removing Roadblocks to the Growth of Renewables by Michael Moynihan, August 17, 2009

Last night's compelling and in many ways inspiring State of the Union speech by President Obama should come as good news to the clean technology community and anyone who cares about the climate, energy independence and American economic leadership.  The President not only higlighted clean energy throughout his speech, but also signaled his continuing view, shared by many, that it must be at the heart of America's economic revival.

While clean energy has advanced since last year's clean-weighted stimulus bill, the critical stage of moving clean technology from a promising funding category in Silicon Valey to a major engine of economic revival remains ahead.  Here is how to accelerate that process.

First, as the president indicated, innovation is key.  But innovation is not just about advanced research and grants to large companies--the focus of last year's stimulus. To really get the job machine revving, we need to move innovation into the marketplace.  And we need small companies to turn into large ones.  That is where job creation really occurs--in the transformation of a startup consiting of a two enrepreneurs into a massive global company employing tens of thousands.  (Think Apple, Yahoo or Google.) As I have long been arguing, the major obstacle here is a complex and highly regulated energy landscape that presents a roadblock to the purchase and uptake of clean technologies.  It is time to change that landscape. 

Second, we need to direct R&D funding toward smaller businesses.  Since the 1980s, American industry has had a problem that while we may invent great technologies in our universities, other countries reap the commercial benefits because of a lower cost structure and also because they have efficient networks of small companies backed by large ones or other sources of funding able to exploit cutting edge American technology.  We are seeing in batterty technology today precisely what we saw in semiconductors and LCDs in the 1980s.

During the 1990s, Silicon Valley helped address this problem by funding the stage between reserach and commercial exploitation in California, specifically around Stanford University.  A disproportionate share of entrepreneurs came from Stanford and the surrounding community.  But there is great science going on around the country that needs development funding to begin producing American jobs.

The answer to this problem are programs such as the Advanced Technology Program introduced in the 1990s to help startups survive the Valley of Death, more small business innnovation and research (SBIR) grants and other funding opportunities available on a peer reviewed bases to startups.  Virtually all of the smart grid money in the first stimulus went to large utilities.  However one 50 million grant to a utility could fund 500 grants of 100,000 to startups.  The latter is, by far, the better bet for our nation's money.

Third, it's not just about money.  In many cases, the key to innovation is getting government out of the way.  This was essential during the Internet era.  Many policy efforts currently are focused on getting the government more involved in the energy space, when in fact, the more cure--since government is already heavily involved in protecting incumbents is to remove those protections so as to give new technologies and new players a shot. 

Finally and most importantly, the public must be engaged.  Only people can make a revolution.  Until consumers are part of the action, clean technology will move forward awkwardly.  During the Internet era, consumers downloading new software, building websits, rigging up home networks, starting online stores and staying up to write code were critical to the revolution.  To move clean tech into high gear, we need to empower the American people to generate power, use new technologies and fight climate change.  At NDN, we have been working a great deal on how to empower people to lead the clean technology revolution and I will be debuting a paper on the subject shortly.

The president has set the correct overall direction.  It's up to his policy experts, those in Congress and stakeholders to craft a set of policies.  But it will be up to the American people to create the clean technology revolution.

The New York Times "Wheels" blog delivers some interesting news on the Nissan “Leaf” (not sure about that name), the company’s new electric vehicle that is being introduced in Los Angeles today. 

The Leaf, an all-electric five-door hatchback, will have a 100-mile range, Nissan said.

Mr. Ghosn said last month, in introducing the Leaf at the Tokyo Motor Show, that the vehicle would be priced “competitively” compared with other cars its size. This has been estimated at $25,000 to $33,000. But the price won’t include the lithium-ion battery packs; those will be available for lease separately. The spent battery packs will be recycled by Nissan and reused.

The Times writes those last two sentences (emphasis added) as if leasing the battery packs is some kind of "catch" in the pricing. It's not. Rather, the battery pack and the electricity to charge it are analogs to gasoline in conventional vehicles, which is never sold with the car.

For this reason, Nissan is on to something with the battery leasing. Like Better Place, which is building infrastructure for electric vehicles (and is teamed up with Renault-Nissan), Nissan knows that the key is not to build a car with a battery for the same price as a conventional gasoline car. Rather, the key is building a battery-less car for the same price as a conventional car. And once that happens, because electricity is far cheaper than gasoline, all one has to do to beat conventional cars is make the lease cost of a battery plus the electricity costs competitive with the cost of gasoline over the same period (which is already a reality in many countries). Incorporating the battery and its cost into the vehicle is likely not the right way to go for so many reasons, but on the financing side the cost of actually making a car go is always an addition to the purchase cost. 

Fully electric cars have some way to go – charging infrastructure needs to be built out and standardized, battery costs still have to come down, and capacity should go up – but getting the cost structure right is crucial in creating this piece of the low-carbon economy. Electric vehicles will ultimately offer tremendous benefits to consumers, from price stability to never having to go to the gas station, and to the electricity system, as the aggregate storage capacity in batteries will provide a demand response capability. And while I might prefer a name that connotes a bit more strength, the Leaf is a nice step forward.

Yesterday, NDN hosted three experts in the automobile industry to discuss the future of clean transportation. NDN Green Project Director Michael Moynihan moderated this wide-ranging and well attended discussion, the video of which can be found below.

Kim Hill, the Associate Director of Research at the Center for Automotive Research and the Director of the Sustainable Transportation and Communities Group, spoke about a recent study he conducted on the economic impact ATT’s shift to a more efficient vehicle fleet. The short version: the conversion to CNG and hybrid vehicles saved fuel and money and created jobs. The detailed study can be found here.

Mike Granoff, the Head of Oil Independence Policies for Better Place, the first service provider for electric cars, building infrastructure, software and the user interfaces to make electric cars available for mass adoption, spoke about the Better Place vision and business model and updated us on Better Place's progress. During the session, he mentioned the video of the battery swap station at work, which can be found here on the Better Place website. 

Finally, Dr. Kathryn Clay, the Director of Research for the Alliance of Automobile Manufacturers spoke about the industry's efforts to innovate to cut greenhouse gas emissions and the regulatory environment around those efforts. More on the Auto Alliance can be found here.

Here's the video of the full session:

One of the most important pieces for the future of transportation, energy, and climate is how we power automobiles. An interesting piece from the Wall Street Journal's "Environmental Capital" blog discusses a new study on the future of global oil supplies:

Here's an intriguing thought: Global oil supplies are indeed set to peak within a few years, and no, that is not bullish for oil. Quite the contrary—it will spell the end of the "oil age."

That's the take from Deutsche Bank's new report, "The Peak Oil Market." In a nutshell: The oil industry chronically under invests in finding new supplies, exemplified both by Big Oil’s recent love of share buybacks and under-investment by big oil-producing nations. That spells a looming supply crunch.

That will send oil to $175 a barrel by 2016—and will simultaneously put the final nail in oil's coffin and send prices plummeting back to $70 by 2030. That’s because there's an even more important "peak" moment on the horizon: A global peak in oil demand. That has already begun in the world’s biggest oil-consuming nation, Deutsche Bank notes:

US demand is the key. It is the last market-priced, oil inefficient, major oil consumer. We believe Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era.

The big driver? The coming-of-age of electric and hybrid vehicles, which promise massive fuel-economy gains for short-hop commuting but which so far have not been economic.

Peak Oil, which used to be dismissed by many as kind of wacky theory (even though the idea was originally formulated by an oil company geologist), seems to have arrived firmly in the mainstream with the likes of Deutsche Bank onboard. Some argue that the arrival of peak oil will generate a massive shock to civilization, but, true or not, it will certainly be a game-changer that necessitates and speeds the deployment of new technologies. So if the Peak Oil believers are right, it's incumbent on us to start investing in these technologies today: Oil prices spikes have generally been economically problematic – or worse – some have triggered recessions.

For more on the "coming-of-age of electric and hybrid vehicles" and the general future of clean transportation and automaking, join us at NDN at noon today for Insights into the future of Clean Transportation, which will showcase speakers from the Center for Automobile Research, the Auto Alliance, and Better Place. If you can't make it, watch the event live online. 

For those of you who have followed NDN for a while, television's must-watch shows hosted familiar faces last night. Jon Stewart hosted Vali Nasr, a professor at the Tufts University and adviser to Richard Holbrooke. Nasr was promoting his new book, Forces of Fortune: The Rise of the New Muslim Middle Class and What It Will Mean for Our World, which sounds like an important entry into the newly forming canon of books on the "rise of the rest." Simon interviewed Nasr, the footage of which can be found below the Stewart interview. 

Beneath that, you can find Shai Agassi, the founder of Better Place. An electric car startup that seeks to radically change transportation, Agassi appeared at NDN's "Moment of Transformation" conference last year. His appearance on Colbert last night is a good update on their progress. 

Nasr on the Daily Show:

Simon interviews Nasr:

Agassi on the Colbert Report:

Agassi at "A Moment of Transformation:"

Experience shows that an important key to growing a vibrant renewable energy sector is a strong domestic market. Germany’s feed-in tariffs have helped it become a world leader in solar energy production. China has long been focusing on building their domestic renewable energy industries, and just announced they are upping their efforts to build domestic renewable demand. 

From the AP's coverage of the U.N. Summit on Climate Change:

Chinese President Hu Jintao said his nation will continue to take "determined" action. He laid out new plans for extending China's energy-saving programs and targets for reducing "by a notable margin" the "intensity" of its carbon pollution — carbon dioxide emission increases as related to economic growth.

He said China would greatly boost its forest cover, "climate-friendly technologies" and use 15 percent of its energy from renewable sources by 2020.

That 15 percent renewable energy by 2020 sounds like a Renewable Electricity Standard. It also sounds similar to the one in the ACES bill that passed the House in June, which mandates 20 percent renewables by 2020, but that generally allows for 5 percent of that to come from energy efficiency (which it undoubtedly will, as efficiency is way cheaper than renewables). In fact, the ACES standard can be weakened even further, all the way down to 12 percent renewables in some cases.

So now China's ahead of the United States, and, even if we pass ACES as is, will have a comparable or slightly stronger RES in an economy whose energy use (and therefore said sector) will grow much faster over the next decade than America's will. We'll have the price signal that cap and trade offers, but it’s not nearly as strong as it could be. (China is unwilling to agree to cap emissions and certainly won't ahead of the U.S.) 

Much of the opposition to domestic climate change regimes comes of the idea that American action on climate without China going along hurts the U.S. economy and does nothing to slow climate change. Now, basically the opposite could play out. With China stepping up on an RES and limited movement from the U.S. Congress toward passing a strong climate bill, some Americans seem willing to let China take a leadership role on perhaps the most pressing global governance challenge of the young century and develop an export-capable renewable energy sector that passes ours, thereby surrendering a high potential economic sector to world's most important rising power.

As the New York Times reports today in an editorial, the decision of Senators Kerry and Boxer to put off introduction of their climate bill until the end of the month is likely to push Congressional action on climate change that much further into the future.  With the fate of health care legislation in doubt, there is little appetite for moving climate change legislation to the floor.  However, as the Times also points out, that does not mean all is lost.  The EPA is moving forward on rules to regulate carbon dioxide as a greenhouse gas.  Perhaps even more importantly, however, the Senate has already passed legislation to create a renewable electricity standard.  Indeed both the Senate and House have passed numerous provisions--that while not as dramatic as putting a price on carbon--attack the climate problem in important ways.

The current situation highlights the fact that while putting a price on carbon through a cap and trade system or carbon tax--as France just announced it will do next year--has achieved symbolic status as a litmus test for seriously addressing climate problem, it is only one policy tool.  Indeed, as the EU's experience with cap and trade (and carbon taxes in Finland, Sweden and Denmark) shows, there is no silver bullet for reducing emissions.  There are policies.  And all of these policies ultimately must accomplish the same thing: accelerate the development and use of new, cleaner technologies.

Assuming continuing growth of human civilization, only new low emissions technologies that replace carbon intensive ones can sustain growth without warming the planet.  Conservation--getting by with less--is helpful in the short term.  So is reforestation.  Over the long term, however, as population grows and living standards rise, forests will be cut and emmissions rise, leaving new technologies as the only long term answer. 

The appeal of putting a price on carbon is that by internalizing the social costs of emissions, it lets the market select the best way to reduce them.  The difficulty, as the EU has discovered, is that allocating the right to pollute or even crafting a fair and harmonized carbon tax is an inherently political process that provides a golden opportunity to free ride on the reductions of others.  Since climate change is something taking place over decades, governments have an even greater opportunity than usual to postpone pain.  To date, Europe's success in reducing emissions through cap and trade has been real but modest and its efforts offset by exploding emissions from India and China. 

This does not mean that cap and trade is not a good idea: only that is just one tool in the shed.  Which brings us to alternative approaches. 

Europe has had success with a feed in tarriff to encourage deployment of renewable energy.  The US equivalent of tax credits has been useful though less transformative.  A renewable electricity standard such as that in the EU and those already passed in separate bills in the House and Senate will also help replace carbon intensive energy with renewable energy. 
 
However, there is an additional problem.  While building is going green--most new large commercial buildings are seeking Leeds certification, power generation is changing far more slowly.  The reason is its regulated status.  While the telecom industry is now turning over its entire network infrastructure every five years at a cost of billions and consumer businesses must continually invest in new products and technologies to stay in place, heavily regulated power utilities face no real competition and, instead, major barriers to innovation.

True, regulated utilities normally earn a guaranteed rate of return on investment which, all things being equal, should incent them to make new investments.  However, they also require the approval of regulators whose mission, above all, is to contain costs to consumers.  A consumer preference for renewable energy rarely expresses itself in the market since consumers don't get to choose their source of power. In  short, the structure of the utility industry is currently blocking the renewable revolution.

I support prompt action on cap and trade as one tool to address the climate problem. However, as valuable as it is, it is one tool of many.  Regardless of how quickly this tool becomes available, it is important to take all of the other steps available to accelerate investments in clean technologies.