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Monthly Archives: April 2010

Greenpeace – Don’t Let Facts Get in the Way

Energy Efficiency, Renewable Energy, Sustainability0 comments

Back in the day when I was in the nuclear Navy, Greenpeace was not so infrequently pulling stunts like running their zodiacs up on the top of submarine hulls to make their unfounded statements of radiation releases to the environment.  Since 9/11, you can bet they stopped this practice.  Even back in the early 1990s the hatch was guarded by a burly guy sporting a short barrel shotgun with the largest shell chamber I’ve ever seen.  Stopping power.  The fact is, the US Navy runs the cleanest nuclear plants in the world with thousands of operating reactor YEARS and not a single significant release of radiation to the environment – including the couple submarines that were lost at sea.

I thought maybe Greenpeace had gone broke and out of business, but they are still hanging on or they emerged from bankruptcy.  My most recent spotting was their protesting large data centers being built by and running on “cheap” coal-derived electricity.   They are also complaining about the use of cloud computing, which is less expensive due to economies of scale, but these humongous data centers are purportedly located to burn cheap, dirty energy.

One specific data center mentioned in the above article, the first one actually, is Facebook’s new data center being built in Oregon, Prineville to be exact.

Before I rant and complain about things I generally make sure I have the facts straight.  Greenpeace not only has their facts wrong on this one, they’re not just a little wrong; they’re 180 degrees wrong.  These gigantic data centers are being located in the Pacific Northwest to have access to cheap HYDRO power, which of course has no emissions.

This is Bonneville Power Administration territory.  I was thinking BPA gets at least 50% of their power from hydro.  According to BPA’s annual report it’s 82%!   All you have to do is tune into this site to see there is a sea of hydro plants, a few natural gas plants, a few biomass, and they are adding wind power like crazy.  Believe me when I tell you, if there is one region on the planet that will avoid building coal plants at almost any price, it’s BPA’s territory.

Greenpeace has a credibility deficit similar to federal fiscal deficit.  If you’re going to hiss and moan about something, at least have iffy facts to back it up.  This is completely bogus.

But let’s take the next steps.  I’m no IT expert, but as the articles note, massive data centers for websites and cloud computing are built for economies of scale.  As with just about anything, economies of scale means tremendous opportunity for greater energy efficiency.  It means fewer servers more fully loaded, which translates to much lower server power and also much lower cooling cost.  It means massive facilities where it is possible to put in huge efficient chillers that literally use 1/3 the power of cheap and crappy packaged air conditioning units ubiquitous among “mom and pop” data centers.

What would Greenpeace have these data centers juice up with?  If a data center needs anything from a power provider, its reliability.  I attended a BPA conference about a year ago and one presentation was about the challenge of keeping the lights on with wind power that bounces all over.  In one stretch I recall, they had zero MW from wind for a stretch of 14 straight days.  No place on earth has sunshine around the clock.  Do people use Facebook after dark?  My guess is, yes.  If there is one place in the country that has a beautiful mix of renewable energy it is the northwest where they have hydro that it seems they can ramp power up and down in no time, and store hydro energy while the wind is blowing.  It seems to me that Greenpeace is bashing the best place on the planet to locate data centers.

I can think of some questionable complaints regarding the greenness of some of the tech companies cited: Google, Apple, Amazon, et al, but no sense in giving Greenpeace something remotely legitimate to protest.

BTW, you may be interested Bonneville’s video for safety with trees and high lines.  It’s on their news page.

written by Jeffrey L. Ihnen, P.E., LEED AP

Wind Energy and the Utility Business Model

Government, Renewable Energy, Sustainability, Utility Stuff0 comments

The masses want power on demand without interruption or failure.  They want it at a practically negligible cost and more so every year, they want it without emissions or other unpleasant byproducts.

In the upper Midwest, energy without emissions means wind energy.  Wind energy sounds great.  It’s “free”.  No emissions.  But it comes with a load of drawbacks compared to conventional sources of coal, nuclear, and natural gas.

First, utilities can’t count on it for peak load generation.  I searched a while for this and found nothing but the bottom line is there is no guarantee there will be any generating capacity from wind on a peak summer day.  Therefore, wind generation offsets zero conventional generating capacity.  It is essentially like buying an electric car for lower emissions but you have to keep your conventional gasoline-powered car for longer trips.

Second, wind generation is expensive.  At a cost of about $2,000 per kW nameplate generating capacity it is very similar to a coal-fired plant.  However, a quick analysis with a reliable online calculator indicates that the capacity factor, which is the average percent output of the turbine, is only about 30%.  (the wind doesn’t always blow 48 miles per hour)  This puts the installed cost of wind generation near triple the cost of conventional coal generation.

Third, the cost of wind energy doesn’t end with the fifty by seven foot deep wad of concrete supporting each turbine.  Wind farms are far from Midwest population centers because that’s where the wind blows and this puts them out of site of the people who want it but don’t want to look at it (or pay for it).  This requires substantial transmission costs with substations to step up voltage and transmission lines that run a minimum of $1 million per mile of transport – and this is for building transmission lines on farmland where it’s physically easy to do and there are no lawsuits because people in these areas have better things to do than file lawsuits to stop transmission construction.

Fourth, on average the wind blows the least when it is needed the most, in July and August.  On average, turbines deliver roughly half the energy in July and August compared to the winter months.

When these unpleasant facts are factored in, wind generation benefits boil down to eliminating fuel costs, which are a tiny fraction of conventional generation, and no emissions or other waste products.

What brings this to mind is this article recently published by the Cedar Rapids Gazette.  Alliant Energy / Interstate Power and Light has a rate case pending for a 14% rate increase to pay for the added wind generation capacity and the installation of a $188 million nitrogen oxides and mercury scrubbing system for their old Lansing plant.

One guy comments, “but I just don’t understand why you expect us as customers to pay for all these upgrades — the wind farm, all your safety upgrades and so on.”  Well who else is going to pay for them?  It isn’t going to come out of shareholders’ hides.  Utilities don’t build this stuff to make more money!

Utilities are fully regulated monopolies in Iowa and many other states.  Their ability to grow revenue and earnings is very limited.  Essentially, it is limited to load growth within service territory by existing buildings and by attracting new business with new facilities to their service territory.  In exchange for having a captive customer base, regulators, in this case the Iowa Utilities Board must approve changes in rates, which essentially translates directly to regulating profit.

Wind power and pollution controls cost the company hundreds of millions of dollars but add virtually no revenue or profit.  These upgrades wouldn’t occur but for public pressure and policy coming out of Des Moines and other state and federal capitols.

These expenses can’t come out of earnings because utilities need to raise capital to pay for this stuff.  To raise capital, they have to offer a competitive rate of return commensurate with the risk involved; thus, the rate case for higher prices.

Like Tom Aller, President of Interstate Power and Light, I am not denigrating or advocating green power and moratoriums on building conventional generating facilities.  The public just needs to know this stuff adds a lot of operating cost and the business model of utilities requires rate increases to fund these things.  If customers don’t like it, they better get involved in the political process and not let the Sierra Club have a monopoly of political ears.

By the way, the reason environmental organizations like Sierra Club are a big turn off to me is they are often political first and environmentalists second.  They are opposed to this rate increase.  Why?  Their mission is “To explore, enjoy, and protect the wild places of the earth; To practice and promote the responsible use of the earth’s ecosystems and resources; To educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out these objectives.”  I don’t see anything in there about controlling income in the private sector.  Moreover, the guy’s statement flies in the face of their mission statement anyway.  Higher prices mean less energy consumption, so why is he opposed?  Could it be… politics?  Or is he a “do as I say, not as I do” greenie?

IPO Return, Treasury Risk

Energy Efficiency, Government, Investments1 comment

If there’s one thing that most people painfully realized over the past couple years, it’s that there is risk in putting your money in anything in hopes of earning a return on investment.  Riding a company into bankruptcy is an obvious one.  I’ve done that several times by investing in fast-growing start-ups, initial public offerings (IPO) and stock options.  Invest $3,000 for 100 shares of common stock and a few years later the company emerges from bankruptcy (isn’t that a cute phrase – it sounds like a daffodil blooming in spring but it’s more like rummaging for your charred silverware after your house burned to the ground) … anyway that investment may “emerge” at 10 shares worth $6 apiece, or if they liquidate you get a check for 36 cents.

If you avoid Bernie Madoff funds, you can greatly reduce your risk by buying mutual funds, which more or less track the entire stock market.  Corporate bonds might be next.  In the case of bankruptcy, provided the government doesn’t take over the company, you are first in line to get your money back.  Next might be U.S. government bonds but I wouldn’t go near them now as their value moves in the opposite direction of interest rates.  Just take a look where interest rates are now compared to historic numbers and do the math.  You CAN lose a lot of money in bonds.  Then there are money market funds that invest in super safe short term treasuries, but right now you earn about nickel a month per $1,000 invested.  Finally, there’s cash in the bank, which earns even less or zero but at least the first $100,000 is insured by the feds (the minimum was increased to something but I don’t care).

Commercial and industrial facility owners can invest in energy efficiency.  Lighting would be the bonds of energy efficiency, with the exception that you’re virtually guaranteed a return on investment as long as you can do 5th grade math to ensure you aren’t being ripped off.  Beyond that, the vast majority of energy efficiency projects carry the full gamut of risk from guaranteed savings (which isn’t free) and just buying a new piece of expensive equipment or system that may not save you a dime or could even increase your energy costs.

The big money is in custom measures and the risk varies depending who is identifying the opportunities and who, if anyone, is calculating savings.  If you browse our website you will find we identify measures and quantify savings all the time.  For many large projects we take a two phase approach to the analysis.  Phase 1 is to identify opportunities and guesstimate cost and savings to within plus or minus 40%, which means a project guesstimated to have a 2 year payback may actually have a payback from less than a year to more than 4.5 years, with the most likely being 2 years.

Phase 2 is a detailed analysis, sometimes with quotes from contractors, and energy analysis based on specific equipment performance characteristics, construction documents, and metered data.  After Phase 2, the guesstimates are sharpened to within plus or minus 10%, perhaps.  Now that 2 year payback would range from 1.6 years to 2.4 years, with the most likely being 2 years.

So energy analysis can take your project from a completely unknown return on investment to something that is close to guaranteed, and if you want, that can be added too.  The cost of hiring a firm that knows what they’re doing, delivering both quantity and accuracy of cost and savings estimates, is considered by end-users to be anything from reasonable to outrageously expensive.  Owners with smaller facilities and especially government ones tend to be at the latter portion of that range.  Large industrials may be closer to the front.

But the kicker is, utilities that run efficiency programs often pay for a good share or all of the energy analysis, sometimes even both phases of analysis described above.  But yet, end users may baulk.  We recently completed phase 2 analyses that largely demonstrated our phase 1 estimates were pretty good and some representatives of customers were scoffing that phase 2 was a waste of money.  Well look at the “uncertainty analysis” above and tell me, would you use “free money” from the utility to shore up your investment certainty before you invest a dime to implement anything, OR NOT?

As my colleague says, “It’s a no BRAINER!  Gee willikers!”

As an investment, an energy efficiency project may pay for itself four or five times or even more over its lifetime.  Peter Lynch who ran the Fidelity Magellan fund during the 80s would call doubling your investment a one bagger; tripling, a two bagger and so on.  This makes energy efficiency a likely two bagger and in many cases a four bagger.  It’s a home run with the risk of a money market fund.

Why doesn’t everyone get on this ride?  There are many reasons; some good ones and some utterly stupid ones.

written by Jeffrey L. Ihnen, P.E., LEED AP

Energy Star Black Eye

Energy Efficiency, Government, Sustainability0 comments

For years, beginning in the 1990s through just a few years ago I considered ENERGY STAR® to be fluffy foo foo feel good goo – kind of like eating meringue smothered in corn syrup after chopping wood all day.

Then they introduced the ENERGY STAR rated homes and ENERGY STAR rated commercial buildings.  Both of these seem to be solid “programs”.  ENERGY STAR for commercial buildings is based on energy intensity, which is energy consumption per square foot, climate region, type of facility and a few other things.  To “earn the ENERGY STAR” commercial buildings must be in the 75th percentile of energy efficiency by energy intensity AND buildings must be inspected by a licensed professional engineer to ensure the occupants or owners aren’t cheating by starving the building of fresh air, sufficient lighting, or comfortable temperature and relative humidity conditions.  This is solid.

Then the ENERGY STAR label for appliances started to carry some weight with me, although I have an ENERGY STAR rated dehumidifier that won’t shut off automatically anymore and I otherwise have no idea what about it saves energy.

Unless you’ve been cryogenically frozen like Austin Powers for the past 30 years and were thawed out yesterday, you know the government has been throwing money at ENERGY STAR rated appliances as fast as the presses at the US mint can churn out $100 bills.

Recently some ENERGY STAR warts were exposed.  The famous electric space heater with feather duster and fly strips passed as an air purifier.  This is ironic because electric resistance is the most wasteful source of space heat and a feather duster kicks up dust, just sort of moves it around – not good at air purification.  The other infamous example that passed was the gasoline-powered alarm clock.

For an organization that has eight pages of how and how not to use their brand, including how to use ENERGY STAR properly in a statement, and how to use the logo, this is a major scandal.  The insouciant reaction to this fiasco is unfortunately not surprising to me, as this is the federal government we are talking about.  An ENERGY STAR spokeswoman states the approvals of these bogus products did not pose a problem for consumers because the products never existed. There was “no fraud”, and she said she doubted that many of the 40,000 genuine products with EnergyStar status had been mislabeled.

Come again?  These ridiculous examples get through the “screening” process, but don’t worry, the 44,000 products with the label are all ok.  I think this woman needs to take a statistics class or maybe some taekwondo six sigma courses.

This is another blithe example of no accountability at the federal government.  If something like this happened in the private sector some big heads would roll.

Snooty congress people haul all sorts of people they don’t like in front of them to call the kettle black.  Examples: Mark McGuire, Jose Canseco, Roger Clemens (why their “crime” rises to a federal level is beyond me), Bill Gates, Steve Ballmer and half of Microsoft, automotive executives, and most recently, evil corporations who are going public with the hit they will take to earnings due to the passage of the healthcare bill – reporting which ironically congress made them do in their kneejerk reaction to Enron with the passage of the millstone known as Sarbanes Oxley.

The problem is the government has a horrible record of policing itself.  I went into this in an earlier rant, or maybe it was while I was in a deep sleep one night; the purpose of government is to protect people from being ripped off.  When they start delivering products and services, in this case ratings, who’s going to oversee that?  Look at this ENERGY STAR scandal.  The government didn’t protect us from getting ripped off, but instead was complicit in it.  I don’t know of a single energy efficiency program in the US that is administered by a state agency – except for Wisconsin, which controlled the energy efficiency purse strings for a while and then, you guessed it, they stole the money to fill budget gaps they were too cowardly to fix the right way.  Programs are administered by utilities, consultants, and/or non-profits and overseen by state agencies.  Yes.  This is how things should work.

This guy says toscrap the ENERGY STAR immediately.  I don’t know if I would go that far.  As mentioned above, I think the intent is very positive for consumers.  Instead it should be privatized, turned over to a non-profit or consortium to manage and police.  This is how commercial equipment is rated.  Organizations include the Air-Conditioning, Heating and Refrigeration Institute, and the American Gas Association.

If the ENERGY STAR “program” were turned over to the private sector and a scandal of these proportions broke, you can bet the executives of the organization administering it would be singing to Henry Waxman right now.

written by Jeffrey L. Ihnen, P.E., LEED AP