Monday, August 31, 2009

What's the Plan?

Two weeks to go in the legislative year and we are still no closer to having an actual "plan" for getting California to the 33% renewable energy mandate that Gov. Schwarzenegger laid out in his Executive Order last November.

Stakeholders are locked in intense negotiations, with no signs that a compromise is imminent.

Writing in the San Deigo Union Tribune, Michael Gardner breaks down the political positions and the sticking points. Primarily it comes down to the impact on ratepayers (i.e., how much bills are going to go up and what, if any, legislated caps will blunt those raises), infrastrucuture construction, and crediting out of state renewable power purchases.

Friday, August 28, 2009

What Happened to Biofuels?

Earlier this week Ann Davis and Russell Gold reported in the Wall Street Journal about the state of the biofuel industry. It was an eye-opening...

The entire industy is under siege, fighting a multi-front war that includes too much capacity, depressed fossile fuel prices, a delay in favorable federal regulations that would promote the use of biofuels, and a dearth of investment capital.

According to the Journal's report, two-thirds of the nation's biofuel capacity sits idle.

Earlier this year, two earth-shattering events potentially scared investors away for a long time. GreenHunter Energy, the largest biofuel refinery in the country, shut down. Cello Energy in Alabama, which had some big time names in the Venture Capital community behind it, was found to have defrauded investors. This does not bode well for buoyed investor confidence in the biofuel sector.

The result of this perfect storm of problems is that there will not be enough biofuel produced to meet the legislated blending targets that were passed in 2007.

Amidst this carnage, however, sits ethanol, which the reporters credibly point out, is politically untouchable.

Thursday, August 27, 2009

Kicking CALSTRS While It's Down

This is a nice follow-up to yesterday's post about wind energy investment...

CALSTRS, the California teachers pension fund is taking heat for causing "social injury" in England.

As if being a California pension fund isn't miserable enough these days (the Sacramento Bee reports that the CALSTRS lost $42 billion last year), now CALSTRS has to deal with this?

The deal is that some British NIMBY's in the county of Kent are ballistic over a 420 foot wind turbine that the the locals claim would be built on an apple and plumb farm and be close enough to houses to be a "noisly nuisance."

Bloody hell!

The best part of this is that CALSTRS isn't even directly involved. It has a $63 million investment (chump change) in Hg Renewable, a hedge fund that claims to be the biggest fund in the world focused solely on European renewable projects. Hg Renewable is the one that financed the wind turbine.

So if you're CALSTRS and you just lost $42 billion, and now you can't even invest in a green energy fund without getting excoriated in the press, it might be time to go to cash or start buying T Bills.

Wednesday, August 26, 2009

Investors Returning to the Renewable Energy Sector?

As the economy soured, more and more renewable energy development deals were put on hold because the financing just wasn't there. The most high profile shelving was T. Boone Pickens' decision to mothball his massive wind energy project in Texas.

Now, however, with the economy showing signs of life, private equity investors are looking to put to work some of the cash they have been holding on their balance sheets. Add on government stimulus incentives for renewable energy development and we could be on the cusp of a new wave of alternative energy infrastructure development.

News of private equity investor Guy Hands' commitment ot acquire a controlling stake in EverPower for $350 million is all over the wires today. EverPower is a New York based wind energy concern that is developing projects in Oregon, Ohio, Pennsylvania and New York.

Tuesday, August 25, 2009

The Cost of Doing Business

The New York Times yesterday took a look at PG&E's new deal with Brightsource. What's interesting about the deal is that the rates PG&E will pay will be contingent on Brightsource getting federal loan guarantees from the Energy Department. If not, the company will be looking at much, much higher financing costs, and those costs will be passed through to PG&E through higher rates.

The Division of Ratepayer Advocates couldn't stand the deal and pointed out that Brightsource did a similar deal with Edison that included no contingecy rate increases.

As the Times pointed out, renewable energy deals represent fairly significant credit risks in these still dicey economic times and, absent federal loan guarantees, deals are going to be expensive.

Monday, August 24, 2009

Hanging Numbers on Climate Change Legislation

When creating policy, or horestrading for votes, it is critically impotant to "hang some numbers" on whatever bill you are selling or fighting. How many jobs will it create/kill? How much revenue will it generate? How much will taxes have to be raised?

All of this is critically important to legisation's passage or failure, but none of it really means anything because everybody has their own set of numbers, depending on whether they are for or against the issue.

The latest set of "numbers" to make headlines comes from the American Petroleum Insitute, which has a predictably negative point of view when it comes to Waxman Markey. Today, API is releasing a report that calculates "the cost" of implementing the Waxman Markey bill.

Here are some expected highlights:

- By 2030, U.S. refining production could drop 17%

- The U.S. could end up relying on other countries for 19.4% of its refined fuel -- nearly twice the amount it imports today.

- The bill requires refiners to have permits for nearly half of U.S. carbon-dioxide emissions, though the industry would receive only about 2.25% of the total emissions allowances. The electricity-generating sector, also a major source of greenhouse gases, obtained a larger share of the allowances.

- Average U.S. refinery output would drop to 12 million barrels a day in 2030 from about 14.5 million barrels a day currently, if nuclear power, technology to reduce carbon emissions and the use of international offsets fail to become widespread. Refinery utilization rates could drop to 63.4%, from about 83% today.

- Without the restrictions of a Waxman-Markey bill, U.S. production rates would grow to an average 16.4 million barrels a day in 2030, according to the study.

These numbers could be accurate, or they could be pie in the sky lobbying fluff. One thing is for sure, though, they won't be alone. Expect them to be rebutted, fast.

Friday, August 21, 2009

Pulling the Plug on SDG&E's Plan to Pull the Plug

I remember on my first trip to Sacramento, commenting to a colleague who had picked me up the airport, that the clusters of homes next to the freeway appeared to have fallen out of the sky-- there was nothing else around them. My colleague commented, "Yeah, they're built in the middle of a flood plain."

That didn't make a whole lot of sense then or now, but putting homes where nature never intended them to be is something of a California thing.

Several hundred miles to the south, the problem of home-creep is a hot one, not a wet one. Wildfire dangers to homeowners who live in fire-prone areas have demanded some out of the box solutions, like the one SDG&E has been pushing for some time now-- cutting power to homes in fire prone areas when fire danger is high.

It has been controversial, to say the least. The utility argues that it is the only responsible thing to do, and after the fires of 2007, it is hard to disagree with them.

Writing in the San Diego Union Tribune, Mike Gardner notes, "The utility company came up with the plan after being sued by insurers, homeowners and government agencies in the aftermath of three large fires in 2007 sparked by arcing power lines. SDG&E has paid out $740 million in settlements so far. "

But, the 55,000 potentially affected homeowners and other stakeholders are crying foul and they are playing every card in the book-- from arguing that shutting off electricity will endanger the lives of elderly or disabled residents, and potentially hinder firefighting efforts by rendering water pumps inoperable.

Yesterday the PUC threw in the shut-off plan's detractors, issuing a preliminary injunction against the plan, by a 3-2 vote. The plan's fate hangs in the balance next month when, on September 10, the commission takes up the measure for a final decision.

There are merits to both sides' positions, but the entire situation begs the larger question of whether we shouldn't be smarter about where we site and build homes.

Thursday, August 20, 2009

Natural Gas To Flex Lobbying Muscle

The natural gas industry has its back up against the wall. It got absolutely rolled by the Waxman-Markey bill which favors clean coal over natural gas, there is an oversupply of gas right now which has driven prices way down, and recent discoveries of gas deposits promise promise to skew the supply-demand curve even further.

As a result, the industry has made influencing Waxman Markey in the Senate its immediate priority. To that end, enter "America's Natural Gas Alliance," a new $80 million lobbying coalition that includes natural gas producers such as Chesapeake, XTO, and Devon Energy.

According to the Wall Street Journal:

"The gas-industry's goals in the Senate include incentives that will encourage power companies to switch to natural gas from coal and lead truck fleets to convert to natural gas from diesel. Lobbyists will also seek to limit companies' ability to atone for their pollution via carbon "offsets," such as planting trees overseas, which reduce the incentive to switch to cleaner fuels like gas."

However the Journal cautions that, "...the gas industry must overcome major hurdles. Other energy producers are also mobilizing. A major theme of the coal industry has been the relatively stable price of coal compared with volatile natural-gas prices. Meanwhile, major natural-gas consumers, including chemical companies and many utilities, oppose increased use of natural gas because it could drive up costs."

Tuesday, August 18, 2009

PG&E Tightens Its Grip

One of the more persistent arguments made during the recent budget mess was that California is essentially ungovernable because the ballot initiative process has effectively made it so.

Similar to Dennis Miller's comedic observation about the absurdity of publicly accessible emergency brakes on trains ("I don’t want to be on any form of transportation where the public has access to the f#*king brakes, okay? I’d hate to hear that I die in some horrific train accident because while we were rolling along at a hundred-miles-per-hour, Gus thought he saw a woodchuck.”), many argue persuasively giving special interests the ability to rewrite the state Consitution to their own economic benefit, has consequences.

Here's more grist for that argument.

According to a David Baker piece in today's San Francisco Chronicle, PG&E poured three quarters of a million dollars into a ballot initiative campaign that seeks to restrict the ability of local governments to extricate themelves from the grip of large utilities and start selling their own electricity. Specifically, the ballot measure would force a 2/3 vote of local citizens.

Ironically, a PG&E spokesman stated that "PG&E supports giving its customers more control over how their hard-earned tax dollars are being spent". This, of course begs the question of how much control ratepayers have over how their hard-earned dollars are spent. On ballot initiative campaigns, apparently.

Monday, August 17, 2009

Boone & Ted's Excellent Adventure

It sounds like the set-up to a bad joke, "Ted Turner and T. Boone Pickens go into a bar..."

Only, in this case it isn't a bar, but another stop on the Ted & Boone media tour to promote Pickens' (and Turners's) investment portfolios.

For several months Turner and Pickens have been making the rounds talking about natural gas and renewable energy. You know all about the Pickens Plan, and Turner's reputation preceeds him on just about every front, but today's co-bylined oped in the Wall Street Journal rehashes the same arguments that they have been making ad nauseum, with a few new facts and some good pull-quotes.

Here's the lede (stop me if you've heard this before):

"Renewable energy and clean-burning natural gas are the basis of a new strategy the world needs to create a cleaner and more secure future. And the global transformation to a clean-energy economy may be the greatest economic opportunity of the 21st century."

But here is something new-- a "cash for clunkers" proposal for power plants:

"In the electricity sector, natural gas is already cheap, available and ready to meet the nation's power needs while improving climate security. It emits about half the carbon dioxide per British thermal unit of energy, and far fewer of the heavy metals than does coal.
Adopting a "cash-for-clunkers" program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants. New coal plants should be required to combine natural gas with the coal they burn, resulting in cleaner emissions, and every power plant should meet strict carbon-emissions standards."

It's no secret that Pickens, in particular, has investments that span the entire natural gas spectrum and he stands to make a gazillion dollars if even a fraction of the Pickens Plan is adopted, but from a policy point of view, one has to consider if this is just a get-richer-quick scheme or if it has merit?

As we posted a couple of weeks ago, targeting only stationary sources (power plants) when, by Pickens's and Turner's own admission 70% of imported oil gets slurped up by vehicles, makes it kind of a specious argument...

Friday, August 14, 2009

Power Line Problems Loom Large

The state is trying to get out in front of the environmentalist and NIMBY opposition that is sure to come when it tries to build out new power lines necessary to transmit all of the new electricity generated from contmeplated renewable projects.

A consortium called the Renewable Energy Transmission Initiative, which consists of state agencies, utilities, and developers has come together to study the problem and make siting recommendations. The San Francisco Chornicle reports that the consortium's report issued this week looks at:

"...where transmission lines are needed most, will cost the least and will cause the least harm to the environment. It doesn't recommend exact routes, nor does it specify how many lines must be built.

Instead, it presents options, suggesting broad pathways for lines that can link planned renewable power projects to the grid. Most of the proposed lines are in the Southern California desert, while one stretches to the Oregon border. "

The Chronicle also notes that, "Together, those places could generate as much as 77,526 megawatts of electricity, more than all of California uses on a typical summer day. A megawatt is a snapshot figure, representing the amount of electricity flowing across the grid in an instant, and 1 megawatt is enough to power 750 homes."

Thursday, August 13, 2009

PG&E Remains Committed to Wave Energy

The New York Times takes a look at PG&E's efforts to develop wave energy. Last year a court struck down one demonstration project and now documents filed by the utility with FERC show that PG&E has voluntarily dropped plans for another in Mendocino County.

Plans are moving forward with a project off of Humboldt County, to which many wave energy detractors are asking "What is PG&E smoking??" (sorry, gratuitous Humboldt County joke...)

According to the Times:

"In 2007, the utility had applied for federal permits to explore the feasibility of placing wave energy generators in the Pacific Ocean off the coast of Humboldt and Mendocino counties.The scuttling of the Mendocino project is just the latest setback for wave power.

Last year, California regulators also declined to approve a P.G.& E. contract to buy a small amount of electricity from a Northern California wave farm to be built by Finavera Renewables, on the grounds the project was not viable.

Despite the difficulties, P.G.& E. is pushing forward with a similar wave project in Humboldt county. The utility has cut that project’s size to 18 square miles from 136 square miles as it zeroes in on the most productive areas of the ocean. Jana Morris, a P.G.& E. spokeswoman, said that the utility expects to file a draft pilot license application for the project in the spring of 2010."

In addition to all of the existing logistical challenges to making wave energy work, the dreaded "fish card" has yet to be played to its full effect. If potentially endangering fish can disrupt a significant portion of the water delivery system onshore in California, just imagine what it can do out in the ocean...

Wednesday, August 12, 2009

Will Clean Coal Work?

Yesterday the Washington Post ran a lengthy piece about the potential and technological limitations of "clean coal" technology. Essentially, clean coal is all about capturing carbon emissions and burying them underground. But with the best estimates predicting that the technology is still 6-10 years away from being commercially viable, there are still a lot of questions to be answered.

The Post reports:

"Coal companies and environmentalists alike are counting on a breakthrough in carbon capture and storage technology to siphon off harmful emissions from the world's coal plants. Coal plants in the United States account for a third of U.S. greenhouse emissions. In the past five years China has brought online coal-fired electricity equal in size to total U.S. installed capacity, and new plants are coming online in the developing world all the time. Without a breakthrough on coal plants, it may be impossible to meet emission limits climatologists say are needed.

Yet carbon capture and storage remains the elusive holy grail of the coal industry, an idea that could contain the damage inflicted by coal-burning power plants but a technology that remains expensive, energy intensive and largely untested. Even optimists say it will not be commercially available for another six to 10 years. Pessimists say it might take much longer, and may never be ready for widespread use without attaching a punishingly high price to carbon."


"But the AEP project illustrates the tremendous obstacles ahead. As big as it is, the equipment there will only capture the emissions from 20 megawatts of power generation, a meager 15 percent of the plant's output. Morris's predecessors were smart enough to buy lots of extra land at the West Virginia plant, but other coal plants would have trouble finding room."

"The huge carbon capture and storage devices are hugely expensive, too. AEP executives estimate that the cost of carbon capture for a modest-size coal plant of about 235 megawatts would start at $700 million. That works out to about $100 for a ton of carbon dioxide, far above the projections made by the Environmental Protection Agency about prices under a cap-and-trade scheme similar to one passed by the House in June. MIT put the cost of carbon capture and storage at $50 to $70 a ton. (The Waxman-Markey bill would give the first six gigawatts of plants -- equal to around seven average-sized plants -- a $90 per ton subsidy in the form of free allowances.)"

Tuesday, August 11, 2009

Who Needs A Pension Plan When You Can Be A Lobbyist?

If you want examples of what is wrong with California, look no further than an article in today's Los Angeles Times that describes a proposed six figure lobbying contract for former Assembly Speaker Fabian Nunez (the author of AB 32) under which he would advise the LA Department of Water and Power on compliance issues related to...

wait for it...

wait for it...

AB 32.

Yeah, I know this goes on all the time, in every state, in every industry-- and at the federal level the practice has been turned into an art form, but this just seems particularly unseemly.

The good news is that the contract got flagged and questions are being raised, but it could still go through:

"That effort hit a roadblock last week after the five-member panel that oversees the DWP asked its executives to explain the need for a contract worth up to $2.4 million with Conservation Strategy Group, which serves as a lobbyist and bond advisor to the utility. Under the proposed contract, the conservation group would retain Nuñez' firm, Mercury Public Affairs, as a subcontractor at a rate of $120,000 a year."

Monday, August 10, 2009

The Hydrogen PR Offensive

It's a familiar story in California: clean-burning alternative energy as a great idea in search of sufficient infrastructure to implement it effectively.

The lastest example is hydrogen.

As a first step to building the much ballyhooed "hydrogen highway" (the five year plan to build hydrogen fueling stations for fuel cell vehicles up and down the state), Shell sought approval from the city Planning Commission in Torrance, CA to build a small, automated fueling station in Torrance. Thought to be a pro-forma step, imagine the company's surprise when they were flatly denied!

Local residents, armed with the kind of misinformation not seen in these parts since the LNG controversy of a couple of years ago (fireballs, mass destruction, end of the human race, etc.) made their voices heard and the Planning Commission did what planning commissions do in those situations.

After regrouping, Team Hydrogen did what it should have done in the first place-- and what it is going to need to do going forward all over the state: it went on a charm offensive and hosted a major community and media event at Toyota Headquarters in Torrance.

The episode provides a lesson that is applicable to the entire range of alternative energy technologies: the urgency of the agenda and the overall public desire to embrace new technologies is not going to be enough; NIMBYism is real and it is going to take lots and lots of outreach all up and down the state before the kinds of alternative energy advances contemplated by proponents and legislation can become reality.

Thursday, August 06, 2009

"Curiouser and Curiouser"- A View From Inside The Rabbit Hole at T-Ridge

The Los Angeles Times absolutely blew up my news aggregator this morning, but two items in particular are worth mentioning...

The first is about the political "gift that keeps on giving"... you guessed, T-Ridge.

It's been a week so we're probably overdue for another bizarre development in the T-Ridge offshore drilling saga. Well the Assembly, which threw the most recent T-Ridge curveball when it torpedoed the Senate plan to approve offshore drilling at the site, did not disappoint.

Patrick McGreevey reports in the Times today that the Assembly has expunged the T-Ridge vote from the official records, essentially making it disappear.

This is rank politics at its worst, even by T-Ridge standards. In a transparent ploy to protect members from defending a "yes" vote on drilling the Speaker simply pulled out the old legislative eraser and made the entire vote disappear.

This would certainly lend credence to the CalBuzz theory we talked about yesterday that recent poll results showing support for offshore drilling are misleading and that the issue is still a huge political liability for anyone trying to get reelected.

Also in the Times is a pretty level-headed commentary from George Skelton who basically says, "Enough!... Drill the oil and tax it. We need the oil and we need the revenue." (I'm paraphrasing but I think that is on point.)

Wednesday, August 05, 2009

What Do Californians Really Think About Drilling?

Last week we posted about CalBuzz's report on the PPIC poll that revealed broad statewide support for offshore drilling. CalBuzz has a follow-up to that report today that seeks to invalidate the survey's results by wrapping a gut instinct theory inside a aggressive defense of pollster Mark Baldassare as a stand up guy.

If that last sentence sounds a bit tortured, it is. So is the line of argument in the CalBuzz piece, but I'm not saying it's wrong. Jerry Roberts and Phil Trounstine have been around the block a few thousand times, so underestimate their instinct at your peril.

Net-net, they argue that in the PPIC poll the issue of offshore drilling was put to voters as part of series of energy policy questions that focused heavily on meeting energy needs and reducing our national dependence on foreign oil. In that context, support for drilling is not that surprising.

However, Roberts & Trounstine posit the theory that most Californians consider offshore drilling an environmental issue and-- had the question been posed in an environmental context-- the results likely would have been strikingly different. Bottom line, they argue, if you are a candidate for statewide office, you could still get your head handed to you if come out in support of drilling.

The post is interesting and probably pretty accurate.

Polling on Offshore Drilling: Energy or Environment? [CalBuzz]

Tuesday, August 04, 2009

San Jose's Green Vision

USA Today shines the national spotlight on San Jose's efforts to become 100% self-sustaining through a commitment to biogas.

The paper reports:

"The California city is pushing forward with its "Green Vision" of getting all its electrical power from clean, renewable sources, as well as diverting 100% of its waste from landfills and converting it into energy.

In mid-June, the City Council gave the green light to start negotiating plans that could lead to the nation's only organics-to-energy biogas facility.

Renewable biogas, which contains methane, will help power the nation's 10th-largest city, which hopes to reduce its per capita energy use by 50% and get the remaining 50% from renewable sources, says Jennifer Garnett, spokeswoman for San Jose Environmental Services Department."

At the center of the city's efforts is a process called "dry anaerobic fermentation," which allows for the breakdown dry materials that would otherwise hit the landfill. According to the article, "

"The dry process, done in the absence of oxygen, is new to the USA, says Michele Young, organics manager of San Jose's Environmental Services Department.

There are similar operations nationwide, but they involve "wet waste," which is easier to recycle than dry waste, Young says. Dry waste is what usually ends up in landfills.

The proposed new technology is already in use in 12 facilities in Germany and Italy. Thirteen more are planned for this year, Young says."

Is biogas the way to San Jose's energy independence? [USA Today]

Monday, August 03, 2009

Will Waxman Markey Less Dependent on Foreign Oil?

Kathleen Parker's column in Sunday's Washington Post seeks to bludgeon the notion that Waxman-Markey bill, dubbed the "American Clean Energy and Security Act," makes us more secure.

In fact, Parker argues that the bill makes us, if anything, more dependent on foreign oil: "The more we cap our carbon, the happier the Saudis are."

Parker is not exactly a reactionary conservative on this issue. She describes herself as "a Prius-driving, pro-seal, recycling, organic vegetarian" who is "heavily tilted toward saving the planet."

Her basic thesis is twofold: that the bill only addresses stationary sources, not mobil (i.e., transportation), and that the carbon taxes it envisions under a cap and trade scheme make domestic production way, way too expensive.

It's a compelling argument and worth a read...

A Crude Reality About Energy Independence [Washington Post]