The new climate game

Lawrence Solomon
Financial Post
April 10, 2010

Right from the early days of the global warming controversy, they whacked any scientist who dissented from the view that CO2 was warming the planet in a dangerous way. Up popped other skeptical scientists, and WHACK!! Down they went.

Up popped skeptical journalists and WHACK! Down they went, too. Then more whacks for new scientists who surfaced, or pesky scientists who resurfaced.

Today, decades later, the climate science establishment is still whacking away, faster and more frenetically than ever, as more and more skeptical scientists, journalists and politicians surface. And now there’s a new species of skeptic in need of whacking down ­— the many inquiries that have sprung up in the wake of Climategate, the unauthorized release of some 3,000 documents from the computers of the Climatic Research Unit (CRU) at East Anglia University showing that data had been manipulated and destroyed.

East Anglia University was the first to establish an inquiry into its conduct. Then it started a second inquiry to complement the first. The Met Office, the UK government’s meteorological department, announced its inquiry to redo the data that CRU had destroyed, a process that would take it three years. The UK’s Information Commissioner’s Office began an inquiry, to ascertain whether the country’s Freedom of Information Law had been broken. The local police force, working with Scotland Yard, also began an inquiry.

All these would and will need to be whacked, and more would, too. The IPCC itself announced an inquiry. Across the Atlantic, Penn State University, home to Michael Mann, one of America’s most important doomsayers, launched an investigation.

The UK government also decided it needed an inquiry, and fast, to address Climategate before it could call national elections, which were imminent. Its House of Commons’ Science and Technology Committee expedited matters by holding a one-day hearing into Climategate during which it took no direct testimony from skeptical scientists. With nothing much discovered the members of the parliamentary committee declared its job done.

“Clearly we would have liked to spend more time of this,” explained the committee’s chair, Phil Willis, en route to the hustings, but “We had to get something out before we were sent packing.”

But many expect the House of Commons committee to pop up again after the elections, particularly since the committee asked whether “publicly funded research groups [were] being as open as they can be, and ought to be, with the details of their methodologies.”

The UK Met Office hasn’t completed its investigation but it has nevertheless been whacked, for announcing its inquiry early on, in December, embarrassing the government before the Copenhagen climate change meetings. The Met Office then assured everyone that it didn’t expect to find anything amiss after its investigation.

In some cases, whacking was not required — at least not by the climate change establishment. The inquiries set up by East Anglia University have as their members people of satisfactory credentials. Consider Lord Oxburgh, who chairs one of the two inquiries. He is also the head of Global Legislators Organisation for a Balanced Environment, a lobby group for global warming legislation, and an advisor to Climate Change Capital, which aims to cash in on the $45-trillion market in the coming low-carbon economy. Others on the inquiries have strikingly similar credentials, so much so that the London Telegraph reported that “almost all their members were committed, even fanatical advocates of global warming.”

Whacking was also not required for the Penn State inquiry, which interviewed no skeptical witnesses and has already exonerated Mann on three of four charges.

But a Penn State whacking may nevertheless be required after the Inspector General at the U.S. National Science Foundation, a major funder of Penn State’s global warming research, unexpectedly popped up. The Office of Inspector General states that “in accordance with our research misconduct regulation, (45 C.F.R. part 689), when the OIG is provided with an institution’s investigation report, we review it for fairness, accuracy and completeness.”

When it does, it will represent the first time that an independent investigative government organization will have scrutinized alleged climate change wrongdoing, but it may not be the last, or the most searching.

As made clear in an 84-page Minority Staff report produced in February by the United States Senate Committee on Environment and Public Works, criminal charges will be aggressively pursued if the chief force behind the report, Senator James Inhofe, finds himself once again a Senator in the majority after the November elections in the U.S.

Entitled “Consensus’ Exposed: The CRU Controversy,” the report asserts that “The scientists involved in the CRU controversy violated fundamental ethical principles governing taxpayer-funded research and, in some cases, may have violated federal laws… An independent inquiry conducted by the UK’s Information Commissioner has already concluded that the scientists employed by the University of East Anglia, and who were at the centre of the controversy, violated the UK’s Freedom of Information Act. … In our view, the CRU documents and emails reveal, among other things, unethical and potentially illegal behavior by some of the world’s preeminent climate scientists.”

And then the whacking might really start, with the climate scientists at the business end of the mallet.

Read the sources for this column. 

Posted in Climate Change, Energy Probe News, The Deniers | 1 Comment

Banking on green subsidies

The feed-in-tariff being offered by the British government for clean energy should be the new savings account. One media outlet claims that a £12,500 investment in solar panels will pay a tax-free return of six to eight per cent per year—more than double what one would earn in a typical savings account.

It’s seems like the British government is simply handing out cash to anyone interested in clean energy. According to Jason Orme, editor of the self-build magazine Homebuilding & Renovating, that’s exactly what’s happening.

“With these tariffs the Government is effectively handing out money to encourage people to put these things on their roofs and, quite frankly, anyone in their right mind would be foolish not to think seriously about getting their hands on this green giveaway,” he says.

Prior to the feed-in tariffs, it would take solar panels nearly 30 years to pay for themselves. Now, it will take as little as a decade. Under the scheme, an average homeowner will earn £1,000 a year in savings. And the benefits won’t be short-lived, as the feed-in tariff program is set to run for 25 years and rise with inflation.

The Daily Mail lays bare the details of the subsidy in a recent article: “Solar panels will earn you 41p per kilowatt hour—and mini wind turbines 34p—while large wind turbines and hydro plants earn just 4.5p. The subsidy is variously estimated to cost between £6.7billion and £8.4billion over 20 years.”

It seems everyone is happy. Except of course those stuck picking up the bill for the program: consumers. The Taxpayers Alliance says the subsidies are utterly bonkers and will result in higher energy bills.

The risk? Falling subsidies.

“Buyer beware,” research director Matthew Sinclair told the Daily Mail. “If readers invest in the renewable energy scam on the basis that the feed-in tariffs will pay out big over the coming years, they could get a rude awakening if those subsidies disappear, or are slashed after consumer outrage.”

Energy Probe is a keen supporter of renewable energy. We believe renewable energy has the ability to diversify our electricity supply, while allowing for more decentralized sources of power for consumers. But we’re not in favour of throwing massive subsides at forms of energy that are not technically or economically feasible.

Read the previous gangrene economy report, "Withering In The Spanish Sun" here.  

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Arctic ice at high point

The Arctic ocean has more ice today that it did last year at this time, more than it had the previous year at this time or the year before that or the year before that. More ice, in fact that at any time since the Japan Aerospace Exploration Agency, using a sensor launched on a NASA satellite in mid 2002, began tracking the extent of Arctic ice.

This comeback for Arctic ice is not noteworthy in terms of presaging a change in climate. As can be seen here at the Japan Aerospace website, run jointly with the International Arctic Research Center, the extent of Arctic ice has fluctuated a great deal since these satellite measurements began. During the month of May in 2009, the Arctic ice had also grown to encompass an area greater than the Japanese sensor had previously recorded for that time of year, before seeing its gains disappear later in the year.

Because today’s advance of Arctic ice has little significance, the press will be right not to make much of it. Just as the press was wrong to make much of a blip in the opposite direction, during a few months in the summer of 2007, when a decrease in the Arctic ice was accompanied by headlines around the world predicting an imminent end to the polar ice cap.

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Aldyen Donnelly: New CAFE standards are a potential cash cow for the US Treasury

(Apr. 05, 2010) US regulators appear to be planning/budgeting for a high level of non-compliance with the proposed new CAFE standard. This planned non-compliance will generate significant new tax revenues for the US Treasury. Canadian manufacturers will take a hit, as they’ll account for more than 15% of the new US Treasury revenues from fines.

The attached “Regulatory Impact Analysis” (“RIA”, mandatory part of US rule-making) identifies two categories of regulatory cost impact:

1. the cost of compliance with the new regulations, and

2. the cost of fines for non-compliance. The attached RIA forecasts that the incremental US technology costs—to be born by US new car purchasers and not including non-compliance costs paid by manufacturers—will be $17.6 billion in 2016.  The RIA acknowledges that the cost of fines paid will also likely be passed through to new car purchasers, but the regulatory impact analysts elect not to include the cost of fines in their estimates of the impact of the cost of the regulation per vehicle sold.

The logic built into the RIA modelling exercise is explained as follows:

And:

I found the remaining tables in the RIA report, given the explanation on page 296 under “VII. Cost Impacts” rather confusing. So I phoned a NHTS (the US regulator) contact to ask for the proper interpretation.

The bottom line is that this cost analysis starts by setting an “Adjusted Baseline” for each car and light truck manufacturers’ vehicle sales fleet average fuel efficiency and tailpipe emissions performance. This Adjusted Baseline assumes all cars sold in 2011 will all be in full compliance with the existing US CAFE standard for 2011.

Then, to estimate the cost impact of the proposed new CAFE standards for 2012 through 2016, the regulator forecasts the costs each manufacturer will bear to increase fleet average fuel efficiency and reduce tailpipe emissions to the CAFE targets for 2012 through 2016 from this Adjusted Baseline for 2011.

There are two significant loopholes in the regulator’s analysis:

1. Many of the manufacturers, I am told, will fail to comply with the 2011 CAFE standard—the Adjusted Baseline. They will pay fines to comply with the 2011 standard (or “Get To the Adjusted Baseline” in Tables VII-1a and 1b), instead of delivering vehicles to the market that physically comply with the regulated model year 2011 performance standards. In Tables VII-1a and VII-1b (pages 297 and 298) the US regulator estimates the continuing costs to the manufacturer—costs, which I am told, will be largely incurred  in the form of non-compliance fines, not new technology costs—to cover the difference between their actual forecast 2011 model year sales fleet average energy efficiency and emissions performance and the Adjusted Baseline.

2. Then, in tables VII-2a to 2o and tables VII-3a to 3o the US regulator shows us only the technology costs of compliance with the new 2012 through 2016 CAFE standards.  The RIA report acknowledges that a number of manufacturers will pay additional fines for non-compliance, over and above the technology costs shown in these tables. The RIA report also discloses that the regulator has estimated what the US government’s revenues from incremental fines will be. But the RIA does not disclose those estimates, arguing that any fines paid are “transfer payments” which will translate into consumer price increases, but which do not need to be reported because they will have no net social or GDP impact.

I am told that, for purposes of forecasting actual new car emissions, the analysis also treats payment of the fine for non-compliance as equal to achieving physical emission reductions. But there is no commitment on the part of government to spend the revenues collected in the form of non-compliance penalties on other measures that will directly cut vehicle emissions. So this procedure results in a forecast that could significantly overstate the actual emission reductions, overstate fuel cost savings and understate the consumer price increases that will arise from the implementation of this new CAFE regulation in the US.

My argument is that the US regulator’s decision not to disclose the extent to which the regulator assumes the manufacturers will simply pay penalties and fail to comply with the regulated performance standards is too cute by miles. A legitimate and transparent analysis would discretely disclose:

  • 100% of the estimated incremental costs per vehicle that will be passed on to customers to cover manufacturers’ investments in new technology;
  • 100% of the estimated incremental costs per vehicle that will be passed on to customers to cover manufacturers’ non-compliance penalty payments, which costs are effectively a new carbon tax that generates new revenues for the Federal Treasury;
  • the regulator’s estimate of actual new vehicle sales emission reductions, given their estimates of manufacturers’ non-compliance rates.

Obviously, in the absence of this full disclosure, any government would be highly motivated to maximize government revenues—and minimize compliance with the stated environmental objectives, by:

  • regulating impractical(y) high new CAFE standards, and
  • setting non-compliance penalties below the estimated sector average cost of physical compliance with those high performance standards.

If and when governments pursue this strategy, they are doing little more than disguising a new tax as an environmental measure—a measure that will inevitably fail to achieve its stated environmental objectives. Among other things, it will extend on-road vehicle stock turnover rates, damage the economic health of all vehicle manufacturers and put the most innovative of manufacturers at greatest risk.

What Does the Existing US Regulator’s RIA Tell Us, if Anything, About US CAFE for 2012 through 2016?

This document does show us the regulator’s estimate of the cost that the manufacturers will pay on a continuing basis to cover the difference between the actual performance of the vehicles they plan to sell in 2011 and the Adjusted Baseline. My NHTS contact suggested that most if not all of this cost will likely be covered in the form of non-compliance penalties.

For now, we can add cost estimates appearing in Tables VII-1a and VII-b in the attached report to the technology cost estimates in the VII-2 and VII-3 tables, then divide the VII-1 tables’ values into those sums, to estimate a minimum apparent non-compliance fine share of the RIA estimated average new car price increase. This procedure is far from perfect, and what we really require is full disclosure of the regulator’s estimates of fines versus their estimates of new technology costs. But in the absence of full disclosure, let’s use the available data and verbal input from the NHTS contact to generate a preliminary signal.

When we complete this little analysis, it appears that the US regulator could be planning that non-compliance fines will represent, at a minimum, the following %s of the reported incremental new single passenger vehicle cost increases from 2012 through 2016, by manufacturer:

I also show the implied value of non-compliance payments to the US regulator, by model year and manufacturer, for single passenger vehicles. At the bottom of the table, I add in the total estimated costs of non-compliance penalties for the light truck fleet. This less-than-perfect analysis suggests that the US Treasury could collect as much as $19 billion in non-compliance penalties from vehicle manufacturers who supply product to the US market over the 5-year period of 2012 through 2016.

If non-compliance penalties prove to be only 50% of the cost “to get to the Adjusted Baseline”, we are still talking about $8 to $10 billion in new taxes on US car sales to be collected by the US Treasury form 2012 through 2016.

Please note that the regulations stipulate that non-compliance penalties will be collected at the point of sale. So, under the regulatory strategy that is currently proposed, the government of the US will collect the lion’s share of Canadian manufacturers’ non-compliance penalties, not the government of Canada.

Also note that historical market experience suggests that most if not all of the non-compliance penalties paid to the US Treasury by Canadian vehicle exporters will not be passed through to US consumers, but will be born as a combination of extra price increases for Canadian car buyers and reductions in export sales margins for Canadian car manufacturing plants.

What Can Minister Prentice Add as an Amendment to Canada’s Version of the NA CAFE Rule to Mitigate Financial Leakage from the Canadian Auto Manufacturers to the US Treasury?

Minister Prentice can maintain his commitment to implement a CAFE regulation in Canada that is “harmonized” with US CAFE, and address the risk of financial leakage described above by:

  • adding an alternative CAFE compliance option for Canadian manufacturers that enables, but does not oblige, them to cover any new car sales fleet compliance shortfall by acquiring and scrapping older, high-emitting used Canadian vehicles, and
  • ensuring that the Canadian CAFE penalty for compliance failure is high enough  to ensure that this measure is truly an environmental measure and not a new tax revenue measure in disguise.

And, of course, Canadian auto manufacturers can only survive a high relative non-compliance penalty if the government of Canada commits that any non-compliance penalty revenues would be used to partially finance, say, a 1-year ACCA depreciation rate for new Canadian clean vehicle purchases by Canadian corporate fleet operators.

Please be assured that I do not present the need for these amendments to the US CAFE regulation for its Canadian application out of distrust of the intentions of Minister Prentice or the current government of Canada. I am concerned, however, that a literal adoption of the US CAFE regulation exposes Canadian auto makers and governments to a potential significant wealth transfer to the US, which could, in turn, dampen private sector investment in Canada’s auto sector.

As in the softwood lumber context, Canada’s final CAFE standard must ensure that any non-compliance penalties associated with Canadian export sales are invested in Canada—not outside Canada—either in the form of emission-reducing car scrapping activities or direct non-compliance penalties.

Aldyen Donnelly, April 05, 2010

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Lawrence Solomon: France to hold official debate on climate change

At the suggestion of France’s science minister, Valérie Pécresse, France’s National Academy of Sciences will hold an official debate on climate change to try to defuse this newly explosive issue.

The Academy of Sciences debate, expected to be held by October of this year, follows two months of heated debate on radio and television, during which France’s two most prominent sceptics, Claude Allegre and Vincent Courtillot, have sown great doubt in the minds of a once unskeptical French public.  Allegre’s new book, L’imposture climatique (The Climate Fraud), has especially caused the French public to reconsider the conventional wisdom about global warming.  In this runaway best-seller (110,000 copies sold to date), Allegre, France’s most celebrated scientist and a former Science Minister in a socialist government, calls the UN’s Intergovernmental Panel on Climate Change, a “mafia-like system” that promotes a “baseless myth” about climate change.

In an attempt to stop the erosion of their public support, some 410 establishment scientists petitioned the current science minster, asking her to rebuke the skeptics and to express confidence in the climate research community.  Her response was to turn to France’s National Academy with a request for a debate on the subject. The Academy’s president, Jean Salençon, readily agreed in the hopes that an airing of the issues would calm some of the fury on the subject.

Noting that the Academy does not take sides on the issue, and that the Academy’s website already reports the views of scientists on both sides of the debate, Salençon aims to defend the scientific method and the principles of scientific inquiry, not any one scientific position. When asked if sanctions might be in the cards for Allegre, a member of the Academy, or any other climate sceptics, he replied: “Under no circumstances! There is no question of ethical sanctions. Even less of an expulsion. The nomination for the Academy of Sciences is perpetual. It cannot be reversed, not even through a resignation.”

The participants in the October debate have not yet been determined.

Lawrence Solomon, Financial Post, April 05, 2010

Posted in Climate Change, The Deniers | 1 Comment

Withering in the Spanish sun

For the past two years Spanish solar companies working in once-gritty city of Puertollano were soaking up the rays of government subsidies—creating what one paper called a 21st century gold rush. But just as quickly as the rush began, the sun set on the subsidies, leaving the city dotted with low-quality, poorly designed solar plants. 

Now it’s the time of reckoning.

Two years ago, the Spanish government provided lucrative subsides to the national solar energy industry, pushing sun-drenched cities on the Spanish plateau like Puertollano to quickly do whatever it took to attract solar companies. Puertollano proved to be incredibly adept at luring solar companies. It even came up with a catchy marketing slogan: “The Sun Moves Us.”

And it worked. The city quickly attracted the investment of two enormous solar power plants, a slew of factories producing solar panels and silicon wafers and a number of clean energy institutes.

The rush helped to create a bonanza among the city’s residents. Farmers cashed in by selling their land for solar plants, while people from around the world moved to the city to cash in on the solar gold rush. For a city that suffered from 20 percent unemployment and a population exodus—the sun was finally shining down.

But government officials soon realized that the shoddy and poorly planned solar plants being built in cities like Puertollano would never be able to survive without the government help and, as a result, the subsidies would go on forever. So in September they decided to pull back the subsidies.

The result: Puertollano’s boom quickly turned to bust. A number of factories and stores closed their doors, workers were let go and foreign companies and banks abandoned contracts.

Looking back on it now, analysts agree that maybe the subsidies were a bit over the top. Pedro Banda, director general of the Institute of Concentration Photovoltaic Systems—one of the research institutes in Puertollano—said, “everyone from all over the world was installing in Spain as fast as they could, and every biologist who could add was working in solar.” 

One reports says that even inefficient, poorly designed plants were able to make a profit, and speculation in solar building permits became commonplace.

Now that the storm has passed, there may be some benefits to the solar bubble. Research institutes in the city continue to develop cutting edge technologies. Unemployment, though it jumped back up to 10 percent, has not returned to 20 percent.  And the city is now home to a number of solar businesses.

Oh yeah, and the sun continues to shine.

Energy Probe is a keen supporter of renewable energy. We believe renewable energy has the ability to diversify our electricity supply, while allowing for more decentralized sources of power for consumers. But we’re not in favour of throwing massive subsides at forms of energy that are either not technically or economically feasible.

Read the previous gangrene economy report, "Windmills lining the pockets of Britain’s wealthy landowners" here. 

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Aldyen Donnelly: A closer look at California’s vehicle emission standards

(Mar. 30, 2010) A recent letter from Diane Feinstein to John Kerry provides a little insight into what is currently under negotiation for a new US Senate climate change bill.

What I find quite interesting is the frequent reference to California’s vehicle emission standards as “more stringent” than US federal standards.

This requires a creative definition of “stringent”. The graph below shows that per capita road fuel consumption did realize a deeper and longer decline than the US average between 1990 and 1995. But the differential between the state and national trends appears to correlate more with the depth and length of the 1990 recession than differences between tailpipe fuel standards.

If/when we normalize the per capita road fuel trends to reflect differences in GDP trends and urbanization or population density rates, there is no evidence that California’s regulated tailpipe emission standards have outperformed the US federal standard.

In fact, given the state’s urbanization rate (which should mean lower per capita fuel consumption), it can be argued that the CA clean vehicle regulations actually under-perform the US federal regulations and that both under-perform the current Canadian regulatory context. In the graph, I show Washington state per capita road fuel consumption, where WA is a state that did not adopt the CA standards.

When we compare CA and BC per capita road fuel consumption rates, BC—without the CA tailpipe standard—appears to have the best overall performance.

Most importantly, since 2007 (when I prepared the slide below), CA statistics have eroded further. The principal issue appears to be that CA tailpipe emission regulations directly increase the price differential between new and used cars. Many families adapt to fuel price increases by extending the operating lives of older vehicles.

In 2007, when I put the graph below together, 33% of California on-road vehicles were over 10 years old, while less than 12% of BC on-road vehicles were over 10 years old.  At the end of 2009, 37% of California on-road vehicles were over 10 years old.

This is not an argument against fuel-efficient standards for vehicles. It is an argument that we must regulate “smarter” than California and should not implement exact CA vehicle emission standards into Canada. Direct implementation of CA-type standards will simply result in an extension of the road life of old vehicles and a net increase in Canadian GHG emissions.

Aldyen Donnelly, March 20, 2010

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Windmills lining the pockets of Britain’s wealthy landowners

The British aristocracy has seen its power and economic clout over the common folk dwindle through the 20th century. But that might be about to change, as recent green energy subsidies are helping British dukes and other aristocrats rake in profits at the expense of the country’s taxpayers.

According to the Times, under the current government subsidy system a typical three-megawatt wind turbine will generate around £670,000 ($1.03-million) of income a year—of which £350,000 comes in the form of subsidies. The potential for massive profits is obvious, considering a three-megawatt machine costs around £2-3-million and can last for around 25 years.

The country’s gentry have taken note. The Duke of Roxburghe, with his 48-turbine scheme on a Scottish estate is expected to generate £30m a year, shared with developers. More than half of this money would come from subsidies from ratepayers. And the Duke of Beaufort, Sir Reginald Sheffield, father of Samantha Cameron, and Michael Ancram, the Tory grandee have all either expressed interest or are seeking approval for wind mills.

Under the current Renewables Obligation certificate (Roc) scheme, renewable energy generators are allowed to claim a Roc certificate for each megawatt hour of electricity produced. Given that a 3MW turbine is expected to produce 7,000 megawatts in a year, the owner will receive £320,000 for the electricity itself and another £350,000 at current prices for the Roc certificates. To ensure that those producing electricity from renewable sources are guaranteed a pay-out, power companies are obliged to buy Rocs to meet government targets for renewable power.

As for the costs…they’re passed onto consumers.  

Not a bad deal, if you can get it.

Economists, on the other hand, point out that it’s fairly obvious who loses out in such a subsidy system: ratepayers. They’re raising concerns over the subsidies, estimating that they will add £13.50 to the average household’s annual utility bills. Professor David Newbery, director of Cambridge University’s electricity policy research group, while keen on the idea of wind power, says Rocs are “bonkers”.

“It is shovelling money towards people who have been lucky enough to get planning permission, [and] it encourages the construction of wind farms in remote places where it is very expensive to connect to the national grid,” he says.

RenewableUK, the wind industry’s trade organisation, sees it, unsurprisingly, quite differently. It says Rocs have helped to increase renewable energy. Its website claims: “The case for wind energy is simple: it is renewable, economic, safe and good for the environment.”

Energy Probe is a keen supporter of renewable energy. We believe renewable energy has the ability to diversify our electricity supply, while allowing for more decentralized sources of power for consumers. But we’re not in favour of throwing massive subsides at forms of energy that are either not capable, or not economic, of acting as a base load source of energy.

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Don’t bet on the Bloom Box

(Mar. 28, 2010) Investors could soon be scratching their heads over a rumoured $1.5-billion IPO for Bloom Energy and its fuel cell, a gizmo the size of a CD that can provide power to a home without needing to be connected to the electric utility’s power lines. Continue reading

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Don’t bet on the Bloom Box

Lawrence Solomon
Financial Post
March 28, 2010

Investors could soon be scratching their heads over a rumoured $1.5-billion IPO for Bloom Energy and its fuel cell, a gizmo the size of a CD that can provide power to a home without needing to be connected to the electric utility’s power lines. Unveiled amid much hoopla on 60 Minutes last month, the Bloom fuel cell is touted for being able to run on natural gas or biofuels, for being more efficient than a conventional natural gas power station and for reducing greenhouse gas emissions. And, the Bloom fuel cell doesn’t just help homeowners — if you stack a bunch of these CDs together, they can power businesses, too, even big businesses. As 60 Minutes showed, major players such as Google and eBay already use the Bloom technology, dubbed the Bloom Box, to power their operations.

But the Bloom Box has its critics. They say it is nothing revolutionary, merely another version of fuel cell technology, which many companies have pursued over the decades, and which many continue to pursue. While the Bloom Box may be more efficient than a conventional natural gas power plant in converting natural gas to electricity, from the little that Bloom Energy has disclosed it seems less efficient than the high efficiency natural gas plants now in use around the world. And the critics question whether the Bloom Box’s high costs of today can be reduced enough in future to make it economical.

Who’s right? The answer now is wildly unknowable, mostly because the political needs of governments, rather than the energy needs of consumers, are likely to be calling the shots.

Take one of the most important attributes of the Bloom Box — its potential to eliminate the need for a power grid. This will not sit well with governments, once it dawns on them that the Bloom Box could undermine their plans. Governments are committing hundreds of billions of dollars in massive new “smart grids” designed to (among other things) conserve energy by remotely controlling our appliances. Will governments accept a technology that negates their vision for us, or will they bend the Bloom Box’s development to somehow rely on the central grid?

The Bloom Box also runs afoul of governments that are backing uneconomical renewable energy technologies, such as remote wind turbines and solar systems, because the Bloom Box could displace many of these government-favoured investments, too. And it runs afoul of the current government bias against CO2, since the Bloom Box would mostly be fuelled by natural gas.

Apart from these specific government policies, where the Bloom Box will fit in our government monopolized power system also requires a crystal ball. Most consumers will want a backup of some kind. Advanced batteries, which governments also subsidize, could work for some, especially since the Bloom Box could recharge them overnight, when it wasn’t providing lighting. But those government battery subsidies could vanish at any time.

Or, the existing power grid could be used as the backup. This could bring governments on board, since their investments in the smart grid would now seem to be justified. Except using the smart grid as backup would negate the Bloom Box’s boast of eliminating the need for the electrical grid. Besides, if the smart grid does become a backup for the Bloom Box, governments could well decide to charge prohibitively for providing this backup service.

If governments didn’t so distort the energy marketplace, most of the variables that potential Bloom Box consumers and investors would need to consider would disappear, making the risks involved in a Bloom Energy IPO much more knowable. Without the distortions, in fact, the Bloom Box could already be economic in niche settings, such as in some remote regions, in some military applications, and as a backup to the grid in settings where space (but not money) is an issue.

As it is, Bloom Energy has no bona fide customers now — the ones it touted on 60 Minutes exist by dint of another set of government distortions, including the rich California subsidies currently available to Bloom Box customers. And if governments don’t vacate the energy business, the Bloom Box may have no customers in the future, either, because its fate will rest less on its innovative properties than on what lobbyists can deliver.

Posted in Energy Probe News, Renewables | 1 Comment