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Conversations About Energy
How the Experts See America's Energy Choices: Conference Report
By Jeremy Carl, James E. Goodby
Hoover Institution PressCopyright © 2010 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
"All of our other seventeen critical infrastructures — so declared by the government because they are essential to basic life, such as water and communications — depend on electricity."
— R. JAMES WOOLSEY
As the vulnerability of America's traditional, largely fossil-fuel-powered electricity grid has soared over the past few years, the issue of distributed energy, long a province of esoteric "off grid" devotees, has increasingly moved into the energy mainstream. Distributed energy has many advantages over traditional grid systems — it is potentially more stable and less prone to catastrophe or terrorism.
One example of the failure of a nondistributed grid is the famous Northeastern blackout of 2003, where a few untrimmed trees in a Cleveland, Ohio, suburb caused a local power line failure that eventually cascaded throughout the eastern United States and Canada, affecting 55 million people, leaving them without power for hours.
In addition to its stability advantages, distributed energy also has the potential for being cleaner — many distributed energy systems are small-scale renewables or natural gas, the cleanest fossil fuel.
To discuss the prospects and challenges for distributed energy, the Energy Task Force convened a session led by R. James Woolsey, former director of Central Intelligence, and a longtime leader in the energy policy field, particularly in issues related to energy security. Serving as a discussant was Dan Reicher, the director of Climate and Energy Initiatives at Google.org. Reicher served as assistant secretary of energy for efficiency and renewable energy in the Clinton administration and brings decades of experience in the energy and environmental policy fields to his work at Google.
The conversation focused on applications of distributed energy, the problems of bringing renewables on to the grid, the efficiency of feed-in tariffs, and the security benefits of distributed generation. There was considerable agreement about the positive role that distributed energy can play in boosting renewables, and there was also broad agreement on its positive implications for energy security. There was intense discussion, however, over the issue of feed-in tariffs (policies that essentially obligate utilities to buy power from small-scale renewable energy producers such as farms and businesses with solar and other renewable power installations) and whether it was economically efficient to use this technique to grow renewable energy.
Woolsey began the proceedings by noting that distributed energy is inherently a more secure solution than more traditional forms of electricity delivery and has security implications.
Distributed generation of energy is defined as a distributed grid that uses energy produced close to where it is consumed and that can "island" to secure itself from cascading grid failure while maintaining electricity to local communities. This should be a key part of solving the complex mix of energy problems we face. When the electrical grid fails, it is not only the lights that go out. All of our other seventeen critical infrastructures — so declared by the government because they are essential to basic life, such as water and communications — depend on electricity. Our grid vulnerability means that our water, sewage, phone, transportation systems, health care, and most of the country's basic economic functions are all easily threatened by both malevolent threats (such as terrorists) and malignant threats (such as tree branches).
Woolsey noted that the key to doing this is to separate the grid into microgrids and minigrids that would prevent a single point of failure.
The grid should be much more resilient, so it can island into microgrids that protect neighborhoods and minigrids that protect towns in the event of an outage, preventing a single failure from cascading into a catastrophe. But we need not all become survivalists to be somewhat safer. The vast majority of homes and businesses would stay connected to the grid but would harness natural gas as well as solar, wind, geothermal, and other local renewable energy sources for an important share of their power needs.
Woolsey also noted that a better distributed energy grid would allow new economies to develop.
New policies could force utilities to allow feed-in tariffs, enabling individuals to sell the electricity they generate in excess of their own needs back to the grid and to earn money on their investment. We would still have a national grid, of course. We would simply build into our existing grid the capability to island and separate when need be.
Woolsey added that while such a distributed grid might not be able to have large industrial processes functioning through a major blackout, it would do fine at a household level or at medical facilities, where most pressing needs occurred.
The microgrid could provide most households, hospitals, schools, and businesses with enough light, refrigeration, and other necessities to function during even a long-term emergency, rather that forcing populations to face the cascading total failure of light, water, heat, and other infrastructure that an attack would cause today. By creating microgrids and minigrids, we could have both the benefits of a national grid system and also the resilience of distributed, independent generating capacity.
Woolsey also discussed what he thought the nature of future developments in renewable energy would look like.
Rapid expansion of renewables is more likely to come from small- and medium-sized commercial facilities of less than 20 megawatts. To be commercially viable and create a market, utilities would need to allow entrepreneurs who install renewable energy platforms at a small commercial scale to sell their electricity back to the grid.
He argued that existing players in the market are the biggest current obstacles to reform.
Utilities — often mired in their ways, with little incentive to change — have not been advocates of a system that forces them to enable such energy entrepreneurship, and neither have most public utility commissions. But Germany, some forty other countries, Ontario, Hawaii, Vermont, and other localities that have established such feed-in tariffs have discovered — no great surprise — that allowing entrepreneurs to make a profit on the energy they generate creates a market, jobs, and more renewable energy.
Woolsey also said that in the developing world, a centralized grid model, rather than distributed energy, has made the entire electricity system unworkable in many areas.
In much of the developing world, centralized grids never developed. Thus, for over a billion people, electricity remains a distant dream. Big, centralized power plants require significant up-front capital investment — saddling developing countries with debt decades before they begin operation, if they begin at all. Miles of transmission lines must be spread over tough, often unsafe terrain to link these generation facilities to the locations that need the power — an activity that is often economically prohibitive in rural and sparsely populated areas. Without votes to drive electrification, autocracies have often neglected to provide electricity beyond ego-driven projects in capitals. The reliance on centralized grids has left large sections of the developing world literally and figuratively powerless.
Such "powerless" developing countries could provide an ideal market for distributed energy.
Distributed generation is a clear policy winner in the developing world. It keeps countries out of debt, while allowing individuals and villages to sidestep corrupt governments and brittle infrastructure. Unlike the West, the developing world does not need to be reacquainted with distributed energy. Cow-dung patties and scraps of firewood — self-generation based on burning local biomass, in energy-speak — continue to fuel rural heating and cooking from Indonesia to Equatorial Guinea. But these traditional forms of energy have severe problems. They have made the developing world rife with lung disease, burn injuries, climate damage, and local pollution. Luckily, a host of new forms of distributed energy are already working in the developing world.
Woolsey argued that the developing world's distributed energy projects are already seeing success.
A multitude of distributed generation initiatives already are underway in the developing world, from Kenya, where solar photovoltaic use in rural areas outpaces new grid connections and unsubsidized photovoltaics compose 75 percent of the solar market, to Inner Mongolia, where China's government has enabled 160,000 herdsmen to draw power from small wind turbines carried along with their yurts. Hundreds of pilot projects need to be scaled to enable a broad solution — but they have already shown what is necessary for distributed generation in the developing world to be profitable and sustainable.
Dan Reicher followed Woolsey and said that he had some issues with the term distributed energy, noting that it had become something of a catchall for a variety of different, but sometimes unrelated, concepts.
"Distributed energy" actually is not a very good term because it encompasses virtually everything we want to talk about in the energy world. We do know it is the production of energy close to the location where it will be consumed, but it ranges over a couple orders of magnitude, from watts to megawatts, and a huge range of fuels. The key question is: Is there a significant energy source near the point of use and can we develop that in a cost competitive way?
He noted that some distributed energy sources, such as geothermal, could operate at a scale and consistency far greater than sources such as solar and wind.
We have a vast resource in geothermal, particularly advanced geothermal energy. Essentially, you drill some distance down, fracture rock, put water down there, bring it back up, create steam, and run a turbine. This is simply exploiting the heat that is in rock at various distances below the surface. This does not suffer from the intermittency problems of solar and wind. So it can, in fact, add a lot from an energy security standpoint.
Reicher noted that such sources could actually operate at enormous scale.
At a few kilometers, we are looking at tens of thousands of megawatts, at five or six kilometers, hundreds of thousands of megawatts, and at ten kilometers, you're looking literally at millions of megawatts. In California itself, if you only exploited 2 percent of the resource here through enhanced geothermal, you would generate 140,000 megawatts versus its current 63,000 megawatt installed base of generation. That is 2 percent. Now is that a distributed generation source, that kind of power, up and down the state, that close to large population centers? And if you add Nevada into that mix it doubles or triples. That is a huge base-load resource that one might argue is distributed, given that this heat is beneath our feet virtually everywhere.
Reicher also noted that in other areas, technologies such as offshore wind could be promising.
For tens of miles off the mid-Atlantic coast you can go out and still be in ten meter, twenty meter, thirty meter water. You don't need exotic turbines. This is a vast resource, tens of thousands of megawatts, very close to large population centers. So again, is this a distributed generation opportunity? I don't know. I think so. I think this is a vast one, very close to the major cities of the United States and readily developable.
Reicher noted that his team at Google had sketched out some fairly aggressive possibilities for renewable and alternative energy targets.
Eliminating coal from the mix, maintaining a fairly significant reliance on natural gas, and moving plug-in vehicles into this mix in a very, very significant way. All the while, we could be creating millions and millions of jobs with very significant net savings to the economy, and 50 percent greenhouse-gas emissions reductions. We are pretty convinced that if you put the right pieces together, you can get pretty far, pretty fast.
He noted that there is a promising federal initiative in this direction, the Clean Energy Development Act (CEDA), proposed by Senate Majority Leader Harry Reid of Nevada.
One of the challenges we see in clean energy technology is government research and development (R&D). The venture capital community can take technologies to a point where they work at the pilot scale. Tens of millions of dollars have been spent on technology that works at a small scale. The challenge we face — indeed we call it the Valley of Death — is how do we get those first few big commercial projects financed, up and running, and really show that this can work? After that, the mainstream financial community will take over, but it is those first couple of scale-up plants that are a serious problem. CEDA particularly as proposed in the Senate, would do a lot to fix that.
But he added that making a real difference would require a real change in federal attitudes towards energy research, development and deployment (RD&D).
R&D spending in the federal government is woefully inadequate. President Obama in the campaign talked about 15 to 30 billion dollars a year. We really need to get there, sooner rather than later, if so much of what we need to have happen in this country is going to actually happen. If you put robust R&D together with a really focused federal backing of high-risk deployment — CEDA and R&D spending — we can really drive this world forward in a very significant way.
In response to a question from Paul Berg about establishing an authority with scientific competence within Congress, Reicher expressed a need for change, noting that perhaps the Office of Technology Assessment (OTA) could be reestablished but that the National Academy of Sciences, the National Labs, and the Congressional Research Service served as reasonably good proxies in the interim.
Paul Gipe wondered whether a feed-in tariff had to be done at a federal level. Woolsey said it would more likely happen at a state level but could be encouraged by federal policy.
John Burges noted the critical role that feed-in tariffs had played in building out distributed and renewable energy. "It accounts for over 80 percent of every single solar cell, solar module that's been installed around the world," he said.
Reicher agreed that feed-in tariffs had been useful but felt that they were no substitute for putting a price on carbon in terms of an effect of driving a change in energy usage. Jim Sweeney added that excessive feed-in tariffs presented their own dangers from the standpoint of economic efficiency.
If you have a feed-in tariff with a very high price, you can get investment in a lot of things that are very uneconomical. A lot of the photovoltaics on rooftops are uneconomical in comparison to the result from energy efficiency, so what the feed-in tariff with a high price does is to establish the opportunity and incentive for doing a lot of very uneconomical things while bypassing some of the more economical things.
Woolsey dissented from this view, arguing that feed-in tariffs worked best for businesses with large system installations rather than for individual consumers.
* Increase research and development on means of enhancing generation of electricity close to where it is to be used.
* Rebuild the national grid so that it can be more easily "islanded," utilizing distributed generation possibilities.
* Evaluate the potential for feed-in tariffs.
* Support a Clean Energy Deployment Administration to bridge the gap between small-scale demonstrations and full-scale commercial plants.CHAPTER 2
What Can We Do To Boost Energy Efficiency?
"The structure of the energy market makes the invisible hand not only invisible, but nonexistent. The invisible hand's just not going to do it for you"
— JIM SWEENEY
Megawatts or negawatts? — this was the provocative question that energy analyst Amory Lovins asked many years ago.
"Negawatts," or energy efficiency gains that eliminate the need for building new energy infrastructure, has been identified as one of the most promising policies for decreasing energy costs and increasing energy security. California, in particular, has pursued policies for energy efficiency over the past few decades that have kept overall per capita energy consumption flat in the state while it has been soaring nationwide.
Many independent studies suggest that energy efficiency is the most cost-effective method of "generating energy" — but the fact remains that investments in efficiency have been low compared to investments in energy sources. The reasons for this underinvestment have been much debated, as it would seem to violate economists' precepts that people do not, as a rule, leave $20 bills lying on the ground. Part of the reason is opportunity cost and some is knowledge. Part is a question of incentives: utilities are often incentivized to make sure customers use electricity, not conserve it.
Excerpted from Conversations About Energy by Jeremy Carl, James E. Goodby. Copyright © 2010 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Hoover Institution Press.
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Table of Contents
Introduction by George P. Shultz
1 Distributed Energy
2 What Can We Do To Boost Energy Efficiency?
3 The Nuclear Fuel Cycle
4 Synthetic Biology and Its Applications in Energy
5 Putting a Price on Carbon
6 A Sustained Research and Development Policy
7 Emerging International Energy Relationships
Working with China and India
What Can America Do with China? by David Victor
The U.S.-India Climate and Energy Relationship: Dealing with a Power-Starved Country by Jeremy Carl
Members of the Shultz-Stephenson Task Force on Energy Policy