Variability of Renewable Energy concerns not fact-based

by John Brian Shannon

Originally published on JBSNews.com

Merit Order ranking control room
Most utility companies have Merit Order ranking control rooms similar to this one where decisions are made about which power producer will contribute to the grid in real time. Microprocessors make the instant decisions, while humans are present to oversee operations and plan ahead.

 

On the Variability of Renewable Energy; The ongoing argument about renewable energy additions to national electrical grids.

Solar Variability

Some people argue that solar photovoltaic (solar panels) produce ‘variable’ electricity flows — and they assume that makes solar unsuitable for use in our modern electric grid system.

And it’s true, the Sun doesn’t shine at night. Also, if you are discussing only one solar panel installation in one farmer’s field, then yes, there is the variability of intermittent cloud cover which may temporarily lower the output of that particular solar installation.

But when grid-connected solar arrays are installed over vast areas in a large state like Texas, or throughout the Northeastern U.S.A. for example, it all balances out and no one goes without power as solar panels produce prodigious amounts of electricity during the high-demand daytime hours. If it’s cloudy in one location thereby lowering solar panel outputs, then it is sunny in 100 other solar locations within that large state or region of the country.

So, solar ‘variability’ disappears with many widely scattered installations and interconnection with the grid. So much for that accusation.

NOTE: The marginal ranking for solar is (0) and that ranking never varies. (More on this later)

Wind Variability

The situation with wind power is essentially the same, One major difference though; In many parts of the world the wind tends to blow at its most constant rate at night, which helps to add power to the grid while the Sun is asleep.

In fact, complementary installations of solar and wind help to balance each other through the day/night cycle — and through the changing seasons. There is even an optimum solar panel capacity to wind turbine capacity installation ratio, but I won’t bore you with it.

NOTE: The marginal ranking for wind is (0) and that ranking never varies.

Natural Gas Variability

What? Natural gas is not variable!

Oh really? Over the course of the past 60 years, how has the natural gas price per gigajoule changed? Got you there! The natural gas price has increased by orders of magnitude and wild price fluctuations are quite common.

OK, that’s not ‘output variability’ but it is a variable factor with regard to energy pricing. And that’s a variable that actually matters to consumers.

Natural gas prices have swung wildly over the years forcing utilities to peg their rates to the highest expected natural gas rate. No wonder investors love natural gas!

So there is ‘supply variability’ and ‘rate variability’ with natural gas, which is why it is often the last choice for utility companies trying to meet daily demand. Gas is a good but expensive option and it comes with its own variability baggage.

We won’t even talk about the associated CO2 cost to the environment. (OK, it’s about $40 per tonne of CO2 emitted)

Coal variability

Not to the same degree as natural gas, but coal also faces price swings and potential supply disruptions — again forcing utility companies to set their rates against unforeseeable labour strikes at a mine, a railway, or shipping line — and against coal mine accidents that can shut down a mine for weeks, or against market-generated price spikes.

These things are impossible to foresee, so this ‘averaging up’ of the price results in higher energy bills for consumers and better returns for investors.

Yes, there is variability in coal supply, coal supply lines, coal power plant maintenance cycles which can have a plant offline for weeks, and market pricing. These things can affect total annual output, yet another kind of ‘variability’. (Again, that doesn’t factor-in the other costs to society such as increased healthcare costs from burning coal which releases tonnes of airborne heavy metals, soot, and nasty pollutants besides CO2 — which some estimates put at $40-60 per tonne emitted — in addition to the environmental cost of $40 per tonne of CO2 emitted)

NOTE: Should we talk here about how much water coal plants use every year? More than all the other energy producers put together, and then some!

Hydro power variability

What? Hydro power is not variable!

Oh yes it is. Nowadays, many hydro dams in the U.S. can barely keep water in the reservoir from August through November. They cannot produce their full rated power in a drought, they cannot produce their full rated power in late summer, they often cannot produce power during maintenance, or during earthquake swarms. Just sayin’ hi California!

An impressive body of water behind the dam is meaningless when the water level isn’t high enough to ‘spill over the dam’. If the water level isn’t high enough to spin the turbines then all that water is just for show. Take a picture!

“In 1984, the Hoover Dam on the Colorado River generated enough power on its own to provide electricity for 700,000 homes because the water level of Lake Mead behind the dam was at its highest point on record. But since 1999, water levels have dropped significantly, and Hoover Dam produces electricity for only about 350,000 homes.” — CleanTechnica

 And then there is this problem; Global warming and its resultant drought conditions mean that some dams are essentially ‘finished’ as power producing dams for the foreseeable future.

Again, we have output variability; But this time it is; 1) lower power output due to reduced reservoir levels caused by anthropogenic drought and 2) the time of year that hydro dams cannot produce their full rated power.

Price variability: This is what Merit Order ranking is about

Merit Order ranking is a system used by most electric utilities to allow different types of electrical power plants to add power to the electric grid in real time. Thanks to a computerized grid, this occurs on a minute-by-minute basis every day of the year.

In the German example, electricity rates drop by up to 40% during the hours in which solar or wind are active, and this is what Merit Order ranking is all about; Using the cheapest available electricity source FIRST — and then filling the gaps with more expensive electrical power generation.

Solar and wind electricity are rated at (0) on the Merit Order scale making them the default choice for utility companies when the Sun is shining, or the wind is blowing, or both.

Why? No fuel cost. That’s the difference. And bonus, no environmental or healthcare costs with solar and wind either.

Once all of the available solar and wind Merit Order ranking (0) capacity is brought online by the utility company, then (1) nuclear, (2) coal, and (3) natural gas (in that order) are brought online, as required to match demand, according to the marginal cost of each type of energy. (German Merit Order rankings)

NOTE: In the U.S. the normal Merit Order rankings are; (0) solar and wind, (1) coal, (2) nuclear, and (3) natural gas, although this can change in some parts of the United States. Merit Order is based on cost per kWh and different regions of the country have different fuel costs.

(The one cost that is never factored-in to the kWh price is the cost of disposal for nuclear ‘spent fuel’ and for good reason, but that’s a discussion for a different day)

The Fraunhofer Institute found – as far back as 2007 – that as a result of the Merit Order ranking system – solar power had reduced the price of electricity on the EPEX exchange by 10 percent on the average, with reductions peaking at up to 40 percent in the early afternoon when the most solar power is generated.

Here’s how the Merit Order works.

All available sources of electrical generation are ranked by their marginal costs, from cheapest to most expensive, with the cheapest having the most merit.

The marginal cost is the cost of producing one additional unit of electricity. Electricity sources with a higher fuel cost have a higher marginal cost. If one unit of fuel costs $X, 2 units will cost $X times 2. This ranking is called the order of merit of each source, or the Merit Order.

Using Merit Order to decide means the source with the lowest marginal cost must be used first when there is a need to add more power to the grid – like during sunny afternoon peak hours.

Using the lowest marginal costs first was designed so that cheaper fuels were used first to save consumers money. In the German market, this was nuclear, then coal, then natural gas.

But 2 hours of sunshine cost no more than 1 of sunshine: therefore it has a lower marginal cost than coal – or any source with any fuel cost whatsoever.

So, under the Merit Order ranking of relative marginal costs, devised before there was this much fuel-free energy available on the grid, solar always has the lowest marginal cost during these peaks because two units of solar is no more expensive than one. – Susan Kraemer

It’s as simple as this; With no fuel cost, solar and wind cost less. Although solar and wind are expensive to construct initially (but not as expensive as large hydro-electric dams or large nuclear power plants!) there are no ongoing fuel costs, nor fuel transportation costs, nor fuel supply disruptions, nor lack of rainfalls, to factor into the final retail electricity price.

As solar panel and wind turbine prices continue to drop thereby encouraging more solar and wind installations, we will hear more about Merit Order ranking and less about variability. And that’s as it should be, as all types of grid energy face at least one variability or another.

Only solar, wind, hydro-electric, and nuclear have a predictable kWh price every day of the year. Coal, natural gas, and bunker fuel, do not. And that’s everything in the energy business.

Although utility companies were slower than consumers to embrace renewable energy, many are now seeing potential benefits for their business and henceforth things will begin to change. So we can say goodbye to the chatter about the Variability of Renewable Energy and utility companies can say goodbye fuel-related price spikes.

Buckle up, because big changes are coming to the existing utility model that will benefit consumers and the environment alike.

Follow John Brian Shannon on Twitter: @JBSNews_com

Modi changes India’s national conversation with Renewable Energy

by John Brian Shannon.

Prime Minister-elect Narendra Modi of India. Image courtesy of: www.narendramodi.in
Prime Minister-elect Narendra Modi of India. Image courtesy: www.narendramodi.in

India’s newly-elected Prime Minister, Narendra Modi says 400 million Indian citizens presently living without electrical service in rural areas of the country will have electricity within five years via upcoming, massive investments in solar power.

Not only that, but the country’s various electrical grids (which are not necessarily connected to each other, nor to the main national grid) will benefit significantly from thousands of distributed solar installations by adding to overall capacity and helping to stabilize weaker parts of the infrastructure.

PM-elect Modi sees no reason why each rooftop in the country cannot install a number of solar panels. Indeed, when millions of rooftops are involved with an average of 10 panels per rooftop (for example), and plenty of land that is unsuitable for growing crops and entire canal systems are already covered with solar panels, you know big numbers are coming.

So, what could India do with 1 billion solar panels?

For starters, every home and business in the country could have reliable (daytime) electricity. Many towns and villages in remote areas would have electrical power for the first time in their history, thereby allowing them entry into the world’s knowledge-based economy. With the advent of electricity, education and commerce should flourish and easy access to online government services will offer significant benefit to many millions of India’s citizens.

And for locations with home-battery backup or diesel-backup power, 24-hour-per-day electricity will become the norm. Employment and productivity in these regions could be expected to rise dramatically and online medical advice could be a lifesaver for those who live in remote areas. All of these are good things to have in a rapidly developing nation.

Then there is the possibility of electrical power sales between electrical power producers and energy consumers of all sizes, whether neighbour-to-neighbour or direct-to-utility, along the projected pathways of the constantly evolving grid system. Finally, (daytime) surplus electricity sales to neighbouring countries like Bangladesh, Pakistan, Nepal and Bhutan might become commonplace and profitable.

Mr. Modi is taking on an unparalleled task, fraught with challenges. Here is a comment on the present state of affairs in India as it relates to the proposed rural electrification of the country.

Four hundred million Indians, more than the population of the United States and Canada combined, lack electricity. An official of India’s newly elected Prime Minister, Narendra Modi, recently said that his government wants every home to be able to run at least one light bulb by 2019. Administrations have made similar claims numerous times since India gained independence in 1947, but this time renewable power sources could bring the longstanding promise closer to a realistic vision.

In a sprawling, diverse country of more than 1.2 billion residents this task is tantamount to a second green revolution, the first being agricultural advances that relieved famine across the subcontinent in the middle of the 20th century. — ThinkProgress

India’s utility industry is at a ‘tipping point’

The Indian utility industry is comprised of a mishmash of coal-fired generation, less than reliable nuclear power plants noted for their high maintenance costs, oil-fired power generation, along with some hydro-electric dams and biomass power generation. The ‘pylons and powerlines’ component of the national grid in India is in need of a complete overhaul. On top of all that, the fossil and nuclear power producers have been heavily subsidized for decades and theft of electricity continues to be a multi-billion dollar problem.

Prior to the Indian election, the country’s utility industry was summed up by industry expert, S.L. Rao;

Power retailers were behind on 155 billion rupees ($2.5 billion) of payments to their suppliers as of Jan. 31, reducing their ability to provide electricity to customers. Blackouts may spread as state utilities in Delhi, Haryana and Maharashtra slash consumer bills in a populist wave before elections. That’s jeopardizing a $31 billion government bailout of the industry, which requires companies to boost rates.

“The power sector needs tough politics, and the only person in politics today who might be capable of that kind of toughness is Modi,” said S.L. Rao, the head of India’s central electricity regulator from 1998 to 2001, according to his website.

The Indian utility industry “has reached a stage where either we change the whole system quickly or it will collapse.” Rao, who was appointed to the regulatory body by an independent committee, said he maintains no political affiliation. — Bloomberg

On the bright side however, India’s outgoing Prime Minister Manmohan Singh had begun a process to inform citizens of the benefits of renewable energy and was instrumental in promoting a 4 GigaWatt(GW) solar park being built in four stages. At present it is only partially operational, with 1GW of power flowing now and construction of the three remaining stages continues at a brisk pace. When completed, it will easily be the largest solar park in the world.

Dr. Singh also directed policy towards massive wind power capacity additions, with major offshore wind installations due to come online in 2015. However, even with the efforts of PM Singh, only 4% of total electrical generation came from renewable energy in 2013. Prime Minister Singh’s policy goal of 20GW of solar by 2022 looks likely to be superceded by PM-elect Modi. Perhaps in dramatic fashion.

Tulsi Tanti, Chairman of the Pune India based wind power company The Suzlon Group, told the newswire today that, “the BJP-led government will provide an environment conducive for growth and investments, with major reforms in the infrastructure and renewable energy sector. This is important as India’s economic environment will act as a catalyst in reviving the global economy.” — Forbes

It is time to roll up our sleeves and get to work

Hundreds of thousands of direct and related jobs are expected during the 2014-2024 Indian renewable energy boom. And, bonus for consumers, the falling cost of solar and wind power electricity rates will have an overall deflationary effect on the national economy.

Later, as solar and wind power begin to displace fossil and nuclear power, declining healthcare costs, improved crop yields, cleaner air in cities resulting in a better quality of life for citizens — the new and stable energy paradigm will remove many of the historic constraints on the country and its people, allowing India to become all that it can and should be.

At this point, it looks like India’s transition to renewable energy may happen quickly and turn out to be the good-news story of the decade with massive economic, environmental, and human health ramifications — not just for India but for the region and the world. Hats off to India!

Follow John Brian Shannon on Twitter: @JBSsaid

Renewable Energy: The Time for Greater Ambition is Now

by John Brian Shannon.

Just as some in the renewable energy world were beginning to imagine that the battle against fossil fuel was largely won and that it was only a matter of time before we achieved 100% renewable energy globally, the Intergovernmental Panel on Climate Change (IPCC) has issued a warning informing us that now more than ever, the push for renewable energy must not lose momentum.

That’s on account of our cumulative CO2 additions to the atmosphere which are in the billions of tonnes annually. It’s one thing to add gigatonnes of carbon dioxide and other gases to the atmosphere, but it’s quite another for the Earth’s natural systems to process and absorb those gases out of the atmosphere at the same rate as they are added.

The planet’s natural systems are capable of absorbing up to 40 gigatonnes of CO2 per year which is produced by decaying organic matter and such natural phenomena as forest fires and volcanoes, but it’s not capable of handling an additional 15 gigatonnes of anthropogenic (man-made) carbon dioxide annually.

As the (IPCC) AR5 report has recently said, “the time for greater ambition is now.”

The report concludes that responding to climate change involves making choices about risks in a changing world. The nature of the risks of climate change is increasingly clear, though climate change will also continue to produce surprises. The report identifies vulnerable people, industries, and ecosystems around the world. It finds that risk from a changing climate comes from vulnerability (lack of preparedness) and exposure (people or assets in harm’s way) overlapping with hazards (triggering climate events or trends). Each of these three components can be a target for smart actions to decrease risk.

“We live in an era of man-made climate change,” said Vicente Barros, Co-Chair of Working Group II. “In many cases, we are not prepared for the climate-related risks that we already face. Investments in better preparation can pay dividends both for the present and for the future.”

Why we have Global Warming

It has also been proven that as many gigatonnes of CO2 as cannot be processed annually by natural Earth systems, will linger in the atmosphere for up to 200 years. That means that the present unabsorbed accumulation is an extremely large amount of carbon dioxide which would take 40 years for the planet’s natural systems to process and absorb, if we permanently stopped every internal combustion engine and every man-made combustion source on the planet. We know that’s not going to happen.

This extra 600 gigatonnes of carbon dioxide is the ‘carbon hangover’ which began during the industrial revolution causing the atmosphere to retain more of the Sun’s heat as compared to the benchmark pre-industrial-era atmosphere. Accumulations of CO2 in the planet’s airmass have already increased the global mean temperature by nearly 2º C since the beginning of the industrial revolution in 1760.

There are other greenhouse gases more potent than CO2 which have even more Global Warming Potential (GWP). For instance, sulfur hexafluoride stays in the atmosphere for 3200 years and causes 23,900 times more global warming per tonne, as compared to carbon dioxide.

See a partial list of these gases below:

Global Warming Potentials chart
Global Warming Potentials chart shows different pollutants and their effects

If we had planted an extra 600 million trees forty years ago, we wouldn’t be facing an extra 600 gigatonnes of CO2 now, as a typical large tree can absorb 1 tonne of carbon dioxide per year converting much of it into life-giving oxygen in the process.

As per the IPCC AR5 update of March 31, while a number of things are going right in the energy sector in terms of advancing renewable energy, the lowering of pollution levels in many cities and adding green jobs to the economy, now is not the time to reduce our efforts thereby shirking our responsibilities to future generations.

What happens if we just ignore the problem?

Of course, we could just ignore the entire problem and spend more money on increasing health care costs, non-stop rebuilding of coastal shorelines, and the dual but related costs of severe weather and increasing food prices.

But here is what that looks like.

Climate Action vs. Inaction
The cost of Climate Action vs. Climate Inaction

Scientists have concluded that for each 1º C increase in the global mean temperature, the cost to the world economy is roughly $1 trillion dollars per year.

It’s already a foregone conclusion that we will see a global mean temperature increase of 2º C (minimum) 2001-2100 due to ever-increasing 21st-century accumulations of CO2. That future temperature increase will be in addition to the previous ~2º C increase which took place during the 240 years between 1760-2000.

What the discussion is all about these days, is capping the second global mean temperature increase to 2º C — instead of ‘policy drift’ allowing an even higher level of climate change to occur.

The energy status quo is no longer affordable

The energy status quo is simply no longer an option as we now discover that the cost of climate inaction is higher than the cost of climate action. Switching out of coal via renewable energy and increasing the energy efficiency of buildings and electrical grids might cost us $500 billion globally — but could cap our generation’s contribution to global warming at 2º C.

Interestingly, $500 billion is roughly equal to the annual subsidy paid to the global oil and gas industry, which totalled $550 billion last year.

The last anthropogenic ~2º C temperature increase took place over 240 years, from 1760-2000. The best-case scenario for us 2001-2100 is to hold the next anthropogenic temperature increase to no more than ~2º C (for a grand total increase of ~4º C increase over the 340 year period from 1760-2100). If all the stars were to align perfectly this goal is just barely possible.

But that shouldn’t stop us from trying. As the IPCC has said, “the time for greater ambition is now.”

Clean Energy Ministerial (CEM5) theme: Act Together, Think Creative

Next-up on the agenda for people who care about our planet, the health of our citizens, and the high costs to consumers — who are, after all, the ones footing the climate bill via higher taxes and higher food and health care costs — is the fifth Clean Energy Ministerial (CEM5) meet-up in South Korea May 12-13, 2014.

CEM5 Seoul, South Korea May 12-13, 2014

Clean Energy Ministerial (CEM5) group government ministers and representatives will meet May 12-13, 2014 in Seoul, South Korea, under the theme of “Act Together, Think Creative” which suggests increased collaboration and innovation by the 23 participating governments as the preferred way to achieve real climate action, culminating in a new international climate agreement in 2015.

From the CEM5 website:

With four years of work behind the CEM, this year’s gathering presents an opportunity to evaluate how the CEM has performed to date and plan for how this global forum can be more effective and ambitious going forward. As in years past, CEM5 will provide ministers with an opportunity to be briefed on the latest Tracking Clean Energy Progress report from the International Energy Agency, hear the status of global clean energy investment from Bloomberg New Energy Finance, participate in public-private roundtables on key crosscutting clean energy topics, and assess progress made through the 13 CEM initiatives. 

Most importantly, CEM5 will offer ministers an opportunity to discuss ways to increase collaboration and action for greater impact—to generate more rapid progress toward CEM’s overall goal of accelerating the transition to a global clean energy economy. The discussions will focus on identifying smart policies, programs, and innovative strategies to increase energy efficiency, enhance clean energy supply, and expand energy access.

CEM5 will feature six public-private roundtables on the following crosscutting clean energy topics:

Follow John Brian Shannon on Twitter at: @EVcentral

Smart Microgrids – ‘Plug & Play’ power for communities

by John Brian Shannon

Smart microgrids represent the best opportunity for developing nations to bring reliable electricity to rural areas

Significant cost saving opportunities also arise by employing smart microgrid systems in developed countries and reliability of electricity is enhanced, as the vast majority of blackouts, brownouts, or other electricity interruptions arise from grid problems and not from the power plants which are often located hundreds of miles away from customers.

Microgrid graphic courtesy of GE.
Smart microgrid graphic for illustrative purposes only. Image courtesy of GE.

The Galvin Electricity Initiative defines smart microgrids as, “…modern, small-scale versions of the centralized electricity system. They achieve specific local goals, such as reliability, carbon emission reduction, diversification of energy sources, and cost reduction, established by the community being served. Like the bulk power grid, smart microgrids generate, distribute, and regulate the flow of electricity to consumers, but do so locally. Smart microgrids are an ideal way to integrate renewable resources at the community level and allow for customer participation in the electricity enterprise. They form the building blocks of the Perfect Power System.” — The Galvin Electricity Initiative

Not much of a factor a decade ago, microgrids are expected to explode into a $40 billion-a-year global business by 2020, according to Navigant Research, a clean-technology data and consulting company. In the U.S., about 6 gigawatts of electricity — enough to power as many as 4.8 million homes — will flow through microgrids by 2020. Reporting by Bloomberg

The microgrid market is heating up quickly, with deployments occurring around the world in a variety of application segments. Navigant Research forecasts that global annual microgrid capacity will increase from 685 Megawatts in 2013 to more than 4 Gigawatts by 2020 under a base scenario. Reporting by Navigant Research

Paul Orzeske, president of the Honeywell International Inc. says “We are seeing requests for proposals going up significantly, 30 to 40 percent higher than last year.” Honeywell built a $71 million microgrid for an FDA research center in Maryland and the agency is in the midst of a $213 million addition that will be online early next year. Reporting by Bloomberg

The industry is moving into the next phase of project development, focusing on how to develop projects on fully commercial terms. As the microgrid market is evolving, innovative solutions are coming to the fore. For example, two new subsegments – grid-tied utility distribution microgrids (UDMs) and direct current (DC) microgrids – are attracting increased market attention. Reporting by Navigant Research

The Navigant Research report is available for purchase by clicking Microgrid

Smart Microgrids Save Money and Lower Carbon Footprint

It must be said that one of the many benefits of a smart microgrid installation is the saving of hundreds of thousands, or even millions of dollars per month, in electricity costs. One example is the University of California at San Diego (UCSD) smart microgrid system which saves that institution about $850,000. each month in electricity costs.

UCSD can also sell any excess power their smart microgrid produces at various times of the day or night to the main California grid through a net-metering connection.

U of C San Diego’s mixed conventional and renewable energy smart microgrid generates 92% of its electricity demand with 42 MegaWatts (MW) of peak power.  Not only does it save UCSD $10.2 million dollars per year, it adds valuable stability to the campus electricity service.

“Our campus does $1 billion a year in research,” said Byron Washom, the university’s director of strategic energy initiatives. “We have an electron microscope that every time we have a supply disruption, it takes six weeks to recalibrate. We can’t let that happen.”

These savings aren’t an anomaly. The FDA estimates it’s already cutting about $11 million a year off its electric bill through both self-generation and the ability to sell power back to the grid — savings that will rise to $25 million a year when an addition is completed in 2014. — Reporting by Bloomberg

We all know that saving $25 million dollars per year (at just one FDA office complex!) is a big deal. That’s a savings of over $2 million dollars, each and every month.

Incidentally, during Hurricane Sandy, as millions of people were forced to survive without electricity, the smart microgrid at the FDA research centre and at Co-Op City, a 45,000-resident housing cooperative in the Bronx, New York, kept the power flowing by automatically disconnecting from the obliterated grid and running in what’s called “island mode.” Reporting by Bloomberg

In the U.S.A. alone, electricity service interruptions cost the business community some $200 billion dollars per year. Lawrence Berkeley National Laboratory has said that lost ‘business continuity’ (resulting from outages and electrical power quality issues) add another $80 billion to $150 billion to that figure.

Historic Utility Business Model Under Threat

Utility companies are feeling the pressure from numerous sources these days as renewable energy threatens their longstanding business model generally, and specifically, their Merit Order ranking, along with stricter environmental standards for energy producers. Now along comes smart microgrids to completely ruin their day.

However, some foresighted utilities see smart microgrids as an adjunct to their existing operations and as a way to add power generation capacity nearer to electricity demand centres, saving millions of dollars in the combined costs of land acquisition for new transmission line corridors, the initial ‘pylons and power line’ construction and annual maintenance.

Not to mention capturing some much needed green energy points with increasingly environmentally responsible consumers.

Some utilities are hedging their bets. With the help of $10 million in U.S. Energy Department and state grants, SDG&E has set up a microgrid in the remote desert town of Borrego Springs, about 90 miles northeast of San Diego. When a severe rainstorm knocked out utility power to the town last month, the microgrid’s collection of rooftop solar panels, micro-turbines and batteries was able to keep electricity flowing to nearly half the town’s customers, including buildings sheltering the elderly and ill from the desert heat. — Reporting by Bloomberg

Ultimately, whether smart microgrids are owned by foresighted utility companies seeking to protect market share and lower electrical transmission costs, or are owned by investor groups, cooperatives, individual investors, local governments, or any combination of those — multi-billions of dollars worth of microgrids are going to be installed by 2020.

Smart Microgrids are Powering Up

And even that $40 billion dollar business might just be the tiniest of microgrid beginnings if the stars align between local rooftop solar power producers, local wind farms, and local biomass power plants.

If utility companies fail to adapt to 21st century thinking by creating smart microgrids that serve the needs of their customers — people living in rural communities and small cities may no longer need standalone utility companies, and decide to set up their own electrical generation facilities.

Smart Microgrid in Sendai, Japan - Natural Gas plus Solar Power. Image courtesy of U.S. Department of Energy Berkeley Lab
Smart Microgrid in Sendai, Japan – Natural Gas plus Solar Power. “Perhaps the most well-known microgrid demonstration on this planet, The Sendai Microgrid Project was one of the four major New Energy and Industrial Technology Development Organization (NEDO) ones carried out in Japan between 2005 and 2008.” Image courtesy of U.S. Department of Energy Berkeley Lab

See also:

Nation’s Largest Microgrid Online

See the excellent UCSD microgrid video

Island of Opportunity: Microgrid Technology Comes to the Bay Area

Microgrids and “Micro-municipalization” Do they threaten the traditional utility business model?

Microgrids on the March: Utilities Are Building Out New Business Models to Make Islanding Work — GreenTech Media

Reinvent Fire: Change Energy Use Forever video  Quote from this video about the U.S. switch to renewable energy; “By investing $4.5 trillion we can save $9.5 trillion and make our energy problems history.”

Renewables and the Future of Oil Companies

by John Brian Shannon.

It may surprise you to know that the world’s oil companies see renewables as an unstoppable force. Some oil companies have issued landmark reports informing us that by 2100 at the latest the world will be getting 90% of its energy from renewable energy, indicating this could happen as early as 2060 under certain geopolitical conditions.

Although oil companies were initially hesitant to embrace renewable energy, in recent years their position has changed somewhat, as the many positive attributes of renewables began to convince senior oil executives that changes were on the horizon and their choice was to either embrace that change or accept an ever-declining energy market share. By their own admission only 10% of late-century energy will be met by petroleum.

In the final analysis, energy is energy after all, and it is the energy business that the oil companies are in.

So, rather than cede energy market share to up-and-coming renewable energy companies, big oil decided to become involved in renewables, first with biofuel, then solar, and later, wind. Some oil companies even purchased solar companies with their already installed and operating solar farms to gain experience in the new frontier.

The Oil Industry: Early Oil

In the early 20th century it was all about the oil, but in the later 20th century it was all about refining it into diverse products and the oil industry then morphed into a much larger entity named the petrochemical industry which created billions of tons of plastics, fertilizers, liquids, products and even medicines every year. The petrochemical sector includes the natural gas segment and thousands of miles of pipelines exist on every continent except Antarctica to move methane from gas wells to processing facilities and then forward it as usable natural gas to the end users.

A much larger industry had sprung up out of the original oil industry, one that was far larger than the one that had merely pulled oil out of the ground and refined it for transportation use.

The High Cost of Oil

Almost all countries heavily subsidize their oil and natural gas industries, and the United States is a great example. Oil companies there get over $4 billion dollars per year (yes, every year) to ensure stable petroleum supplies, compliance with regulations even in difficult drilling locations, and to help levelize gasoline prices across the country.

It is commonly reported that the petroleum industry (worldwide) receives over $500 billion dollars worth of subsidies and tax breaks every year. The worldwide oil and gas subsidy reported by the EIA for 2012 was $550 billion dollars and 2013 will have a similar subsidy figure attached to it.

Besides the massive taxpayer funded subsidy scheme for oil and gas are the externalities associated with the burning of all those long dead and liquefied dinosaurs. For each ton of gasoline burned, 4.5 tons of CO2 are created. If you add up all the billions of tons of gasoline that have been burned since the first Model T Ford rolled off the assembly line on August 12, 1908, it totals an incredible amount of CO2. Not to mention the billions of tons of non-CO2 airborne emissions created by our petroleum burning transportation sector since that date.

All this burning has a significant healthcare cost for nations (look at China, for example) and pollution-related damages will continue to affect the agriculture sector and cause damage (spalling) to concrete structures like buildings, bridges and some roads.

Although an excellent source of energy for motive power with high output per unit, the necessary high subsidies and unfortunate climate-changing externalities have conspired to considerably shorten the age of oil.

Natural Gas, the ‘Bridge Fuel’ to a Renewables Future

The oil companies are ahead of regulators on this one. Knowing that emission regulations were getting stricter every decade, petroleum companies knew that they had to pull a rabbit out of a hat, as gasoline and diesel can burn only so cleanly without prohibitively expensive technology. This is why we hear every day about ‘Natural Gas the Bridge Fuel to the Future’ and how natural gas will revolutionize our power generation segment and transportation sector.

Convincing regulators, utility companies, and automakers to switch to natural gas became the new mantra of oil company executives in order to meet increasingly stringent emission targets in developed and emerging nations.

The ‘Bridge Fuel’ will peak between 2040 and 2045 in most published oil company scenarios and somewhere between 2060 and 2100 natural gas itself will be almost completely replaced by renewables.

Although natural gas is hundreds of times cleaner burning than other fuels, it still emits plenty of CO2, but emits only minute quantities of toxic gases — and, importantly, no airborne soot or particulates.

By mid-century or 2100 at the latest, cleaner burning natural gas will be replaced in order to meet emission targets, and natural gas would lose out to renewable energy anyway — even without emission regulations — for the simple reason that solar and wind have zero fuel cost associated with their operation, while natural gas will always have a fuel cost and a separate delivery cost per gigajoule.

Imagine all of the costs involved in prospecting for and siting natural gas fields, purchasing the land, drilling, installing pipelines, processing methane into natural gas and adding even more pipelines to deliver natural gas to the end user. It all adds up, and even the most efficient gas producers/processors/pipeliners must cover their overhead.

There are no comparable ongoing fuel or distribution overheads with renewable energy.

What will we miss in the Clean Energy Future?

Once a solar or wind power plant hits completion all it needs is for the Sun to rise or the wind to blow. No drilling, no processing, no pipelines, no supertanker spills or pollution, and no CO2 sequestration required. Just plenty of clean renewable energy.

For all the right reasons, renewables are making progress. Economics, human health and our environment are the factors driving this energy change-up.

Let’s hope in our energy future that oil companies and gas companies, simply yet profoundly, morph themselves into energy companies and upon actualizing it, become renewable energy companies in the process.

For further renewable energy reading:

World Cumulative Solar Photovoltaics Installations,  2000-2012
The world installed 31,100 megawatts of solar photovoltaics (PV) in 2012—an all-time annual high that pushed global PV capacity above 100,000 megawatts. There is now enough PV operating to meet the household electricity needs of nearly 70 million people at the European level of consumption. Image courtesy of the Earth Policy Institute
World Cumulative Installed Wind Power Capacity 1980-2012
Even amid policy uncertainty in major wind power markets, wind developers still managed to set a new record for installations in 2012–with 44,000 megawatts of new wind capacity worldwide. With total capacity exceeding 280,000 megawatts, wind farms generate carbon-free electricity in more than 80 countries, 24 of which have at least 1,000 megawatts. At the European level of consumption, the world’s operating wind turbines could satisfy the residential electricity needs of 450 million people. Image courtesy of the Earth Policy Institute.