U.S. Solar Spin, China Moves Ahead
Congressional oversight and press coverage of DoE’s failed $500 million loan guarantee to Solyndra, a now bankrupt
With President Obama’s green jobs push, it is easy to see why Solyndra is such a hot political button. There are also reports of campaign contributions linked to both the decision to approve by solar interests and zealous scrutiny by some critics in Congress linked to fossil fuel interests.
So here are some facts to help maneuver one through the spin:
- The 2005 Energy Policy Act was passed in a bipartisan fashion by Congress and signed into law by President George W. Bush.
- Solyndra submitted its initial application to the Department of Energy in 2006 and due diligence crossed both the Bush and Obama Administrations resulting in a 2009 loan being issued.
- The Department of Energy was not alone in their positive assessment of Solyndra. For instance, in 2010 the Wall Street Journal published a review entitled, “The Next Big Thing: Top 50 Venture Backed Companies.” Solyndra was ranked #5.
- The total sum of the current DoE solar loan portfolio is $15.585 billion. Solyndra's loan guarantee accounts for $535 million or approximately 3.4% of the total portfolio.
Beyond the facts and spin, however, Solyndra failed primarily due to an inability to compete with cheaper solar panels made by Chinese manufacturers. According to Bloomberg New Energy Finance, the China Development Bank has provided at least $30 billion in government-backed credit to Chinese solar companies, thus increasing the scale of manufacturing and radically bringing down the cost of production. The direct result for
DOE-Commissioned Study Highlights Role that U.S. Can Play in Helping Other Countries Responsibly Develop Shale Resources
Last week, Rice University’s James Baker’s Institute for Public Policy released a Department of Energy-commissioned study entitled “Shale Gas and U.S. National Security.” Consistent with other recent studies, the report concluded the new U.S. domestic shale development offers significant benefits, including reduced liquefied natural gas (LNG) imports and lower natural gas prices.
The report also found that new U.S. shale development can limit Iran and Russia’s share of the global natural gas market, and therefore, reduce these countries’ ability to use their resources as a political tool. According to the report, U.S. production is already affecting global markets; LNG supplies previously intended for the U.S. are now being diverted to Europe and Asia. This development is lowering natural gas prices for Europe, while also providing these countries with an alternative to Russian pipeline supplies. The report argues that these developments represent a “major paradigm shift” and can allow for Europe to more aggressively influence Russia’s foreign policy.
The study’s “reference case” assumes, however, that all known global shale gas resources can be developed with existing commercial technologies and open tendering practices. As noted by the study, one potential impediment globally to development is water scarcity. For instance, the study argues that water scarcity could make production in Western China cost prohibitive. With its increasing demand for natural gas, China’s reliance on supply from Russia will likely be heightened, particularly if shale development in China is limited.
As the report notes, there is fortunately a role for the U.S. to play in helping countries develop technologies to manage water impacts of shale development. Last year, the State Department launched the Global Shale Gas Initiative to help countries responsibly develop their shale resources. The initial meeting last August included 50 delegates from 20 countries, including China, Poland, India and Chile. The meeting also included U.S. producers and service companies, and representatives from 13 federal agencies, including EPA, Department of Energy and the Bureau of Land Management. This initiative can help provide these countries with information on practices to reduce the overall environmental footprint of development, particularly focusing on technologies to recycle and reuse water.
This initial meeting was an important first step, but it’s important that the State Department continue to devote time and resources into the Global Shale Gas Initiative. Federal agencies are reassessing their priorities as they prepare for significant budget cuts. Helping other countries responsibly develop their shale resources, which can reduce the influence on countries like Russia and Iran, should be an important priority, and the State Department should remain committed to programs like the Global Shale Gas Initiative that can help achieve this goal.
Guest Blogger: AEP's Decision Reveals Legal, Political, and Economic Realities Associated with Implementing Carbon Capture and Sequestration (CCS) Technology
By John S. Wyckoff, CPG
Senior Regulatory Scientist, Technology Sciences Group, Inc. Washington, DC[1]
In less than four weeks after the Supreme Court ruled in favor of American Electric Power Company and four other power companies (see SCOTUS Holds That Plaintiffs Cannot Maintain Federal Common Law Nuisance Claims Against GHG-Emitting Utilities,) American Electric Power (AEP) announced on July 14, 2011 that it terminated its cooperative agreement regarding its Mountaineer Carbon Dioxide Capture and Storage Demonstration project with the U.S. Department of Energy due to the uncertain status of the U.S. climate policy and the continued weak economy. As part of its announcement AEP stated that it is impossible to gain regulatory approval to recover its share of costs for validating and deploying the technology without federal requirements to reduce greenhouse gas emissions already in place. (see AEP Announcement).
Cost Recovery Not Approved
A review of AEP’s announcement and its 2011 First Quarter 10-Q filed on March 31, 2011 (see 10-Q, March 31, 2011) provides insight into the company’s decision-making and in particular AEP’s ability (or lack there-of) to recover a portion of its costs from its rate base. The 10-Q indicates that in May 2010 Appalachian Power Company (APCo) and Wheeling Power Company (WPCo) (subsidiaries of AEP) submitted a base rate filing and requested rate base treatment of the Product Validation Facility (PVF) as part of its development of the Mountaineer Carbon Capture and Storage Project. In March 2011, the West Virginia Public Service Commission (WVPSC) denied the request for rate base treatment of the PVF largely due to its experimental operation. The March 2011 base rate order provided that should APCo construct a commercial scale carbon capture and sequestration (CCS) facility, only the West Virginia portion of the PVF costs, based on load sharing among certain AEP operating companies, may be considered used and useful plant in service and included in future rate base. As a result, APCo recorded a pretax write-off of $41 million ($26 million net of tax) in the first quarter of 2011. As of March 31, 2011, APCo recorded a noncurrent regulatory asset of $19 million related to the PVF.
Status of Project and Work Completed
During 2010, American Electric Power Service Company (AEPSC) on behalf of APCo began the project definition stage for the potential construction of a new commercial scale CCS facility under consideration at its Mountaineer Plant. AEPSC applied for and was selected to receive funding from the U.S. Department of Energy (DOE) for the project in the amount of 50% of allowable costs incurred for the CCS facility up to a maximum of $334 million. A Front-End Engineering and Design (FEED) study, scheduled for completion during the third quarter of 2011, was supposed to refine the total cost estimate for the CCS facility and the results from the FEED study were to be evaluated by Company before it sought any regulatory approvals to build the CCS facility. As of March 31, 2011, APCo had incurred $25 million in total costs and had received $7 million of DOE eligible funding resulting in a net $18 million balance.
Other Carbon Capture and Sequestrations Projects Funded by DOE
The Mountaineer project was one of three Carbon Capture and Sequestration (CCS) Projects that the DOE announced on December 4, 2009 that it had selected to support with $979 million in funds from American Recovery and Reinvestment Act. The other two projects were:
1) Southern Company Services, Inc. (Birmingham, AL) Project Title: Southern Company Carbon Capture and Sequestration Demonstration
2) Summit Texas Clean Energy, LLC (Bainbridge Island, WA) Project Title: Texas Clean Energy Project (TCEP) (see DOE Announcement of CCS Projects).
In light of the legal, political (See MLA's A Challenging Legislative Environment - Democratic and Republican Staff Directors Provide Legislative Outlook for Energy Policy,) regulatory uncertainty covering climate change, and now AEP’s decision to place its CCS project on-hold, it is not clear what will happened to the two other CCS projects. In addition, the resurgence of nature gas (lower natural gas pricing (see EIA Daily Natural Gas Futures Contract) due to increased production from shale-gas may hasten the conversion of coal burning plants to natural gas -- further complicating the future of CCS and other clean-coal initiatives.
[1] TSG is a subsidiary owned by the law firm McKenna Long & Aldridge LLP. TSG provides environmental technical consulting advice to MLA, other law firms, and clients (see www.TSGUSA.com).
Four Bright Green Spots in the Budget
As I’ve mentioned before, I’ve been spending a lot of time this year helping clients see how the American Reinvestment and Recovery Act (ARRA) can help support their environmental initiatives.
But last week, when the President sent Congress the fine print of his proposed Fiscal Year 2010 budget, even I had a start: Never before has US government set out to make its spending so green. Not even the stimulus.
Here’s a list of Four Green Bright Spots:
1. Pouring Money Into Water. The Environmental Protection Agency’s funding will increase roughly 30 percent from the $7.6 billion in the fiscal 2009 omnibus to $10.5 billion.
There’s a massive increase for water infrastructure, including $2.4 billion for the Clean Water State Revolving Fund, a low-interest wastewater loan program that helps states construct water treatment facilities. (The fund received just $689 million in fiscal 2009.) The Drinking Water State Revolving Fund would receive $1.5 billion, up from $829 million this year.
2. Carbon Infrastructure. The EPA will dedicate $17 million to the development of a GHG registry for US greenhouse gas emissions. As we’ve written before, this is a necessary first step toward regulating carbon emissions.
3. Oil is Out. Over at the Department of Energy, the proposed spending is flat from last year. Of course, that doesn’t include the nearly $40 billion showered on the department from the stimulus law for alternative-energy and efficiency initiatives. There are significant changes in emphasis on spending, though when it comes to fossil fuels. The budget completely cuts funding for the oil research and development program authorized by the 2005 Energy Policy Act. Finally, a budget that leaves behind the perverse incentives supporting fossil fuels that are costing us so much more than their sticker price.
4. Adaptation Gets Attention. State Department is contributing $600 million to two World Bank funds, one that supports clean technology in the developing world and the other that helps spur adaptation solutions in countries struggling with climate change. Over at Interior, the department is touting $183 million in increases for clean energy and the mitigation of climate impacts on the home front.
I’m sure there’s more to find, but the four points give some sense of this extraordinary bright green spending plan that, if adopted, will change the federal government’s impact on the economy.
The United States Through a Carbon Lens
We wrote earlier this week about the prospect of a national GHG registry that could provide an up-close view of the nation’s carbon emitters. While we’re waiting, a team at Purdue has delivered a fascinating tool that provides a taste of that future. The Vulcan Project is a initiative funded by NASA and DOE that is taking emissions data from 2002 and presenting it in extraordinarily accessible ways.
This week, the Vulcan team released an application for Google Earth that allows everyone to view emissions state by state or county by county across the United States. You can even layer over emissions from power plants and transportation. The team has posted a You Tube video demonstrating their work here.
For the first time, you can fly over emitters and get a visual sense of what pollution is coming from where. I believe tools like this will be crucial to spark entrepreneurial solutions to address climate change.
Renewable Portfolio Standards: An Avenue for Fostering Alternative Energy Projects
Government’s response to the focus on climate change must be holistic and visionary. One regulatory avenue for fostering alternative energy projects that assist in the battle against climate change is a Renewable Portfolio Standard (RPS). At its core, an RPS is a requirement that retail electricity suppliers purchase a certain percentage or quantity of renewably generated energy. Currently 25 states and Washington DC have mandatory targets for retail electricity purchases and 4 states have non-binding goals. In 2007 the House of Representatives passed an RPS, but the US Senate did not.
While most RPS programs share a common goal of encouraging the production of renewably generated energy, they vary in terms of purchase goals, timeframes for compliance and eligible technologies. Wind, solar, and geo-thermal are eligible under most of the RPS programs, but eligibility criteria varies widely with respect to other technologies and fuel sources such as bio-mass, landfill-gas, municipal solid waste, hydropower, and fuel cells. While the advantages in terms of climate change impacts associated with renewably generated energy may seem obvious (no emissions), less obvious may be the results stemming from the expansion of several states’ RPS programs into non-renewable areas.
The variety of RPS programs has allowed for many designs and policies to be demonstrated. Although not technically renewable, combined heat and power, energy efficiency and demand side energy efficiency have found their way into several of the RPS programs. By reducing demand for electricity, air emissions from current fossil fuel fired power plants is reduced to the extent that power is not needed. Arguably, the impact from reducing the demand of one megawatt of power, should have the same air emissions impact as the creation of one megawatt of renewably generated power and as such the nexus to demand management and energy efficiency in an RPS becomes self evident. Energy efficiency, demand management, and renewable energy should co-exist in an RPS and are a fundamental part of the future of our energy delivery system. As states continue to adopt and refine RPS programs, policy makers should bear in mind what this future of a sustainable energy delivery system may look like.
The US Department of Energy (DOE) has promoted (in part) a vision of the future that includes a hydrogen based energy delivery system that begins with small-scale distributed generation (DG) systems fueled by hydrogen. These DG systems provide stationary power and may also dispense hydrogen for hydrogen-fueled vehicles. DOE has funded several projects that evaluate the potential for the generation of wind-to-hydrogen, solar-to-hydrogen, geothermal-to-hydrogen and hydro-to-hydrogen, hydrogen generation systems. The common denominator is that renewably generated electricity is used to power an electrolyzer to generate hydrogen. Renewably generated hydrogen is the future. To bridge the gap to the future, however, Renewable Portfolio Standards should be developed that include hydrogen generated from fossil fuels.
One notable Wind-to-Hydrogen (also Solar-to-Hydrogen) demonstration funded by DOE is in Hawaii at the Kahua Ranch test site. There, the wind turbine has been configured to produce 48VDC, the solar array has been redesigned to produce 48VDC and each of these generation sources is connected to 24 battery cells allowing 48VDC short term electricity storage. The electricity is used to power an electrolyzer that generates hydrogen which is then stored in a low pressure hydrogen storage tank. When electricity is needed the hydrogen is used to run a 48VDC Plug Power Gencore Fuel Cell system.
Fuel cells utilize hydrogen and hydrogen-rich fuels to generate electricity and useful heat in a remarkably efficient way. A fuel cell is an electrochemical device that combines hydrogen and oxygen to create electricity heat and water. Because the conversion of hydrogen occurs without combustion, fuel cells do not produce the emissions normally associated with combustion such as carbon dioxide, oxides of nitrogen, carbon monoxide and particulates. Fuel cells are secure, reliable and high-quality power at the point of demand, with some systems able to provide high quality thermal energy as well as electric energy. Because many renewables like wind and solar produce intermittent power, a natural symbiotic relationship exists since fuel cells have the ability to generate electricity regardless of weather conditions. Fuel cells can act as a power storage technology converting off-peak generated wind and solar energy to peak power. Clean power that emits virtually no pollution during the power generation is a natural complement to intermittent renewable technologies such as wind and solar.
Introducing fuel-neutrality for fuel cells into every RPS in the short term will provide a bridge to renewably generated hydrogen. Currently, supplies of renewably generated hydrogen are scarce and the delivery systems not readily available. Simply put, today’s fuel cells that use existing fossil fuels (much more efficiently and cleaner than any combustion engines) can also use hydrogen from renewable sources as they become cost-competitive and the production and delivery of renewably generated hydrogen catches up with the demand. In this manner, the use of hydrogen from the conversion of hydrocarbons is seen as a temporary expedient to the long-term development of fuel cells. Moreover, even when they run off of fossil fuel derived hydrogen, the inherent efficiencies of the fuel cell systems, and the lack of combustion is an incremental advancement in the fight against climate change.
The vision of the future displayed in the Kahua Ranch project will only be advanced in the short term if fuel cells that utilize hydrogen reformed from fossil fuels are made a part of any federal RPS. At its core, a RPS should promote technologies that have a legitimate chance of substantially lowering pollution, reducing stress on the utility grid, spurring economic development, increasing our energy independence and fostering demand for hydrogen production and delivery systems that will eventually be renewably generated.
Initially, it may sound counter intuitive, but by allowing hydrogen generated from fossil fuels in any RPS, a critical component to generating the demand for renewably generated hydrogen will be in place and our path toward a more sustainable and energy independent future will be advanced. This model is not without precedent. New York, Pennsylvania, Connecticut, Minnesota, Colorado, Maine all include fuel cells as renewable resources regardless of the fuel supplied.
