Monday, October 30, 2006


Governing mag pundit on why power dereg failed

Why Dereg Didn’t Work
Electricity and Economics 101

Deregulation was a great success in the airline and trucking industries. So why has it been such a flop among electric utilities? There are many reasons, but one stands out: It takes a long time and a lot of money to build a power plant. Why is that important? Glad you asked. Grab a seat. The Economics 101 class is about to begin.

As any economist will tell you, free markets are efficient. When we want stuff that’s in short supply, prices rise, and before you know it, factories are pumping out the things we want. And then something fascinating happens: As all these things flood the market, prices level off, then decline, and factories stop producing so much. If demand surges again (or supplies dwindle), prices rise, factories call back the third shift, more stuff gets produced, and on and on it goes.

Notice the role that prices play. Funny to think about them this way, but at their core prices are high-quality information, signals that tell businesses when to step up production, add more assembly lines, build new factories ... or cut production, close assembly lines and shutter plants. (In communist countries, governments tried substituting plans for prices, but it didn’t work because five-year plans don’t deliver information as quickly or decisively as prices.)

So what does this have to do with deregulation? For prices to work their magic, they need a reasonable response time, a time during which signals (we want more!) result in action (call in the third shift and start building a new factory!). It turns out that airlines and trucking companies can respond to those signals in a reasonable amount of time, but electric-generation companies can’t.

Why? Because it takes so much time and money to build a plant. In the years it takes to site, build and power up a generation plant (given the engineering and environmental restrictions, not to mention objections from neighborhood groups), prices can go up, down or sideways numerous times. And not just at the consumer level. Most of the power plants built in recent years burn natural gas, which was cheap, available and more environmentally friendly than coal until ... oops, Hurricane Katrina knocked out much of Louisiana’s natural-gas production last year and gas prices went through the roof.

Well, if it’s so hard to predict a decade out how much electricity we’ll need, how have power companies managed it in the past? Through a system of shared responsibility. The electric companies made their guesses, state public service commissions verified the reasonableness of the estimates, then committed the state’s consumers to paying for those plants, regardless of how things actually turned out.

Compared to the mess caused by deregulation, that looks like a reasonable way of providing such a vital but difficult-to-create commodity. Not convinced? Ask consumers in Houston, where, according to the New York Times, a botched state deregulation plan has produced electric rates nearly double the national average.

Footnote: There are other reasons electric deregulation hasn’t worked as planned. In some cases, the deregulation schemes were deeply flawed (deregulating, for instance, the prices utilities paid their suppliers but continuing regulation of consumer rates). In others, the free market wasn’t really free; that is, not enough companies jumped into the electric generation business to create a free market. And, of course, deregulation opened the door to all kinds of financial shenanigans and outright market manipulation. One word describes how heedlessly state legislatures deregulated electric power: Enron.

Posted October 27, 2006


Great idea -- commuter rail in Michigan

* Passenger rail idea has a powerful advocate Railroad owner backs mayor
on concept Ann Arbor News By John Mulcahy
Louis Ferris joins up with Ann Arbor Mayor John Hieftje and other
proponents of a commuter rail service between Ann Arbor and Livingston
County and perhaps other points north.

Passenger rail idea has a powerful advocate Railroad owner backs mayor
on concept
Sunday, October 29, 2006

News Staff Reporter

Louis Ferris - salesman, entrepreneur, financier and now railroad owner
- believes a lot in creativity.

That will be a key element as Ferris joins up with Ann Arbor Mayor John
Hieftje and other proponents of a commuter rail service between Ann
Arbor and Livingston County and perhaps other points north.

In March, Ferris bought the Tuscola Saginaw Bay Railway and renamed it
the Great Lakes Central Railroad. Operating on tracks that run north
from Ann Arbor, through Howell and all the way to Traverse City, the
line hauls cherries, logs, sand, rock and tons of grain.

But a major goal for Ferris is offering passenger service.

"As I would see it in my lifetime, for this generation, the ultimate
goal is to bring passenger rail successfully to the state of Michigan
... between Ann Arbor and the northwest cities, and that includes
commuter rail,'' Ferris said.

Hieftje, who has long advocated some kind of rail service from
Livingston County as an alternative to expanding US-23 to ease traffic
congestion, contacted Ferris this spring.

"When we heard that Great Lakes Railroad had bought the rights to the
line and that they were interested in commuter rail, we were thrilled,''
Hieftje said. "We thought it was a piece of providence that had fallen
into our laps.''

Both Ferris and Hieftje will face formidable challenges making the
commuter rail dream come true. While the estimated $27 million needed to
start the service is small by railroad startup standards, the tracks and
signals along the aging route will have to be improved, stations will
have to be built and some form of operating subsidy will almost
certainly have to be found.

Having Ferris on his side has lent some credibility to Hieftje's claim
that the commuter service, or some portion of it, can be up and running
in three years.

"Great Lakes Central Railroad is certainly a huge component if we're
going to achieve commuter rail from Ann Arbor to Howell,'' Hieftje said.

A track record of success

There can be little doubt that Ferris is a can-do kind of guy. He lives
on a 100-acre estate in Superior Township in a 20,000-square-foot house
that could be mistaken for a Frank Lloyd Wright design. After starting
out as a salesman, in 1974 he founded what grew over the years into
Federated Financial Corp. of America. The company finances industrial,
manufacturing and transportation equipment, buys large amounts of
commercial debt at discounts and collects on it, installs technology in
national-chain retail outlets and invests money in other businesses.

Ferris has helped finance, or has had an interest in, businesses as
divergent and far-flung as a restaurant in Ann Arbor, cellular phone
leasing and sales, and a company in Europe that rebuilds automatic
transmissions. More recently, he bought what is now Bella Vino
Marketplace on Plymouth Road in Ann Arbor, which he supplies with
mutton, blueberries, vegetables and honey produced on his estate.

Ferris grew up near downtown Detroit. His father was a skilled tradesman
at the General Motors Willow Run plant, his mother a homemaker. Early in
life, he said, he wondered about the difference between those who drove
large cars and wore suits to work, and everybody else.

"I realized there wasn't any difference between people,'' he said.

With that in mind, Ferris set out to achieve some goals. From being a
top shoe salesman at 15, he graduated to selling electronic protection,
background music, computer time shares and other products. He became a
salesman in several industries and by age 31 was constructing his own
building at Northwestern Highway and 13 Mile Road, where Federated
Financial Corp. of America still is based.

His company has leased and lent out more than $2 billion over its
history, he said.

"I'm really in the wholesale-retail business,'' he said. "I buy money
wholesale and I lend it out retail, and I take the risk.''

Ferris has been able to see opportunity where others haven't. For
instance, in the early days of cellular phones, when many people found
they couldn't pay the monthly charges, Ferris worked out a deal with the
cellular phone companies that allowed him to lease phones, collect those
in default and resell them. At one point, he says he had an inventory of
1 million phones.

But can a man who made his money in sales, leasing and financial
services successfully operate at passenger rail line?

"It's all about creativity,'' Ferris said during an interview at his
home in front of a fireplace looking out on a pond and fountain. "Yes,
goals have a lot to do with it. But creativity is more how an idea is

With creativity, up in

3 years

Though it may take a good deal of creativity, at least some rail service
between Ann Arbor and Livingston County could be up and running in as
little as three years, said Eli Cooper, transportation program manager
for the city of Ann Arbor.

For instance, with a park-and-ride lot and a boarding platform at an old
industrial site where the Great Lakes track crosses Eight Mile Road,
another boarding platform at Barton Drive and Plymouth Road in Ann
Arbor, and some buses to meet the train, a portion of the proposed
commuter line could be up and running in a relatively short time and
with relatively little cost, Cooper said.

Rather than go through the time-consuming process needed to get federal
short-line start-up funds, the city could more quickly seek the needed
money piecemeal from a variety of federal and state programs - including
federal pollution mitigation funds, some federal surface transportation
funds and some state transportation funds that come to the city to be
used for pedestrian improvements, to name some examples, Cooper said.

He said he also believes the private sector may be willing to invest.
One idea: What if the boarding platform and park-and-ride lot at Eight
Mile Road was part of some mixed commercial and residential development
on that land?

"I'm not sitting here saying that these are highly likely funding
sources,'' Cooper said. However, there is some advantage in getting
something up and running sooner rather later for people who frequently
get stuck in the congestion on US-23 on their way to work, he said.

Ultimately, there will have to be some kind of operating subsidy for the
rail service, since no public transport anywhere in the country operates
just on revenue from the fare box, Cooper said. That, also, might be
some combination of public and private money. The city, or whatever
entity was chosen to be in charge of the service, would negotiate a deal
with Great Lakes Central Railroad to operate the service, he said.

State's timetable slower

Cooper and Hieftje have some support for their view that some level of
commuter service can be up and running in a relatively short time.

"I think it's going to depend a great deal on whether MDOT steps up to
the plate and gets serious about rail in the state,'' said Terri
Blackmore, executive director of the Washtenaw Area Transportation

In August, the Michigan

Department of Transportation announced a $500,000 study of the US-23
corridor that will

include the existing rail line as a possible way to improve
transportation along the corridor. Another much-talked-about option
would add a bus or high-occupancy-vehicle-only lane in each direction.

In either case, the study will take 18 months and will provide only the
initial steps of the full-blown environmental impact statement that
would be necessary before the state could even seek federal construction
funds for widening the highway, improving the tracks or any other
proposed improvements.

Backers of the commuter rail idea want to avoid that excruciatingly slow

Ronald DeCook, director of MDOT's Office of Governmental Affairs, said
Ann Arbor will not be able to get federal rail startup funds without the
environmental impact statement, but that doesn't preclude city officials
from trying some other means to get a rail service running.

"If they've got a plan for it, that's fine,'' DeCook said. "I applaud
the mayor.''

Hieftje said he wants to see rail tried before improvements to US-23. He
compares the projected $500 million cost of adding a third lane in each
direction to the highway between Ann Arbor and Brighton with the
estimated $27 million for the rail project.

"Why would we spend $500 million expanding US-23 before we see what we
can do for $27 million?'' he asks.

For his part, Ferris is convinced that passenger rail service has a
great future in the United States.

"Somebody is going to have to make this model work, because it works in
Europe, it works everywhere in the world, it's working in the United
States,'' Ferris said.

Ferris, who bought 52 double-decker, stainless steel railroad cars even
before he bought the railroad, believes he can draw on the technology,
people and equipment he already has to make rail passenger service a

"I bought the railroad because I want to do passenger rail,'' Ferris
said. "If you believe in the goals you set for yourself, you can achieve
them. I really believe that.''

John Mulcahy can be reached at or


As temps go up, R&D $ to combat global heating dropping
October 30, 2006
The Energy Challenge
Budgets Falling in Race to Fight Global Warming
DENVER — Cheers fit for a revival meeting swept a hotel ballroom as 1,800 entrepreneurs and experts watched a PowerPoint presentation of the most promising technologies for limiting global warming: solar power, wind, ethanol and other farmed fuels, energy-efficient buildings and fuel-sipping cars.

“Houston,” Charles F. Kutscher, chairman of the Solar 2006 conference, concluded in a twist on the line from Apollo 13, “we have a solution.”

Hold the applause. For all the enthusiasm about alternatives to coal and oil, the challenge of limiting emissions of carbon dioxide, which traps heat, will be immense in a world likely to add 2.5 billion people by midcentury, a host of other experts say. Moreover, most of those people will live in countries like China and India, which are just beginning to enjoy an electrified, air-conditioned mobile society.

The challenge is all the more daunting because research into energy technologies by both government and industry has not been rising, but rather falling.

In the United States, annual federal spending for all energy research and development — not just the research aimed at climate-friendly technologies — is less than half what it was a quarter-century ago. It has sunk to $3 billion a year in the current budget from an inflation-adjusted peak of $7.7 billion in 1979, according to several different studies.

Britain, for one, has sounded a loud alarm about the need for prompt action on the climate issue, including more research. [A report commissioned by the British government and scheduled to be released today calls for spending to be doubled worldwide on research into low-carbon technologies; without it, the report says, coastal flooding and a shortage of drinking water could turn 200 million people into refugees.]

President Bush has sought an increase to $4.2 billion for 2007, but that would still be a small fraction of what most climate and energy experts say would be needed.

Federal spending on medical research, by contrast, has nearly quadrupled, to $28 billion annually, since 1979. Military research has increased 260 percent, and at more than $75 billion a year is 20 times the amount spent on energy research.

Internationally, government energy research trends are little different from those in the United States. Japan is the only economic power that increased research spending in recent decades, with growth focused on efficiency and solar technology, according to the International Energy Agency.

In the private sector, studies show that energy companies have a long tradition of eschewing long-term technology quests because of the lack of short-term payoffs.

Still, more than four dozen scientists, economists, engineers and entrepreneurs interviewed by The New York Times said that unless the search for abundant non-polluting energy sources and systems became far more aggressive, the world would probably face dangerous warming and international strife as nations with growing energy demands compete for increasingly inadequate resources.

Most of these experts also say existing energy alternatives and improvements in energy efficiency are simply not enough.

“We cannot come close to stabilizing temperatures” unless humans, by the end of the century, stop adding more CO2 to the atmosphere than it can absorb, said W. David Montgomery of Charles River Associates, a consulting group, “and that will be an economic impossibility without a major R.& D. investment.”

A sustained push is needed not just to refine, test and deploy known low-carbon technologies, but also to find “energy technologies that don’t have a name yet,” said James A. Edmonds, a chief scientist at the Joint Global Change Research Institute of the University of Maryland and the Energy Department.

At the same time, many energy experts and economists agree on another daunting point: To make any resulting “alternative” energy options the new norm will require attaching a significant cost to the carbon emissions from coal, oil and gas.

“A price incentive stirs people to look at a thousand different things,’ ” said Henry D. Jacoby, a climate and energy expert at the Massachusetts Institute of Technology.

For now, a carbon cap or tax is opposed by President Bush, most American lawmakers and many industries. And there are scant signs of consensus on a long-term successor to the Kyoto Protocol, the first treaty obligating participating industrial countries to cut warming emissions. (The United States has not ratified the pact.)

The next round of talks on Kyoto and an underlying voluntary treaty will take place next month in Nairobi, Kenya.
Environmental campaigners, focused on promptly establishing binding limits on emissions of heat-trapping gases, have tended to play down the need for big investments seeking energy breakthroughs. At the end of “An Inconvenient Truth,” former Vice President Al Gore’s documentary film on climate change, he concluded: “We already know everything we need to know to effectively address this problem.”

While applauding Mr. Gore’s enthusiasm, many energy experts said this stance was counterproductive because there was no way, given global growth in energy demand, that existing technology could avert a doubling or more of atmospheric concentrations of carbon dioxide in this century.

Mr. Gore has since adjusted his stance, saying existing technology is sufficient to start on the path to a stable climate.

Other researchers say the chances of success are so low, unless something breaks the societal impasse, that any technology quest should also include work on increasing the resilience to climate extremes — through actions like developing more drought-tolerant crops — as well as last-ditch climate fixes, like testing ways to block some incoming sunlight to counter warming.

Without big reductions in emissions, the midrange projections of most scenarios envision a rise of 4 degrees or so in this century, four times the warming in the last 100 years. That could, among other effects, produce a disruptive mix of intensified flooding and withering droughts in the world’s prime agricultural regions.

Sir Nicholas Stern, the chief of Britain’s economic service and author of the new government report on climate options, has summarized the cumulative nature of the threat succinctly: “The sting is in the tail.”

The Carbon Dioxide Problem
Many factors intersect to make the prompt addressing of global warming very difficult, experts say.
A central hurdle is that carbon dioxide accumulates in the atmosphere like unpaid credit card debt as long as emissions exceed the rate at which the gas is naturally removed from the atmosphere by the oceans and plants. But the technologies producing the emissions evolve slowly.

A typical new coal-fired power plant, one of the largest sources of emissions, is expected to operate for many decades. About one large coal-burning plant is being commissioned a week, mostly in China.

“We’ve got a $12 trillion capital investment in the world energy economy and a turnover time of 30 to 40 years,” said John P. Holdren, a physicist and climate expert at Harvard University and president of the American Association for the Advancement of Science. “If you want it to look different in 30 or 40 years, you’d better start now.”

Many experts say this means the only way to affordably speed the transition to low-emissions energy is with advances in technologies at all stages of maturity.

Examples include:
¶ Substantially improving the efficiency and cost of solar panels;
¶ Conducting full-scale tests of systems for capturing carbon dioxide from power plants and pumping it underground;
¶ Seeking efficient ways to generate fuels from crops;
¶ Finding new ways to store vast amounts of energy harvested intermittently from the wind and sun.
Carbon dioxide levels will stabilize only if each generation persists in developing and deploying alternatives to unfettered fossil-fuel emissions, said Robert H. Socolow, a physicist and co-director of a Princeton “carbon mitigation initiative” created with $20 million from BP and Ford Motor.

The most immediate gains could come simply by increasing energy efficiency. If efficiency gains in transportation, buildings, power transmission and other areas were doubled from the longstanding rate of 1 percent per year to 2 percent, Dr. Holdren wrote in the M.I.T. journal Innovations earlier this year, that could hold the amount of new nonpolluting energy required by 2100 to the amount derived from fossil fuels in 2000 —a huge challenge, but not impossible.

Another area requiring immediate intensified work, Dr. Holdren and other experts say, is large-scale demonstration of systems for capturing carbon dioxide from coal burning before too many old-style plants are built.

All of the components for capturing carbon dioxide and disposing of it underground are already in use, particularly in oil fields, where pressurized carbon dioxide is used to drive the last dregs of oil from the ground.

In this area, said David Keith, an energy expert at the University of Calgary, “We just need to build the damn things on a billion-dollar scale.”

In the United States, the biggest effort along these lines is the 285-megawatt Futuregen power plant planned by the Energy Department, along with private and international partners, that was announced in 2003 by President Bush and is scheduled to be built in either Illinois or Texas by 2012. James L. Connaughton, the chairman of the White House Council on Environmental Quality, said the Bush administration was making this a high priority.

“We share the view that a significantly more aggressive agenda on carbon capture and storage and zero-pollution coal is necessary,” he said, adding that the administration has raised annual spending on storage options “from essentially zero to over $70 million.”

Europe is pursuing a suite of such plants, including one in China, but also well behind the necessary pace, several experts said.

Even within the Energy Department, some experts are voicing frustration over the pace of such programs. “What I don’t like about Futuregen,” said Dr. Kutscher, an engineer at the National Renewable Energy Laboratory in Golden, Colo., “is the word ‘future’ in there.”

Beyond a Holding Action
No matter what happens in the next decade or so, many experts say, the second and probably hardest phase of stabilizing the level of carbon dioxide will fall to the generation of engineers and entrepreneurs now in diapers, and the one after that. And those innovators will not have much to build on without greatly increased investment now in basic research.

There is plenty of ferment. Current research ranges from work on algae strains that can turn sunlight into hydrogen fuel to the inkjet-style printing of photovoltaic cells — a technique that could greatly cut solar-energy costs if it worked on a large scale. One company is promoting high-flying kite-like windmills to harvest the boundless energy in the jet stream.

But all of the small-scale experimentation will never move into the energy marketplace without a much bigger push not only for research and development, but for the lesser-known steps known as demonstration and deployment.

In this arena, there is a vital role for government spending, many experts agree, particularly on “enabling technologies” — innovations that would never be pursued by private industry because they mainly amount to a public good, not a potential source of profit, said Christopher Green, an economist at McGill University.

Examples include refining ways to securely handle radioactive waste from nuclear reactors; testing repositories for carbon dioxide captured at power plants; and, perhaps more important, improving the electricity grid so that it can manage large flows from intermittent sources like windmills and solar panels.

“Without storage possibilities on a large scale,” Mr. Green said, “solar and wind will be relegated to niche status.”
While private investors and entrepreneurs are jumping into alternative energy projects, they cannot be counted on to solve such problems, economists say, because even the most aggressive venture capitalists want a big payback within five years.

Many scientists say the only real long-term prospect for significantly substituting for fossil fuels is a breakthrough in harvesting solar power. This has been understood since the days of Thomas Edison. In a conversation with Henry Ford and the tire tycoon Harvey Firestone in 1931, shortly before Edison died, he said: “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”

California, following models set in Japan and Germany, is trying to help solar energy with various incentives.
But such initiatives mainly pull existing technologies into the market, experts say, and do little to propel private research toward the next big advances. Even Vinod Khosla, a leading environment-oriented venture capitalist who invests heavily in ethanol and other alternative energy projects, said in an interview that he was not ready to back solar power because it did not appear able to show a profit without subsidies.

The Role of Leadership
At the federal level, the Bush administration was criticized by Republican and Democratic lawmakers at several recent hearings on climate change.

Mr. Connaughton, the lead White House official on the environment, said most critics are not aware of how much has been done.

“This administration has developed the most sophisticated and carefully considered strategic plan for advancing the technologies that are a necessary part of the climate solution,” he said. He added that the administration must weigh tradeoffs with other pressing demands like health care.

Since 2001, when Mr. Bush abandoned a campaign pledge to limit carbon dioxide from power plants, he has said that too little is known about specific dangers of global warming to justify hard targets or mandatory curbs for the gas.

He has also asserted that any solution will lie less in regulation than in innovation.
“My answer to the energy question also is an answer to how you deal with the greenhouse-gas issue, and that is new technologies will change how we live,” he said in May.

But critics, including some Republican lawmakers, now say that mounting evidence for risks — including findings that administration officials have tried to suppress of late — justifies prompt, more aggressive action to pay for or spur research and speed the movement of climate-friendly energy options into the marketplace.

Martin I. Hoffert, an emeritus professor of physics at New York University, said that what was needed was for a leader to articulate the energy challenge as President John F. Kennedy made his case for the mission to the moon. President Kennedy said they were imperative, “not because they are easy, but because they are hard.”

In a report on competitiveness and research released last year, the National Academies, the country’s top science advisory body, urged the government to substantially expand spending on long-term basic research, particularly on energy.

The report, titled “Rising Above the Gathering Storm,” recommended that the Energy Department create a research-financing body similar to the 48-year-old Defense Advanced Research Projects Agency, or Darpa, to make grants and attack a variety of energy questions, including climate change.

Darpa, created after the Soviet Union launched Sputnik in 1957, was set up outside the sway of Congress to provide advances in areas like weapons, surveillance and defensive systems. But it also produced technologies like the Internet and the global positioning system for navigation.

Mr. Connaughton said it would be premature to conclude that a new agency was needed for energy innovation.
But many experts, from oil-industry officials to ecologists, agree that the status quo for energy research will not suffice.

The benefits of an intensified energy quest would go far beyond cutting the risks of dangerous climate change, said Roger H. Bezdek, an economist at Management Information Systems, a consulting group.

The world economy, he said, is facing two simultaneous energy challenges beyond global warming: the end of relatively cheap and easy oil, and the explosive demand for fuel in developing countries.

Advanced research should be diversified like an investment portfolio, he said. “The big payoff comes from a small number of very large winners,” he said. “Unfortunately, we cannot pick the winners in advance.”

Ultimately, a big increase in government spending on basic energy research will happen only if scientists can persuade the public and politicians that it is an essential hedge against potential calamity.

That may be the biggest hurdle of all, given the unfamiliar nature of the slowly building problem — the antithesis of epochal events like Pearl Harbor, Sputnik and 9/11 that triggered sweeping enterprises.

“We’re good at rushing in with white hats,” said Bobi Garrett, associate director of planning and technology management at the National Renewable Energy Laboratory. “This is not a problem where you can do that.”

Saturday, October 28, 2006


Looks like a must-read

"This book should be read by every intelligent person."
– Robert Lieberman, Cornell University

The Second Law of Life
Energy, Technology, and the Future of Earth As We Know It
By John E.J. Schmitz, $27.99

Each moment of every day, we lose irreplaceable energy, and “modern”
technology is not helping. In fact, it is accelerating the problem at a
catastrophic rate. This compelling and important book explains how
entropy (the second law of thermodynamics) leads to seeing our
environmental and energy problems more clearly. Understanding this
critical science will lead to more complete solutions and future
generations will not be faced with the most severe of consequences.

"The book gives an excellent overview of thermodynamics and
entropy...Certainly the relationship with environmental issues is clear…"

- Martin Heerschop, General Electric

"As a lay reader, I found this book on thermodynamics to be fascinating
and easy to follow. Schmitz gives the reader a solid understanding of
basic thermodynamics theory and the concept of entropy, along with a
systematic description of how these ideas relate to every day life."

– Paul Newman, University of Texas at Austin

"This is one of the most personal science based books I've ever read,
explaining not just the history of the topic, but the author’s own
personal journey into discovering it's wonders and implications for us
all. For fellow fans of Carl Sagan's 'Cosmos' TV series on Astrophysics,
this book has the same style. I hope you all enjoy it as much as I did."

- Matt Grimshaw, Future Fab International

If you have any questions or comments, please contact Brent Beckley via
email at If you do not wish to receive
such emails, please reply and type REMOVE into the subject line.

William Andrew Publishing
13 Eaton Avenue
Norwich, NY 13815

Friday, October 27, 2006


Excellent ethanol survey (Chi Trib)

Beyond corn: Ethanol's next generation,0,7209827.story?coll=chi-business-hed
Scientists seek cheap, plentiful energy alternatives

By Michael Oneal
Tribune staff reporter
Published October 13, 2006

WEST LAFAYETTE, Ind. -- Sitting in a cluttered, windowless office here surrounded by pictures of her three grandchildren, Nancy W.Y. Ho did her best on a recent afternoon to show why everything you thought you knew about ethanol is wrong.

It's not just about distilling auto fuel from corn, explained the 71-year-old molecular biologist from China. It's about weaning America from its self-destructive oil habit by tapping the energy in everything else that grows--and rots--all around us.

Ho has spent the better part of a career at Purdue University figuring out how to rejigger the DNA of a simple form of brewer's yeast by cloning a gene nobody else had thought to clone.

Now, if you stir her creation into a beaker filled with the sugars derived from throwaway organic materials like wheat straw, switch grass, orange peels, even municipal garbage, it will gradually convert most of them into high-octane auto fuel.

"Everybody knows that [corn] is not enough," Ho said. "We have to use all the resources we can."

As the combines roll across fields throughout the Corn Belt this harvest season, the debate over ethanol has never been hotter. On Wednesday, President Bush reiterated his support for ethanol funding at a conference on renewable energy in St. Louis. But critics bemoaning the folly of hefty government subsidies over the years continue to insist that ethanol is a wasteful, extravagant boondoggle.

Producing ethanol from corn in any real volume, they say, threatens the food supply, uses too much land and creates a litany of messy environmental issues. The U.S. burns through 140 billion gallons of gasoline a year. Replacing that with ethanol is pipe dream.

Changing the game

For a growing number of scientists, entrepreneurs and policymakers, however, the constant grumbling about corn ethanol entirely misses the point. While they don't disagree that the corn-based fuel has major limitations, they insist that obsessing over them is like disparaging first-generation personal computers for being slow and unwieldy.

Breakthroughs in genetic and industrial engineering, they insist, are changing the game. Not only is technology making corn ethanol more efficient, but researchers like Ho are making striking progress toward tapping what scientists call cellulosic biomass, the vast store of non-food plant matter that grows and renews itself daily.

If they succeed, many experts believe, cellulosic ethanol could be a plentiful, cheap and easily renewable oil alternative, with few of the negatives that plague the corn-based variety.

"It's the holy grail ... if you can make it work," said John Felmy, chief economist at the American Petroleum Institute.

The question is, can you really make it work?

On a sun-baked plateau in Golden, Colo., scientists at the Department of Energy's National Renewable Energy Laboratory have been working on that question for three decades. James McMillan, a top biochemical engineer at the lab, said the outlook has never been brighter.

One measure of that promise is the unprecedented investment pouring into the industry. Most recently, British transportation magnate Richard Branson has pledged $3 billion over 10 years for research into cellulosic ethanol and other biofuels. BP PLC, the world's second-largest oil company, has earmarked $1 billion to be split evenly between research and venture financing.

Even Bush has surprised his allies in the oil business by pushing the Energy Department to dole out more than $400 million in fresh funding for ethanol-related research and development.

"This country's got to use its talent and its wealth to get us off oil," Bush said on Wednesday. "I believe, and Congress agrees, that the proper use of tax credits will help stimulate a new industry that will help our economy and help us with national security."

Strolling through a state-of-the-art test facility in Golden devoted to distilling cellulosic ethanol, however, McMillan makes it clear that the future isn't here yet. The building is a welter of pipes, tanks and valves, and as he points out the different phases of the production process he notes that crucial improvements must be made to each if cellulosic ethanol is ever going to truly compete with oil.

Looming stubbornly in front of researchers is a masterpiece of evolution: the rigid cell walls that give plants their strength and resiliency. Developed over the eons, these walls allow a slender stalk of prairie grass to bend like a ballerina in the wind yet snap back to attention to fend off cold, heat and pestilence. They help explain why a field of corn can grow over a man's head in a matter of a few short months.

The problem is, breaking down those walls is like robbing a bank. While the starch in corn kernels gives up its energy-packed sugars easily, the sugars in plant cell walls are locked into winding structures of complex carbohydrates designed to give plants backbone and protection.

Getting at those sugars in an efficient way is the secret to tapping the energy potential of cellulosic biomass, McMillan explained. Researchers long have known how to do it in the lab. But nobody has yet proved it can be done profitably in a commercial-scale plant. To get there, some of the best minds in science are creating such wonders as fungi that are genetically modified to spit out vats of powerful enzymes, and transgenic prairie grasses that are bursting with energy yet engineered to break down more easily.

"This is transformative technology," said Sharlene Weatherwax, a program manager in the U.S. Energy Department's Office of Science. "It's pretty daunting."

What's even more daunting is the economic challenge. Estimates are unreliable, but at the moment most experts believe it is probably more expensive to produce a gallon of cellulosic ethanol than an equivalent volume of gasoline. The comparison is even less favorable if you consider that ethanol produces about a third fewer miles per gallon than gasoline in typical engines. Fighting through these hurdles is attractive when oil is at $70 a barrel, but less so as the price falls. Most experts agree that corn ethanol is cost competitive when the price per barrel of oil is $40 or higher.

Despite using cheaper feedstocks to make cellulosic ethanol, the capital outlay to build more complicated plants drives up costs. McMillan said that it runs from $2.50 to $4 per gallon of capacity to build a typical cellulosic-ethanol plant. That compares with $1 to $1.50 for a corn-ethanol plant.

Plowing ahead

None of this has stopped pioneering companies like Canada's Iogen Corp. or Spain's Abengoa Bioenergy from plowing ahead with plans to build what the ethanol industry calls biorefineries. The Department of Energy has allocated $160 million to help develop three cellulosic demonstration plants. Iogen, Abengoa and several others have applied.

These ventures are highly risky but exactly what the industry needs, said Steven Koonin, oil giant BP's chief scientist. As the technology matures, he said, somebody like Iogen needs to build a plant, power through the learning curve and solve the inevitable problems that crop up.

Jeff Passmore, Iogen's executive vice president of development, is confident his company is well on the way to cracking the cellulosic-ethanol problem. But he also concedes that developing a new plant at commercial scale represents more a voyage of discovery than a hard and fast business plan.

"The more you know," Passmore said, "the more you know you don't know."

The reason Passmore and others persevere is that the knowledge gap has been closing faster over the past several years than it has for the past three decades. Breakthroughs in biotechnology are producing gains in productivity that are steadily driving costs out of each phase of the cellulosic production process.

Iogen, for instance, is using Ho's genetically modified yeast organism to address a major competitive handicap. As much as 40 percent of the sugars contained in typical forms of cellulosic biomass are of a type that normal yeast won't metabolize. Consequently, the process starts out at a 40 percent efficiency disadvantage to corn ethanol, which produces sugars that are 100 percent convertible with normal yeast.

The goal of Ho's cloning exercise was to tweak the yeast into converting both kinds of sugars almost simultaneously, boosting fermenting efficiency substantially. The result is a major step forward, but Ho and her colleague, Miroslav Sedlak, hope to do better. They are toiling to make the organism more efficient.

"With industry," Ho said. "if its not efficient, nobody is going to use it."

For Chicago native Mark Emalfarb, who founded a Florida biotech company called Dyadic International Inc., the hard work originally involved stonewashed jeans.

In the early 1990s, he ferreted out a fungus discovered on the floor of a lakeside forest on Russia's Pacific Coast. Known as chrysosporium lucknowense, or C1, the organism produced the kinds of cotton-fading enzymes that allowed denim companies to take the stones out of the stonewash process.

What the enzymes actually did was break down the plant cell walls in cotton, the same metabolic process needed to release the sugars for cellulosic ethanol. Unfortunately, the fungus produced the enzymes only in tiny amounts. So Emalfarb hired a team of scientists to bombard C1 with ultraviolet radiation until it one day mutated into a "biofactory" that could spit out enzymes in commercial quantities.

"We don't even know how the hell it happened," Emalfarb said. "It was serendipitous."

Dyadic has since introduced C1 into the same kind of high-speed robotic screening process that pharmaceutical companies use to ferret out new drugs. That means splicing different sequences of DNA into thousands of individual C1 fungi at a time and seeing what enzymes each one produces as a result of its newly altered genome.

The goal is to find enzymes, or "cocktails" of enzymes, that are particularly adept at breaking down various kinds of plant matter. Once researchers find the right enzyme recipe for breaking down, say, wood chips, they can genetically alter C1 to produce that particular blend of enzymes in quantity, something evolution might take eons to do.

"It's like Charles Darwin on steroids," said Dyadic Vice President Sasha Bondar.

Ancient discovery

Mike Himmel, a principal scientist at the National Renewable Energy Laboratory, said this sort of eye-popping research is happening across many branches of science and engineering. He recently attended a conference in Aspen, Colo., where a plant geneticist gave a paper on primordial plants that had low levels of a substance called lignin and high levels of sugar. Because the plants grew in swamps, they hadn't yet evolved the defensive structures that lignin offers modern plants.

"It occurred to me that what people are really going to be doing here is redefining modern plants to look more like ancient plants," Himmel said.

Richard Hamilton, CEO of a California plant genetics company called Ceres Inc., is trying to do exactly that. By analyzing 12,000 switch-grass genes and characterizing the genetic variation associated with each one, Ceres has created a trait database that it hopes to use to create the most effective varieties of "energy crops."

Already, Ceres and its partner, the Samuel Roberts Noble Foundation, are marking genes to increase the effectiveness of conventional breeding. But they are working to perfect cloning strategies that turn on or turn off specific genes that regulate traits like yield, drought tolerance or plant structure.

Using the fruit fly of the plant world, a rapid-growing species called arabidopsis thaliana, the company clones hundreds of transgenic plants a week. The goal is to find novel traits--plants that might break down more easily in a biorefinery, for instance, or varieties that produce more energy per acre.

That would address what Hamilton termed "the tyranny of distance," a major cost issue for would-be producers of cellulosic ethanol. If a refinery needs tons of biomass to produce fuel, he said, "by the end of the year you're driving your truck a long way to get that wheat or corn stover." If Ceres could develop a higher-yielding plant, travel distance, and cost, would shrink accordingly, he said.

When asked how long it will take to transform some of these ideas into reality, Hamilton and others in the industry tend to shrug.

"Trying to predict technology trends is a fool's game," he said. "I wish I could put my finger on just one bottleneck. But it doesn't work that way."

On the other hand, most experts in the field agree that focus is a powerful thing, especially when the federal government starts to put real resources behind an idea. As evidence that giant steps can be made in a hurry, McMillan points to two enzyme companies called Novozymes Inc. and Genencor International. They took approximately $40 million in Department of Energy funding over five years and knocked the cost of the latest enzymes down from about $5.50 per gallon to about 20 cents.

The Department of Energy has set a goal of supplying 30 percent of the nation's need for transportation fuels with ethanol by 2030, a tall order given that ethanol currently supplies about 3.6 percent of the 140 billion gallons of gasoline we consume each year.

But even some unlikely sources say the need for oil alternatives is severe enough to drive a major transformation.

"We're not going to replace oil in the next 20 years, but the resource is finite," said BP chief scientist Koonin. "The world is going to need more diverse hydrocarbons going forward. ... For many reasons it seems that this is the right thing at the right time. It's very exciting."


- - -

Not all ethanol created equal

The vast majority of U.S.-made ethanol uses corn as its primary ingredient, but some researchers say that ethanol made from cellulosic biomass, or plant waste, is a better alternative.


For fuel, scale in billions of gallons

1980 '85 '90 '95 2000 '05

2005: 3.9 billion


Primary ingredient: Corn kernels



Corn kernels are ground into flour, and water is added to form a "mash."

Unlocking sugars

Common enzymes are added to the mash to convert starches into dextrose, a simple sugar.


The mash is cooked to reduce bacteria levels and then cooled.


Yeast is added to the mash in fermenters. After 40-50 hours, the sugar in the mash ferments into ethanol.


Ethanol is separated from the rest of the mash and concentrated.


Ethanol is blended with about 5 percent of a denaturant to make it undrinkable and thus not subject to a liquor tax.

Finished ethanol for storage


- Starch in kernels contains easily accessible sugars to be converted to energy.


- Expanded use could lead to an increase in food prices and the need for much more cropland.

- Growing more corn and processing it into ethanol would require additional use of fossil fuels.


Primary ingredient: Corn stalks, switch grass, wood chips, organic waste.


(Switch grass illustrated)

Unlocking sugars

Because its sugars are more difficult to extract, extensive pretreatment with acid or steam is required. Special enzymes also are used due to the stronger composition of the biomass.


Genetically modified yeast or another fermenting agent is required.


- Made from cheap, abundant materials.

- Expanded use of cellulosic ethanol would have no effect on the food supply.

- Production creates far fewer greenhouse gases than corn-based ethanol, in part because one of its byproducts, lignin, can be used to help power the plant.


- Requires an expensive process that is unproven on a commercial scale.

- The cost to build a biorefinery is $2.50 to $4 per gallon of production capacity compared with $1 to $1.50 for corn-based ethanol.

Sources: Renewable Fuels Association, Tribune reporting

Chicago Tribune/Adam Zoll and Phil Geib


The cost of failing to act on global heating: 20% of world GDP

Climate change: US economist's grim warning to Blair's Cabinet
The stark findings of Nicholas Stern's report yesterday increased the pressure on the PM to act
By Andy McSmith and Colin Brown
Published: 27 October 2006
Global warming could cost the world's economies up to 20 per cent of their gross domestic product (GDP) if urgent action is not taken to stop floods, storms and natural catastrophes.

That stark warning was given to Tony Blair and his cabinet yesterday by Sir Nicholas Stern, a former World Bank economist, and is said to have left cabinet ministers chastened by the magnitude of the threat posed by climate change.

In a preview of a report he is to deliver next Monday, Sir Nicholas told the Cabinet the world would have to pay 1 per cent of its annual GDP to avert catastrophe. But doing nothing could cost 5 to 20 times that amount. He told them: "Business- as-usual will derail growth."

The massive 700-page report - commissioned by the Chancellor, Gordon Brown - was described as "hard-headed" and "frighteningly convincing". It focused on the economic peril now confronting the world, unless action was taken to combat harmful CO2 emissions that contribute to global warming.

"He left no one in any doubt that doing nothing is not an option," said one Whitehall source. "And he stressed that the need for action was urgent."

His review could be a watershed in overcoming scepticism about the existence of global warming. "It was hard-headed," said another source. "It didn't deal in sandals and brown rice. It stuck to the economics."

Mr Brown believes it could force the oil-dominated White House of George Bush to concede the importance of action to curb climate change. One minister who was present said it destroyed the US government's well known argument that cutting carbon emissions was bad for business.

His report, covering the period up to 2100, warns that climate change could cause the biggest recession since the Wall Street Crash and the Great Depression. A downturn of that magnitude would have "catastrophic consequences" around the globe, with the poorest countries hit first and hardest, Sir Nicholas told the Cabinet. Insurance analysts, who submitted their evidence for his report, said they feared insurance claims could exceed the world's GDP.

One witness said: "The entire pitch of the report is that there is nothing in it about the need to be green, or about caring for the environment, it's all hard-headed economic reality," he said.

The Treasury believes that publication of the Stern report could be a turning point in public opinion in America, to force the Bush administration to accept the scientific evidence that global warming is happening.

"It is huge, a desk-breaker. It could be as important for climate change as the Africa Commission was for poverty in Africa. Its biggest impact could be on public opinion in America, which is like turning around a tanker," said one official. It is expected to dominate the UN international climate talks scheduled to start in Nairobi, Kenya, next week.

The Prime Minister's official spokesman said the Cabinet recognised "this was a very serious piece of work on a very serious subject and a very clear piece of thinking about the economic benefits of dealing with climate change now."

The Foreign Secretary, Margaret Beckett, is believed to have been extrapolating from the findings when she warned this week that global warming could cause more conflicts as a result of massive population shifts because of rising sea levels and flooding.

Downing Street appeared to be gearing up last night to use the Stern report to launch a fightback over the Government's record on climate change which was attacked yesterday as "woeful" by Sir Menzies Campbell, the Liberal Democrat leader. The Chancellor gave the clearest hint so far that he would use his forthcoming Budget and the pre-Budget report next month to raise "green" taxes, including the cost of motoring. He promised legislation on climate change, but he appeared to resist the growing demands for binding annual targets for reducing CO2 emissions.

The Conservative leader, David Cameron, put forward his own Bill to impose annual targets monitored by a new independent commission. That strategy is supported by a growing cross-party coalition of more than 400 MPs who may still force the Chancellor to change his mind.


MIT eyes more clever way to use ethanol to improve efficiency

Scientists Eye Ethanol Boost For Gasoline Engines

BOSTON - Injecting small quantities of ethanol into car engines at moments of peak demand -- such as accelerating sharply or climbing a steep hill -- could improve the fuel economy of gasoline engines by 20 percent to 30 percent, a scientist said on Wednesday.

A team of researchers at the Massachusetts Institute of Technology is working on the system, which scientists say would allow carmakers to use smaller engines in their vehicles, reducing weight and improving fuel economy at a lower cost to consumers than by adding a hybrid engine.

"To have a big impact on reducing oil consumption, one needs a low-cost way of improving efficiency, so a lot of people buy the car," said Daniel Cohn, senior research scientist at MIT in Cambridge, Massachusetts.

He estimated that adding the ethanol injection system to a car would cost about $1,000 and that cars using the new system could be in mass production by 2011.

"We view it as a very important near-term way to reduce oil consumption," Cohn said.
Volatile US retail gasoline prices -- which hit a record high above $3 per gallon this summer but have since eased to around $2.20 per gallon -- have piqued consumer interest in fuel-efficient cars.

"It's crucial that the internal combustion engine, whether it's gasoline or advanced diesel, is improved to the point where those improvements are meaningful," said Ron Cogan, editor of the Green Car Journal, a quarterly magazine focused on alternative powertrains.

Much attention has focused on hybrid cars, such as Toyota Motor Corp.'s Prius, which couple an electric motor with a traditional gasoline engine to improve fuel efficiency. But they are pricey -- hybrid engines can add $3,000 or more to a car's cost -- and account for just about 1 percent of new car sales in the United States.

The U.S's Big Three Detroit automakers -- General Motors Corp., Ford Motor Co. and the Chrysler unit of DaimlerChrysler AG -- as well as the White House have backed the adoption of cars that can burn the 85 percent ethanol-15 percent gasoline blended fuel known as E-85 as an alternative to pure gasoline, which is made from petroleum.

But the limited supply of ethanol, which is made from plant matter, limits its usefulness as a primary fuel source. There are only 900 pumping stations nationwide that sell E-85.

The MIT scientists' plan gets around the ethanol supply issue by using small amounts of it -- so little that Cohn estimated the ethanol tank in cars using the technology would need to be refilled every three months or so.

A turbocharger is added to produce more power. The ethanol injection system with the turbocharger would give a driver more power than a conventional engine of the same size.

The higher pressures and temperatures of a turbocharged engine can lead to a problem known as knock, which occurs when the fuel and air in the engine explode prematurely, hurting performance and potentially damaging the engine.

Cohn said his group's technology avoids that problem by injecting ethanol into the engine when knock is likely to occur. The ethanol vaporizes and cools the fuel-air mixture, keeping it from exploding until the engine is ready.

"This is a very special feature of ethanol," Cohn said.
Story by Scott Malone

Sunday, October 15, 2006


Press notices that deregulation didn't lower energy costs

October 15, 2006
Competitive Era Fails to Shrink Electric Bills

A decade after competition was introduced in their industries,
long-distance phone rates had fallen by half, air fares by more than a
fourth and trucking rates by a fourth. But a decade after the federal
government opened the business of generating electricity to competition,
the market has produced no such decline.

Instead, more rate increase requests are pending now than ever before,
said Jim Owen, a spokesman for the Edison Electric Institute, the
association for the investor-owned utilities that provide about 60
percent of the nation’s power. The investor-owned electric utility
industry published a June report entitled “Why Are Electricity Prices

About 40 percent of all electricity customers — those in 23 states and
the District of Columbia where new competition was approved — mostly
paid modestly lower prices over the past decade. But those savings were
primarily because states, which continue to have some rate-setting
power, imposed cuts, freezes and caps at the behest of consumer groups
that wanted to insulate customers from any initial price swings.

The last of those rate protections expire next year, and the Federal
Energy Regulatory Commission and other federal agencies warn in a draft
report to Congress that “customers may experience rate shock” as
utilities seek to make up for revenue they did not collect during the
period of artificially reduced prices and to cover higher costs of fuel.
They warned that “this rate shock can create public pressure” to turn
back from electricity prices set by the market to prices set by
government regulators.

The disappointing results stem in good part from the fact that a
genuinely competitive market for electricity production has not developed.

Concerned about rising prices, California and five other states have
suspended or delayed transition to the competitive system.

And voters around two California cities, Sacramento and Davis, will
decide next month whether to replace investor-owned utilities with
municipal power in hopes of lowering rates. Drives are under way to
expand public power in Massachusetts. In Portland, Ore., the city
council tried and failed to buy the local utility company.

Electric customers in other states are facing rude surprises.

In Baltimore, an expected 72 percent rate increase in electricity prices
has aroused so much protest that the state legislature met in special
session, where it arranged to phase in the higher costs over several
years. In Illinois, rates are about to rise as much as 55 percent.

The three New York area states opened their electricity markets to
competition, with different results.

In Connecticut, residential electric rates rose up to 27 percent last
year to an average of $128 a month, and are expected to go up as much as
50 percent more in January.

In New Jersey, rates rose up to 13 percent this year, and are poised to
go much higher.

New York residential customers, by contrast, paid an inflation-adjusted
average of 16 percent less in 2004 than in 1996, a state report said. It
is not known how much of that is attributable to government-ordered rate
cuts, but the state benefited from huge increases in power generated by
its nuclear plants and by buying power from New England plants that,
starting next year, may have less electricity to sell to New York.

The Federal Energy Regulatory Commission and five other agencies, in the
draft of the report to Congress, are unable to specify any overall
savings. “It has been difficult,” the report states, “to determine
whether retail prices” in the states that opened to competition “are
higher or lower than they otherwise would have been” under the old system.

Joseph T. Kelliher, the commission chairman, said Friday that eventually
“market discipline will deliver the best prices” and noted that every
administration and Congress since 1978 had pushed the industry toward
competition. He added that the commission recognized a need for
“constant reform of the rules.”

Under the old system, regulated utilities generated electricity and
distributed it to customers. Under the new system, many regulated
utilities only deliver power, which they buy from competing producers
whose prices are not regulated. For example, Consolidated Edison, which
serves the New York City area, once produced almost all the power it
delivered; now it must buy virtually all its electricity from companies
that bought its power plants and from other independent generators.

The goal is for producers to compete to offer electricity at the lowest
price, savings customers money.

Independent power producers, free-market economists and the Clinton
Administration cheered in 1996 when the federal government allowed
states to adopt the new system. The new rules “will benefit the industry
and consumers to the tune of billions of dollars every year,” Elizabeth
A. Moler, then chairwoman of FERC, said at the time. She said the new
rules would “accelerate competition and bring lower prices and more
choices to energy customers.”

But that has not happened. A truly competitive market has never
developed, and, in most areas, the number of power producers is small.
In New Jersey, for example, only six companies produce power, and not
all of them sell to every utility.

Some utilities have decided to buy electricity not from the cheapest
supplier but from one owned by a sister to the utility company, even if
that electricity is more expensive. That has been the case in Ohio.

And if electricity is needed from more than one producer, utilities pay
each one the highest price accepted in the bidding, not the lowest. This
one-price system, adopted by the industry and approved by the federal
government, is intended to encourage investment in new power plants,
which are costlier than older ones.

But critics say that, as in California five years ago in a scandal that
enveloped Enron, the auction system can be manipulated to drive up
prices, with the increases passed on to customers. What is more,
companies that produce electricity can withhold it or limit production
even when demand is at its highest, lifting prices. This happened in
California, and the federal commission has found that it occurred in a
few more instances since then. Critics say that more subtle techniques
to reduce the supply of power are common and that the commission shows
little interest in investigating.

Bryan Lee, a FERC spokesman, said complaints of manipulation are
investigated, but only last year did Congress give the commission the
legal tools to punish manipulators.

Under the new system there have been some big winners — including
Goldman Sachs and the Carlyle Group, the private equity firm — that
figured out that there were huge profits to be made in one area of the
new system.

Such investors have in some cases resold power plants they just bought,
making a large profit. In other cases, investors have bought power
plants from the utilities at what proved to be bargain prices, then sold
the electricity back at much higher prices than it would have cost the
utility to generate the electricity.

Richard Blumenthal, the Connecticut attorney general, said the
supposedly competitive market has been “a complete failure and colossal
waste of time and money.”

He asked the federal commission to revoke competitive pricing in his
state, but the commission dismissed the complaint last Wednesday, saying
the state had not proved its case.

Advocates of moving to the new system say that, in time, the discipline
of the competitive market will mean the best possible prices for
customers. Alfred E. Kahn, the Cornell University economist who led the
fight to deregulate airlines and who, as New York’s chief utility
regulator in the 1970’s, nudged electric utilities toward the new
system, said that he was not troubled by the uneven results so far.

“Change,” Professor Kahn said, “is always messy.”

But some advocates of introducing competition to the electric industry
have soured on the idea. They include the Cato Institute, a leading
promoter of libertarian thought that favors the least possible
regulation and that concluded earlier this year that government and
electric utilities have made such hash of the new system that the whole
effort should be scrapped.

“We recommend total abandonment of restructuring,” Cato said. If the
public rejects a greater embrace of markets, Cato wrote, the next best
choice would be a “return to an updated version of the old” system.

The conflicting results among the many studies of electric prices stand
in contrast to the sharp, unambiguous drops in the prices of telephone
calls, air travel and trucking.

One study by the utility economist Mark L. Fagan, a senior fellow at the
Kennedy School of Government at Harvard and a consultant to various
businesses who favors a competitive system, found that the new system
often produces better results. He found that in 12 of 18 states that
restructured, prices were lower for industrial customers than they would
have been under the old system. But he also found that prices were
somewhat lower than his model predicted in seven of 27 states that did
not open to competition.

In Virginia, a state that did not move to the new system, a report last
month by the agency that regulates utilities found “no discernible
benefit” to customers in the 16 states that had gone the farthest and
warned that electricity prices in those states “may actually be
increasing faster than for customers in states that did not restructure.”

And Professor Jay Apt, a former astronaut who runs the electricity study
center at Carnegie-Mellon University, found that savings from
introducing competition to sales of electricity to large industrial
customers “are so small that they are not meaningful.”

Regardless of the debate over the effectiveness of the new system,
electricity prices are expected to rise in the next few years for
several reasons apart from any rise in the price of coal, natural gas,
oil, uranium and other fuels.

A study issued in June by the Edison Foundation, which represents
investor-owned utilities concluded that utilities would have to raise
rates to upgrade local distribution systems and to finance long-distance
transmission lines, as well as for new power plants. The study found
that utility profit margins had thinned and financial strength had
weakened. It called for relief in the form of higher rates.

Saturday, October 14, 2006


Read more about ehtanomania and sister biofuel illnesses

Pumping CO2 into the atmosphere at top speed -- to create space for CO2
sequestration and biofuels projects

Thursday, October 12, 2006


At last, the industry with the most to lose stirs . . .

from the October 13, 2006 edition - note highlighted paragraph below

New combatant against global warming: insurance industry

The world's second-largest industry, worried about losses related to
climate change, offers incentives to 'go green.'

By Ron Scherer | Staff writer of The Christian Science Monitor

Insurance companies, who like to stay out of the limelight, are becoming leading business protagonists in the assault on global warming. . . .

The insurance industry's clout is sizable. It's the second-largest industry in the world in terms of assets, and has a direct link to most homeowners and businesses. It insures coal-fired power plants as well as wind farms, so it can influence the power industry's cost structure.

With its financial muscle, the industry could help advance the use of new financial instruments designed to allow companies to trade greenhouse-gas emissions in the same way that commodities are bought and sold.

"The insurance industry has the ability to change behavior, policies and communicate with clients," says Nancy Skinner, US director of the Climate Group, which lobbies for business and government action to address global warming. . . .

"Climate change represents an ever- increasing risk, a risk far too great to ignore," says Clement Booth, a member of the Board of Management at Allianz AG, one of the world's largest insurance firms.

This week, Allianz, in cooperation with the World Wildlife Fund, issued a report on steps the insurance industry could take to reduce the physical impact of global warming or to help society adapt.

"The industry is in a unique position to incentivize," says Miranda Anderson, an author of the report and a vice president at David Gardiner & Associates. "This is the very beginning of thinking through this issue." . . .

The attention on climate change is likely to receive a boost from state insurance regulators, who had planned to discuss its risks in September 2005 in New Orleans, at their annual meeting. Hurricane Katrina intervened, however, and the meeting was moved to Chicago.

"As a result, regulators spent an enormous amount of time on climate change and what changes to promulgate to make sure the companies are financially sound," says Mindy Lubber, president of Ceres, a coalition of investors, environmental groups, and public-interest organizations in
North America.

Ceres has made two reports on what the insurance industry can do to profitably manage climate change. In a report issued in August, Ceres details some steps currently under way, such as Swiss Re's investment in new solar technology, Munich Re's insurance renewable energy projects, and Lloyds of London's insurance on predicted energy savings.

In the US, one of the more unique and potentially far-reaching efforts will be rolled out this fall by Fireman's Fund. After a building is damaged, Fireman's will specify that it must be repaired with "greener" materials, including consumer electronics that must have Energy Star ratings from the Environmental Protection Agency. If a building is a total loss, it will be rebuilt as a "green" building. The insurer also plans to pay for an engineer to make sure ventilation systems and boilers are installed properly, which could also save energy.

"All the evidence suggests [that] if you decrease energy usage in a building, the owner's net operating income increases and you will improve the asset value," says Steven Bushnell, product director of Fireman's, owned by Allianz. . . .


Global Heating Climate Chaos: Cheaper to Prevent than Respond

*The Economics of Global Warming*

The world would have to give up only one year's economic growth over the next four decades to reduce carbon emissions sufficiently to stave off the threat of global warming. Consultants at PricewaterhouseCoopers offer a "green growth plus" strategy, combining energy efficiency,
greater use of renewables and carbon capture to cut emissions by 60% by 2050 from the level reached by doing nothing. Nuclear energy, it says, can play a role, but it is not crucial.

. . .

A shift to a much less carbon-intensive fuel mix would more than double the current non-fossil fuel primary energy share to about 30% by 2050. That alone would be sufficient to reduce carbon emissions by 25%. PwC's view that renewables could do the job without having to use nuclear technology could undermine Tony Blair's argument that atomic power is crucial. Increasing energy efficiency gains to 2.6% a year from today's 1.6% would reduce emissions by a third, while carbon capture and storage - pumping power station emissions into disused gas fields underground - could achieve a further 20%. The report says a combination of all these
measures will be necessary to stabilise global CO2 levels at 450 parts per million, the figure scientific opinion judges to be broadly acceptable.


An effective renewable portfolio approach that works quickly

In Ontario, Making 'Clean Energy' Pay

Utilities Ordered to Compensate Homeowners For Power From Solar, Wind, Water Projects

By Doug Struck
Thursday, October 12, 2006; A16

TORONTO -- Leonard Allen, who runs a small solar panel company here, finally has something good to tell callers, he says. For the first time, he can promise it won't take 50 years to recoup the money they spend on a rooftop solar system.

Canada's Ontario province has ordered local utility companies to pay homeowners or businesses for any electricity they generate from small solar, wind, water or other renewable energy projects, beginning next month.

. . .

Tuesday, October 10, 2006


Insurance industry notices what W refuses to see

Global Warming Seen Pushing up Insurance Costs
US: October 11, 2006

WASHINGTON - Global warming will push up insurance premiums in high-risk areas like coastal Florida and other hurricane-prone parts of the United States, an insurance company official said on Tuesday.

"That it will cost more, there's no question; we can put that on the table right at the beginning," said Clem Booth, a board member of Allianz Group. "The pricing of an insurance portfolio in a coastal region is a matter of the number of incidents to be expected within a given time and the size of incidents at certain levels."

Other likely consequences of global warming, including an increase in wildfires in the American West, will also need to be taken into account by US insurers, according to a report released by Allianz and conservation group World Wildlife Fund.

"To me as an insurance person, climate change is an absolute reality," Booth said in a telephone interview. "We could debate to what extent it's affected by human activity or not but it doesn't change the fact that we have to deal with the additional risks."

Currently, he said, insurers withdraw from these high-risk areas entirely.

"We're in the business of solving our customers' problems and providing risk solutions, so pulling out may be a short-term way of doing that ... but getting into the underlying causes is fundamental to our business," Booth said.

The report, "Climate Change and Insurance: An Agenda for Action in the United States," found that US insurance companies are good at modeling risk on historical models, but they lag behind their European counterparts in studying climate change to estimate future risk.


"This report and other reports are making it clear that there is a direct correlation between climate change, forest fires, storm surges and people's livelihoods," said Carter Roberts, president of World Wildlife Fund in the United States. "I think right now the US public is
waking up to just what an enormous risk this represents for them."

Booth said the disastrous 2005 US hurricane season, especially the costly destruction of Hurricane Katrina, was a wake-up call for US insurers. Beyond setting the correct premiums on areas expected to bear the brunt of global climate change, Booth said insurers need to work with government to make sure construction in those areas dealt with the risk and did not continue as "business as usual."

The report stressed that government-subsidized flood insurance may have encouraged people to live in high-risk zones, and suggested that these subsidies end.

The Bush administration has been skeptical of the link between global climate change and hurricanes and wildfires, and President George W. Bush has only recently acknowledged a relationship between human activities and global warming.

Booth said, however, that he was confident that the American people and their local and state governments would push for a reduction in the emission of greenhouse gases, which spur global warming.

"There's no question that business leaders like Allianz, GE and others are way ahead of the current administration," Roberts said.

Booth said the Allianz unit Fireman's Fund represents between 2 percent and 3 percent of the US market share.


A good post-peak strategy for making better use of urban land


When Wilmington, Delaware, Mayor James M. Baker took office in 2001, more than 1,500 abandoned and vacant properties peppered the city, bringing crime, contributing eyesores to community landscapes and lowering property values.

To encourage owners to rehabilitate or sell the properties, Baker persuaded the city council to enact the Vacant Property Registration Fee Program in 2003-an ordinance that bases a sliding annual registration fee on the total number of years a property is vacant. The fee starts at $500 for a building that has been vacant for more than one year and goes up to a maximum of $5,000 for 10 years.

Before a bill is sent out, the city sends a notice informing the owner of the years of vacancy and the size of the fee. The program also allows fee waivers, which give property owners one year to rehabilitate, sell or demolish their properties. Since the program's creation, the number of vacant homes in the city has declined by 22 percent, from 1,455 to 1,135, and has brought in nearly $1 million in fees to the city and spurred over $15 million in new development.

To learn more, visit, or call the Department of Licenses and Inspections at 302-576-3096.


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