December 28, 2010 - a history of heating my house, and current economics

Tuesday, December 28, 2010

In the wake of yesterday's blizzard, I've been thinking about how we heat our homes.  At over 150 years old, my house has kept people dry and warm for quite some time.  Much of the house remains the same as it was originally, while other "new" systems like electricity and running water have been installed later in the house's history.  Its heating systems have likely been changed several times in those years.

[Photo: down by the docks on Monhegan Island, Maine.  A large cache of propane tanks rests just out of view on the right.  Propane provides a major part of Monhegan's space heating energy needs.]

When the house was built, its residents likely burned wood to keep warm.  The front room or parlor on the first floor had a fireplace, as did the bedroom above the parlor.   (These fireplaces are now bricked up, as the chimney they used is now dedicated to an oil furnace situated in the basement.)  Until 1885, wood was the dominant fuel used to heat homes in the U.S.  After 1885, wood was surpassed by coal as the dominant heating fuel in the U.S.  It isn't clear whether my house was ever heated by coal.

Today, my house has three primary heating systems: an oil furnace in the basement that feeds warm air to the first floor, a propane "decorative appliance" in the kitchen, and small amounts of electric heat (a baseboard in one room, and a portable heater).  How much does it cost for me to operate these resources?  How are my decisions affected by that cost structure?  What should I do differently?

A few data points:

The portable electric heater is rated at 1,500 W.  In one hour, it uses 1.5 kWh.  One kWh = 3,412 Btu.  Thus in one hour of maximal operation, the heater puts out 5,118 Btu of heat.  Over the past several years, I've paid an average of 15.5 cents per kWh delivered.  This means the portable electric heater costs 23.25 cents per hour of operation -- or yields 146 Btu per penny.

According to the Maine Office of Energy Independence and Security, oil in Maine is retailing for an average price of $2.98 per gallon as of 12/20/2010.  In general, a gallon of heating oil contains about 138,690 Btu.  This divides out to 465 Btu per penny assuming 100% efficiency - or 386 Btu per penny at a more realistic 83% efficiency.

The Maine OEIS reports that the statewide average for propane based on a use of 925 gallons a year is $2.74 per gallon.  Notably, a gallon of propane contains less usable energy than does a gallon of oil; a gallon of propane might contain 91,330 Btu.  This divides out to 333 Btu per penny assuming 100% efficiency.  Even assuming 80% efficiency, this yields 266 Btu per penny.

Compare wood, a fuel the house is no longer set up to burn.  Wood can be an imprecise fuel type, with great variability in both how much wood is really in a delivered cord, as well as in how many Btu are available per cord.  (It's supposed to be 128 cubic feet per cord, but in practice air spaces mean there is almost never that much wood in a cord.)  The EIA recommends a figure of 20,000,000 Btu per cord.  Prices vary widely, but $200 per cord isn't a bad price in Maine.  Using that figure, you get 1000 Btu per penny assuming 100% efficiency, or 800 Btu per penny at a more reasonable 80% efficiency.  This makes wood seem like an attractive option.

Btu per penny may not be the only factor I consider in allocating my heating burden across these fuel sources.  For example, I can set the portable electric heater up anywhere in the house, while the oil-based warm air system is permanently installed in the first floor of the house.  Wood may appear economical, but without further capital investment (in a wood stove) is unavailable as a heating source.  Still, this look at the history of the house is illustrative.  What did previous owners spend on heating?  What fuels did they use?  Do we pay more today to heat our house than they did in 1860?  Are we more comfortable today than was the house's first owner?

December 27, 2010 - REC price crash in Australia

Monday, December 27, 2010

A renewable energy credit or certificate (either way, a REC), represents the renewable attributes associated with a particular megawatt-hour of generation. REC markets are one tool states use to incent the development of renewable generation capacity.  RECs are designed to be additive to other energy products.  This means that the revenue stream a project owner reaps from RECs is on top of the energy and capacity values of its project.  The philosophy behind this policy incentive is that because renewable projects are socially desirable but tend to demand greater revenue streams - and revenue certainty - than do other traditional projects.  (This may not be universally true across the board of all renewable projects, but is generally accepted as the primary policy explanation for RECs.)  Developers can either sell RECs into the spot market at a floating market-based price, or secure long-term contracts to sell the RECs at a specified price fixed in the agreement.

[Photo: a view toward Acadia from the backside of Great Cranberry Island, Maine.]
What happens when REC prices crash?  A look at Australia's REC market is illustrative.  Under Australia's Renewable Energy Target law, load-serving entities must ramp up REC purchases toward a target of 20% renewable by 2020.  RECs are awarded to generators for every MWh of renewable power produced in excess of a regulatory baseline established by the Office of Renewable Energy Regulator.  As in other markets, REC value is determined by supply and demand.  Throughout 2010, RECs have generally been between $35 and $45 (in Australian dollars).  Prices of at least $45-$50 are seen as necessary to support the development of new wind in Australia.

Today, Australian REC prices are below $30.  Analysts point to the glut of REC supply created from broad acceptance of small-scale residential and commercial solar panels funded through government subsidy, which caused the utility-scale market to tank.  Australian RECs may still have been serving a purpose - supporting widespread rooftop solar - but are no longer functioning to incent the development of large-scale wind farms, something they were broadly expected to do.  Indeed, companies placed large bets on the continued value of the REC market.  For example, Australia's largest renewable baseload generator, NSW Sugar Milling Co-operative, faces receivership unless the REC price nearly doubles.

So what to do?  Australia is in the midst of restructuring its REC markets to carve out small-scale RECs as a separate market with a $40 fixed price, while simultaneously restoring the (government-mandated) demand for large-scale RECs.  Will this bring the large-scale REC market back to life?

December 22, 2010 - Ocean thermal energy conversion

Wednesday, December 22, 2010

As any sailor knows, the Earth's oceans are enormous and powerful. About seventy percent of the Earth’s surface is covered by its oceans. These oceans contain vast amounts of energy - many times more than is consumed by mankind. Through the confluence of water's physical properties and natural energy dynamics, combined with a considerable amount of technology, much of this energy can be harnessed. Whether or not it is cost-effective is dependent on the specifics of each project and its technology, as well as whether any governmental incentives or subsidies exist.

A summer view from the dock at Great Cranberry
Island across to Mount Desert Island.
When we think of the potential of ocean energy, offshore wind development often comes to mind. Offshore wind may rely on oceanic siting and conditions, but its primary energy source is the wind. The waters of the ocean itself are understood to contain even more energy, in the form of moving water like currents, tides, and waves, as well as in subtler embodiments such as gradients of temperature and salinity.

December 21, 2010 - Penobscot River dam removal one step closer

Tuesday, December 21, 2010

The plan to remove several hydroelectric dams on the Penobscot River reached a milestone yesterday: transfer of ownership of three dams from PPL to the Penobscot River Restoration Trust.  The Trust plans to remove the Veazie and Great Works dams, while building fish passage at the Howland dam.  By removing the two dams and generation assets, about 16 MW of renewable capacity will be removed from the grid, although permitted increases in power production upstream are expected to recover this capacity.

The lower Penobscot River seen from Fort Knox in
Prospect, about 25 miles downstream from the
dams to be removed.
The sweeping Penobscot River dam removal project arose from a 2004 settlement agreement called the Lower Penobscot Basin Comprehensive Settlement Accord.  In that settlement, seven conservation groups, hydroelectric company PPL Corp., the Penobscot Indian Nation and state and federal agencies, agreed to the removal of both the two dams as well as the removal of flashboards and the installation of a fish bypass at the Howland Dam.

December 20, 2010 - FERC approves Condit Dam removal

Monday, December 20, 2010

It's a story you've read before.  The places and names here may be different, but you know the basic plot line.

In the early part of the twentieth century, industrial production was booming.  New technologies enabled revolutionary advances in manufacturing.  Because these mills needed power -- even more power than the mechanical hydropower their ancestors once consumed -- utilities turned to hydroelectricity to provide a steady stream of affordable power.

December 17, 2010 - $184 million in grants for vehicle efficiency R&D

Friday, December 17, 2010

Improving vehicle energy efficiency is a key component of our federal energy strategy.  Of particular interest to businesses developing transportation efficiency technology, yesterday Secretary Chu announced a new funding opportunity.  DOE is putting up $184 million in grant funding for R&D into a variety of vehicle energy efficiency topics.

This vehicle powered by BioDiesel.
 The Funding Opportunity Announcement provides fairly standard federal contracting procedures, such as the use of the existing FedConnect and infrastructure for tracking and applying.  Letters of intent are due by January 18, 2011, with applications due by February 28, 2011.

December 16, 2010 - a tale of two solar projects

Thursday, December 16, 2010

Let's celebrate a milestone: I've now been blogging here for over a year.

Florida solar?  Setting sun over the Everglades.
Two news articles about solar power from across the country caught my eye today.  Taken alone, each describes the success of a solar power project.  Read together, the differences between the two projects are thrown into relief.

First, South Carolina utility Santee Cooper is building that state's largest solar array.  Santee Cooper's $1.3 million Grand Strand Solar Station project is under development in Myrtle Beach.  The utility is installing 1,300 solar photovoltaic panels on the roof and surrounding grounds of a warehouse it owns there.  In total, the project is expected to produce a peak of 311 kW under optimal conditions.  Adding this 311 kW will increase South Carolina's solar PV power production by 50%.

December 14, 2010 - rain and flooding

Tuesday, December 14, 2010

It's wet in Maine!  Much of the state was soaked by rain in the last two days, with up to 4 inches falling in some areas.  In many places, this warm water fell on snowpack.  Melting added even more surface water, causing streams and rivers to rise.  Flooding has been reported throughout Maine, covering everything from the walking path along the Androscoggin River below NextEra's hydroelectric dam in Brunswick, to the overtopping of a dam on the Piscataquis Rive, road washouts and power outages.  The Bangor Daily News reports that flood water flowed into the boiler room at the True Textiles-Interface Fabrics Guilford of Maine manufacturing facility in Guilford.  On the Kennebec River, Gardiner anticipated flooding of parking lots and streets as well.

Maine is no stranger to rain and flooding, and for the most part can weather the storms.  Yet when it rains like this, it does make life more interesting for hydroelectric operators in the region.

December 8, 2010 - Deepwater Wind proposes expansion of Rhode Island Sound project

Wednesday, December 8, 2010

Renewable developer Deepwater Wind has announced today its plans to double the size of its proposed Rhode Island Sound offshore wind project.  Under the current proposal, Deepwater's second-generation development will now consist of 200 turbines to be installed in federal waters off Rhode Island and Massachusetts.  Deepwater hopes to commence construction of the project in 2014, bringing the first turbines into operation in 2015.

A recent sunset over Maine's
Merrymeeting Bay.
What price will Deepwater get for its power?  Looking at other offshore wind projects is illustrative of the kinds of pricing we might expect.  For example, Deepwater Wind is also developing a smaller 8-turbine demonstration project in Rhode Island state waters, the Block Island Wind Farm.  The developer has already secured one major state approval to construct the project, although this approval is currently being challenged in state Supreme Court.  The Rhode Island PUC has approved a contract with utility National Grid establishing a maximum starting price of 24.4 cents per kWh, with 3.5 percent increases over the the 20-year life of the deal.

December 2, 2010 - a deeper look at the Cape Wind PPA complaint

Thursday, December 2, 2010

Yesterday, the news broke that a group called "Californians for Renewable Energy" (CARE) filed a complaint with the Federal Energy Regulatory Commission (FERC) challenging Cape Wind's power purchase agreement with National Grid.  In its complaint, CARE asks FERC to set aside the November 2010 order of the Massachusetts Department of Public Utilities (DPU) approving Cape Wind's power purchase agreement with National Grid.  CARE also points serious allegations against a variety of parties including National Grid, Cape Wind, and the DPU itself.  These allegations range from technical legal points (e.g. that FERC alone has "exclusive jurisdiction to regulate the rates, terms and conditions of sales for resale of electric energy in interstate commerce by public utilities") to rather disjointed but sensational accusations of connections between wind developers and Italian organized crime.

I've read the Complaint, and this morning, I had a pleasant discussion with Mark Rodgers, Cape Wind's Director of Communications.  Mark described CARE's complaint as "baseless", and characterized CARE's allegations of an Italian mafia connection as "false, malicious, and defamatory".

Looking at the Complaint itself, I would personally characterize it as a mix of legal argument and wild conspiracy-theory accusations.  On the legal argument side, the Complaint appears to allege that the Massachusetts DPU exceeded its jurisdictional authority in approving the PPA.  This argument is based on the recent precedent in which FERC told the California Public Utilities Commission that its feed-in tariff program was invalid because it purported to set wholesale rates for power at the state level.  Reasoning by analogy, CARE appears to argue that the DPU improperly set a wholesale rate for power in excess of the utility's avoided cost.

Other legal arguments asserted by CARE strike me as more tenuous.  For example, CARE asserts that renewable energy credits (RECs) are "greenhouse gas (GHG) offsets", as well as "a type of energy ancillary service that Mass DPU maintains authority over in regard to the price that is paid wholesale Sellers [sic]".  CARE goes on to say, "The REC’s purpose therefore is to offset greenhouse gas emissions by avoidance." This is a troubled argument at best.  In general, RECs are distinct from GHG offsets; RECs represent the attributes associated with the generation of energy from state-qualified renewable resources, not the specific amount of GHG emission reductions associated with that generation. RECs exist in compliance markets because state legislatures establish renewable portfolio standards requiring specified amounts of energy to be sourced from renewable resources, and do not generally have an explicit GHG tie-in.  Further, REC pricing is generally established through bilateral contracts between parties.  While a state utility commission like the DPU does retain authority over utilities in its jurisdiction, state commissions do not necessarily specify the price of RECs.

The second half of the Complaint gets even farther out.  In a rambling set of long sentences and quotes from emails sent by CARE and its co-complainant Barbara Durkin, CARE alleges that National Grid and the DPU aided and abetted "fraudulent actions and claims to defraud taxpayers of ARRA stimulus funds".  This section, which appears largely to be a rehash of the complainants' earlier position before the DPU, includes a request for FERC to "investigate Cape Wind, National Grid, the Massachusetts Attorney General, and Mass DPU for actions they have taken to aid and abet (act as an accessory to) Cape Wind’s fraudulent actions and claims whose purpose is to defraud taxpayers and ratepayers alike of ARRA stimulus funds".  CARE goes so far as to assert that when a National Grid representative said “We have every reason to believe that [the production and investment tax credits] are going to be extended and supported by Congress,” this somehow constituted an admission of a violation of the prohibition on energy market manipulation.  (This claim is a real head-scratcher.)

Then, if possible, things get even stranger.  CARE devotes 24 pages (nearly the remainder of the complaint) to a series of purported quotes from news media stories and other documents about various wind developers (puzzlingly, including developers other than Cape Wind Associates) and connections to Italian organized crime.  I won't bother to recite those allegations further here.  Suffice to say that this section of CARE's complaint is wild, disorganized, and fails to effectively illustrate any concrete misdeeds by any of the parties against whom CARE complains.

Clearly, this complaint is sensational.  Even trying to read between the lines, it is hard to make sense of many of CARE's claims.  While the legal issues regarding whether a state has the authority to approve such a PPA are indeed interesting, particularly in the wake of FERC's restrictions on the California feed-in tariff program, the conspiracy claims tend to detract from CARE's credibility.  It will be interesting to see how FERC's review of this complaint proceeds.

December 1, 2010 - Cape Wind contract challenged?

Wednesday, December 1, 2010

Breaking news: today, a group including an organization called "Californians for Renewable Energy" (CARE) filed a complaint with the Federal Energy Regulatory Commission (FERC) against National Grid, Cape Wind and the Massachusetts Department of Public Utilities for approval of Cape Wind's power purchase agreement with National Grid.  FERC has docketed this as docket no. EL11-9-000.

As you may know, the Massachusetts DPU issued an order approving the PPA between Cape Wind and National Grid.  Under the deal, National Grid will buy half of Cape Wind’s output for 18.7 cents per kilowatt-hour, with a 3.5% annual escalator in each of the 15 contract years.

The incendiary Complaint opens with the following summary alleging "ongoing conspiracy" to violate the FPA as well as fraud:

Pursuant to the Federal Power Act (“FPA”), 16 U.S.C. 824d, 824e, 825e, and 825h, (2008) and Rule 206, 16 C.F.R. 385.206 (2008) of the Rules of Practice and Procedure (“Rules”) of the Federal Energy Regulatory Commission (“FERC”), CAlifornians for Renewable Energy, Inc. (“CARE”) and Barbara Durkin hereby files this Complaint against the National Grid, Cape Wind, and the Massachusetts Department of Public Utilities (“DPU” or “Mass DPU”), for their ongoing conspiracy to violate the Federal Power Act (“FPA”) by approving contracts for capacity and energy that exceeds the utilities’ avoided cost cap and which also usurps FERC’s exclusive jurisdiction to determine the wholesale rates for electricity under its jurisdiction within those territories that it exercises regulatory authority and further for National Grid and DPU and aiding and abetting Cape Wind’s fraudulent actions and claims to defraud taxpayers of ARRA stimulus funds it is seeking for the project in violation of 18 C.F.R. § 1c.
These are serious and bold allegations indeed.

So who is CARE?  CARE describes itself in the Complaint as "a nonprofit corporation that works to educate and encourage the use of alternative forms of renewable energy to avoid dependence on declining supplies of fossil fuels, and the harmful air emissions their use entails. All of CARE’s members are residential or small business customers."

What is CARE's interest in this?  CARE claims that the alleged actions "harm the interests of CARE’s members by allowing Cape Wind Associates a competitive advantage over land-based wind farm developers who must meet stricter requirements for environmental mitigation and monitoring, including preconstruction monitoring for species protected by the ESA".

Other highlights worth further probing include extensive paragraphs devoted to an attempt to link the Cape Wind project to Italian organized crime.  (See page 26 for some of the most lurid of that text.)

At 51 pages, it is a broad-ranging complaint.  Here is a link to the FERC docket sheet if you are interested.  I will be watching this docket with great interest to see how the Cape Wind PPA weathers this challenge.

[Update 12/2/2010: see my next blog post for a deeper look at the Complaint.]