Navigant Research Blog

Wind Power Industry Faces Solar-Like Challenges in 2012

— January 27, 2012

The recent announcement by Vestas, the largest manufacturer of utility-scale wind turbines in the world, about a major shake-up at the management level and the loss of 2,300 jobs in Denmark, raises the question of whether wind – like solar photovoltaics (PV) in 2011 – may be entering a major shakeout and downsizing period.

While the growth of wind power is still an astounding success story, there are clouds on the horizon, particularly in the United States. Among the major challenges facing the industry today are record low natural gas prices, which have lowered the price of electricity, making it more difficult for wind to compete in wholesale power markets.

A rush to develop new supplies from shale deposits through the controversial practice of so-called “fracking” raises interesting questions about how we regulate future energy supplies.  In Texas, it is possible to get a permit to drill for natural gas wells in a residential neighborhood within a week, without an environmental permit, and at a total cost of around $3,000. Contrast that streamlined approach – for a technology that has been implicated with polluting drinking water supplies and contributing to air quality concerns, as well as leading to possible lethal explosions – with wind (and solar) technologies.

Where I live, in Marin County just north of San Francisco, the county is imposing a height restriction of 40 feet for any wind turbine located in the western, rural part of the county, which, in effect, is an outright ban, even on small on-site wind turbines.  Why?  There’s just not enough wind at that height to generate power.  Furthermore, local activists successfully filed a suit against NextEra Energy to block the erection of a meteorological tower to measure wind resources for a possible wind project near the town of Tomales, in the northwestern corner of the county.  Since Marin County has set a goal of becoming completely powered by renewable energy over the long term through a community choice aggregation program, this reluctance may seem a tad ironic.

The good news (at least for the wind industry) is that the growing backlash against fracking, and the familiar boom and bust cycle in fossil fuel exploitation, may send prices for natural gas upward again within the next few years.  Innovations and global competition appear to be driving prices for wind and solar down, and that trend will likely continue. How much would natural gas cost if it had to undergo the same kind of environmental scrutiny as wind and solar projects?

Wind power will always face greater opposition than solar PV, though trends toward utility-scale solar PV projects have engendered intense debates over land use.  In this case, wind power may actually have fewer impacts, since turbines have small footprints and allow farmers and ranchers to continue their traditional way of life, whether grazing livestock or growing crops.  Solar arrays, on the other hand, blanket the entire landscape.

The other major challenge facing the wind industry is continued uncertainty around the extension of the production tax credit (PTC), the federal government’s prime vehicle for making wind more cost-competitive with traditional fossil fuel resources.  Vestas has announced it may trim another 1,600 employees here in the U.S. (mainly in Colorado) if the PTC is not passed. At a time of great economic uncertainty, it seems unwise to send mixed signals to the private sector about the U.S. commitment to clean energy.

Given the fracking/natural gas dynamic – and the poisoned political environment in Washington, DC in regards to government support for renewables, the “austerity and delays” scenario in the graph above may be the best current forecast for the future of wind power worldwide.


How Not to Build a Nuclear Plant

— January 27, 2012

The Utah state engineer, a man named Kent Jones, has approved the water rights for the proposed Blue Castle nuclear project in Green River, Utah.  The two-reactor plant would be the first nuclear power plant built in the West since the late 1980s.  Jones’ decision has caused outrage among environmental and anti-nuclear groups in the West, and justifiably so.  The Blue Castle project pretty much sums up everything that’s wrong with today’s nuclear power industry.

First, it’s huge: the twin reactors would produce up to 3,000 megawatts (MW) of power.  The future of nuclear power lies in small, modular reactors (SMRs) that are prefabricated, easy to transport, easy to assemble, and easier to win permits for than gargantuan reactors.  Recognizing this, the American Nuclear Society, among other groups, is campaigning for new licensing procedures for SMRs that could avoid the absurdly long lead times facing most nuclear-power projects in the United States (see below).

“Big” means “expensive,” and the Blue Castle project is nothing if not costly.  It will take on the order of $18 billion to complete the project, including $100 million just to shove it through the approval process.  Blue Castle Holdings, needless to say, does not have that kind of cash.  In its water-rights application, the company listed as a primary backer a Wall Street company called LeadDog Capital.  LeadDog, which Blue Castle said was putting up $30 million for the nuclear project, has been accused in a cease-and-desist petition filed by the Securities and Exchange Commission of running a scam operation.  Blue Castle CEO Aaron Tilton, a former Utah state legislator, says that he never “pulled the trigger” on the LeadDog financing and that his company no longer does business with the embattled funder; however Jones, the state engineer, listed the LeadDog funding as primary evidence that Blue Castle “has the financial ability to complete the proposed project.”  In interviews with the Salt Lake City Tribune, Jones admitted that he took Blue Castle’s word for that: “It was just a plan presented by them, and we didn’t do a lot of investigation into the plan, about the validity of the plan.”

Even if the money becomes available, Blue Castle is years, if not decades, away from actually producing power.  Tilton said his company is readying an Early Site Permit to be submitted to the U.S. Nuclear Regulatory Commission (NRC) in 2013.  The application could take three years to be approved.  Then a combined construction and operating license (COL) would be needed, which would add another four years to the process. “The earliest the project could break ground is 2020,” points out Dan Yurman on his nuclear blog, Idaho Samizdat.  Nuclear power that might come online sometime in the mid-2020s is not exactly going to help reduce carbon emissions from coal plants in the short term.

Inevitably, there’s the question of water.  The state specifically approved Blue Castle’s lease of water rights held by Utah’s San Juan and Kane counties.  As with all Western water rights, the San Juan and Kane rights are part of a complicated tangle of competing claims. They are set to expire in 2015 if not put to beneficial use.

“At times, the Blue Castle proposal looks like a water right in search of a project,” remarked High Country News in a 2010 feature on the project.

The design for the reactors at Blue Castle has not been finalized, but they are most likely to be boiling water reactors, which are considered “Generation III+” designs – in other words, hardly a real advance over today’s uranium-fueled light water reactors.  There is no plan in place for where nuclear waste from the plant would go.

Finally, the Blue Castle plant would require the construction of massive transmission lines to carry the power to the coastal cities Southern California, the project’s ultimate customers.  Most of those lines would cross federal lands, requiring yet more permits – and more years to approval.  Yurman calls Blue Castle “a continuation of California’s ‘colonial’ strategy of banning new reactors within its borders while buying nuclear powered electricity from plants in other states.”

As I’ve noted elsewhere, the NRC should not be in the business of sitting for years on grandiose plant proposals, backed by speculative (if not fraudulent) investors, based on obsolete technology, requiring huge amounts of scare water resources and new investment in transmission and distribution facilities.  The U.S. nuclear power industry badly needs to move into the 21st century. With Blue Castle, it’s still pursuing the failed strategies of the 20th.


Super Bowl 2012: A Power Play

— January 25, 2012

The New Year is upon us, and President Obama has delivered his State of the Union address, which offered high-level insight on the energy sector in the US but was reminiscent of messages we’ve already heard. Now it’s time to turn our attention to another really important event of the year: the 2012 Super Bowl.  As always, this year’s game will be a staggering display of athleticism and energy consumption (rather than verbiage and applause).  These two things, generally not discussed in the same conversation, offer a more nuanced look at the energy sector here in America.

Every year the stats at the Super Bowl pile up like Tom Brady’s passing yards, including the kilowatt-hours (kWh) consumed.  The 2011 Super Bowl in Dallas, Texas set a record, becoming the most highly viewed television program in American history.  Almost 16 million people tuned in, consuming roughly 11.3 million kWh through television sets alone, according to a report by General Electric.  That’s enough electricity to power all the homes in three NFL cities – Green Bay, Pittsburgh, and Dallas – for 10 hours.

While many fans are focused on the number of touchdowns or turnovers, they’re generally unaware of the statistics they post in their own homes, through their electricity consumption.  On a wider scale, this lack of awareness plagues the energy efficient home market, the consequence of forces on both the supply and demand side.  Traditionally, consumers’ utility bills have not provided actionable information, making it difficult to interpret their consumption and how to reduce it.  Simultaneously, home builders and renovators haven’t been able to articulate a sensible value proposition for energy-efficiency measures.

Appliance designs have made considerable gains in energy efficiency, but these gains are eclipsed by the proliferation of consumer electronics, like LCD televisions and digital video recorders (DVRs).  According to the U.S. Energy Information Administration, more than 50 million U.S. homes have more than three TVs, and more than 45 million (40%) homes have a DVR.  The power consumed by appliances and electronics grew from 17% of average home energy use in 1978 to 31% in 2005, according the EIA’s Residential Energy Consumption Survey.  Advances in energy efficiency have historically mattered less to the American consumer than the newest entertainment device.

There is a chance the American consumer has started to pay attention, however.  Major organizations like the NFL have started highlighting residential energy efficiency – like investing in 800 free home energy audits in the Indianapolis area.  And according to a recent Yahoo Real Estate poll the American homebuyer’s dream home might be more energy efficient and constructed of sustainable materials.

Currently, there’s little incentive for consumers to tune in to their energy consumption.  Engaging the American public through the most popular entertainment forums (e.g.  the Super Bowl) and by using devices and outlets they already love (e.g.  televisions and social media) may be the ticket to unlocking the energy efficiency potential in the residential sector.


Smart Energy Investments Paying Off

— January 23, 2012

It’s that time of year when everyone makes their predictions for the year, including Pike Research.  I recently attended the World Resources Institute’s overview of the top Stories to Watch in 2012, which is a little different than the typical year-ahead projections.  WRI is not primarily trying to make predictions; instead, the organization tries to provide a “roadmap” of the top issues or events that are likely to be significant in 2012.  It is worth checking out the full list, but there were two that jumped out as being particularly interesting and relevant to Pike Research’s own predictions on The Year Ahead in Cleantech, outlined in our January webinar.  I’ll examine the first one in today’s blog, and cover the second in my next post.

WRI asked whether 2012 might be the year that investment in renewables surpasses fossil fuel investment.  This idea pivots off of a Bloomberg New Energy Finance report that estimated global investment in renewables in 2010 at $211 billion – and, more importantly, not far off comparable investments in fossil fuels for that year.  The growth trends for renewables vs. fossil fuels were dramatically different, with investments in renewables showing roughly a 30% compound annual growth rate (CAGR) from 2004 to 2010, compared to fossil fuels at around a 7.7% CAGR.  The Bloomberg analysis includes all biomass, geothermal and wind generation projects of more than 1MW; all hydro projects of between 0.5 and 50MW; all solar projects of more than 0.3MW; all marine energy projects; and all biofuel projects with a capacity of 1 million liters or more per year.

It’s interesting is to compare this to Pike Research’s forecasts for revenue from renewables.  Interesting, but somewhat challenging, as Bloomberg looks at a slightly different set of renewables than Pike Research does – for example, Bloomberg includes small hydro, which is a relatively mature market and therefore not part of Pike’s global forecasts for new energy.  Even so, we can expect to see revenues somewhat lagging the investment numbers, as it will typically take several years for investments to bring returns.

Pike Research has projected total 2012 revenue for the Smart Energy sectors that we cover as $298 billion.  If you take out the sectors that are definitely not in Bloomberg’s numbers – energy storage plus energy efficiency applications like combined heat and power (CHP) and fuel cells – you get projected 2012 revenues of around $235 billion.  This is still not apples to apples, but it does suggest that previous years’ investments are showing major returns.

The graph below shows the total projected revenue pie broken out by sector.  Solar is still the biggest revenue generator – not surprising given that it is a comparatively “older” technology that has been seeing major investments for many years.

But it’s also important to note the sheer number of clean energy options not counted in Bloomberg’s investment figure, like energy storage (ESS), CHP, fuel cells, and virtual power plants.  (Bloomberg’s report does reference other sectors but does not focus on them.)  While the traditional “renewable vs fossil fuels” comparison is cleaner to make and easier to explain, it’s important to keep an eye on these other applications and technologies.  They may not be the major revenue generators yet, but they’re all showing serious growth that will have an impact on energy markets.


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