Author: Michael Giberson

Michael Giberson

At his Oddhead Blog, Yahoo! researcher David Pennock reports several links of interest for folks working at the intersection of the fields of economics and computer science and then asks what this subfield should be called.  He finds several terms in use for projects or at conferences: Algorithmic Economics, Market Algorithms, Electronic Commerce, Economics and Computation, Algorithmic Game Theory, and adds “A fun suggestion is Economatics (or Autonomics), meant to invoke a mashup of economics and automation.”

I suggest “computational economic systems design” as an accurate description, even if a bit awkward even by geek science standards, putting the intersection of computer science and economics Pennock is concerned with within the slightly broader subfield of computational economics.

Pennock notes, “the phrase Computational Economics makes sense but is already in use by a different field.” (Link in source)  In a long comment posted in response to Pennock’s related Facebook note, Duke University computer scientist Vincent Conitzer argues for using a wide definition for Computational Economics and finding room within that definition for this intersection.  Conitzer said in part:

As [Pennock] pointed out, the main downside of “computational economics” is that other people have already started using this phrase. But note that they (comp-econ.org) seem to (correctly, IMO) have a very wide interpretation of this phrase, including topics in finance, macroeconomics, and econometrics — but also things like “computational tools for the design of automated Internet markets.” I think it doesn’t make any sense at all to say that the computer scientists working on economics are not part of computational economics! I think we should politely claim our rightful place under the phrase “computational economics,” and the other community may not mind at all — but perhaps we should engage this other community more, and also think more about whether we can in fact make ourselves useful in topics in macro, econometrics, etc. Actually, this may be more important than our struggles with finding a name.

For me at a personal level, when I came to Duke, there was already a strong sense that I would be working in “computational economics,” doubtlessly encouraged by the fact that we have a strong computational biology presence and the parallel is natural (and now we also have a computational economics minor). I went along with that vision (which I think is a good one), though I have tried to make it clear that I work on computational MICROeconomics — I don’t do any macro or econometrics — and I think this mitigates the issue of a conflict with the existing comp econ people.

Michael Giberson

David Pennock hears another another tick of the clock in the countdown to web sentience.

[In 2003] we trained a computer to answer questions from the then-hit game show by querying Google. We combined words from the questions with words from each answer in mildly clever ways, picking the question-answer pair with the most search results. For the most part (see below), it worked.

It was a classic example of “big data, shallow reasoning” and a sign of the times. Call it Google’s Law. With enough data nothing fancy can be done, but more importantly nothing fancy need be done: even simple algorithms can look brilliant. When in comes to, say, identifying synonyms, simple pattern matching across an enormous corpus of sentences beats the most sophisticated language models developed meticulously over decades of research.

Our Millionaire player was great at answering obscure and specific questions … It failed mostly on the warm-up questions that people find easy — the truly trivial trivia. The reason is simple. Factual answers like the year that Mozart was born appear all over web. Statements capturing common sense for the most part do not. Big data can only go so far.

In 2003 their best example of a question that they could not answer via websearch was “How many legs does a fish have?“

Now, on the other hand, Pennock said:

I was recently explaining all this to a colleague. To make my point, we Googled that question. Low and behold, there it was: asked and answered — verbatim — on Yahoo! Answers. How many legs does a fish have? Zero. Apparently Yahoo! Answers also knows the number of legs of a crayfish, rabbit, dog, starfish, mosquito, caterpillar, crab, mealworm, and “about 133,000″ more.

Pennock links to Lance Fortnow’s related comments on IBM’s effort to write a Jeopardy-playing computer, and Fortnow suggests something that is going to remain hard for computers for a while: making sense of natural language in context. Fortnow, part of the group that wrote the Millionaire paper, said:

Humans have little trouble interpreting the meaning of the “answers” in Jeopardy, they are being tested on their knowledge of that material. The computer has access to all that knowledge but doesn’t know how to match it up to simple English sentences.

Michael Giberson

“PACE” stands for “Property Assessed Clean Energy.”  It is a financing tool through which cities sell bonds and then loan the proceeds to property owners to improve building energy efficiency.  The loans are repaid via a dedicated taxing mechanism.  A Milken Institute event on PACE financing described it in more detail:

In the PACE framework, cities and counties form financing districts that could issue bonds to provide financing for residential and commercial property owners to voluntarily retrofit buildings and make improvements such as installing solar, wind or geothermal energy systems.

Property owners would repay the loans over 20 years through a special property assessment, with the paper secured by a super-senior position, much like any property tax. Up-front costs for owners are dramatically reduced, which improves return on investment and the internal rate of return and doesn’t discourage them from opting in.

One bit of legal uncertainty surrounding PACE proposals is in that super-senior position.  Since the loan would become attached to a property that frequently is already mortgaged, in the case of default lenders become very concerned with who gets paid first from any proceeds from liquidation.  If PACE loans can achieve the super-senior position, then the bonds are safer investments, it lowers the city’s borrowing cost, and enhances the attractiveness of the program to property owners.  The legal question concerns whether, for already mortgaged properties, the law will allow PACE loans to jump ahead of the mortgage lender in priority.

On the finance side of things, the main issue comes in packaging bundles of small-scale, non-standardized city loan programs into something that can be sold in the municipal bond market. But there are a lot of creative financial types that are under-employed these days, so I trust “the market” will solve this particular problem.

Mitchell Schnurman’s column in the Fort Worth Star-Telegram discusses the PACE program’s California origins and growing interest among cities in Texas, he calls it a “game changer for a green economy.”

PACE financing has a couple of key principles. Most important, the improvements have to generate enough savings to cover the costs. That helps ensure that homeowners are making high-value investments.

Most programs exclude homeowners who are underwater on their mortgage. Leaders try to make sure that contractors are qualified, that the work is done correctly and that nobody is shortchanged.

There’s one more reason Texas leaders should get moving soon. To make the numbers work on energy efficiency, residents tap a slew of federal, state and local incentives.

With deficits rising, that money won’t be around forever.

I wouldn’t oppose the PACE idea on principle, though municipal management of lending programs make me a little nervous.  Lots of critics of Wall Street these days are calling for salaries and bonuses to be tied to long term performance in order to prevent short term manipulation of results.  How will municipal workers be motivated to be good loan officers?  Program management overhead should be recovered through the loan repayments, otherwise these costs become an indirect subsidy to participants.

On principle I worry about the after-the-fact revision of lender priorities.  And it seems like a misuse of the taxing authority of government to use it to support home and commercial property improvements, even though the “taxing” is limited to the properties involved in the PACE program.  Yet I’m not a specialist in these finance issues, so I am not particularly confident that my worrisome feelings properly identify substantive areas of concern.

I do object to the idea that government subsidies can “make the numbers work on energy efficiency.”  Seems to me that a proposed energy efficiency project is either a net value enhancer or a net value destroyer.  Subsidies can’t change energy efficiency facts, they only change who ends up paying for property owners to improve their property.  If it takes a subsidy to “make the numbers work,” the numbers don’t work.  But government subsidy is not inherent in the program, so this is not an “in principle” objection to PACE financing.

Much more information on PACE financing is available at PACE Now.

Michael Giberson

In advance of the screening next week at SXSW, the Austin Chronicle presents a story about Haynesville and its director Gregory Kallenberg.  Here’s a bit of it:

The Rev. Reegis Richard was wandering through a field, hungrily eyeing a dilapidated former school and dreaming of the possibilities, when a Haynesville producer climbed over a fence out of curiosity. Five minutes later, a camera crew was set up, says documentary director Gregory Kallenberg.

It was the sort of serendipitous moment that has guided his documentary, which explores how a massive shale natural gas find in Louisiana is both fueling the dreams of Louisiana’s downtrodden and crushing them, while providing a potential solution to our nation’s energy thirst.

[…] Kallenberg interweaves Richard’s story along with those of Mike Smith, a good old boy who finds himself a sudden multimillionaire from the shale his 300 acres of land contains, and – perhaps the doc’s most gripping character – Kassi Fitzgerald, a single mother who turns into a driven community activist to make sure both her economically depressed neighbors and the environment are treated fairly.

Michael Giberson

From the Houston Chronicle’s coverage of CERAWeek:

… later in the day, ConocoPhillips’ [CEO James] Mulva drew applause from the crowd when he blasted “hydrocarbon deniers” for questioning the potential of natural gas to meet future U.S. energy needs.

In an interview afterward, he said he wasn’t necessarily calling out the administration.

“It can be current and past administrations. It can be Congress. It can be states,” he said, anyone with “unintended, ill-informed opinions” about the industry.

Whatever the case, he said, the result is the same: an unrealistic call for the world to move quickly away from fossil fuels “when we know that oil and gas and coal, there’s not going to be an alternative to them for decades to come.”

Anyone with “unintended, ill-informed opinions” about the industry? Could be a pretty big group.

Michael Giberson

From a NERC press release:

The North American Electric Reliability Corporation (NERC), the Federal Energy Regulatory Commission (FERC), and the Florida Reliability Coordinating Council (FRCC) have reached an agreement regarding the role of the FRCC Reliability Coordinator in the February 26, 2008 power outage that left nearly one million homes and businesses in the state without electricity…. Under the agreement, FRCC will pay a $350,000 civil penalty, to be split equally between the United States Treasury and NERC.

The agreement closes a joint NERC-FERC investigation into FRCC’s part in the event. Funds received by NERC will be used to offset its operating expenses, which are otherwise collected through allocations to load-serving entities in the U.S. and Canada.

The agreement is available at: http://www.nerc.com/files/Order_FRCC_Settlement_03052010.pdf.

The agreement contains a summary of the events leading to the Florida blackout:

4.  On February 26, 2008, portions of the lower two-thirds of the State of Florida experienced a loss of load event more commonly referred to as the Florida Blackout. The event led to the loss of 22 transmission lines, 4,300 MW of generation, and 3,650 MW of customer service or load.

5.  The event originated at the Flagami Substation on the FPL system when a field engineer was diagnosing a piece of BES transmission equipment that had previously malfunctioned. In the process, he disabled two levels of protection on equipment energized and connected to the BES and a “fault” (short circuit) occurred that resulted in transmission outages in the vicinity of the fault as well as generation and distribution outages across portions of the southern two-thirds of the state. The disabling of protection introduced the potential for much more significant contingencies within the FRCC footprint, but the operator fulfilling the RC function was not informed that any protection had been disabled and therefore could not and did not operate the system recognizing these contingencies.

6. At the time of the event, the FPL System Operator was also acting as the RC. Immediately after the event, he delegated his RC responsibilities to a NERC-certified operator present in the control center, but who was not involved in operations that day. The original operator maintained responsibility for the FPL system. The new operator performing the RC function then had to assess the extent of the impacted load and canvass the system operators state-wide in order to initiate restoration. During the event, when issuing directives, the RC operators did not use the three-step communication process, direct-repeat-acknowledge. Nonetheless, restoration of the system occurred in a relatively reliable and expeditious manner.

In October 2009, Florida Power and Light was assessed a $25 million civil penalty for its role in the blackout and agreed to make several improvements to systems and practices affecting reliability.

Michael Giberson

The New York Times has a fascinating story on the solar power industry boom and bust in Spain created by shifting public policies. Similar effects have been observed from shifts in subsidy support for renewable power development in the United States, though because the subsidy was smaller and spread over a larger area the consequences were not so dramatic as described in the Spanish solar policy case.

The renewable power industry usually takes these boom-and-bust cycles as evidence that long-lasting subsidies are needed, but it may just signal that the subsidies are poorly designed and so neither economically nor politically sustainable.

Michael Giberson

Today ten companies announce “Friends of the Supergrid,” a group dedicated to promoting policy support for a massive power grid to link offshore wind resource areas to European power markets. The project would also enhance the ability to trade power between regions. The group complements the “North Seas Countries’ Offshore Grid Initiative” announced in December 2009, but appears to have a somewhat broader scope.

Since I’m more focused on U.S. policy and markets, I’m not sure how these developments relate to two other very large scale transmission projects proposed for Europe, the SuperSmart Grid and the Desertec concept.

All of these project announcements represent pretty large scale dreams, but typically they are short on the responsibilities side of thing. Who’ll pay for a project that the Financial Times suggests may cost hundreds of billions of Euros?

The United States faces similar issues. Dreams of significant electric power generation from renewable sources appeal to many people (see also EWITS), but who wants the responsibility of paying for the needed transmission enhancements? That part of the dream remains a bit fuzzy. Hoping to help develop policy is the newly formed Coalition for Fair Transmission Policy, a group of mostly East Coast utilities that mostly don’t want to pay a lot to bring wind power resources in the central U.S. to their regions.

Michael Giberson

The Houston Chronicle has added another voice to its roster of energy bloggers: Pat Wood III.  Wood is former chairman of the Federal Energy Regulatory Commission and before that chairman of the Public Utility Commission of Texas (though around here they usually list those two items the other way.  In order of importance, you know).

The blog, Wood on the Wires, is subtitled “Energy infrastructure with Pat Wood.”  As the Chronicle’s NewsWatch: Energy blog says in its introduction, “His inaugural post shows a bit of the humor that anyone who knows Pat is sure to recognize.”

Michael Giberson

At ThinkMarkets, Roger Koppl urges supporters of liberty to get into market design.  In effect Koppl says: it isn’t especially useful to oppose the growth of government and hold high the beacon of freedom and prosperity, if there is no way to get from here to there.  What is useful is finding a way to bridge the gap.

I’m a fan of this way of thinking. One reason I advocate “restructuring” the electric power industry instead of “deregulation,” is that I think that restructuring is the faster way of achieving the good things that can come from the decentralization of valuation and control (i.e., increased liberty) in electric power markets.

Koppl is too modest when he mentions his own work: (“My work on improving forensic science in the criminal justice system is an example outside the usual context of ‘deregulation.’ See here and here.“)  His work on the flaws inherent in government monopolization of forensic data collection and analysis is original and important.

Michael Giberson

We’ve mentioned the “natural resource curse” a few times here.  Harvard’s Jeffrey Frankel provides a recent and thorough overview of the literature in “The Natural Resource Curse: A Survey” with a helpful focus on what policies resource rich companies can consider to mitigate the curse. Abstract:

It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. This is the phenomenon known as the Natural Resource Curse. The principle is not confined to individual anecdotes or case studies, but has been borne out in econometric tests of the determinants of economic performance across a comprehensive sample of countries. The paper considers six aspects of commodity wealth, each of interest in its own right, but each also a channel that some have suggested could lead to sub-standard economic performance. They are: long-term trends in world commodity prices, volatility, crowding out of manufacturing, civil war, poor institutions, and the Dutch Disease. The paper concludes with a consideration of promising ideas for institutions that could help a country that is rich in, say, oil overcome the pitfalls of the Curse and achieve good economic performance. They include indexation of oil contracts, hedging of export proceeds, denomination of debt in terms of oil, Chile-style fiscal rules, a monetary target that emphasizes product prices, transparent commodity funds, and lump-sum distribution.

Michael Giberson

The Wall Street Journal published a lengthy article by Russel Gold on the behind-the-scenes struggle over cost allocation and performance obligations between wind power producers and conventional generators.  Tension over how variable resources participate in markets have been simmering for years, but wind power and other intermittent resources have been too small to worry too much about.  Now wind power is edging into the big leagues and the rules begin to matter (e.g.: “Big blow boosts Texas wind record“).  The article focuses on the ERCOT power market in Texas, where the action is hottest, but the same kinds of issues arise in other markets.

From the WSJ:

Many environmental groups talk of how wind and relatively clean-burning natural gas can partner to displace dirtier coal, creating a path to power the U.S. while releasing fewer greenhouse gases. A bitter fuel fight in Texas points to a different future: one in which gas and wind are foes.

The gas and wind factions have been clashing over the state’s operating rules for the past several months. The gas people say the playing field is tilted in wind’s favor; wind accuses gas of trying to snuff out the nascent wind energy sector.

[…]

At the heart of the battle is a fight over the vicissitudes of wind itself. The wind industry argues that since it can’t control when the wind blows, it shouldn’t be held to the same rules that require everyone else to make payments when they fail to deliver promised power. The natural-gas generators say everyone should operate under the same rules, and lament that wind’s success is merely coming at the expense of another relatively clean energy source.

[…]

One grievance: Coal, nuclear and gas operators must pay for their own backup if an operational or maintenance problem prevents them from delivering power as promised. But if wind generators fail to deliver promised power because the wind doesn’t blow, the cost of backing up wind power companies is spread among all the generators, state officials say. This puts an unfair burden on nonwind generators, says the gas faction.

For a closer look at the behind-the-scenes battle, try searching the ERCOT website for information about “voltage ride through” requirements for wind generators or the actions of (and reactions to) the Wind Cost Allocation Task Force.  If you drill down beyond the meeting schedules and status reports, all the way down to the presentations, reports, and comments filed by individual parties, things can get a little sharp.

For example, this recent presentation opposing recommendations of the Wind Cost Allocation Task Force uses terms like “fundamentally flawed,” “unfortunate squandering of resources,” “solutions … in search of a largely non-existent problem,” “arbitrary,” “would thwart public policy goals of the State of Texas.” Thems fighting words, and that’s just from page 2 of a 15 page presentation. On page 8, there is the suggestion of “serious anti-trust concerns.”

One of the page 2 phrases is right on target: “not consistent with principles of sound market design.” Unfortunately it isn’t until p. 13 that any market design principles actually get raised by the presenter.  Not surprisingly, the presentation itself seems a bit cavalier in its own use of “the principles of sound market design,” invoking principle when principle is convenient and pleading overall policy benefits when principles are inconvenient. But the principles mentioned are a start: cost causation, non-discrimination, and something about allocating costs to motivate “proper market behavior.”

The way forward, in ERCOT’s committees and in other power market design efforts, is in the systematic working out of principles of sound market design to be invoked in these kinds of discussions.

Michael Giberson

Robert Rapier on Bloom Energy.  Jumping straight to the end, his conclusion:

Bloom Energy looks like both Plug Power and Range Fuels to me. It is a company that is attempting to produce energy cheaper than all those who came before using known technology – and using hype to attract investors. And if Bloom Energy fails to deliver, they will learn just like Range Fuels that hype is a two-edged sword.

Rapier, with a modesty both rare and valuable among the blogging class, observes that fuel cells are not his specialty. He leaves to others the task of assessing the technology.  But his background in biofuels and alternative energy prepares him well to recognize revolutionary-technology hype, and he thinks he has seen this story before.

(Plug Power is a company that promised to do in 2000 the same kind of thing that Bloom Energy promises now.  A New York Times story from that year describes Plug Power as “developing refrigerator-sized cells that run on natural gas or propane for use as home power sources.”  Plug Power, still around, does make and sell fuel cells, but apparently isn’t profitable and hasn’t, yet, revolutionized the electric power industry.)

Michael Giberson

Michael Finney observes that Girl Scout cookies sell at different prices in different locations, and he asks (tongue in cheek), is it “Girl Scout cookie price gouging?”

No, actually it is more like “zone pricing“ price discrimination – setting the price to a level that the local market will bear.

(EDITED, see comments for explanation).

Michael Giberson

After eight years in stealth mode, Bloom Energy had a big week in the media last week.  They opened up on 60 Minutes and picked up mentions everywhere from the New York Times to local newspapers to a zillion blogs (us included).  Much of the discussion was a bit over-excited.  At Green Chip Stocks, Chris Nelder noted that environmental blogs seemed particularly agog over the announcement (“The green blogs fell all over themselves repeating the breathless ‘Holy Grail’ speculations in Lesley Stahl’s 60 Minutes report, which was indistinguishable from an in-house marketing puff piece.”).

But a few analysts, Nelder included, managed to run the numbers on the handful of specific claims sprinkled within the public relations blitz.  The exercise has left them less impressed.

Nelder, “Is the Bloom Box Energy’s Holy Grail?“:

Fuel cells aren’t new…. None have achieved real commercial viability yet…. What’s new about the Bloom Box is that it claims to be high efficiency (producing more power with less waste heat than other fuel cells), small, relatively cheap, and able to run on a variety of fuels including natural gas, landfill gas, and biogas….

Let’s have a look at the numbers….

And then, after chomping on a few numbers, he concludes the estimated “payback period” is longer than the product’s estimated lifespan (meaning you won’t have recovered your initial investment by the time comes that you need to buy a new one), the capital costs are high even compared to solar PV, and the emission reductions are good but not great.

In addition, Nelder notes, this fuel cell is unlikely to run on anything other than natural gas in residential use – how many homes will ever be served by a landfill gas pipeline? – and for similar gas supply reasons  it is unlikely to light up the dark in many developing countries.

Sam Jaffe, Renewable & Distributed Energy Blog, gives us “Four Things Bloom Energy Forgot to Tell the World,” namely that the fuel cell ”does not produce electricity more efficiently than centralized generation, isn’t much cleaner than centralized generation, and is more expensive to produce than most other forms.  Finally, Jaffe notes the process theoretically has energy storage capability*, but it isn’t clear when the capability may be made available.

*Instead of producing power, theoretically the technology can consume power and produce hydrogen, which can be stored for later use as a fuel.  But no information seems to be available about the efficiency of the system as a storage device, and the apparent lack of a willingness to speculate on the availability of the feature is not encouraging.

(HT to Kate Mackenzie at FT Energy Source for the Nelder link.)

Michael Giberson

A federal court in Massachusetts has dismissed a class-action claim filed against four Martha’s Vineyard gasoline retailers.  The suit claimed the stations engaged in price fixing over several years and in price gouging after Hurricanes Katrina and Rita in Fall 2005.  Defendants argued that pricing patterns observed by plaintiffs were insufficient to support either the price fixing or price gouging allegations.

The Martha’s Vineyard Times has provided thorough description of the case, including articles on the plaintiff’s expert testimony (by Boston College economist Frank Gollop) and the defendant’s expert testimony (by Michael Quinn of the Analysis Group).  In addition, the Times posted selections from expert testimony online.  (Links below.)

My general reaction from reading parts of Gollop’s testimony was that it was very basic industrial organization analysis – all comparative price movements and changing margins – and neglected completely the extensive economics literature on retail gasoline pricing. The law likely makes no special distinction for gasoline pricing cases, so the analysis wouldn’t have to address what is known about gasoline prices, but neglecting the literature may have led plaintiff’s to mistake common retail gasoline price patterns as evidence of price fixing.

The main surprise from looking at Quinn’s testimony for the defense was the revelation that there are nine gasoline stations on Martha’s Vineyard, not just the four defendant stations. Gollop managed to produce a 36 page affidavit, including a discussion of market shares, barriers to entry, the relevant market area and economic substitutes for the defendant’s gasoline with – so far as I was able to find – just one incidental reference to just one of the five non-defendant retailers.  Gollop compares the defendants’ prices to prices on Cape Cod, nearby but obviously less relevant than the five other on-island gasoline retailers. I assume that the plaintiffs studied the behavior of the other on-island stations and found it not helpful to their case, but it looks like a pretty big hole in the plaintiff’s analysis.

The price gouging claim rests almost entirely on Gollop’s calculation that gross margins on gasoline sales at the four defendant stations increased by more than five cents after Katrina, comparing margins in September, October, and November to the margin in August, 2005. Gollop said the five-cent standard was suggested by the FTC’s report on gasoline prices post-Katrina and Rita.

Quinn, for the defendants, observed that patterns in retail prices surrounding Hurricanes Katrina and Rita were similar to patterns in retail prices at other time of wholesale price volatility. And, interestingly, price increases at the defendants’ stations were smaller than the price increases at the five non-defendant stations on the island.  In general he finds the price patterns to be typical of “price-cost dynamics inherent in this industry,” including the rockets-and-feathers effect that has been studied at length by economists.  In short, nothing surprising here (at least to someone familiar with the economics literature on gasoline prices).

Additional information (posted online by the Martha’s Vineyard Times):

• The plaintiff’s original August 2007 complaint and Frank M. Gollop’s affidavit
• Comparison of Average Monthly Pump Prices at some Cape Cod stations with Pump Prices at Defendants’ Gas Stations
• A table showing Volume of Gasoline Sold at Defendants’ Gas Stations
• A report for the defendants written by Michael Quinn and dated April 30 of this year, but not yet made a part of the court record in the case
• Price Changes During Market Emergency Period
• Average Daily Unleaded Regular Retail Price for Dukes County and Providence Average Rack Price
• United States Average Daily Unleaded Regular Retail Price and United States Average Rack Price

Michael Giberson

Sandia National Lab has just published a study of energy storage applications for the electric grid: “Energy Storage for the Electricity Grid: Benefits and Market Potential Assessment Guide.” John Petersen at Alt Energy Stocks said:

I’ve been following the work in progress on this report since last summer and have eagerly awaited the opportunity to shift my focus away from the overhyped electric vehicle sector and focus on something with real meat. It looks like my time has finally come. For technology types that want a detailed understanding of what the various potential utility-scale applications for energy storage are, the entire 232 page report is a must read.

Petersen then provides an overview of the report’s information from the point of view of a potential investor.

Michael Giberson

Another Silicon Valley start-up out to solve the world’s energy problems, promising “clean, reliable, affordable energy anywhere.”  Sounds good, hope they can deliver.

Today’s energy-problem-solver is Bloom Energy.  The company has been around since 2001, quietly developing what it claims is a new fuel-cell technology, much of it on the dime of Silicon Valley venture capitalists like John Doerr of Kleiner Perkins Caufield & Byers.  Sunday, television news show 60 Minutes provided the first public look at the company and its technology.  Today the company held a news conference officially unveiling its product.

The basic product is a solid oxide fuel cell that produces power by reacting natural gas with oxygen without using combustion.  The process yields water and carbon dioxide in addition to power. The water is reused within the system, the carbon dioxide emitted is less than traditional power plants would emit generating similar amounts of power.

Here are some links, beginning with 60 Minutes and the buzz before the official release:

• 60 Minutes, “The Bloom Box“
• FT Energy Source, “A lot of guesswork about Bloom Energy’s fuel cells“.
• Fast Company, “eBay Opens Up About Installing Bloom Boxes and Their Room for Improvement“.
• New York Times, “Bloom Energy claims new fuel cell technology“.
• Forbes.com, “What Bloom Energy needs to prove“.

Samples from post-press conference coverage (which is substantial):

• FoxNews.com, “Can this object save the world?“
• Fast Company, “Is the Bloom Box Energy Server the Future of Plug and Play Electricity?“
• National Geographic News, “Bloom Box: Secret App may be Key to Tiny Energy Plant.”
• Green, Inc., “A secretive start-up raises the curtain.”
• ADDED LATER: Gizmodo, “Giz Explains: Fuel Cells and Bloom Energy’s Miracle Box” (Thx to Chris Masse).

Bloom isn’t the first Silicon Valley-linked company seeking to solve the world’s energy problems.  In fact, that’s a fairly crowded space these days, with Google.org and A Better Place and Tesla Motors just a few of the companies making techie-based forays into the world of energy.

Or, a less glamorous example, Range Fuels, a biofuels-based company funded in part by Vinod Khosla, former founding CEO of Sun Microsystems and currently head of Khosla Ventures and a general partner with Kleiner Perkins Caufield & Byers (the  same venture capital firm that employs Bloom Energy supporter John Doerr).  Range Fuels, which peppers its website with quotes from people like Mahatma Ghandi and Albert Einstein, has burned through hundreds of millions of dollars – much of it in the form of government grants – so far unsuccessfully pursuing the goal of commercial production of cellulosic ethanol.  Robert Rapier delivers a run down on the company at R-squared Energy Blog, and it isn’t pretty.

Bloom Energy does have working products in use by customers – companies like Google, FedEx, and eBay – so at least that much is real.  But, of course, fuel cells have been around for a long time. The real question is whether they can produce power at a low enough cost over the lifespan of a unit.  They claim average costs around 8 to 10 cents per kwh, which is competitive relative to retail prices for grid-connected commercial and residential consumers in the United States (rates average about 10 to 11 cents per kwh).  If that claim is substantiated after the company moves the product into commercial scale production and widespread use, then the company will be winner.

Michael Giberson

One of the issues surrounding development of shale gas resources has been concern over the effects of resource development (especially fracturing processes) on groundwater quality.  Congress has initiated an investigation of the practice, for example.

Geoff Styles looks over the issue in “Shale Gas and Drinking Water“, concluding it isn’t likely to be a big deal:

The more I learned about fracking, the more puzzled I became that it has attracted so much criticism recently. After all, the practice was developed in the late 1940s and has been used since then in tens of thousands of wells to produce literally billions of barrels of domestic oil and trillions of cubic feet of domestic natural gas.

… So how do we explain the current ruckus over hydraulic fracturing? Perhaps one reason this old practice is attracting new scrutiny is because it’s being applied in parts of the country that haven’t seen a drilling rig in decades, where it provokes a similar reaction to the arrival of 300-ft. wind turbines, utility-scale solar arrays, and long-distance transmission lines.

The industry doesn’t seem too concerned about the Congressional inquiry, which suggests that folks in the business don’t think that there is anything to be concerned about.

Michael Giberson

David Wagman, chief editor of Power Engineering magazine, toured the Electric Reliability Council of Texas’ primary control center in Taylor, Texas as part of a group attending the Renewable Energy World Conference in Austin.  If you wonder what ERCOT’s control center is like:

Inside the control room, the most striking feature is the lack of noise. The room, which must be 50 by 50 with a 35-foot ceiling, is library quiet. And that’s the way they like it, Joel Mickey told me in a video interview I filmed with him and which will be on this web site in the near future. Anything else suggests a system that’s out of balance or with a problem. Eight people work in the control room, responsible for everything from day-ahead forecasting to on-the-spot transmission balancing. Each has a bank on consoles.

The front wall consists of a massive projection screen with perhaps a dozen displays showing the grid and various real time operating conditions. Two digital displays at either side of the room report the current load, the time and the system’s cycle. Those numbers in particular move up and down within a narrow range around 60 cycles. Every four seconds the control center pulses commands to generating units around the state, commanding changes in generating output up or down to keep 60 cycles in the center of the target.

More at the link, including some description on how wind power is changing the system operator’s job.

(HT to the Caprock Plains Wind Energy Association.)