How To End Petrodictatorships

“The supreme art of war is to subdue the enemy without fighting.” – Sun Tzu

It’s fitting that here on U.S. Memorial Day (for those outside the U.S. – a holiday commemorating the military service of current and past soldiers) to write about ending authoritarianism tied to petroleum without the loss of our military men and women. It’s hard to deny that our current military adventures in Iraq are at least in part due to the country’s vast energy reserves.  But it need not be that our young men and women come home in caskets draped in the American flag. It need not be that we send hundreds of billions of dollars of wealth overseas each day for energy. There’s a better way to loosen the authoritarian grip of petrodictators. We don’t have to fire a single shot to ruin them.

We simply bankrupt them.

We’ve done it before.. to the Soviet Union specifically. Actually, the British did. The Soviets collapse had little to do with President Ronald Regan’s impassioned “tear down the wall speech” nor did it have to do with the Soviet military adventures in Afghanistan (although the latter was certainly a contributing factor). Instead, the Soviets adopted a model whereby oil revenues were used to subsidize the consumption of is poorest citizens. The policy worked for a while until Prime Minister Margaret Thatcher came into power in the U.K. in 1979. The impact of her decisions to privatize the petroleum rich North Sea lead to a flurry of activity, which turned Britain into a major energy exporter. When the western democracies began to buy from Britain, and not from the Soviet Union, the Soviet revenue machine collapsed, and with it the social policies which kept social stability. What happened next was too predictable: the Soviet currency plummeted in value, the country pulled out of Afghanistan because of functional bankruptcy, and the media began to report on Soviets hauling barrels of rubbles to the local baker to buy a loaf of bread.

Hugo’s Folley

If this sounds all too familiar to anyone in Venezuela, that’s because President Hugo Chavez has implemented the exact same policies. The Chavista policies are likely to hold ground in an inflationary market for petroleum products, but would similarly collapse social security payments to the country’s poorest. You won’t hear that on Aló Presidente.

There’s already substantial evidence that his plan to buy his way to social stability with petrodollars is unwinding quickly. Until recently, the Venezuelan government was encouraging private investment in oil services. then on May 8th, Hugo Chavez changed the law to make the entire industry the ward of the state. The National Guard promptly began to occupy dozens of drilling rigs, docks and boats operated by private contractors, both local and foreign, hired by PDVSA, the state oil company. PDVSA next issues a press release on queue citing that the oil-services firms did not cut their prices when the oil price plummeted last year.

The real reason behind the nationalization is evident one you begin to scour PDVSA’s accounting ledger. Despite years of record oil revenues, PDVSA accumulated liabilities of almost $70 billion by last September, up from less than $30 billion in 2006, according to the company’s financial reports. The company is itself owed more than $24 billion, mostly by Cuba and other neighbours to whom Mr Chávez supplies oil on easy terms. Included in the $70 billion in liabilities are $14 billion in short term liabilities owed to contractors, according to a report to the National Assembly. The same contractors who were just nationalized.

In other words: Venezuela ran out of cash, so Chavez decided to nationalize his creditors in a fit of panic.

Ay Chihuahua.

By the Numbers

Of course to bankrupt petrodictatorships, we would first need to employ enough renewable energy resources to drop the demand for petroleum products below the break even point at which petrodictatorships. Fortunately, the IMF has already done the math based on OPEC meeting minutes. What follows here is a listing of the Dollars per barrel prices needed in 2008 to float the petroleum country’s spending. An oil price over that amount means the country is runnign a surplus relative to social spending. An oil price under means the country is running a deficit which, left uncorrected, will lead to “restructuring”, possibly of the Soviet kind. Here’s how it breaks down:

Bahrain	$84
Kuwait	$34
Oman	$78
Qatar	$24
Saudi Arabia	$54
United Arab Emirates	$24
Algeria	$60
Azerbaijan	$35
Iran	$90
Iraq	$94
Venezuela	$95
Russia	$70
Kazakhstan	$67
Libya	$53

As of the date of this posting, the price of a barrel of crude is hovering at $61 a barrel. It’s pretty obvious why Venezuela’s National guard is sitting on expropriated assets right now. Highlighted for emphasis is Saudi Arabia, who would need to feel the pinch substantially to make any dent, Iraq, who is just plain high, and the UAE, who has the lowest breakeven point.

Ideally, Our goal should be to invest in renewable energy to easily hold the Iraq price, push down below the Saudi price, and eventually hit the UAE price. Maybe I’m naive here, but I figure such a change will force these countries leaders to invest in people to grow GDP rather than drilling equipment. It’ll also make the planet more comfortable for us to live in as we use more solar, wind, and geothermal. And it will ensure more military veterans will be around to commemorate memorial days to come.

More info:

http://seekingalpha.com/article/116369-behind-the-numbers-problems-loom-for-opec

http://www.cnbc.com/id/27355967

More Speed For My Buck Please

President Obama unveiled his vision to upgrade “the nation’s transportation system” earlier this month, pledging a long-term commitment at the federal and state levels to build a comprehensive high-speed intercity passenger rail network connecting the nation. It’s a National Highway act for an abandoned rail system which could (if taken seriously that is) provide an alternative to domestic airplane travel. A lower energy, lower cost alternative.

Under the American Recovery and Investment Act, high-speed rail would receive an initial investment of $8 billion, plus a requested $1 billion a year for five years in the federal budget. Here’s the Federal Railroad Administration spokesmouth’s statement:

“High-speed rail (HSR) is a family of transportation options that address longer-distance passenger transport needs in heavily populated corridors. Implementing HSR will promote economic expansion (including new manufacturing jobs), create new choices for travelers in addition to flying or driving, reduce national dependence on oil, and foster urban and rural livable communities. With the successful completion of the original phases of the Northeast Corridor (NEC) Transportation Project offering Amtrak’s 150 mph train service, known as “Acela,” between Washington, New York, and Boston, efforts have expanded beyond the NEC. A number of high-speed rail corridors are being planned by States that range from upgrades to existing rail lines to entirely new rail lines exclusively devoted to 150 to 250 mph trains.”

Envisioning 1960’s Technology

If you’ve traveled from Boston to Washington D.C. on America’s Acela Express, you know how far we need to go to make high speed rail a viable long distance alternative (not just a low budget alternative). The Acela staff provide great service, but a sustained speed of 138kph/86mph isn’t going to compete effectively with an average commercial passenger airplane speed of 800 kph/500 mph.  It’s not just Acela that’s slow. Japan’s Shinkansen high speed train network shuttles locals at 210kph/130mph, which is great only if you live on a geographically small island nation.  It’s also worth mentioning the Shinkansen opened its doors in 1964.

Then in 2003 Shanghai Maglev Train opened up for business, covering the Longyan-Pudong corridor in China, which moved the speed standard forward to a sustained 431 kph/268mph. I’ve been on it, and the experience rocks.

Shanghai Maglev Train leaving the Longyan Station. Photo Coutesy of Jian Shuo Wang

The SMT is still the only commercial Maglev train in existence, but there are others in the works. California has been on the forefront of voter ballot measures which have proposed building a high speed rail service from the San Francisco bay area to Los Angeles, and even has this really cool trip calculator on their site. Unfortunately, the project aims to build maglevs traveling at underwhelming sustained speed of 350/220.

Aim for Airspeed California

So maglev trains traveling in a frictionless, motionless tube seems to provide the best prospects for energy efficient, fast domestic travel, but how fast can they really go? Current maglev trains in use have been clocked at 501kph/311 mph in Shanghai. But that’s not the end of the story: while California dabbles in meeting last century’s speed records, the Japanese are busy designing Shinkansen’s successor, which aims for sustained speeds of 581kph/361mph. But we don’t need to go overseas to find maglev trains traveling at cutting edge speeds. San Diego-based General Atomics is testing designs which achieve the same speeds, and is hoping to tap into American Recovery and Investment Act funding.

As stated at the beginning of this blog post, the American Recovery and Investment Act provides 13 billion over 5 years for high speed rail. That’s alot of money, and it would be nice to buy an alternative to airports with all that cash. But that will only happen if California and other funded states set their sights high, rather than at easily achievable targets. It’s likely that low expectations could ironically undermine progress. Taxpayers who see little improvement for a generous outpouring of funds could vote to pull the plug on much needed investment in the future.

Edit: Noticed Christopher Beam wrote a similarly stinging piece, although he gives my home state credit more credit than I for leading the feds and other states. Rightly so – a hat tip to you sir.

The Grid Within the Grid (My Earth Day 2009 Post)

Most people driving into San Jose, CA will quickly notice the quixotic mix of the hotel De Anza, a throwback to art deco style architecture, and the many new glass-and-steel condo towers beckoning white collar 30 somethings to migrate back into the city center.  To be sure, this city draws a striking contrast between the city streets around the gleaming center of the city, and the dilapidated wooden structure homes on the other side of the 280 freeway dressed up in all manner of baby blues and yellow paint jobs. Old and new San Jose, they call it.  I live about 5 minutes from city center in San Jose, and from time to time drive past the building-turned-artwork city hall on the way to something or another. The last few times I drove past city hall, I noticed an approximately 2-3 foot black machine right across city hall on the curbside – about the half size of a mailbox. Now what seemed at the time like a high tech parking meter may in fact transform old San Jose yet again – only this time it’ll be the roads which change.

It turns out the curbside machine was one of four installed by Coulomb Technologies —three in a parking garage on 4th Street and one curbside across from city hall. The purpose of the device is to provide drivers with the ability to charge up electric and electric-hybrid vehicles. Here’s how it works: a driver can subscribes to the company’s ChargePoint Network, and receives a smart card that allows he or she to fuel up at any station. A driver can pay for 10 sessions a month for $15 or all the way up to unlimited monthly access for $50. The charging station will work for fully electric vehicles as well as plug-in hybrids. Chargepoint subscribers can visit the network’s web site to view a Google maps feed of available (or occupied) stations.

Let that sink in a moment – an electric or hybrid electric driver using this network can effectively place a ceiling on his or her transit fuel costs while driving “green”.

But charging stations are the visible tip of a larger iceberg. To enable a consumer level cap on transit costs in this fashion, we would need a standardized grid of services and standards – one which would allow drivers to plug in whether they are in San Jose or anywhere else in North America. And that requires what I like to call the grid above the grid. It’s an idea stemming from the way the internet works, simply applied to energy. Think about all the things that have to work in concert ot allow you to read this blog post : An ethernet cable (or wifi) is used to connect your computer to your router at home or in the office. That’s a physical layer standard. Next you need an Internet address, or IP, which works on top of the physical standard.  This blog has an IP address, and so does your computer – its how traffic gets to and from you on the internet. Next, you have to have a transport standard from your browser to the blog server to allow to you request the blog post text. That’s a standard too which sits above the IP address standard (the “TCP” in “TCP/IP”). Finally you have the application layer standard which sits atop the transport layer. That’s the HTML standard which all web pages adhere to, allowing your browser to work all over the internet. The point here is that to make it all work, it’s important to compartmentalize the system into different layers of a “stack model”, with each standard layer sits on top of one another. The same stack model can be helpful in identifying steps needed to fuel transportation in a post-petrol world.

Here’s one (admittedly simple) Grid Within the Grid model:

Connector – Refuel – Transmission – Production

The assumption here is, like the internet, there’s a grid built on the back of another to make post-petrol driving convenient. In turn, the four pieces are as follows:

The Connector (or “plug”) Layer

The first layer in the grid would a standard plug which connects to any charging station (home or commercial), and fits any electric or hybrid-electric vehicle. The good news is we already have one.  The three-point, 400-volt plug, which will allow electric cars to be recharged anywhere in a matter of minutes, is set to be unveiled Monday at the world’s biggest industrial technology fair in Hanover, northern Germany. According to a press release from German energy company RWE,  sa press release from German energy company RWE, automotive and energy companies have reached an agreement for a standardized plug electric and electric-hybrids. Some of the automakers include in that agreement are Volkswagen, BMW, Ford, General Motors, Fiat, Toyota and Mitsubishi.

The Refuel Layer

The next part of that standards stack is the charging stations on the roadsides, or what I call the charge station layer. It’s also problem for which appropriate tools have been developed and deployed for determining where Starbucks franchises will be located to tap demand, for instance. Same thinking applies to charging stations, and making sure those stations all support the lower level standard (use the same plug). Of course there’s also the matter of making sure Chargepoint users are authenticated. Energy credits provided to Chargepoint users would need to be billed, which requires set up of a monetization grid as well. To make such a system convenient, drivers would need to be able to pay a number of different ways: credit cards, subscription, stored value cards, and possibly other exotic methods such as bill to a phone (the way some vending machines work in Japan). Layer on top that a number of different providers would jump on board to provide charging stations the same way ExxonMobile, Shell, Chevron, etc all lined up to provide drivers with fuel for conventional vehicles. The trick is getting the most ubiquitous charge network providers to join open payment interoperability standards. This too is a problem which has been solved in the past – by banks who have coordinated to provide ubiquitous use of Visa and Mastercards, regardless of what bank a business accepting credit cards is using, or whether that business is a brick-and-mortar business or a web business.

The Energy Transmission Layer

There’s little point to switching to electric or electric-hybrids if we keep generating electricity through fossil fuels – whether you’re concerned about the impact of greenhouse gases on the environment, domestic job creation, or the America’s political-economic entanglements driven by dependence on petro-dictatorships for fuel. It’s the same problem. The U.S. has the natural resources, the technology and the capital to initiate a shift to renewable energy. Missing is a high-voltage and fault-tolerant transmission backbone to make that future a reality. The issue is that the prime areas for renewable energy production are in places where we don’t have robust existing transmission infrastructure.  Since there is a geographic gap between production and demand, electric companies have understandably built coal, nuclear, natural gas and oil-fired generators closer to customers.

Matthew Wald of Scientific American provides depths around the issue by writing that “North America is actually covered by four regional grids (three of which serve the U.S.). The largest is the Eastern Interconnection, an extensive complex of transmission lines that stretches from Halifax to New Orleans, with substations that step down the high-voltage electricity to lower levels so that it can be distributed locally along smaller wires. West of the Rockies is the Western Interconnection, from British Columbia to San Diego and a small slice of Mexico. Texas, in an echo of its history as an independent republic, comprises its own grid, now called the Electric Reliability Council of Texas. And Quebec, with its separatist undercurrent, also has its own grid. The high-voltage transmission systems in the four regions comprise about 200,000 miles of power lines, divided among a staggering 500 owners, that carry current from more than 10,000 power plants run by about 6,000 investor-owned utilities, public power systems and co-ops.”

Power traveling through a feudal mess of jurisdictions is only one problem. We also lose power the longer we transmit it, and the older the energy grid is the less efficient it operates. According to the U.S. Department of Energy (DOE), seventy percent of the existing high-­voltage system is consequently 25 years old or more. Hence the DOE’s current goal of attaining 20 percent of U.S. electricity from wind by 2030 includes a plan for a national, high-voltage transmission backbone. The 22,000-mile system is the energy equivalent of the interstate highway act for a post-carbon transportation economy. Today’s transmission system usually operates at no higher than 345 kilovolts, but the proposed national energy backbone  would operate at an extreme high-voltage rating: 765 kilovolts. The bump in power would reduce typical system losses of 3 to 8 percent to around 1 percent and provide routing around. It also wouldn’t hurt to have a smart grid which routes around failure between any two lines, in case of routine failure or in the case of an electro magnetic disruption. Incidentally, the U.S. military is currently studying the effects of a weaponized electro magnetic disruption device, which could be used to knock out power to affected areas. Enhanced security is a nice benefit to revamping the grid too.

The Production Layer

As the self-explanatory name implies, the production layer involves what happens inside a power plant – be that power plant conventional, or renewable. To the extent that the other three layers are properly sorted out as above, a centralized conversion from fossil fuels to renewables at the power plant level would have the effect of “greening” transportation around the country.

The Big Picture

This is one picture of what we can create , and none of this is new. Making the kinds of changes we’ll need to make one way or another is a matter of applying internet design principles, business community buy-in, public support, and exercise of a new national highway act focused on energy.  The key to this is a concerted effort – our national highway system was not constructed individually by states and glued together afterwards. So it is with the need for a national transportation energy grid. The best part is we will probably create lots of jobs while we’re at it.

Why I’m Not Sold on Nuclear Power

Most of the conversation around nuclear power in the U.S. these days usually ends up summarized by two words:  “bridge solution”. That is, nuclear power is increasingly pitched as a cleaner, safer alternative to fossil fuels based energy. The thinking goes something like this: We use nuclear power for the next few decades to drop our dependence on imported fossil fuels energy and our carbon emissions, while we fine tune our ability to extract energy from the sun, wind, etc. If the “green” energy sources do not provide the energy density we need to replace fossil fuels, nuclear fission can become one part of the tapestry of technologies we will eventually need to deploy to cover the energy gap.

Of course public opinion has been cast squarely against nuclear since the 1970s, for reasons mostly not founded on real science. However, even if we get past the misunderstanding around Chernobyl and Three-mile Island, nuclear might not be viable in America – not as a permanent solution, and not even as a bridge.  Here are some reasons why.

Time to Utility

The concept of a bridge technology in energy is to wean us off fossil fuels in the short term while giving our engineers time to improve the efficiency of green technologies. Time to utility or time to online is a critical metric with any bridge technology – every year consumed by plant construction is one less year of “bridge”, if you will. Estimates for plant construction range from 6 to 25 years. The three year number specifications from Westinghouse for the AP1000 bids for several Chinese contracts. The Chinese accepted Westinghouse’s bid to build at least four units for the Sanmen Nuclear Power Plant in Zhejiang, China, which broke ground in February 2008. Operation is scheduled for 2013–15.  Westinghouse also won the Haiyang Nuclear Power Plant in Shandong, China bid, for 2 units. Construction in Haiyang began in July 2008, and the plant is scheduled for operation between 2014 – 2015.  The median time to live including regulatory and technical oversight for recent projects is thus about 6-7 years. If we factor a most pessimistic scenario of 25% time and cost overruns, we at facing nearly a decade of lead time which significantly reduces nuclear’s appeal as a short term bridge. This analysis assumes enough enriched Uranium mining capacity is available, since new mines would take years to bring online as well. It’s worth noting this analysis ignores decommissioning of power plants, which would deflate the benefits of nuclear power even further as a bridge technology.

One relevant point of reference – preliminary contracts between Westinghouse and South Carolina Electric & Gas point ot an estimated cost of almost $5 billion for each AP1000 reactor sold ot the utility in 2008 – orders of magnitude more expensive than conventional plants. The cost of servicing the financing on a project of this magnitude can drive an operator to bankruptcy before launching if significant construction delays occur.

Running Low on Fuel

Nuclear plants are diminishing returns investments because enriched Uranium and Thorium are both nonrenewable resources. That is, as the supply of these rare earth metals reaches zero, the value of power plants both in Dollar and kilowatts approaches zero. Making matters worse, Uranium production peaked in 2001, and estimates in the same year estimated known resources would last up to 42 years, with a theoretical 72 years if military equipment were dismantled to provide raw materials (the dismantle scenario ignores national security concerns, which is a bit naive). Even these figures do not take into account growth. If we account for a doubling of the rate at which nuclear fuel is spent, we would have between 21 – 36 years of fuel remaining.  But is that doubling truly realistic, or is it inflated? In order to understand how much we would have to increase our Uranium burn rate, it’s important to take into account the increase in energy demand worldwide. In 2003, MIT professors John Deutsch and Ernest Moniz chaired a task force which produced a report titled “The Future of Nuclear Power“, available for download. The report contains estimates of energy demand growth (the methodology described in the report itself) which are summarized as follows:

Country specific breakdowns are also included.

All countries currently spending Uranium fuel would need to increase spend by 40% to maintain the percentage of energy derived from nuclear constant with current percentages. These numbers also do not account for increased fuel spend in China, or a nuclear India, Pakistan, or even Iran. Our doubling of fuel spend scenario and the estimate of 21- 36 years of known reserves seems reasonable.

Insurance

Insurance companies must make assessments as to what projects are profitably covered based on solid actuarial analysis, but no private insurance company is willing to provide coverage for nuclear plant operators, so the federal government has to step in to cover the insurance gap. Enter the Price-Anderson Act of 1957, which passed as an amendment to the Atomic Energy Act of 1954. Congress’ intent was to fund the Price-Anderson federal insurance for a period of ten years, during which they figured utilities would amass enough safety and operational expertise to convince private insurance to assume policy risk. However, Price-Anderson remains in effect today, having been renewed lastly through the year 2017. The federal insurance represents a large, invisible subsidy on the price of nuclear energy, the full burden of which we are shouldering anyway.

Final thoughts

Any hope of replacing a fossil fuels energy infrastructure must involve a combination of technologies to account for the sheer energy density of petrol and coal, and nuclear is but one option. There are a number of statistics industry groups will cite around lower operating costs of nuclear as well as safety records, all of which are important to take into account. But the above three issues seem to be the key impediments to nuclear becoming a viable bridge, much less a permanent fixture in our energy policy.

The Measurable Impact Web

Like many of you reading this blog, I too have the attention span of your average hummingbird.  The funny part my ADD-ness has become more acute over the last year or two, and I’ve discovered an odd side effect to it. Rather than sit in a zen state just thinking for an extended period of time, I tend to think in a packet-like state. That is, I tend to process information, then come back to it later and pick up where I left off last whenever I have a spare moment. This happens over and over again until I have completed “processing”, which is usually where I begin blogging. Like Susan Wu at CRV, I’m pretty bad about opening up my thought process and I usually blog about fully baked thinking, but I’m going to step out of my comfort zone here.

I Confess…

So, I’ve been mulling a confession for the past 2-3 months. Here it is: like Fred Wilson, I’ve grown restless with Web 2.0 startups. Now, Fred is a smart fellow with a high signal to noise ratio, but he’s bored for a different reason than I. He basically wants to change the world and feels Web 2.0 is not world changing. you can’t blame him, considering Supernova and TED have been all about energy and microfinance of late. I’m with you Fredster, but I’m bored because I believe the web is world changing but I’m not seeing jaw dropping innovation (or revenue for that matter). But this isn’t about Fred – his posts tend to spawn more than a few copycat blog posts anyway. Nor is this about me. It’s about what’s next in connecting us all.

Exhibit A

Case in point (and one of two catalysts for this post): Yammer wins the TechCrunch 50 competition. Now, we’ve been using Yammer internally for our company with some success, but frankly Yammer is more evolutionary than revolutionary. Most of us are still using Twitter and email primarily and no adoption methodology is in place. This isn’t a hate fest on Yammer, by the way, which is a good product with a real business model (where for art thou Twitter??). But the Yammer nod seems a bit of smarmy protest vote for the oft-errorprone microblog default Twitter, who’s been giving us the big fail whale far less of late. Also, Twhirl, the social software front end client, now supports any laconi.ca installation. In plain English, this  means that any company can set up their own microblog and allow employees to send messages in one interface to the public Twitter and the private company microblog (Loic LeMeur, you are one uber-smart Frenchman). Let’s put this in big-picture-principle perspective: will Yammer earn even a footnote in a historian’s texts 100 years from now?

Exhibit B

I mentioned there were two catalysts for this post. The second was my chat with James, biz development dude for BigWorld games, who has developed a platform for massive multiplayer online games (MMOs) development. They’re doing some cool things with gaming performance which I won’t delve into here, but one of the things I will mention is they’ve extended the mashups idea into the virtual worlds space. Consider a gaming character interacting with an e-commerce site within a virtual world (sort of a virtual mall)..

Interacting with the Web in a Virtual Environment

Now consider a mashup with micro finance site Kiva, allowing small business owners in Bangladesh give investors in New York a virtual tour of their operation. Last stop: an in-world Kiva website where would-be investors can sign up. Another application: video gamers can get involved with each other via the web within a virtual world – and voila, instant e-commerce among players. Remember the old wild west days of Yahoo storefronts selling everything from lawn gnomes to dog biscuits? Lifting the poor out of poverty is going to be easier with virtual items – there’s virtually zero capital costs other than time involved, which the poorest unemployed have plenty of.

Where We Need to Go From Here

We need to start talking about measurable impact.

Not some hypothetical “ideas are currency” talk, but real quantifiable results. Once we do, we’ll start seeing Web 2.0 copycats merge just like the American automobile industry went from about 10 players to 3 from 1910 to 1940, since the network effect requires will natrually shrink the number of platforms out there. One great example of putting social tools to work to product measurable impact is Carticipate, which is pragmatic and location-aware way to combat high gas prices. Nothing sexy, fun, or lofty here. Just people reducing gas costs and carbon emissions to boot. Impact: less traffic, less money thrown at ExxonMobile,  and more money socked away for Christmas gifts.

If you’re not sure where to begin, here’s a few questions to get started:

• “How can social interactions lift the poor out of poverty? The Chinese have been turning World of Warcraft items into real dollars for years now. How do others in poverty enter the market without introducing so much competition that incomes collapse (ie supply far outweighs demand)?”
• “How can microblog-accelerated serendipity create revenue-driving partnerships between entrepreneurs in 3rd world regions with otherwise poor connectivity?” (related thought by Marc Hustved here).
• “How can we create a revenue stream from creating synergy between traditionally unrelated markets?” An example: Wall Street discovered a while back that engineers’ heat diffusion equations are surprisingly good formulas for stock option pricing. That’s what created the options trading market we have today.

That’s just for starters. Yes, I’m working on one of the above. No, I’m not dropping any hints here, but I might leak some of it if you and I strike up an interesting chat here.

Overnight Successes Never Are

I was recently in front of the television (a rare occurance) watching a documentary on Pixar’s humble origins and its jaw dropping string of successes since its inception.  To casual observers, it seems like the studio came out of nowhere to redefine their market. The reality is quite different – they’ve been working at it since the 1980s. I was struck by something Steve Jobs said about Pixar’s rise to fame, which I’ve paraphrased in this blog post’s title. He should know – it took him a quarter century to build his legacy. The same will be required to developing our national energy strategy, and Jobs’ turn of phrase also brought back to mind President Bush’s stated goals for a rapid switch to E85 ethanol. His statement during the 2006 State of the Union address: ” to make this new kind of ethanol practical and competitive within six years.”

Let’s dissect current energy consumption and extrapolate what it would take to switch to E85 ethanol using some back-of-napkin type math. The U.S. consumes 388.6 million gallons of gasoline per day for transportation, according to Energy Information Administration. Since 1 bushel of corn can produce 2.5 gallons of ethanol, the U.S. would need 132 million bushels of corn per day, or 48 billion bushels per year, to produce sufficient quantities of ethanol to displace 85% of petrol use. Compare that figure to U.S Department of Agriculture projections that U.S. corn production is expected to be 11.715 billion for the 2008/2009 period. This is before we adjust for a growing economy and thus increased demand for fuel. In other words, it isn’t going to happen. The theoretical maximum we are able to produce is about two thirds of what we’ll need, and that’s before we actually consider the fact that we have to use corn for trivial uses like say, food.

Which brings me to what I really want to talk about in this blog post: Brazil.

Brazil’s policymakers understood all too well during the 1973 oil shocks that they need to be ready for the next shock. They also understood that apparent “overnight successes” are actually the culmination of many years of hard work, as Steve Jobs notes. After 30 years and billions of dollars worth of incentives, the country is now beginning to execute on a plan which will lead to the complete energy independence. In 2003, Flex Fuel Vehicles (FFVs) were introduced which can run on 100% ethanol or gasoline or a combination of both fuels. The result of careful planning and methodical progressis starting to create critical mass in the retail market. Figures from Brazil’s National Petroleum Agency (ANP) for September showed national gasoline prices at an average of Brazilian reais (R) 2.49/liter ($5.20/gal). That compares with R1.33/liter for ethanol in the same month, according to the ANP. In states such as Sao Paulo, the country’s ethanol powerhouse, the biofuel in September was available at an average of R1.09/liter versus R2.37 for a liter of gasoline. It simply doesn’t make sense for retail customers to purchase imported energy any longer.

Now I’m not advocating we try to import our way out of the fossil fuels trap by swapping Brazil for the gulf states, nor are the Brazillians interested in obliging. From the New York Times..

“We are not interested in becoming the Saudi Arabia of ethanol,” said Eduardo Carvalho, director of the National Sugarcane Agro-Industry Union, a producer’s group. “It’s not our strategy because it doesn’t produce results. As a large producer and user, I need to have other big buyers and sellers in the international market if ethanol is to become a commodity, which is our real goal.”

Ideally, we would develop an efficient mass transit system which would displace our current automobile culture, but let’s be realistic – Americans love wide open spaces as much as we love our cars. Instead of hoping for an idealistic solution or a silver bullet, I’m instead hoping we can hold the next President and congress accountable for the kind of long term planning we’re seeing south of the border. One other thing is clear from the Brazillian example; even if we move decisively, any shift to national energy independence is going to take some time, and we should be prepared to ride out the short term.

Ok, that’s the end of my rant.. I hope it was thought provoking!

U.S. Issues Moratorium on Energy Independence?

I don’t know about you, but I feel like there’s a palpable sense for moving forward on energy independence and cleantech these days. Advances in CLFR technology have made commercial solar utilities a legitimate option and Oil tycooons are talking about commercial windmill power, and so are the Dutch.

To quote the NY Times, the U.S. Bureau of Land Management “says an extensive environmental study is needed to determine how large solar plants might affect millions of acres it oversees in six Western states — Arizona, California, Colorado, Nevada, New Mexico and Utah.

But the decision to freeze new solar proposals temporarily, reached late last month, has caused widespread concern in the alternative-energy industry, as fledgling solar companies must wait to see if they can realize their hopes of harnessing power from swaths of sun-baked public land, just as the demand for viable alternative energy is accelerating.”

The U.S. BLM has dominion over some primo resources of sunbaked earth in the American southwest, and locking out commercial solar operations could stunt their development. Spokesmouths for both Solel and Ausra have come out swinging:

““The problem is that this is a very young industry, and the majority of us that are involved are young, struggling, hungry companies,” said Lee Wallach of Solel, a solar power company based in California that has filed numerous applications to build on public land and was considering filing more in the next two years.

On the other hand, there are a number of conservation groups who praised the decision. Afterall, several states require solar developers often hire environmental experts to assess the effects of construction on the desert tortoise and Mojave ground squirrel.

Let’s inject some common sense into the discussion with a few simple questions here:

1. How do we adequately study the environmental impact of large scale solar facilities, since we’ve never really built them?  I’m in favor of conservation of resources like everyone else, but in the absence of actual experience, the process might as well be a bunch of voodoo.

2. How much enviornmental assessment was done on the Gulf of Mexico prior to drilling off the Louisiana coast? Just saying.

3. The bureau says it will continue processing more than 130 applications for development, but how big a backlog is this? If the process is already bottlenecking, it might make sense to slow things down if we won’t lose steam.

Thoughts?

Global Weirding

I took a look over at Stowe Boyd’s blog today after chatting it up with him this weekend, and I found a featured post which I missed on the first go around: “Global Weirding“. The term was brought to the mainstream by Thomas Friedman, who gets a whole lot of coverage for writing about globalization, despite the fact this guy knows a lot more about it. But I digress: the the term is certain a far better marketing catch-all than the flaccid euphamism “climate change” or the tropical vacation image-inducing “global warming”. To quote Friedman:

“And sweet-sounding “global warming” doesn’t really capture what’s likely to happen. I prefer the term “global weirding,” coined by Hunter Lovins, co-founder of the Rocky Mountain Institute, because the rise in average global temperature is going to lead to all sorts of crazy things — from hotter heat spells and droughts in some places, to colder cold spells and more violent storms, more intense flooding, forest firesand species loss in other places.”

Like Stowe, I’m also wondering why there isn’t rioting on the streets at the current administration’s denialist policy stance. He believes milquetoast marketing is to blame, which I agree with. I also think the enormity of the problem is keeping people on the sidelines. There’s a perception (at least in mainstream America) that there is significant pain in switching the way we produce and consume energy, with very little added benefit. What I love about the term climate weirding is the connotation that doing nothing is inherently the riskiest and most painful proposition.

Needless to say, you’ll be seeing this term on this blog a lot from now on, and I hope you’ll use “Global Weirding” in your writings and dialogue as well.

The Vulcan Project

There are many reasons for transitioning out from a fossil fuels based economy (a conviction in climate change, foreign energy independence, etc) but nothing will happen until we’re able to identify what we can change.

Enter the The Vulcan Project. This joint NASA-Department of Energy project aims to provide detailed analysis of carbon emissions per each kilometer in the United States. According to Wired, the project has already drawn some controversy, since the northeast U.S. seems to be emitting less carbon than previously thought, while the coal-driven southeast produces more than previously thought. It would be pretty cool to map this to congressional districts, although we’d have to constantly adjust for gerrymandering, I’m sure.

Oil: Key Players and Movements

Here’s a fascinating interactive map summarizing who’s producing oil and where it’s going (click image to go to the map). The key takeaway here folks is that 13.6 million barrels are coming into the USA each day.

That means that at $100 per barrel, we’re exporting nearly $1.4 billion  in wealth every day.  Where’s our renewables energy policy, Washington D.C.???