Could the NSA Reduce CO2 Emissions?

April Fools’ Day in the USA inspires pranks and hoaxes, and smart readers beware unusual news stories on that day.   Here are some fictional news headlines and stories that if real, would certainly accelerate Smart Grid and other infrastructure upgrades, as well as reduce CO2 emissions.

 1.  Congress Creates Green Bank Fund to Modernize American Infrastructure

In an unprecedented acknowledgement of the dire state of national electrical, water, gas, and transportation systems, bipartisan Congressional passage of the Green Bank Fund will result in the equivalent of a Marshall Plan to modernize vital American infrastructures.  A White House aide, speaking on conditions of anonymity, revealed that the President and Congressional leaders worked behind the scenes to hammer out this agreement.  The Green Bank Fund takes money Congress previously allocated to weapons programs that the Pentagon didn’t want, like the Abrams tank, and makes it available as a source of seed capital to state-based Green Banks.  “Leaders from both parties realized that our economic and national security rests on a strong and resilient infrastructure.  The Green Bank Fund will help capitalize infrastructure upgrades and create the foundation for a secure economic future going forward,” said the aide, adding that “the latest ASCE report card scared the hell out of political leaders.”

All kidding aside, Green Banks are one of the latest innovations in finance that have positive impacts on Smart Grid progress.  Green banks provide low-cost sources of capital for state-wide projects that meet their criteria.  Green Banks leverage public and private sector funds and eliminate gaps in financial supply chains that often confront projects that use innovative technologies like renewable generation.  While the situation is improving for utility-scale projects, projects at the individual home or building scale languish without funding.  Connecticut first initiated a green bank in 2011, with other states now planning similar financial programs to align infrastructure and policy goals with newly available public and private capital.

2.   Congress Kills Fossil Fuel Subsidies

In an unprecedented overhaul of the tax code, the permanent tax breaks for fossil fuel companies were eliminated today, over vociferous objections from representatives from oil-producing states.  The resulting annual $4B in savings will be redirected to residential and small business weatherization projects in all 50 states.  The projected results include local economic growth through increased employment as well as savings in energy bills and improved comfort for many Americans. 

Without a doubt, clean renewable energy sources are given second class tax status through temporary measures that can expire every few years and thereby cause significant trepidation in investor communities.  Immensely profitable multinational fossil fuel companies receive permanent breaks written into the US tax code.   It’s blatant tax code policy discrimination that picks winners (fossil fuels) and losers (clean renewables).  Today’s situation is anything but a level playing field, although there are valiant efforts in Congress to offer renewables one tax treatment that is only available for fossil fuel companies today.  The bipartisan Master Limited Partnerships Parity Act does exactly that.

Equally important, a redirection of the $4B annually saved by eliminating unnecessary tax breaks to well-established fossil fuel companies would have powerful payoffs to communities, ratepayers, and taxpayers.  A 2010 Oak Ridge National Laboratory study stated that for every $1 invested in weatherization, there’s a $2.51 benefit to households and society.  Each weatherization household gets $1.80 back in reduced energy bills, money which can then go towards food, healthcare, or education.  An additional 71 cents is returned to communities in increased local employment, reductions in uncollected energy bills, and reductions in weather-related deaths in dwellings.


 3.  CO2 Emissions Reduced Thanks to NSA Anti-spam Initiative


The NSA, maligned for spy activities around the world, achieved heroic status today.  Using its sophisticated technologies to ferret out spammers, they shut down their operations, dismantled their networks and financial operations, and identified perpetrators to local law enforcement agencies.  “Spam email constitutes about one fifth of a typical business’s email traffic in a year.  Eliminating this traffic not only improves the productivity of everyone with an email account, it also reduces the demands for electricity at every stage of the spam lifecycle,” said an NSA resource who requested anonymity.  “We’re proud to do our part to combat human-caused climate change.”

Yes, it costs electricity to create, transmit, distribute, filter, display, and delete spam.  Thus spam email contributes to greenhouse gas emissions.  A study commissioned by McAfee identified a total of 62 trillion spam emails were sent globally in 2008, consuming 33 billion kWh and producing 17 million metric tons of CO2.  That translates into enough electricity to power 2.4 million homes in the USA and the amount of CO2 produced by 3.1 million internal combustion engine vehicles.  Sadly, the most recent numbers for 2010 indicate that email spam climbed to 95 trillion messages.  


The sections of this article in italics are fictional stories today. Which headline do you think is most plausible and may come true?



The Smart Grid – It’s More Than Grid Modernization, It’s Grid Transformation

The Smart Grid is all about grid modernization and transformation. When we modernize the grid, we update technologies, but leave in place existing energy sources, existing business models, and existing policies.  When we transform the grid, we exchange old energy sources for new ones, reinvent business models, and revise policies to support the transformations.  Of the two, transformation is ultimately a much more difficult objective but it also holds the greatest rewards.  Why?  Simply put, transformation delivers energy and economic security.

The current grid has taken modern society as far as it can, but we’ve seen its shortcomings magnified on a global scale over the past few years.  Reliance on fossil fuels for electricity generation and transportation has real downsides to the health of the citizens of Beijing.  Their ongoing “airpocalypse” of hazardous air quality is a public health emergency.  In the USA, reliance on centralized, just in time generation has expensive downsides to our economic vitality as witnessed in prolonged outages caused by derechos and hurricanes.  A grid that is built to meet performance expectations based solely on reliability and not on resiliency cannot adequately support an electron-based economy.

Development of alternative energy sources that replace fossil fuels has been a top priority for electric grid transformation.  For example, the US military is concentrating on buildouts of microgrids into their fixed and mobile bases that integrate renewables as energy sources. The prime mover, as noted by Vice Admiral Dennis McGinn (USN, ret.), president of ACORE (American Council on Renewable Energy), is that renewable energy is essentially free.  That’s real economic security.

We are enjoying the results of several years of advances in solar technologies and services.  The costs of panels are doing down as the harvestability ratios go up.  We’ll continue to see exciting innovations in technologies and services.   The recently announced peel and stick solar cells can make more devices self-generating.   Companies like Geostellar create online solar marketplaces that connect potential solar customers with information, suppliers, and services.

Energy storage is a critical technology to aid the transformation to the Smart Grid, and serves two purposes.  First, it helps firm the intermittency of renewable energy sources like wind and solar.  Second, it can deliver much-needed resiliency to grid operations when it is deployed in distribution grids at points of consumption.  Like renewables, energy storage technologies will benefit from enlightened federal and state policies that encourage R&D and pilot deployments that stimulate innovation and build practical knowledge applied to further technological, policy, and market improvements.

The recent history of renewable energy illustrates how policy can accelerate grid transformations.    California’s Solar Initiative has 1 gigawatt of rooftop solar in production already, and New York’s recently announced NY-Sun program calls for an annual investment of $150 million for 10 years to stimulate solar deployments.  The introductions of Green Banks like those forming in Connecticut or announced in New York use public and private funds for energy efficiency and energy generation projects.  California may allocate all the revenue from a tax loophole closure to fund energy efficiency and renewable energy projects at primary, secondary, and community colleges, and reduce energy bills.

California took a first step on a similar trajectory for energy storage in 2010, directing the state Public Utilities Commission (CPUC) to study the feasibility of energy storage on a widely distributed scale. The CPUC could set mandates for each state Investor Owned Utility (IOU) to procure energy storage, and the final report is due soon.  What remains to be seen is if other states move to consider similar policies, and the forms that financing takes for energy storage as standalone or integrated components in renewable energy projects.

Technology and policy are relatively easy challenges compared to the changes needed to business models and operations.  These challenges will get more detailed exploration in future articles.


Changing the Energy Value Chain – ACORE’s Pragmatic Approach

We often read the lament that the USA has no energy policy.  Of course it does.  It’s what we have today – a policy which favors fossil fuels through permanent subsidies and special financial treatments written into the federal tax code.  And perhaps it will take an act of Congress to make them stop picking the most environmentally-costly winners over all the sustainable, indigenous and clean energy sources.  But there are other ways we can change our energy direction.  One organization that takes a pragmatic, business-based approach is ACORE, the American Council on Renewable Energy.  This nonprofit association is focused on building a secure and prosperous America with clean, renewable energy.  It provides thought leadership through technology, policy, and finance lenses and fosters industry partnerships that promote adoption of renewable energy in public and private enterprises.

I recently spent time in conversation with Vice Admiral Dennis McGinn, (USN, ret.), president of ACORE since April of 2011.  Our conversation is summarized here, but you can hear more insights from Admiral McGinn in his keynote address and Fireside Chat at the Savannah International Clean Energy Conference on November 12-13.

ACORE focuses on three strategic initiatives – National Defense and Security, Power Generation and Infrastructure, and Transportation. There are cross-over themes amongst these three initiatives – such as reducing costs in labor, materials, and finance.  Of these three, reducing the investment costs of renewable projects is the greatest challenge.  For instance, oil, gas, and coal companies enjoy an important tax break known as the Master Limited Partnership (MLP).  MLPs are taxed like partnerships, but owned like stock.  It is a popular structure to organize financing with lower costs and reduced risks for investors.  But MLPs are not allowed for renewable energy projects.  The Senate and House now have bipartisan legislation that extends the MLP tax break to renewables  – S3275 and HR6437.  But unless and until this legislation passes Congress, renewables do not enjoy a level playing field in financing options.  That’s a shame, because a recent study released by the US Partnership for Renewable Finance (US PREF), an ACORE program, revealed that U.S. taxpayers can get a 10% internal rate of return on the initial government investment in solar projects via the solar investment tax credit or ITC.

Green banks are also an interesting workaround to today’s financing impediments.  These entities can focus investment solely in renewables and energy efficiency projects.  Admiral McGinn noted that renewables and energy efficiency are “partners to improve sustainability and the bottom lines for businesses, in fact, energy efficiency can be a key enabler for renewable energy.” Green banks, like the one recently instituted in Connecticut, can produce appealing returns and market certainty for institutional investors while delivering low-cost financing products aimed at small business or residential households.

ACORE also advocates for advanced biofuels and maintaining the Renewable Fuels Standard (RFS) as part of its technology and policy focus.  While the initial feedstocks spurred a food versus fuel debate, the latest array of feedstocks, particularly cellulosic, coupled with biochemical innovations in enzymes are promising developments that can help wean the USA off of fossil fuels.   There are more than 10 commercial-scale cellulosic plants under construction now that will help “provide much greater consumer choice at the gas pump and get us off the petroleum monopoly train,” noted the Admiral.

No conversation about renewables is complete without considerations of natural gas. Admiral McGinn doesn’t see natural gas and renewables as mutually exclusive. From a utility perspective, natural gas has fast firming capabilities for renewables, and a good percentage of renewables serves as an excellent long term hedge against the price instabilities of natural gas.  And price instability is key.  “Over time, with greatly increased demand,” he said, “the price of natural gas will go up.  The factors impacting price increases could be potential increases in the export of liquefied natural gas, the replacement of aging coal-fired power plants and home heating with natural gas, the buildout and maintenance of gas pipeline and storage infrastructure, and the increased costs of responsible oversight and regulation to protect water and air from increased natural gas extraction.”

ACORE is in the thick of things – helping governmental agencies like the Department of Defense, electric utilities, and institutional investors to meaningfully contribute to grid modernization and energy supply transformations through technology, policy, and finance decisions.  At a macro level, their initiatives can be hugely influential in helping integrate clean, indigenous, and sustainable renewable energy sources into the Smart Grid and our transportation infrastructure.