Dark Thoughts: Solar is Useless for Ice Cream Lovers

NER’s CSO & CCO, Brentan Alexander, reflects on northern California’s “Public Safety Power Shutoffs” occurring this fire season. Because, you heard that right, California now has a fire season.

 

The most surprising thing about this power outage is how loud it is. As I write this, Pacific Gas and Electric Company (PG&E) has temporarily turned off the power to as many as 3 million people across northern California, and the sound of countless consumer-grade gasoline generators is echoing throughout the valley. You’ve likely heard about PG&E’s actions since it made international headlines (to offer just a sample from The Guardian, The Economist, and Financial Times). The effect is being acutely felt by the NER team; we all live within the PG&E service territory. 

For myself, that means I’m on hour 30 without a utility hookup. My garage door is stuck, laundry is piling up, and I’m reminding myself not to open the freezer by applying tape to the handle with the words ‘DO NOT OPEN’ scribbled in sharpie. It’s a failing strategy: I’ve accidentally peeked inside twice. But I’m not in the dark. Outside, my 15-year old Toyota Prius with 150,000 miles is happily running a small DC-AC inverter, kicking on the engine as needed to keep the battery topped up, and providing the house with lights, a few working outlets, and power for the internet.

It’s an absurd situation, but one I’m reasonably well equipped to understand and handle. Working in the insurance industry where I think often about risk makes me wonder if these shut offs are really helping reduce fire risk, or just reducing PG&E’s exposure. On the one hand, the vast majority of large fires in California over the last few years have been caused by utility equipment (burning over a half-million acres since 2000). De-energizing lines surely reduces the risk of utility-sparked fires dramatically. And yet, there are now a large number of generators in operation, each manually filled from gas canisters. How many of these systems are properly wired to the house and up to code? (My Macgyver Prius generator sure isn’t.) A common solution to a lack of electric lights is also to literally light fires, albeit small controlled ones (ok: candles). Surely the uptick in candle usage increases the risk of an accidental fire. And then there’s the separate issues of deaths caused by offline medical equipment, or the loss of phone power to report other local emergencies. I have yet to see a detailed analysis of this risk tradeoff. Perhaps it’s good to trade the risk of (A) remotely started fires in rugged terrain from large power lines with (B) fires started in populated areas (where they’re more likely, perhaps, to be caught early and extinguished?). I do not know the answers. All that is certain is that this action lowers financial risk for PG&E, on the backs of financial losses (e.g. spoiled food, lost business) of their customers. 

I brought this risk tradeoff question up with a neighbor, and he quickly pivoted to a different but related point: how much reliable electricity is taken for granted and how little the average person knows about how it works and how it’s delivered. He was primarily talking about his frustrations with his solar system. Across my neighborhood, countless homes have gleaming panels on the roofs, some coupled with shiny battery packs mounted on the side of the house. All of these houses currently lack power. My neighbor simply didn’t know that solar is useless without a working electric grid, and for the folks with batteries, I doubt those owners understood that most of their inverters were not designed to island during a blackout. For my neighbor, I could sense his exasperation that this panel on his roof, which can generate electricity, somehow can’t power his home. A discussion on alternating vs. direct current, load matching, and frequency regulation was met with a blank stare and shake of the head. 

My hunch is that this experience will lead more people who currently lack solar to seek to install it (especially with the imminent step-down in the investment tax credit). I wonder how many of those installs will be done with the latest generation hardware (enabling the house-sized nanogrid), and how many installs will instead be the usual setup that only allows for power when PG&E keeps the street energized. 

That leads me to another question: these household systems have been built around a particular financial story; will it hold up? The utility death-spiral, wherein more and more consumers put solar on their roofs and therefore lower utility revenuesall without lower O&M costs to maintain miles and miles of utility lineshas been explained in exhaustive detail for nearly a decade. But the sudden bankruptcy of PG&E raises the distinct possibility that the current rate structure will be reshaped to ensure the financial viability of the utility while funding the repair and replacement of the ageing and failing infrastructure causing this whole mess. The more the utility bill shifts to distribution charges instead of use charges, the less the home-solar array will payoff.

For now, there are just questions and accusations. Should I point my finger at PG&E, climate change, or the inverse condemnation doctrine? (A recent article by Micheal Shellenberger broke this down well.) Does it even matter? None of that blame is going to get someone to replace my lost pint of rocky road.

 

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A Plan B for Air Quality

By Brentan Alexander, Chief Science Officer & Chief Commercial Officer

 

News broke recently that the U.S. Environmental Protection Agency and Department of Transportation would jointly be moving to revoke the waiver that California has used to set stricter auto emissions than the U.S. government. The only shock was that the action had taken so long to materialize. Long a leader in environmental protection, California put rules and procedures in place to manage air pollution before the Feds caught up with the Clean Air Act of 1970. California was awarded for its foresight: the bill enshrined a pathway for California to maintain continued dominion over its air through a waiver process. The Trump administration's decision to rescind that special position was the least surprising development in the long running feud between Trump and the Golden State. As the news exploded across the newswire and prompted to-be-expected reactions from both sides in the twitterverse, I felt a smirk come across my face... Trump may be claiming victory (possibly prematurely!), but California has the upper hand in this war.

The stricter auto emissions standards currently under attack are just one quiver in use by California and its allies in the fight to reduce carbon emissions. Another tool in the arsenal, the Low Carbon Fuel Standard (LCFS), is proving to be equally powerful and, more importantly, durable. But for all the attention that our national media is heaping on the auto-emissions waiver, few are aware of the LCFS program or the work it is doing to enable a cleaner future.

LCFS is a state-run program enacted in 2006 under Governor Schwarzenegger through AB32 that is administered by the California Air Resources Board. Adopted in 2009 and implemented in 2011, the regulations underpinning LCFS require the producers of refined road-ready fuels to reduce the “carbon intensity” of their fuels, with ratcheting targets that continually require further reductions year-over-year. Using a scientifically-derived and technology-neutral process, the LCFS program awards credits to fuel producers who make liquid fuels that produce less CO2 (or CO2-equivalents) over their lifecycle, as compared to conventional methods. These fuels, which are less carbon intensive, lower the total CO2 emitted by the transportation sector when blended into the fuel stock. Fuel producers can reach their mandated carbon-intensity through new technologies and processes, or by buying LCFS credits from third-parties with more efficient processes in place.

The beauty of the LCFS regime is that it does not pick winners or losers. Unlike the investment and production tax credits that have helped wind and solar run down the cost curve and compete without subsidy, the LCFS program is not technology specific. Any method that produces a cleaner gallon of fuel (so long as it’s sold in California) or that sequesters CO2 is eligible for credits under the program. May the best technological solution win!

Can you make a biofuel from plants or plant wastes? You qualify for credits since a portion of the carbon is non-fossil. Can you pull CO2 out of the air and bury it underground? That process is carbon negative and you qualify for LCFS credits, as well. Did you build a solar farm that will be used to power EVs? Congrats, have some credits. As the carbon-intensity target under LCFS rules gets stricter over time, producers must create even more climate-friendly fuels or buy still more credits to compensate for their conventional fossil products, which increases the demand for cleaner solutions and supports the price of the credit.

So, how is this program working? LCFS is the major driver of revenue for several innovative, first-of-a-kind facilities being built around the United States right now. Without this subsidy, these projects would not be economically viable; as with wind and solar, the LCFS program is helping these technologies get to market, and their success at scale will help reduce prices and further enhance the economics of alternative fuel sources. Meanwhile, investors are stepping up to support these projects, assuming the risk that future LCFS prices will remain stable and attractive. Their confidence is well-founded: generators of LCFS credits today are banking a portion of their credits for future years, betting that future prices will be higher than today and justifying a ‘hold’ approach on the asset. Billions of dollars of credits now sit unused in savings, waiting for a future where their value is even greater. Other regions have taken notice of this success, and proposals to replicate California’s system are gaining traction in the Pacific Northwest and Canada. The demand for credits is expected to grow substantially over the next decade as more states come online with their own programs.

The great irony for the Trump administration, and all those fighting against California’s clean-air waiver, is that if they “succeed” and auto fuel-economy stagnates, the resulting increased demand for liquid fuels will further enhance the value of the LCFS credit. This provides more financial incentive for new technologies and developers to enter the space and reduce the carbon footprint of transportation fuels. Perhaps this is not the shortest route to decarbonizing the transportation sector, but it’s not a bad Plan B. When it comes to the future of carbon, California is playing for keeps.

 

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No, we’re not running out of Helium

By Brentan Alexander, CSO & COO

I’m often frustrated when reading science coverage in the national press. There are often a number of inaccuracies and misleading narratives that are routinely embedded in the stories that seem to get picked up by a wide variety of outlets. Seeking a catchy headline or narrative, the articles often distort the science and draw erroneous conclusions (which makes me wonder, are all the articles in these papers where I have less insight and background as poorly researched?). The latest piece to draw my ire?

From Forbes: Humanity Is Thoughtlessly Wasting An Essential, Non-Renewable Resource: Helium

Reading the article, you are led to believe a few things: We waste a huge amount of helium every year, that party balloons and other extravagances are the primary culprit, that once lost to the atmosphere the helium is gone forever because *SPACE*, and that we are running out of helium which will shutdown portions of medicine and science.

WELL….NO.

Let’s start from the top. Do we waste helium? This really depends on what one means by ‘wasting’, but in a simple sense, yes…nearly all the helium we use is done in a one-time fashion that is then released to the atmosphere. Balloons are obvious, but use of helium in MRIs and superconducting magnets also allows for the escape of the helium. The article fails to explain WHY we do this though….and to me it’s pretty obvious. Helium is cheap! Capturing and recycling that helium from MRI machines and other uses just doesn’t make financial sense (or hasn’t in the past)…its cheaper to just let it go and go buy more. That balance may be changing, which is, quite simply, economics at work. We waste because we can.

OK you say, but we are still losing vast quantities of helium from balloons! We can’t possibly recycle that. The article notes that filling party balloons is the single most common use of helium, and quickly works to ruin our fun. What the article fails to note is that by volume party balloons are basically a rounding error in overall helium use. No less of an authority then the National Research Council makes this point. Right there in chapter 6 of this report is an investigation of helium uses. Party balloons? They are less than 40 MMscf a year, or less than 2% of usage in the U.S. Balloons aren’t our problem, so keep on partying .

But even that is a bad idea, you say, because that helium, once released, will just escape our earth and end up…in SPACE! This is my favorite part of this story, and why I think it keeps popping up in the popular press (seriously, just google ‘helium shortage’ and you’ll find dozens of articles over the last decade like this Forbes article). It’s just such a good visual, all that wasted helium drifting up, up, and away, never to be heard from again.

I call BS. Let’s run some numbers. First, helium loss from the upper reaches of our atmosphere is a real phenomenon, with the solar wind blowing the stuff away (we lose hydrogen that way too). How much do we lose? About 50g per second. That is less than 3% of our consumption rate (see my math here). So we are adding helium to our atmosphere far faster than it is being lost to space. It’s not being lost forever, it’s just being mixed in to our air. And what to the argument that the increase in helium in our atmosphere will increase the loss to space? Not much to that really…our annual consumption is just 0.00001% of the volume of He in the atmosphere today!

Which gets to the last argument this article makes: we’re running out of Helium. Nope. Take the number above and invert it….in our atmosphere alone we have something like 6–8 million years of supply at current consumption rates. And that ignores all the helium still in the ground.

SO YOU’RE SAYING THERE ISN’T A PROBLEM?

Not quite…we do have periodic helium shortages (there have been 3 in the last 15 years). But this is fundamentally a supply/demand issue (and public policy too…the sale of the U.S. Helium Reserve, which previously was a government program to maintain helium supply, is also messing with the market) that comes back to price. There is plenty of helium in the world: whether you want to build more infrastructure to grab it from more natural gas wells (our current helium source) where it is otherwise released, or whether you want to build a plant to separate it from the air (unlikely to be very competitive against natural gas separation for a very long time) is simply a question of how much you’re willing to pay to get at it.

This indeed has profound impacts on science and medicine. That MRI test may get more expensive, and those superconducting magnets will cost a lot more to cool. And that collection of colorful paw patrol adverts floating over the picnic table at your next family BBQ may cost you a few more bucks as well. But they will all still be filled with helium.

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Advice for Innovators: Keep it Real

By Brentan Alexander, CSO & COO, New Energy Risk

The latest entry in my series on resolutions for technology innovators: test your tech in the real-world! Having spent a number of years in academic and early-stage R&D, I understand the desire to use highly controlled conditions and parameters when putting together testing programs. When you are working to understand fundamental aspects of your technology to allow for refinements and improvements, it is necessary to inject as few variables as possible in your testing program so that you can reliably link changes in performance to control parameters of interest.

However when moving out of the development stage and in to the commercialization of your new technology, this controlled approach to testing is insufficient. At New Energy Risk, I regularly review testing data from companies and innovators who misunderstand what types of data that I, and by extension the broader debt and growth capital investment market, want to see. You are trying to sell your equipment or build a project; having an understanding of the science underpinning your process is table-stakes. You better have that understanding, or you aren’t even making it through the door. What I (and other capital providers) want to see is that you can demonstrate the engineered system works as advertised.

SHOW ME THAT IT WORKS, NOT HOW IT WORKS

When we first meet, I will assume that the science that underpins your technology is well understood. Showing me the controlled experiments that elucidate the interplay between operating conditions and performance are necessary so I can validate that assumption, but they miss the point of what I’m really after: I want test data that demonstrates the ability of the technology to reliably operate over the full operational window for the expected life of the technology.

Using super-refined, ultra-pure feedstock for a new kind of biomass facility does not demonstrate that a technology will work on the dirtier and less consistent biomass available for a commercial plant. Validating a predictive algorithm on the very data that was used to train the system, even if only a subset of the validation dataset was used in training, provides little guidance on whether the algorithm will perform on the wide variety of datasets likely to be encountered in the field. Running controlled charge/discharge tests on a battery in a specially conditioned laboratory does not validate that the battery will perform under variable loading conditions in the desert sun.

TAKE OFF THE KID-GLOVES

If you’re working to shield your device or equipment from real-world conditions that could significantly undercut performance of the technology, then you probably aren’t ready for commercialization. Take the kid gloves off, because no customer wants to be a guinea pig, and nearly all of them will see a lack of real-world testing data as a lack of readiness and seriousness.

So how do you operate a demonstration test useful to the finance community? Stop trying to control things and let go of the handlebars. Send devices outside, give them to potential clients or partners, and let them control the asset. Is your technology sensitive to feedstock quality? Buy the low quality stuff for an extended test. Does temperature impact efficacy? Send one to the desert and another to Alaska. Vary loads, feedstock parameters, or any other controlling conditions throughout the test, or let nature randomize it for you.

Anything short of this, and you’ll find yourself with customers, partners, or capital providers asking for more validation before starting a relationship.

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