The Electric Grid. Answering question #2: What determines the capacity of power plants and #3: Why not a DC grid?

Again this week I would like to thank everyone for responding to my Electric Grid Questions. This week I will address the other two questions:

2- What determines the capacity needs of the power plant? Is it the installed capacity in the network (each appliance and circuit in each house, office and factory) or is it the historic average consumption of electricity?

3- Why can’t we have a direct current (DC) grid? Many alternative energy technologies struggle with the conversion from DC to AC (alternative current). Why do we need to use AC everywhere?

First of all, about the capacity. This question was difficult to formulate and it was also misunderstood on several responses. The reason for this question is to find out if there is something that can be done regarding Watts and Amperes of new appliances and alternative power sources to minimize the required capacity of new power generation.

At the end of the day my understanding is that even with the most efficient appliances in the grid, power generation and distribution is still a statistical game, and this is EXACTLY where the so called "smart" grid will contribute to energy savings. Power plants generate at constant preset levels and additional capacity is turned on or off based on "peak demand"

Regarding DC vs AC I gather that the big problem of DC is the inefficiency of transporting this current from the source to the user. But, I definitely see an opportunity in generating locally DC power and using it in DC appliances without wasting electricity in DC to AC conversion.

The other problem of the DC power is that many appliances relay on the frequency of the AC electricity to work properly. Many people also mentioned the fact that DC components are much more expensive than AC components. I believe the answer to both this issues relies on the fact that AC has been mainstream while DC has been kept in the dark. If we inject new force in the DC solution then we will find that the market will generate new ideas and better pricing for DC applications.

Some of the answers received:

"2. The capacity needs of the power plant should be based on total load installed [maximum consumption] + some allowance for VAR correction + anticipated or estimated future augmentation [load additions]
3. DC generation & distribution equipments are far more expensive than the AC equipments like generator, transformers, safety devices etc. Its comparatively cheaper to convert it at user end [the converter modules with the chord would not be more than $30 each"

"Dumb Grid allows double digit percentages of electricity to escape and a new Smart Grid would not.
The U.S. will need to install a new Smart Grid system if there is any chance of going to electric cars.
AC vs DC: AC technology is much more flexible and has a strong economic advantage as DC requires very thick copper."

"...why is there no DC? First, there are increasing uses of DC power in parts of the grid that consumers don't see. DC power can be used now for relatively long distance power transmission. But to switch the entire grid and each and every device that uses electricity from AC to DC would clearly be impossible. There may be room for DC in some applications; but not on a widespread basis."

"#2 - I think plant size is governed by politics, dollars available and demand.
#3 DC does not travel well. over distances the voltage drops. not true with ac. ac losses are in current - not volts."

"We could have a DC grid, and yes it would be much more efficient, but it is highly unlikely to happen in our lifetime because no one will accept going without power long enough to switch the system around and highly unlikely investors or the government would pay to do it."

"2) Make the consumer more mindful of their power usage by forcing them to look at the data in the power distribution console/display or connected smart appliances designed to take advantage of data communications technologies built into both appliances, devices and the smart meter interface"

"2)There are additional needs to consider, including extra reserve capacity, based on rules from NERC/FERC. No one wants to experience a blackout or brownout, so the generators/systems/transmission lines all have extra capacity designed in

3)There are several examples of HVDC in North America. When it is most economically feasible, HVDC is used"

"2.There are no ideal figures for per capita electricity consumption as the same can be open ended.At the household level,one could consume as much electricity as one wants depending on availability.At the industry level,one could keep setting up newer manufacturing units once again depending upon availability of electricity.The best way is to link it to nominal and per capita GDP growth rate which the government plans to achieve.Growth in electricity generation must lead GDP growth by a factor of about 1.4 to 1.5.
3.This goes back to epic debate of AC vc DC between Nikola Tesla and Edison.AC won over DC and hence AC grids were set up.A DC grid needs inversion equipment which adds to the cost. However there is a realization that DC is more economical with lesser losses than AC over distances longer than 800 kms.There are now quite a few HVDC grids being set up."

"I believe that as alternative energy evolves, as more and more end users are using solar power, as LED lighting becomes the norm, that AC will eventually become extinct. The "grid" concept will be redundant"

"Transmission losses are the big dirty secret of centralized power."

Until next week... SHALOM!

The Electric Grid. Answering question #1: Centralized vs Distributed power

First of all I would like to thank everyone for responding to my Electric Grid Questions and throwing light into this subject which I find fascinating. Here is the compiled version of the answers I received for the first of the three questions plus some research of my own (the other two questions I hope to address in the upcoming weeks):

1- What is the best strategy for the future of power? Is it to generate electricity in each home, or neighborhood, or community; or to maintain the current system where a series of big power plants inject their product into a complex network that distributes the electricity to large geographic areas?

To help me answer this question I turned to Amory B. Lovins' newest article "Does a Big Economy Need Big Power Plants?" (it turns out we both wrote about this particular subject at the same time, therefore proving that great minds think alike!)
Amory is 100% for distributed power: “Central thermal stations have become like Victorian steam locomotives: magnificent technological achievements that served us well until something better came along.”

Some interesting facts mentioned in Amory's article: "The U.S. lags with only about 6 percent micropower: its special rules favor incumbents and gigantism. Yet micropower provides from one-sixth to more than half of all electricity in a dozen other industrial countries. Micropower in 2006 (the last full data available) delivered a sixth of the world’s total electricity (more than nuclear power) and a third of the world’s new electricity. Micropower plus “negawatts” — electricity saved by more efficient or timely use — now provide upwards of half the world’s new electrical services. The supposedly indispensable central thermal plants provide only the minority, because they cost too much and bear too much financial risk to win much private investment, whereas distributed renewables got $91 billion of new private capital in 2007 alone"

Even though I would also prefer to see a distributed power system I am not as optimistic as Mr Lovins (and neither were some of the people who responded). There are some important efficiency and market issues with distributed energy generation that we have to face right now. Take wind power for example: the newer generation of wind farms has more and bigger turbines than their predecessors. I credit this to several factors:

• Turbines become more efficient as they grow in size - bigger turbines (this is true up to certain limits)
• Wind farms benefit from economies of scale as they become larger (more turbines)
• As wind farm owners become more comfortable with the investment, higher capacity plants are being proposed and funded.
• Most important of all: Selling and installing ONE wind farm that produces a Mega Watt per hour is easier (and more commercially viable) than selling thousands of smaller kilo watt turbines. This point in particular affects the whole chain of development of power plants:
• 1. Developers of new technologies aim towards bigger pockets (centralized plants). Therefore, creating newer and more efficient generators for the centralized system and neglecting the distributed option.
• 2. Investors, distributors and installers aim to reduce their risk by concentrating their investment and effort into more focused and less mass market trend-changing technologies. When we talk about creating a new wind power plant, we understand the limits and the risks better than if we would talk about selling wind turbines door to door.

The same efficiency and market issues hold true for other renewable energy generation methods (with perhaps the exception of solar PV, being the one with the most distributed systems to date). Furthermore we are leaving hydro and nuclear out of the equation. Forget the impossibility of having distributed hydro power and the danger of having distributed nuclear power!

Finally, I am including some answers I received via email or LinkedIn (I am reserving the names of the authors awaiting for their approval):

· "we need to break away from centralized power...and as it happens - while that's not a common opinion with the big power companies - it is the common opinion of electrical generation engineers"

· "technology and wisdom will dictate the answers...Now that science is finally focusing on the problem of sustainability and innovation, breakthroughs will be coming within a few years based on existing "future-tech" inventions and unimagined ones"

· "With the move to wind and solar power it will be necessary to maintain a large grid system because of the instability of the energy production"

· “I think the "smart grid" has the potential in the 2010s to duplicate the same type of transformation of our everyday lives as did the Internet in the 1990s… New technologies are making small generating facilities (solar, wind, biomass, even natural gas) sufficiently economic that they can compete with the large central station generators… The smart grid can help here also. It will be able to control the micro generating device you install at your house. When you are away or not otherwise using your full capacity for your own house, the smart grid will pump your electricity into the grid for others to use. This lets your system operate on a useful basis closer to 100% of the time with the resulting efficiency gain”

· “the best strategy isn't a single approach. By combining efficiency at the demand end of the grid (homes, business, etc) and allow the demand to sell the ability to reduce further during peak periods we can avoid building some amount of new generation. This alone isn't enough. Technology on the supply side with newer more efficient means of generation also play a role”

· “Imagine rental properties or tightly packed suburban neighborhoods. These folks would find it difficult if not impossible to erect a wind turbine or solar panel. Also, many consumers would not be able to generate enough alternate source power individually to run their homes and most businesses would not either”

· “Think how consumption is accomplished - locally in homes and local businesses, and there are some large energy intensive industries that require huge amounts of energy, like metal foundries and smelting, and they need the massive generation power of wind farms and solar farms and hydro dams (for overnight storage, and base load power)”

· “Part of the problem with local generation is that no one wants to live next to a power plant”

· “Electricity tends to be a natural monopoly. Established industrial groups especially the utilities owning and operating generating stations on fossil fuels and large dumb grids and super highways supplying energy at low tariffs were hitherto getting away with murder by not paying for externalities (carbon footprint increase).”

· “for most sources local generation is impractical, and you still need a grid to even out supply and demand even for solar”

· “The moving of energy from point A to B, and often back again, is a huge drain on efficiency. Keeping it all close by to where it was generated and will be used would be great. However are there good options for the consumer and/or the business that want to store the power? I've read about some custom hydrogen fuel cell methods. There is always batteries I guess”

Until next week…SHALOM!

The Electric Grid. Questions?

I come here before you to seek for answers!

Now that the words “Smart Grid” is in our everyday lives. I would like to better understand how the current “Dumb Grid” works. In this world full of information I have not been able to find satisfactory answers to the following questions regarding the Electricity Grid. Excuse my ignorance!

1- What is the best strategy for the future of power? Is it to generate electricity in each home, or neighborhood, or community; or to maintain the current system where a series of big power plants inject their product into a complex network that distributes the electricity to large geographic areas?

2- What determines the capacity needs of the power plant? Is it the installed capacity in the network (each appliance and circuit in each house, office and factory) or is it the historic average consumption of electricity?

3- Why can’t we have a direct current (DC) grid? Many alternative energy technologies struggle with the conversion from DC to AC (alternative current). Why do we need to use AC everywhere?

What I have learned recently is that the existing network of power plants works under a demand / cost of production basis. The power plant that is cheapest to run is producing 24/7 (Base Load Power Plant); as the demand grows during the day (or the week) additional plants start generating to produce the needed electricity. Therefore creating a different (cost and) price for electricity at different times of the day (or the week).

Will this complex network be needed if (and when) we obtain electricity from the sun or the wind (or any other renewable source)?

The real core of the matter is whereas new alternative energy technologies will flourish in the home or neighborhood scale, or will they replace existing power plants in the power grid? In other words, who will be the pioneer of renewable energy? Will it be the average Joe or the big utility companies?

Regarding the capacity of the power plants:

This question seems simple, but I have found is not as straightforward as it seems.

According to me, there are two "measurements" of electricity in your home, commerce, office or factory: the installed capacity and the actual electricity being consumed.

When you build a house and install the main electricity "box" you have to do so according to a calculation of the power needs for that house. This calculation is based on the number of outlets, appliances, lights and other power consuming devices the house has built into it (or may be able to support). The breaker box in the house reflects the need of each room or appliance for the power capacity (voltage).

The question is: does the power plant need to generate according to the installed capacity of the aforementioned house, or can the power plant generate based on the actual use of electricity in the house? In other words, if we reduce the installed capacity of all the houses in a city, but these houses consume the same amount of electricity as before; will we save any power?

Finally, I am puzzled by the lack of DC alternatives in today’s wind, and solar power generation world. I am aware of the “War of Currents” between AC and DC (won by AC). But I wonder what would happen if today’s technological advances were applied to a DC network with alternative energy as a power source and DC applications everywhere.

I want to apologize for the time gap between my previous posting and this one. It turns out that having a third child, traveling and keeping up with three different types of businesses in three different countries does take time!

Until next week: SHALOM!

Is your car plugged? or do you have a dinosaur?

The Toyota Prius is, without a doubt, the current standard for the future of the automobile industry.

The following video is from one of my favorite TV shows "Top Gear". In the clip from this BBC show they demonstrate the disadvantages of the Toyota Prius . The video only takes 2min and 40sec, and in that time they completely debunk the Prius from its high throne. (the only disadvantage they fail to mention is one that claims that hybrids are too quiet!)

Say what you will, the Prius is the starting point. The important question is "where do we go from here?"

If the Prius is the starting point, then let's see what the future Prius will look like:

On January 2008 Toyota announced that the 2010 Prius will be a Plug-in Hybrid version of the current model (this makes a lot of sense!). Suddenly a year goes by and in January 2009 Toyota previews the 2010 Prius. SURPRISE! This Prius is NOT a plug-in hybrid, its a regular Prius with a bit more room and 4 more MPG of efficiency. Wait, there is more! On the same January 2010 Toyota announces the introduction of a plug-in vehicle by late 2009 (go figure!)

Well, it seems Toyota is unsure if it wants to let others take the lead. Let's see who will launch electric or hybrid cars on 2009 and 2010.

- Ford (clumsy and late as always) is announcing a new Fusion Hybrid. This vehicle will be less efficient than the Prius, but it will be roomier (it will do 3 more MPG than the Camry)

- Honda is going in the opposite direction. It will launch the Insight Hybrid. This vehicle will be LESS efficient than the Prius (7 MPG as compared to the 2010 Prius - 3 MPG compared to the current one), but it will cost about $4,000 LESS than the Prius too!

- Chevrolet's Volt is not expected until late 2010. Given Detroit's history on new design and reliability, and with a price tag of $40k I doubt it will create any wave in the market.

- BMW through its Mini brand will launch a fully electric car. This will happen in the upcoming months, but it will only entail 500 customers in California (at $800 lease price per month)

- Something similar is happening with Mercedes and it's Smart brand

- Nissan-Renault is entering the race with an entirely electric car by 2010

- There are rumors of a totally electric car from Ford (project M). This car will appear in the market in 2011

- There are many smaller competitors with cars already in the market or ready to launch: Tesla, Aptera, ZAP, ZENN, Th!nk, and Fisker

If we look further than 2010 we start seeing plans to introduce Hydrogen cars from Toyota and Honda.

At the end of the day, the consumer will have the last word. As explained by Andrew Revkin "consumers are the biggest threat to the rise of electric vehicles"

If you want to enjoy a bit more from "Top Gear" here is the link to the full review of the Prius. Otherwise, until next week: SHALOM!

My perspective on Obama's Green Economy

Well, here we are in 2009! Will this be the year the "Green economy" gets a jump start?

The US is in bad financial shape. Globalized as we are nowadays, everybody is affected. Let’s follow the money to see what the options in this economy are. Keep in mind I am NOT an economist, this is just my personal view of things.

Who has cash?

Cash is the king of economic downturns, whoever holds cash is able to buy assets at a discounted price and will benefit from the eventual up-turn of the economy (if we ever get there!).

China is loaded with cash; it has accumulated cash by becoming the manufacturing center of the world and maintaining their consumption per capita at low levels.

The Oil producing countries have cash. They have been benefited by the absurd surge in oil prices.

Lets assume for one moment that Obama takes on the task of building the "Green Economy" he has promised head-on (I believe he will, because this is his answer to the economic downturn). Obama (or the US) will need MONEY (Obama: "Strategically invest $150 billion over 10 years in green initiatives") to get this "Green Economy" up and running. So, who will fund this endeavor?

There are two options:

A- Get funds directly from the Chinese or the Saudis into "Green Economy" initiatives (very unlikely). The US will not allow these countries to become the direct engine of the new economy. Therefore we are left with only one option:

B- Print more US dollars and sell the T-bills to the Chinese and the Saudis.

Clarification 1: If a country prints more money it either has to create more wealth or find buyers to support the "fresh" money, otherwise it would trigger an hyper-inflation

Clarification 2: I use T-bills as a general term, there may be other financial instruments used by the government to raise money, I am not sure

Now that we have some idea of where the money will come from, let's take some time and run a simulation of how will the "Green Economy" will be developed.

As an example we will use Obama's initiative of pushing for 10% renewable energy by 1012. Let's say that wind farms will help US energy get to that 10% (most probably they will).

Company XYZWind is going to build a 200 Mega Watt wind farm. They are going to purchase land (good for the US). Then, they will have to buy wind turbines. If they buy from a US supplier is beneficial to the US, if they buy foreign technology is not so good. Either way, the components will be most likely manufactured (where else?) in China!

Company XYZWind will require $350 Million to develop this project. Where will the money come from (again, same question)? Here are some options:

1- From government funds: either by way of subsidy or by way of loan. As we mentioned before, the "fresh" money from the US government will have to come from whoever holds cash to buy T-Bills (China and the Saudis)

2- From private funds: most US investors as well as big corporations got hurt in the recent economic downturn, it will be interesting to see if they have the guts to undertake this type of ventures.

Finally, the wind is blowing and the turbines start rotating. Electricity is sent to the grid. But as we all know, the cost of generating a Kilo Watt with wind turbines is more expensive than the price we currently pay per Kilo Watt from the utility (or in the best case is too close to generate enough profit). The government has to provide an incentive. Where is the money from the incentive coming from? You guessed right! China and the Saudis through Treasury Notes!

CONCLUSION: We can have a new Green Economy that will help improve the current financial crisis. If the US (and the rest of the countries that wish to jump into this strategy) follow the Green Economy development plan there will be a big debt to pay. But if these countries play the cards correctly, eventually the debt will be paid and the benefits will remain at home. Otherwise, we will be in the hands of the Chinese and the Saudis.

What do you think?

I would like to send a special SHALOM to my friend in Israel who are going through rough times. In war there are no winners, I hope this conflict gets resolved as soon as possible with the least amounts of deaths (from either side!).

Who can figure Oil out?

First of all I would like to apologize to my readers for missing last week's post. I was out of the country in a business trip. I would also like to inform you this will be the last post of the year, since I will be, again, out of the country for the next week. So, to all of my (millions and millions of!) readers I would like to wish a happy new year, happy Hanukah, merry Christmas, happy Kwanzaa, and all the good stuff!

Now, let’s get down to business: Oil is Greentech’s biggest allied and its biggest enemy too!

On one hand its price becomes an incentive or disincentive to new alternative energy technology development. If the price goes up it’s an incentive for greentech.

On the other, it shapes the world economic outlook in a way that it frees or strangles resources flowing into greentech. If the price goes down more resources are available for greentech development (notwithstanding the global crisis).

Are you confused yet? Wait there is more:

What drives the price of Oil? Well this is also a complex answer.

Any traditional product follows the supply-demand curve. As the amounts of supplied product increase and demand diminishes, the price drops. On the opposite end, if supply is low and demand is high the price escalates.

Oil has a couple of added ingredients that make the supply-demand curve bend in different directions.

HIGHER PRICE, HIGHER SUPPLY: Oil has a very particular characteristic. Its supply sources become more abundant as the price goes up. Many heavy oil production fields, as well as other, less profitable sources, become feasible only after oil hits certain price targets. That is the case of the Athabasca Oil Sands a large deposit of heavy crude in northeastern Canada, where “despite the large reserves, the cost of extracting the oil from bituminous sands has historically made production of the oil sands unprofitable” (additional info can be found here)

LIMITED SUPPLY: Oil, as we al very well know, is a non-renewable natural resource. Therefore, its Supply quantity is a finite number. Many different estimates exist as to “how finite” oil is (i.e. when will it run out?), but there is a general consensus that IT WILL in fact run out some day.

As we get closer to the day Oil runs out, the price will skyrocket to levels never seen before. As any other scarce resource it will become a luxury.

SPECULATION AND CRISIS: This is a factor that has altered oil prices recently, it relates to the “market perception” of the above mentioned factors.

When the economy was booming and oil prices escalated, investors started getting into oil to make big profits, pushing the price further up.

Now, the economy has slowed down and demand has decreased and oil is at 30% the price that it was 6 months ago, investors have shun away from oil.

I will not attempt to include this factor into the supply-demand graph, as it is a very volatile and subjective variable.

The reality is that we are facing uncertain times, and as such people are going back and reconsidering their strategies. Will this affect Greentech?

In one sense it will, because the people that were unconvinced will tend to tilt more towards non-green as the price of oil gets lower and resources for greentech gets scarcer.

On the other hand this will be the big trial for greentech because it will test weather the critical mass of believers in a greentech future exists. And, if this critical mass will be able to propel Greentech to the next level (the mass market or mass implementation of green technologies).

I personally believe that people are aware that whereas oil goes up or down we need to do something to get off the “Oil rollercoaster”. Furthermore, people have also realized that oil dependency has very serious political consequences and they are more willing to do something about it. And, last but not least, oil has an environmental impact that many people are aware should be changed before we destroy our planet, and with it: ourselves.

Again, HAPPY HOLLIDAYS and SHALOM! See you in 2009!

Are we there yet?

Depends who you ask.

According to the Saudis, Oil will be the primary source of energy for many years to come (see the interview with Ali Al-Naimi, the Saudi oil minister, in CBS "60 minutes"). In the segment, the reporter shows the new petroleum facilities being developed in Saudi Arabia. They claim they will find DOUBLE the amount of oil they already have in the near future. It makes you wonder weather we are overreacting to the "end of times" for the oil sources.

In addition to the oil conundrum we are facing a challenge in the renewable energy front, and according to the NY Times here in the US we are not doing too good (read "Energy Goals a Moving Target for States").

A mere 10 to 15% goal of renewable sources of energy is an uphill battle for many states to achieve. According to the article: "Nationwide, the hard numbers provide a sobering counterpoint to the green-energy enthusiasm sweeping Washington".

On the other hand

The US will soon have a new president. The general expectation (based on his own words) is that the "Green Economy" will be a priority. This effort towards renewable energy and clean technologies is one of the tools Mr. Obama proposed as a strategy to overcome the current financial crisis (see Obama’s entire plan at Elections and Greentech, are they related?)

Additionally, the same NY Times, did a whole section on the "Business of Green" in September (featured in one of our entries "NY Times Week-in-review"). I believe they were responding to a trend, therefore being optimistic about the growth of the Green Business.

So which one is it? Are we reading too far into the energy and pollution crisis, or are we in the verge of major changes towards the "Green Wave".

Until next week, SHALOM!