Power to the people

Posted on September 18, 2002 by Other News Sources

Lawrence Solomon
National Post
September 18, 2002

Rooftop power plants are sprouting in California, a state that has suffered from volatile power costs and electricity shortages, and before the end of the year, they’ll be sprouting in New York and New Jersey. By the end of next year, they may have come to electricity-challenged Ontario, where another botched deregulation is leading to wildly fluctuating prices, brownouts and threats of California-style rolling blackouts.

The power plants – pioneered by a new California company called RealEnergy – do more than provide security for their customers against power interruptions. They can also lower energy costs and dramatically slash environmentally harmful emissions. If economics, rather than politics, determines the future of these new plants, they will put many if not most large-scale generating plants out of business.

RealEnergy, which is installing dozens of systems in the United States and is in talks with several property owners about installations north of the border, gives building owners an offer they can’t refuse. It leases unused space on the roof of an office building or hotel – 1,000 square feet or more of space that doesn’t currently provide landlords with revenue – and builds a small power plant there, entirely at its own expense. It then offers power to the building – typically meeting 40% to 50% of the building’s entire needs – at rates no higher than the building currently pays the local utility.

Landlords find themselves owning a building offering a premium amenity while earning some additional rental revenue, and tenants appreciate the immunity from blackouts – a growing concern for many companies.

RealEnergy can make the kilowatt-cost guarantee because it has inherent advantages over traditional utilities, which must often transport power great distances from remote hydro, coal or nuclear plants. By avoiding the costs associated with transmission and distribution – often 20% of the total power bill – RealEnergy gives itself one big advantage over its central utility plant competitors. By using the rooftop plant’s waste heat to meet the building’s hot-water needs, RealEnergy gives itself another advantage: Rather than lose the heat to the atmosphere, as utility companies generally do, the water it heats provides a lucrative revenue stream. It all adds up to higher efficiency, less waste, and more profit.

RealEnergy uses no new technologies. It attaches its generating plants to the natural gas or other fuel supply that’s already available to a building. The plants themselves are off-the-shelf – whether natural gas-driven internal combustion engines, microturbines, or, when they become economically viable, fuel cells. RealEnergy typically requires six to nine months to install a system, most of it in obtaining permissions of various kinds. “Ideally, if all the permits are in place and the physical environment doesn’t present challenges, a system can be installed in three months,” says RealEnergy’s president, Paul Slye.

The advent of distributed power – the industry buzzword for small-scale plants located close to customers – is long overdue, almost 100 years overdue. The world’s first power plant – built by Thomas Edison in 1882 in lower Manhattan with help from financier J.P. Morgan – supplied 59 customers in 12 city blocks, and generated both power and heat. Edison accurately foresaw a proliferation of small-scale, localized electricity generation companies, and numerous on-site generators. A decade later, power plants had spread throughout the continent and two-thirds of all power was generated on site.

What Edison didn’t foresee was the industry’s hijacking by promoter Samuel Insull. Early in the 20th century, Insull struck a pact with the state of Illinois: If the government allowed him to wipe out small competitors – they were inefficient and ultimately costly to customers, he explained – he would voluntarily agree to allow the government to control the rates he charged. “In order to protect the public,” he claimed, “exclusive franchises should be coupled with the conditions of public control, requiring all charges for services fixed by public bodies to be based on cost plus a reasonable profit.”

Illinois agreed and the rest is history. State-sanctioned power monopolies soon became established across the United States and Canada, and wasteful, large-scale generation became the law. Large power plants typically convert only 30% to 35% of the energy they burn into electricity, and allow 65% to 70% of the energy to escape, heating the atmosphere to the environment’s sorrow. In contrast, Edison-type systems that capture waste heat achieve efficiencies of 80% to 90% or more. Put another way, we use two to three times the fuel we need to meet light, heat and various other energy needs because of the regulated monopolies that Insull pioneered.

Electricity regulation made that immense economic and environmental loss possible in the early 20th century. In the early 21st, electricity deregulation is making efficient energy use once again possible, and unleashing a torrent of innovation. Capstone, a California company, manufactures a 30-kilowatt microturbine the size of a washing machine that can supply a small office building or a restaurant. Calgary’s Enbridge, meanwhile, is betting big on fuel cells, possibly the ultimate on-site power system.

Ironically, the need for efficient small-scale systems is best understood in jurisdictions that have most botched the job of deregulation. Central utilities have their place, building owners and tenants are deciding – as a backup to clean, reliable and more efficient home-grown electricity.

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The city after 9/11

Posted on September 11, 2002 by Other News Sources

Lawrence Solomon

September 11, 2002

Sept. 11, 2001, unleashed a momentous, urgent debate over the future of homeland security and an equally momentous, if less urgent, debate over the future of the city. “Dispersal rather than concentration is being talked about as the viable pattern of life and work, where monumental buildings will give way to camouflaged sheds, or be entirely scattered to home offices,” stated The New York Times in a Sept. 30, 2001, article entitled “A City Transformed: Designing ‘Defensible Space.'” Several weeks later, The Wall Street Journal, in a front-page column, entitled “Decentralization and Downtowns,” encapsulated the larger urban debate: “Even before terrorists levelled the World Trade Center, economic and technological forces were combining to decentralize the economy. Sept. 11 will only reinforce these centrifugal forces, underscoring the risk of concentrating too many people, computers and phone lines in one spot.”

Throughout the last year, in fact, arguments in favour of dispersing the population have been building, not just in the United States but in Canada and Europe as well. Road-builders cite security needs in justifying the rebuilding of national highway systems, recalling that President Eisenhower had justified the U.S. highway system – officially known as the Dwight D. Eisenhower System of Interstate and Defense Highways – in large part on the need to evacuate cities in the event of nuclear war. Advocates for suburban lifestyles tout the vulnerability of cities to terrorist attacks as another reason to leave city for suburb. And business analysts such as Lehman Brothers’ David Shulman state that “Terrorism demolishes agglomeration economies,” meaning that businesses will no longer cluster together in downtowns or other dense locales, as they historically have.

Shun-the-city thinkers correctly note that terrorists target people-rich places – the World Trade Center held 40,000 to 50,000 occupants a day – but they forget that there is no shortage of people-rich targets throughout society. And that terrorists crave trophies as much as high casualties, explaining why the Statue of Liberty, the Eiffel Tower, and Olympic events have also ranked high on terrorists’ target lists. In the wake of the Sept. 11 attacks, the insurance industry set about cataloguing the targets likely to attract the eye of terrorists – bridges, national monuments, railway stations, and city halls among them – and found 330,000 in the United States. National treasures and well-peopled targets, it has become clear, exist throughout a country.

Killing large numbers of innocents, however, may be more easily done away from the big city. Early fears of casualties in the tens of thousands at the World Trade Center soon dropped to 6,000, then to 5,000, then to 3,000 and now 2,800 – fewer than 2,300 civilians who worked or visited the World Trade Center, fewer than 400 firemen and policemen, and 147 airline passengers and crew. The diminished death count must surely have become a disappointment for the blood-lusters at al-Qaeda, particularly since the lives saved are a direct testament to the incomparable heroism of New York’s firemen and policemen. Some analyses credit the men in uniform with rescuing an astounding 12,500 civilians in the World Trade Center; a more recent McKinsey & Company analysis credits them with saving an even more astounding 25,000 civilians.

But more than heroism was at play. New York employs more than 11,000 firemen and 40,000 police officers, many of them highly trained in emergency procedures. Had a meticulously planned terrorist attack such as the one at the World Trade Center instead targeted a rural theme park or a small-town college football game, which often attracts more than 50,000 fans, the toll could have several times exceeded that at the World Trade Center. New York City lost far more in fire equipment alone – 91 vehicles worth US$97-million – than many counties own, and it had tens of thousands of professional rescue workers in reserve. Likewise, the city’s vast hospital network had sprung into action, prepared to accept thousands of casualties that luckily did not need their services. In comparison, a rural college stadium under attack, even if it wasn’t dependent upon a local fire department and the local deployment of state troopers, would have been woefully defenseless and incapable of averting a larger catastrophe.

The gap between the preparedness of dense cities and sparsely populated areas will soon grow. Though New York’s rescue workers were unquestioningly heroic and effective, they could have done better, the New York City government has decided. Two newly released reports that the city commissioned after the Sept. 11 attacks point to numerous impediments to efficient rescue operations that became evident following the World Trade Center attacks. As a result, all New York City high-rises will soon be outfitted with equipment that boosts the radio signals rescue workers use, for example, and fire chiefs will ride police helicopters to help them dispatch the right number of firemen in emergency situations, preventing too many from arriving in the same place at once, as happened during Sept. 11.

Other post-Sept. 11 analyses will benefit all cities. A two-year, US$23-million study has just begun to scrutinize the mechanics of the twin towers’ collapse, and the reasons why more than 1,000 people trapped on the upper floors were unable to escape. Once various riddles are solved – such as why the steel near a Boeing 767’s entry point into the north tower resisted intense fire – new building techniques may allow present skyscrapers as well as future ones to withstand similar attacks or worse. Even before those new studies are complete, building and fire codes have changed in light of post-Sept. 11 engineering understandings.

Cities – New York, Chicago, London, Toronto – have seen devastation before, and they have bounced back brilliantly. New technologies, new building codes, new practices, invariably arose to solve old problems. In 1835, an accidental fire incinerated 700 buildings and 52 acres in the heart of New York’s business district. Although one-quarter of Manhattan was gone, it was soon rebuilt. Thick granite replaced brick and wood facades, a new water system was brought in and the city became more valuable, and more splendid, than ever. Within one year, the value of Manhattan’s real estate increased by more than 60%, from US$143-million to US$233-million, and business was prospering.

One year after Sept. 11, downtown businesses continue to suffer, but in many ways the city is once again coming back stronger and more splendid than ever. While the site’s redevelopment is yet to be determined, New York’s architectural tradition, and its refusal to accept mediocre designs, point to excellence. At the same time, the often-voiced fear that people would abandon Manhattan – the residential buildings that ringed the World Trade Center sat half-empty in the months following Sept. 11 – has vanished.

“Hot, hot, hot,” is how realtor Brown Harris Stevens characterizes the general residential market. “The recovery is now across the board; our sales of apartments over US$5-million are up 300%,” announced Insignia Douglas Elliman, the city’s largest real estate company. The price per square foot has been increasing, as have apartment sizes, says Miller Samuel, a New York appraisal firm, leading to a 21% increase in the cost of apartments throughout Manhattan. Condominiums are now selling for the highest prices seen in years.

Rather than dispirit New Yorkers, the terrorist attacks have brought New Yorkers together, creating a bond and strengthening the sense of community that, ironically, tends to especially thrive in the big city. The immense insecurity that followed the terrorist attacks is being supplanted with a new optimism, as New Yorkers make clear that they’re there for keeps. “Today, joggers and baby strollers ply the narrow paths once crammed with dump trucks and moving vans, and only the slightest sheen of ashy grit still clings to the buildings,” The New York Times reports. “The thousands of apartments that stood so precariously vacant have dwindled to a few scattered dozen, all of them going fast.”

Islamic terrorists didn’t select New York because it is a city, as shun-the-city thinkers seem to think. The terrorists selected New York because it is a great city, the ultimate trophy. New York is a beacon of personal liberty, as symbolized by the Statue of Liberty, and a beacon of capitalism, as symbolized by Wall Street and the World Trade Center. For those who aspire to personal and economic freedom, for those who seek the cultural amenities that only a large and diverse population can bring, there is no alternative to great cities. And for those very reasons, attacks on New York, as on other great cities, will fail to persuade their residents to leave.

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Letters

Posted on September 10, 2002 by Other News Sources

Graham Reinders
National Post
September 10, 2002

Lawrence Solomon‘s “How Meeting Kyoto Goals Can Save Canada Money” (Sept. 4), was a fabulous article. All those scenarios are possible.

I am a follower of history. I can say with absolute certainty that we will not pass Kyoto in its present form. The best we will do is pass a token. Politics never has and never will have anything do with the good of the planet or its people. Even the not-so-bright know that our leaders are the elected of the various power and financial blocs; that is what party politics is all about.

It does not need more than grade school to understand that if we burn 500,000,000 years’ accumulation of plants, (coal, oil, and gas, which are 45% carbon and 45% oxygen) within only 100 years, we are in deep trouble, no matter what the normal weather cycles are doing.

Where do these mental giants who run our country think all this energy is going within our global thermos flask? The answer of course is that they get paid, one election at a time, not to think, but to lead us away from reality.

Graham Reinders, Vancouver

To read Larry’s article, “How Meeting Kyoto Goals Can Save Canada Money,” please click here.

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How meeting Kyoto goals can save Canada money

Posted on September 4, 2002 by Other News Sources

Lawrence Solomon
National Post
September 4, 2002

Now that Canada seems certain to commit to the Kyoto treaty by the end of the year, the choice before Canadians is stark. We can cut greenhouse gases in ways that gut the economy and impoverish Canadians – such reforms could cost 450,000 jobs, according to estimates from business lobby groups – or we can reduce gases by modernizing and liberalizing the economy.

Reducing our greenhouse gas emissions by 20% – a goal of the Kyoto treaty – is not a near-impossible technical feat that can only be accomplished at great cost to the Canadian economy, and to Alberta in particular. Reductions on an even larger scale can be readily accomplished while saving money and lowering taxes, while increasing wealth and productivity, and while reducing state intervention. Albertans would be winners along with almost everyone else.

Canada should have an easier time than most other countries in reducing our energy emissions because our industries are more wasteful than those of most others. Our entire energy infrastructure – Hibernia, the tar sands, natural gas pipelines and power plants – has become vastly oversized due to state subsidies of all descriptions. Remove the subsidies and the existing energy operations begin to shrink while new energy developments – most of them subsidy-dependent – largely disappear. Once this happens, our energy sector – among the largest in the world – will become leaner, Canada will become cleaner, and taxpayers will be pocketing the handouts governments had been giving our energy companies to encourage them to make risky investments.

Although Canada’s energy sector is bloated through subsidies, it nevertheless deserves credit for being a major net contributor to the Canadian economy. Not so for the rest of Canada’s resource economy, which would shrink to irrelevance without subsidies. Most mining, logging, and pulp and paper operations are marginal at best, while large-scale agriculture is wildly unprofitable – for every dollar of profits that a Canadian farmer earns, the agriculture sector receives $3.50 in subsidies.

Removing subsidies to these resource industries would do more than cut them down to size, it would impressively chop our greenhouse gas emissions because these sectors rank among Canada’s leading energy gluttons. The nitrogen fertilizer used throughout Canada’s agricultural lands depends on natural gas as a feedstock, for example, while mining and pulping operations consume inordinate amounts of all fossil fuels.

While the government was ending subsidies to the resource sector, it could end corporate subsidies across the board. The chief losers would be outdated steel companies and other smokestack industries whose usefulness to the economy has all but vanished. The chief winners, apart from the environment, would be the corporations and individuals now paying to prop them up. While ending subsidies would create dislocations, and one-time costs, these would be spread across the economy, and not be limited to Alberta.

Ending corporate subsidies alone would likely reduce Canada’s greenhouse gases by 1% or more per year – all that Canada would need to meet the time lines likely to be acceptable to Kyoto signatories. But further savings are available throughout the economy merely by doing what we should be doing anyway – ending the subsidies that ports receive to ship our raw resources, for example, and recovering the full cost of providing employment insurance to loggers and other seasonal workers.

The very largest reductions in emissions, however, would come from ending what may be the most wasteful product of all – free roads. Rather than willy-nilly expand the Trans Canada Highway, as the federal government plans to do, governments should end the free ride that Canadians have had on the Trans Canada and all other roads. Tolling our roads to recover the full cost of their construction and maintenance, even if we simultaneously reduced gasoline taxes, would greatly reduce the fuel consumed by vehicles by applying the forces of supply and demand to road use.

While gasoline taxes collect small fortunes from vehicle owners, the taxes do little to reduce the demand for road building because they don’t reflect which roads are used, and when. The modern toll roads now being built in Canada and around the world can send intelligent economic signals to drivers by charging vehicles more at peak times, and by charging cars much less than trucks, which cause most of the roads’ wear and tear.

Once roads are properly priced, the economy would slowly but profoundly adjust. To lower shipping costs, manufacturers would locate closer to markets, and to lower commuting costs – rush-hour commuters would pay $1 or more per mile travelled in high-cost areas such as Toronto – people would tend to relocate to work closer to home. Canadians wouldn’t necessarily own fewer cars – we would just use them less often in polluting stop-and-go traffic.

Less soot, less waste, more intelligent devices, more intelligent design. A more efficient society would rely less on raw resources and more on value-added services, employing fewer people to crush rocks and more to crunch numbers. A modernized economy has much to recommend it, whether or not the Kyoto treaty is the driver.

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Competition in Retail Electricity Supply: CMI Working Paper 09

Posted on September 1, 2002 by Other News Sources

Stephen C. Littlechild

September 1, 2002

Massachusetts Institute of Technology Center for Energy and Environmental Policy Research

This paper explains the benefits of retail competition, particularly for residential customers. Experience in the U.K., and the cost benefit debate there, are used to illustrate the arguments.

Click here to view .pdf document

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