On the heels of President Obama's State of the Union Address, T. Boone Pickens praised the President for adopting much of what the legendary energy executive has been proposing in The Pickens Plan to promote U.S. energy independence.

The energy initiatives described in the President's annual address to Congress include incentives to move America's transportation sector to natural gas and away from imported petroleum products such as gasoline and diesel.  In his plan, Pickens has pushed for greater use of natural gas in transportation on the ground that continued dependence on imported oil is "a grave threat to America's national and economic security."

As Pickens points out, the President's "initiative" in this area is not exactly new.  Legislation to provide incentives to move the nation's transportation sector to natural gas has widespread bipartisan support in Congress, with more than 180 co-sponsors in the U.S. House of Representatives.  A similar bill in the Senate also has strong bipartisan support.

Regina Hopper, President and Chief Executive Officer of America's Natural Gas Alliance (ANGA), also praised the President's emphasis on natural gas as a solution to both environmental and national security concerns.  "We agree with the resident that American natural gas can play a pivotal role in our national security and in our economy," she said.  "For this reason it is a fuel that has great bipartisan appeal. Using American natural gas to meet more of our transportation needs makes us less reliant on countries that do not have our best interests in mind."

President Obama also called for a dramatic increase in the use of wind, solar and other renewables to generate electricity.  Wind and solar are also key pillars of The Pickens Plan that the energy executive announced in 2008. 

"I've accomplished my goal of achieving legislation and proposed policies to help solve the OPEC oil crisis," Pickens said. "The ball's now in Washington's court. What we need is leadership. Despite the political partisanship that divides Washington, I am hopeful and confident Congress will put America's best energy future first."

John J.P. Howley
Woodbridge, New Jersey

Remember when politicians told us not to worry about a housing bubble, and a few smart investors made huge profits by betting against them?  Well, it is deja vu all over again.  While the most vocal politicians argue today that renewable energy will never be viable, the smart money is betting that they are wrong again.

Warren Buffett is a major investor in the largest wind power portfolio in the United States, the largest electric vehicle (EV) manufacturer in China, and one of the the largest solar power plants in the world.  Munich Re, the largest reinsurance company in the world, has invested in a solar power company with 168 megawatts up and running and another 500 megawatts in the pipeline.  Other smart investors making big bets on sustainable energy include Kohlberg Kravis & Roberts (KKR) and Goldman Sachs.

The arguments supporting these massive investments in sustainable energy today are just as simple and logical as the arguments supporting bets against the housing market were in the recent past.  If you own a traditional power plant, your fuel costs for coal, natural gas, or oil will inevitably rise in price over the 50 to 100 year life expectancy of the power plant.  If, however, you invest in wind, solar and other forms of sustainable energy, your fuel costs will remain at zero for the next 50 to 100 years.  This creates a built-in cost advantage for sustainable energy that becomes ever more valuable every time fossil fuel prices increase.

So, who will benefit from the tremendous cost advantages of sustainable energy over time?  Again, we are facing a case of deja vu all over again.  The way we are headed right now, almost all the benefits of sustainable energy will go to a very small group of smart investors.  Here's why.

Let's assume that we meet our national goal of having 80% of our electricity generated by fossil fuels and 20% generated by renewable sources in the year 2020.  With that type of lopsided ratio, the market price for electricity will be heavily influenced by the cost of fossil fuels.  The relatively small contribution of renewable energy sources will not lower prices much for consumers.  As a result, the investors who own renewable energy power plants will reap outsized profits by selling electricity at prices that are driven by fossil fuel costs and producing that electricity with zero fuel costs.  The consumer will get very little price benefit from 20% renewable energy.

Now let's assume that 100% of our electricity will come from renewable sources in the year 2020.  Under this scenario, electricity prices will be set in a competitive market where all of the power producers having zero fuel costs.  Since all power producers will be competing against other power plants that also have zero fuel costs, the price consumers pay for electricity will drop (or at least not rise as quickly).

Can we really build enough renewable energy to make a difference over the next eight years?  Yes.  The United States has pulled off similar feats in the past, which is why we dominated the global economy in the 20th century.  In the seven years between 1938 and 1945, we built 663,000 military aircraft, 155 aircraft carriers, and 10 million tons of concrete runways in the course of winning World War II.  In the 1950's, we built more miles of highways than the rest of the world combined.  In the 1960's, it took us only eight years to develop the necessary technologies to put a man on the moon.  If we set our minds to it, we can produce more renewable energy, with zero ongoing fuel costs, than the rest of the world combined.  And if we do that, we will create a more competitive economy that is capable of creating more jobs and lower electricity costs for everyone, instead of a small renewable energy industry that creates higher profits for just a few.

Let me admit that I have oversimplified how electricity prices are set in competitive markets.  Yes, I know that electricity markets are incredibly complex, that we must take into account differences in costs and prices for base load vs peak power generation, that prices for renewable electricity must allow investors to recover their capital costs plus attractive profits, and that producing more renewable energy will require breakthroughs in storage technologies and/or significant investments in smart grids.

All I am saying is that we must not lose sight of the forest for the trees.  In the years leading up to the Great Recession, we allowed the complexities of derivatives markets to distract us from the simple fact that too many mortgages had been financed for people who could not afford them.  We must not let the complexities of electricity markets distract us from the simple fact that more renewable electricity will provide benefits for everyone, while small amounts of renewable electricity will only provide benefits for the few. 

Once we accept the simple fact that we must invest in more renewable energy, we can move on to the more complex question of how to get that done.  That's what FDR did when he led us to victory in WWII.  That's what Dwight Eisenhower did when he built the Interstate Highway System.  And that's what JFK did when he set us on course to put a man on the moon.

John J.P. Howley
Woodbridge, New Jersey

_A new report confirms what I have been saying for at least the past ten years.  That is, Energy Efficiency will improve our energy independence and reduce our Greenhouse Gas (GHG) emissions faster, cheaper, and by a greater amount than even the most optimistic projections for solar, wind, and all other renewable energy sources combined.

Titled "The Long-Term Energy Efficiency Potential:  What the Evidence Suggests," the new report is from the American Council on an Energy Efficient Economy (ACEEE).  The report outlines three scenarios under which the U.S. could either continue on its current path or cut energy consumption by the year 2050 almost 60 percent, add nearly two million net jobs in 2050, and save energy consumers as much as $400 billion per year (the equivalent of $2600 per household annually).

According to the ACEEE, America is thinking too small when it comes to energy efficiency, while also making the mistake of "crowding out" economically beneficial investments in energy efficiency by focusing on riskier and more expensive bids to develop new energy sources.

So why aren't we investing in Energy Efficiency?  Because it is difficult to make money in Energy Efficiency when energy prices are so low.  When the price of energy is low, then every BTU or KWH you save by becoming more energy efficient is worth very little.  As energy prices rise, every BTU or KWH saved becomes that much more valuable.

Just today, the New York Times reports that oil and gas companies are "flaring" or burning off natural gas at oil wells because the price of natural gas is so low right now that it is cheaper to waste the gas than to find a place to store it.  This is an incredibly inefficient use of resources.  The inefficiency has absolutely nothing to do with the state of technology.  The inefficiency is driven 100% by the low price of natural gas.  Why bother saving natural gas, when it is actually cheaper to waste it?

The other barrier holding back energy efficiency is the dispersion of benefits.  Unlike a power plant, where the owners of the plant can capture the lion's share of the economic benefits, the benefits of energy efficiency tend to be more dispersed and indirect.  According to the ACEEE, increased investments in energy efficiency would allow lower investments in power plants and other supply infrastructure, thereby substantially lowering overall energy expenditures on an economy-wide basis in the residential, commercial, industrial, transportation, and electric power sectors.  In plain English, the people who pay for increases in energy efficiency don't necessarily get all the benefits directly.

What we need -- and what the ACEEE urges -- are government policies that incentivize a longer-term and society-wide view to the issue of energy sustainability and independence.  And the new ACEEE report provides the data to back up the long-term benefits both to investors and to the health of the U.S. economy.

Examples of potential large-scale energy efficiency savings identified by ACEEE include the following:
  • Electric Power.  Our current system of generating and delivering electricity to U.S. homes and businesses is an anemic 31 percent energy efficient. That is, for every three units of coal or other fuel we use to generate the power, we manage to deliver less than one unit of electricity to our homes and businesses. What the U.S. wastes in the generation of electricity is more than Japan needs to power its entire economy. What is even more astonishing is that our current level of (in)efficiency is essentially unchanged in the half century since 1960, when President Dwight D. Eisenhower spent his last year in the White House.
  • Transportation.   The fuel economy of conventional petroleum-fueled vehicles continues to grow while hybrid, electric, and fuel cell vehicles gain large shares, totaling nearly three-quarters of all new light-duty vehicles in 2050 in the report's middle scenario. Aviation, rail, and shipping energy use declines substantially in this scenario through a combination of technological and operational improvements. In the most aggressive scenario, there is a shift toward more compact development patterns, and greater investment in alternative modes of travel and other measures that reduce both passenger and freight vehicle miles traveled. This scenario also phases out conventional light-duty gasoline vehicles entirely, increases hybrid and fuel cell penetration for heavy-duty vehicles, and reduces aviation energy use by 70 percent.  
  • Buildings.   In residential and commercial buildings the evidence suggests potential reductions of space heating and cooling needs as the result of building shell improvements of up to 60 percent in existing buildings, and 70-90 percent in new buildings. The ACEEE scenarios also incorporate advanced heating and cooling systems (e.g., gas and ground-source air conditioners and heat pumps and condensing furnaces and boilers), decreased energy distribution losses, advanced solid-state lighting, and significantly more efficient appliances.
  • Industry.  In the industrial sector, energy efficiency opportunities reduce 2050 energy use by up to half, coming less from equipment efficiency and more from optimization of complex systems. The ACEEE analysis focuses on process optimization in the middle scenario, but also anticipates even greater optimization of entire supply chains in the most aggressive scenario, allowing for more efficient use of feedstocks and elimination of wasted production.
Are such advances in energy efficiency realistic?

As the ACEEE report points out, the U.S. already has achieved considerable advances in the energy efficiency context and is poised to do more:  "The U.S. economy has tripled in size since 1970 and three-quarters of the energy needed to fuel that growth came from an amazing variety of efficiency advances—not new energy supplies. Indeed, the overwhelming emphasis in current policy debates on finding new energy supplies is such that emphasis on new supplies may be crowding out investments and innovations that can help to achieve greater levels of energy productivity. Going forward, the current economic recovery, and our future economic prosperity, will depend more on new energy efficiency behaviors and investments than we've seen in the last 40 years."

John J.P. Howley
Woodbridge, New Jersey

__A new report on the thin film solar market suggests that one of the most promising technologies has promised more than it has delivered.  The report from industry analyst firm NanoMarkets examines the developments and prospects for thin film solar panels made with Copper Indium Gallium (Di)selendine (CIGS) semiconductors.  CIGS semiconductors are used as light absorbing material for thin film solar panels.

According to the NanoMarkets report, CIGS has failed to be the printable high-efficiency, low-cost and flexible solar panel technology that was once hoped for by its advocates.  The report also notes that the Solyndra scandal in the U.S. has at its center a CIGS firm.  Yet despite all this, the CIGS industry has begun to ship panels in significant quantities.

The NanoMarkets report -- "CIGS Photovoltaics Markets-2012" -- will be released the week of January 30th.  Additional details about the report, including a table of contents, are available at: http://nanomarkets.net/market_reports/report/cigs_photovoltaics_markets_2012  The report is listed at pre-publication pricing through January 30th.

This is NanoMarkets' latest report analyzing the CIGS industry and its prospects for the future.   NanoMarkets has been covering the CIGS space since CIGS' earliest days, and this report examines the future of this important solar panel technology from both the standpoint of the technical and the commercial.  It does so with a background in which it seems likely that many of the subsidies that have helped solar in the past will fade away and that the world economy will not return to the strong growth of the last decade for quite some time.

Among the important technical aspects of CIGS that this report covers are the likely evolution of CIGS fabrication and encapsulation and how these factors factor into market expansion and cost reduction for CIGS.  Much of the report is also devoted to the role that CIGS will play in the building-integrated PV (BIPV market) and how flexibility and price parity with silicon solar panels could considerably improve the revenues generated by CIGS technology in the near future.

The report includes an eight-year forecast in volume and value terms of CIGS markets broken out by applications and product type.  It also includes a discussion of the leading firms active in this space and their product/market strategies.