July 2009 Archives
07/24/09 2:48 PM
Lessons from the Lunar Leftovers
All week I've been stewing on the connection between landing on the moon and solving our climate, pollution, economic and security problems with fossil fuels. The two metaphors used for government initiatives are the Apollo Project and the Manhattan Project. The problem is that both the Apollo and the Manhattan Projects had clear goals (rocket/moon; atoms/bomb) while there is no clear goal or path to a single energy solution, but a need for many, and also a need for a marketplace robust enough to pick the winners among those solutions. But then I happened upon the site NASA Spinoffs, which details thousands of things that were originally invented for the space program but have now become products in their own right. Many of these things relate to energy: More than a dozen solar innovations, a process for making trucks more aerodynamic, sophisticated wraps that trap heat in buildings, lithium batteries.. And then there's space food, temper foam, etc. Putting a man on the moon was only a midpoint in a massive push in basic science and applied technology, followed by a multi-decade process of commercialization. We need to ask ourselves whether we're going to get innovation on that scale from the fairly small investments we're currently making in alternative energy. (Here's a chart of what the DOE is doing with stimulus money.)
We also need to ask whether we're putting money into projects that are too focussed on goals like biofuels to create the kind of bizarre creative spinoffs that history shows are possible and useful. The DOE has funded a group of Bioenergy Research Centers to search for cellulosic fuel solutions "at the frontier of basic and applied science." Will they be too focussed on the narrow goal of a possibly unsuccessful fuel to realize that they just stumbled across, say, an enzyme that will clean your clothes with barely any water or energy? (Saving the world an enormous amount of fuel and hassle.) And will giving loans to limited private initiatives (like the nearly half a billion dollars recently loaned to Tesla) result in intellectual property that everyone can share and innovate from? Looking at the NASA spinoffs page I think we took the wrong lessons from the Apollo Program: Its greatest success wasn't the giant step for mankind, it was hundreds of thousands of baby steps and quirky products.
If you'd like to comment, you can make use of the commercialized version of DARPA's quirky 1970's online community by posting on Steven Chu's Facebook page.
(Photo: Flickr User Brian Knight Photography)
07/15/09 12:20 PM
Dr. Chu in China: Warnings, Money, Leapfrogs
Energy Secretary Stephen Chu and Commerce Secretary Gary Locke are both in China today, forming a new joint research program for US/China cooperation on clean vehicles and buildings with China's Minister of Science and Technology Wan Gang. (The very fact that Chu and Gang are sitting down to talk is reason for some hope: They are cut from similarly brainy optimistic technocratic cloth and before government both spent a long time at the cutting edge of private industry's research. Chu was at Bell Labs, where he won a Nobel. And Gang was at Audi's research center in Germany. Having interviewed both of them, I can easily imagine them having a beer. But if they do, there will be a leapfrog under the table, testing out its first hops.
Chu and Locke are on a unenviable chore of a mission to get China to publicly commit to reducing CO2 emissions. The Wall Street Journal's Environmental Capital Blog points out that the tensions in this mission are evident in the difference between the WSJ headline ("Chu Warns China on Emissions") and the China Daily's: "Chu Says US Ready to Lead on Climate Change." The less public truth, as Chu knows from his stint at LBNL, which works extensively with China, is that China is very concerned about the environmental and competitive impacts of climate change and legislation and is preparing extensively and helter skelter, but not talking about it much. (Here's an article I wrote about the extent of China's energy efficiency program and its 20 year cooperation with LBNL.) Numerous bureaucrats told me that they were coming to see carbon reductions as a competitive strategy, particularly against the slower moving US, and a way of breaking out of the trap of low-cost labor as the country's competitive advantage. In the Reuters article, Locke rightly points out that China needs far more than energy efficiency.
And that's where Wan Gang comes in. He returned to China from Germany after writing a highly influential paper saying that the only way for China to dominate the auto industry of the future is to be a pioneer in alternative fuel vehicles. Aka Leapfrogging. (Here's an article I wrote about that mission for Wired. Substitute hybrid and electric for hydrogen and note that Wan Gang's fortunes have risen considerably.)
China can't bet its future on leapfrogging anymore than the US can bet its competitiveness on preventing the worldwide adoption of emissions standards. Will Chu and Gang figure out a collaboration that satisfies the competitive urges of both?
Chu and Locke are on a unenviable chore of a mission to get China to publicly commit to reducing CO2 emissions. The Wall Street Journal's Environmental Capital Blog points out that the tensions in this mission are evident in the difference between the WSJ headline ("Chu Warns China on Emissions") and the China Daily's: "Chu Says US Ready to Lead on Climate Change." The less public truth, as Chu knows from his stint at LBNL, which works extensively with China, is that China is very concerned about the environmental and competitive impacts of climate change and legislation and is preparing extensively and helter skelter, but not talking about it much. (Here's an article I wrote about the extent of China's energy efficiency program and its 20 year cooperation with LBNL.) Numerous bureaucrats told me that they were coming to see carbon reductions as a competitive strategy, particularly against the slower moving US, and a way of breaking out of the trap of low-cost labor as the country's competitive advantage. In the Reuters article, Locke rightly points out that China needs far more than energy efficiency.
And that's where Wan Gang comes in. He returned to China from Germany after writing a highly influential paper saying that the only way for China to dominate the auto industry of the future is to be a pioneer in alternative fuel vehicles. Aka Leapfrogging. (Here's an article I wrote about that mission for Wired. Substitute hybrid and electric for hydrogen and note that Wan Gang's fortunes have risen considerably.)
China can't bet its future on leapfrogging anymore than the US can bet its competitiveness on preventing the worldwide adoption of emissions standards. Will Chu and Gang figure out a collaboration that satisfies the competitive urges of both?
How much do we really pay for the gasoline we use? What we pay at the pump is only the beginning, with direct and indirect subsidies and tax breaks appearing on our tax returns on April 15, environmental costs showing up at the ER and banking in the atmosphere, and the opportunity costs... Well, I won't go on because we just don't have a legitimate estimate. And because we don't know how much the gas really costs us, we are less inclined to make those supposedly economically rational decisions that will lead our economy away from oil dependence. Some suggest taxes to make the pinch real, but there's hardly any political support for that.
Enter the US military, the world's largest purchaser of petroleum. After many decades of accounting for the cost of oil as only the amount they paid refiners, they have recently started accounting for the cost of delivering the gas to the tank where it will be used. The result is amazing, and it may be enough to change the calculus of how the military uses energy. The average peacetime delivered cost of fuel purchased for $2.30 a gallon and used on military bases averages out to $5.61 a gallon when the costs of delivery are added in. (For the details, see this post in the always-interesting DOD Energy blog, and then download the pdf.) Camp Casey, in the Republic of Korea, averages $11.04 a gallon. Later in the pdf there's a screen that seems to show that it's $13 or so for fuel in Iraq, but it may be higher. I've heard that the military spends about 9 gallons getting a single gallon of fuel to its destination in some conflict areas. (Is this true? Please! Correct me if not.)
There is plenty of criticism that the military is not doing enough to move to alternative fuels, like this from the Bulletin of the Atomic Scientists. (And from what I've heard , the biofuel and synfuel programs described here have been modified since this was written. Again, correct me if this is wrong.)
But the new cost calculus makes such things as portable garbage -to-fuel converters, and today's green media darling, the urine-powered fuel cell, feasible. According to this article, Ohio University's Geraldine Botte's lab is using urine to produce the equivalent of a gallon of gas for 90 cents. (Insert moderately tasteless pun here.) No. There is simply nothing I can say to top that whole scenario, except that the cost of war will fall dramatically if we find a way to turn soldier's pee into fuel at less than 1/6 the cost of gasoline.
Enter the US military, the world's largest purchaser of petroleum. After many decades of accounting for the cost of oil as only the amount they paid refiners, they have recently started accounting for the cost of delivering the gas to the tank where it will be used. The result is amazing, and it may be enough to change the calculus of how the military uses energy. The average peacetime delivered cost of fuel purchased for $2.30 a gallon and used on military bases averages out to $5.61 a gallon when the costs of delivery are added in. (For the details, see this post in the always-interesting DOD Energy blog, and then download the pdf.) Camp Casey, in the Republic of Korea, averages $11.04 a gallon. Later in the pdf there's a screen that seems to show that it's $13 or so for fuel in Iraq, but it may be higher. I've heard that the military spends about 9 gallons getting a single gallon of fuel to its destination in some conflict areas. (Is this true? Please! Correct me if not.)
There is plenty of criticism that the military is not doing enough to move to alternative fuels, like this from the Bulletin of the Atomic Scientists. (And from what I've heard , the biofuel and synfuel programs described here have been modified since this was written. Again, correct me if this is wrong.)
But the new cost calculus makes such things as portable garbage -to-fuel converters, and today's green media darling, the urine-powered fuel cell, feasible. According to this article, Ohio University's Geraldine Botte's lab is using urine to produce the equivalent of a gallon of gas for 90 cents. (Insert moderately tasteless pun here.) No. There is simply nothing I can say to top that whole scenario, except that the cost of war will fall dramatically if we find a way to turn soldier's pee into fuel at less than 1/6 the cost of gasoline.
07/07/09 2:36 PM
Regulating Oil and Onions...
The US is reportedly considering regulating "speculative" trading in the oil and gas markets, according to the New York Times. This brings to mind recent discussions on onions and a very mysterious competitive ballroom dancer accused of Wall Street espionage.
The relevant quote from the NYT about the perceived need to regulate the oil futures market is here:
While more transparency in the markets definitely seems like a great idea--and the Commodity Futures Trading Commission is hoping to make records of trades more accessible--I do wonder about discerning trader's intent and tying their hands in the markets. What if an airline decides to make money on their oil trades? The futures market trades such a small volume of paper barrels (in comparison to the full number of barrels of oil traded daily) that it functions more like an index, anyway. And what happens if Exxon, say, decides to use the futures market to hedge against currency changes? Arbitragers are another target, apparently, but we love them when they make prices lower, which they do whenever they transfer cheap oil to our hot market.
Two thoughts come to mind: First, there's been a fascinating discussion of onion futures over at Platt's. Apparently onions are the only commodity that is prohibited from being traded in a futures market. And yet! Onion futures prices are the very definition of wild gyration!
From Platts Powerline: "The average price of a hundredweight of onions in the US swung from over $50 in April of 2007 to below $5 by that December. "Indeed, they lost 96% of their value between April 2007 and March 2008, before quadrupling in the following month," said Barclays analyst Paul Horsnell." Be careful what you wish for.
Secondly: Machine trading. There's a strange case of industrial espionage out of Goldman Sachs that suggests that they've been doing a lot of trading in stock markets (explicitly) and possibly also in commodities markets. Automated trading in which computers use calculations to trigger trading, which may in turn trigger trading among other machines may be a more relevant place to poke around than trying to figure out the intention of hedge funds and other oil traders. According to Bloomberg, machines made 28 percent of stock market trades in the fourth quarter. For the implications for possible market manipulations, see this post at ZeroHedge. (Hat Tip to Salon's Andrew Leonard, who also posts video of the alleged perp's ballroom dancing.) I'm going to have to poke around to see if there are numbers on automated trades in the oil market, though I've heard anecdotally that the numbers are growing. The story is satisfyingly cloak, dagger, and mainframe, and it suggests that we need to figure out what is actually going on in the futures market before we start trying to regulate it.
The relevant quote from the NYT about the perceived need to regulate the oil futures market is here:
"Oil prices have swung wildly in the last year, hitting about $145 a barrel last summer, then plunging to $33 in December before rising to about $70.
Much of that gyration stemmed from chaos in the global financial system, as banks and much of Wall Street came perilously close to collapse last September and the global economy fell into the most severe recession in decades.
But a growing number of critics have blamed some of the extreme volatility on the role of purely financial investors -- those who are simply betting on the direction of energy prices, as opposed to those who actually use such products, like airlines."While more transparency in the markets definitely seems like a great idea--and the Commodity Futures Trading Commission is hoping to make records of trades more accessible--I do wonder about discerning trader's intent and tying their hands in the markets. What if an airline decides to make money on their oil trades? The futures market trades such a small volume of paper barrels (in comparison to the full number of barrels of oil traded daily) that it functions more like an index, anyway. And what happens if Exxon, say, decides to use the futures market to hedge against currency changes? Arbitragers are another target, apparently, but we love them when they make prices lower, which they do whenever they transfer cheap oil to our hot market.
Two thoughts come to mind: First, there's been a fascinating discussion of onion futures over at Platt's. Apparently onions are the only commodity that is prohibited from being traded in a futures market. And yet! Onion futures prices are the very definition of wild gyration!
From Platts Powerline: "The average price of a hundredweight of onions in the US swung from over $50 in April of 2007 to below $5 by that December. "Indeed, they lost 96% of their value between April 2007 and March 2008, before quadrupling in the following month," said Barclays analyst Paul Horsnell." Be careful what you wish for.
Secondly: Machine trading. There's a strange case of industrial espionage out of Goldman Sachs that suggests that they've been doing a lot of trading in stock markets (explicitly) and possibly also in commodities markets. Automated trading in which computers use calculations to trigger trading, which may in turn trigger trading among other machines may be a more relevant place to poke around than trying to figure out the intention of hedge funds and other oil traders. According to Bloomberg, machines made 28 percent of stock market trades in the fourth quarter. For the implications for possible market manipulations, see this post at ZeroHedge. (Hat Tip to Salon's Andrew Leonard, who also posts video of the alleged perp's ballroom dancing.) I'm going to have to poke around to see if there are numbers on automated trades in the oil market, though I've heard anecdotally that the numbers are growing. The story is satisfyingly cloak, dagger, and mainframe, and it suggests that we need to figure out what is actually going on in the futures market before we start trying to regulate it.
07/06/09 11:10 AM
"Free" vs. Peak Oil
I haven't read Chris Anderson's new book "Free: The Future of a Radical
Price," but I've been following the debate over Malcolm Gladwell's New
Yorker review and Anderson's response. Gladwell summarizes Anderson's
basic argument as: The digital age is exerting inexorable downward
pressure on the prices of all things "made of ideas." This revelation is not unique to Anderson. I mean, hey, it's 6:30 am and I'm blogging for free about articles I read
for free for you who will read it for free and meanwhile, my "free"
gmail account is trying to sell me a "Didgeridoo for Sleep Apnea."
But underlying this copious pile of free is a steady stream of electrons that keeps our eyes and ears hooked into the ideas beaming out of our computers, TV's, stereos, and twitter-enabled smart phones. Between 2000 and 2005 according to this pdf report by Jonathan Koomey, the amount of electricity used by servers alone doubled to account for 14 power plants world wide and $7.2 billion dollars. Is there some tension between free ideas and limited energy and natural resources? Are free ideas and Peak Oil compatible? Or do they have some strange synergy? I think so, but the unified theory of it all remains to be thought, so I'm throwing it out to you, readers. Respond freely.
The low cost of energy has underwritten much of what we accept as reality. Free shipping for buying an extra book on Amazon is a case in point. But so is the bargain price of goods made in China with subsidized fuel and cheap container transport. And so are suburban McMansions, enabled by mortgages that didn't take the cost of power into account. Long commutes in big cars were enabled by cheap gas, which seemed inconsequential until it topped $2 a gallon (and then $3 and then $4.) In the US, energy is a "right" as much as an expense, which changes its psychological price, at least.
Anderson (as quoted by Gladwell) says "From the consumer's perspective, there is a huge difference between cheap and free. Give a product away, and it can go viral. Charge a single cent for it and you're in an entirely different business.... The truth is that zero is one market and any other price is another."
So what happens as the economy of free, with its viral geometric expansions, hits the economy of not-quite-free-and-increasingly-scarce energy? It seems to me that the price of energy will increase and somewhere along the way it will loop back and start either choking the flow of these free ideas, or putting a new price on them. But in the case of oil, the price of the resource itself is determined in the sphere of necessarily free ideas and information. Because much of the information about the world oil market is open and freely available, multiple participants in the market can price the product and transfer "free" news of its price frictionlessly around the world. As the resource rises in price, and the value of news falls, there will be two tiers of information about it--free and pricey. Will the market still work if the free information becomes worthless?
And what about not-free CO2? We are at one of those watershed moments in history where we plan to reverse a million years of free CO2 emissions and start charging for something that looks like, and is, air. The grand hope is that charging for carbon will create new economies that care about limiting CO2 emissions. But limiting those emissions will require huge knowledge economies, and a lot of information, both of which need to be sustained through money. Free might not work for us there.
Obviously, this is a disorderly smorgasbord of a reaction to a book I haven't read, and I welcome your thoughts and reactions. But I have one basic reaction to the concept of "free" ideas, and that is that probably, somebody, somewhere is paying. A massive shift in technology, behavior, and pricing finds me sitting here this morning snickering at didgeridoo ads and creating free blog posts, but somewhere, a real economy of money, resources, and carbon is piling up. Somewhere, someone is mining coal, someone else is cursing the coal trucks that roll past her house every few minutes, somebody's having an asthma attack from the combo of emissions and ozone required to produce the electricity that's powering my computer and yours. And meanwhile, somebody else is looking at his sheep on the edge of the Sahel and wondering where they're going to go when the grass finally dries up. Free may be another name for a high price that's spread very far and very thin.
But underlying this copious pile of free is a steady stream of electrons that keeps our eyes and ears hooked into the ideas beaming out of our computers, TV's, stereos, and twitter-enabled smart phones. Between 2000 and 2005 according to this pdf report by Jonathan Koomey, the amount of electricity used by servers alone doubled to account for 14 power plants world wide and $7.2 billion dollars. Is there some tension between free ideas and limited energy and natural resources? Are free ideas and Peak Oil compatible? Or do they have some strange synergy? I think so, but the unified theory of it all remains to be thought, so I'm throwing it out to you, readers. Respond freely.
The low cost of energy has underwritten much of what we accept as reality. Free shipping for buying an extra book on Amazon is a case in point. But so is the bargain price of goods made in China with subsidized fuel and cheap container transport. And so are suburban McMansions, enabled by mortgages that didn't take the cost of power into account. Long commutes in big cars were enabled by cheap gas, which seemed inconsequential until it topped $2 a gallon (and then $3 and then $4.) In the US, energy is a "right" as much as an expense, which changes its psychological price, at least.
Anderson (as quoted by Gladwell) says "From the consumer's perspective, there is a huge difference between cheap and free. Give a product away, and it can go viral. Charge a single cent for it and you're in an entirely different business.... The truth is that zero is one market and any other price is another."
So what happens as the economy of free, with its viral geometric expansions, hits the economy of not-quite-free-and-increasingly-scarce energy? It seems to me that the price of energy will increase and somewhere along the way it will loop back and start either choking the flow of these free ideas, or putting a new price on them. But in the case of oil, the price of the resource itself is determined in the sphere of necessarily free ideas and information. Because much of the information about the world oil market is open and freely available, multiple participants in the market can price the product and transfer "free" news of its price frictionlessly around the world. As the resource rises in price, and the value of news falls, there will be two tiers of information about it--free and pricey. Will the market still work if the free information becomes worthless?
And what about not-free CO2? We are at one of those watershed moments in history where we plan to reverse a million years of free CO2 emissions and start charging for something that looks like, and is, air. The grand hope is that charging for carbon will create new economies that care about limiting CO2 emissions. But limiting those emissions will require huge knowledge economies, and a lot of information, both of which need to be sustained through money. Free might not work for us there.
Obviously, this is a disorderly smorgasbord of a reaction to a book I haven't read, and I welcome your thoughts and reactions. But I have one basic reaction to the concept of "free" ideas, and that is that probably, somebody, somewhere is paying. A massive shift in technology, behavior, and pricing finds me sitting here this morning snickering at didgeridoo ads and creating free blog posts, but somewhere, a real economy of money, resources, and carbon is piling up. Somewhere, someone is mining coal, someone else is cursing the coal trucks that roll past her house every few minutes, somebody's having an asthma attack from the combo of emissions and ozone required to produce the electricity that's powering my computer and yours. And meanwhile, somebody else is looking at his sheep on the edge of the Sahel and wondering where they're going to go when the grass finally dries up. Free may be another name for a high price that's spread very far and very thin.
