A trillion dollar energy overhaul

During the past few months, the federal government has given about two billion dollars to completed renewable energy projects and provided construction grants (through the Department of Energy or state energy programs) for several billion dollars more. These are impressive totals, and there is more to come. Unfortunately, the stimulus package is only making a tiny down payment on the enormous cost of overhauling our energy system.

Americans use energy in two primary forms: liquid fuels and electricity. Expensive conversion equipment allows raw energy sources such as petroleum and coal to be refined into these two forms of energy. For a variety of reasons, some of the conversion equipment we have installed over the past half-century is becoming obsolete and will have to be replaced soon--but at a staggering cost. I estimate the energy overhaul during the next two decades will cost about a trillion dollars.

Let's look at electricity first. The United States uses about 4,000,000 gigawatt-hours of electricity annually (while we're talking about trillions, when converted into electric-bill kilowatt-hours that number becomes four trillion kWh); coal-fired power plants have typically produced about half of that amount. The good news is that electricity usage dropped slightly each of the past two years, and the portion generated by coal dropped as well. The bad news is that we're going to have to start cutting back on coal-fired generation for three main reasons:

1. older plants not only waste about 70% of the energy in the coal but they also lack pollution control and are simply wearing out
2. while the United States has vast amounts of low-grade coal, we're running out of the best stuff (and the Appalachian mountains that are blasted away to get at it)
3. burning coal does more to drive climate change than any other human activity

I expect that half our coal plants will still be running twenty years from now, but we still have to replace a huge amount of equipment. Let's assume that electricity demand remains stable (not at all assured, with recession pulling one direction and electrification--primarily of transportation and heating--pulling the other); we still have to build enough power plants to supply a trillion kWh a year. Since a year consists of 8760 hours, it would take new power plants rated at more than 120 million kW to produce this much electricity. Natural gas plants are the cheapest capacity currently on the market, but building plants capable of running most of the year on renewable fuel (like wood biomass or wind) costs around $5,000 per average kilowatt. Altogether, this partial overhaul of our electricity generation system will cost over $600 billion.

Now let's look at liquid fuels. The United States uses about 200 billion gallons of gasoline and diesel each year. All of this is refined from petroleum, and we import the majority of the petroleum. As with electricity, consumption of liquid fuels has dropped slightly during the past two years, but the bad news is similar: we are going to have to cut back on petroleum refining for three reasons:

1. older refineries were designed to run on the high-quality, low-sulfur ("light sweet") crude oil that flowed from early wells; refitting them to run on the heavier oils more commonly pumped today will be so costly that some refineries will just be shut down
2. the United States imports over half its oil, sometimes from places we'd rather not see benefit from our dollars
3. transportation emissions are the second largest source of greenhouse gases (after generation of electricity).

Industry measures its production in forty-two gallon barrels per day; again, this production currently takes place at 150 refineries, billion-dollar installations with an average capacity of over 100,000 barrels per day. Liquid fuels can be produced from other carbon/hydrogen sources, ranging from natural gas to wood waste, using processes that can differ substantially from oil refining and require very specialized equipment.

Let's assume that fuel demand drops, but we still have replace almost half of the lower demand--six million barrels per day of transportation fuels and other petroleum-replacement products. The EIA graph above shows that equipment for refining crude oil is the cheaper than any alternatives--just one of the reasons why there is twenty times more oil refinery capacity than corn ethanol capacity, the next largest liquid fuel source.

The cost of equipment varies inversely with the cost of its feedstock; natural gas is quite expensive, while some biomass can be free or even better. I expect we'll even have some coal-to-liquids conversion, using the extra feedstock freed up by closing the less efficient half of the coal-fired electrical generators. The coal-to-liquids plant cost of $60,000 per barrel offers a good average between the other technologies; at this price, the partial overhaul of our liquid fuel system production system costs almost $400 billion.

So, a cool trillion dollars buys the United States an energy capacity similar to today's but cuts coal and oil consumption by half. It's not complete energy independence and many facilities still require purchased feedstocks. The most interesting question, though, is whether we can afford this trillion-dollar overhaul; the United States has burned through close to that amount of stimulus funding without having a serious impact on energy infrastructure. Is there much hope that we'll focus our efforts better in the future?

Rural green power--a conference worth attending

We at Farm Power don't attend many conferences; we don't even consider the substantial number of gatherings that charge four-digit fees to attend, and we steer clear of conferences that are thinly-disguised attempts to capitalize on green/clean as the hot topic of the moment. Fortunately, a few still pass our muster and allow for some great networking. The EPA's AgSTAR program puts on great manure-digester-focused events around the country; I attended their 2007 conference. Closer to home, Climate Solutions--an advocacy group fighting global warming--sponsors a regional convention on rural green power: Harvesting Clean Energy 2010 starts next weekend in Kennewick and looks to be worth the drive. The smaller-scale renewable-energy industry in Washington state is pretty small, so it will be good to see what's happening in more-active Oregon while catching up with friends from our corner of the green power business. I'm even contributing to two panel discussions, one on digesters and another entitled "Politics and Your Project". Registration remains open, so if you can spare a couple days to see what's happening at the intersection of agriculture and energy, I recommend Harvesting Clean Energy.

Render Unto Caesar

I send a check to the Washington State Department of Revenue yesterday; it covered the Business and Occupation (B&O) Tax we've been incurring since starting to produce electricity in August. Unlike the income tax charged by the federal government and many other states, the B&O tax is based on revenue rather than profit. The rate varies depending on the type of revenue (the chart above shows the rate for manufacturing; the rate for service businesses is much higher at 1.5%, while some types of food processors pay a rate as low as 0.138%). However, many in the business community hate this tax because it keeps on accruing right through a recession, even when losses are piling up.

A great history of Washington State taxes found here shows that we never intended to have this needs-blind tax--it was an emergency measure to raise money during the Great Depression after the state supreme court struck down a voter-approved income tax. Three-quarters of a century later, Washington remains one of a half-dozen states without an income tax (four more votes failed, most recently in 1975). The resulting reliance on property and especially sales taxes earns our state a special distinction: the most unequal tax structure in the nation.

Voters in Oregon just approved a hike in their income tax rates, but preemptive opposition immediately appeared against taking such measures here to fill the $2.6 billion state budget shortfall. So the Legislature will spend the next month struggling through more cuts, and I'll get ready to send another small check in three months--if nothing else, we at Farm Power are doing our part.

More Rexville Pictures Online

Our builder recently updated their webpage. The first part of the digester section features several photos from our project, but the Farm Power Rexville page has two dozen shots from various stages of construction and completion. One of my favorite shots is the delivery of our genset--it came halfway across the country on a truck and then moved the final one hundred feet to its resting place by crane (this was back in May 2009). Check out the rest of the Andgar website too--we hope to have another project listed there soon!

Seattle Renewable Energy Meetup

For those of you already planning for after the holidays, I'll be speaking in Seattle on Thursday evening, January 21st, at the Renewable Energy Meetup. By then Farm Power Rexville will have almost five months of operations behind it and perhaps I'll even have some more progress to report on Farm Power Lynden. I've been giving a development-themed presentation for so long that I need to redesign it to reflect the fact we're actually producing power now! I'm looking forward to other conferences and presentations in 2010, so watch this space for more information.

One gigawatt-hour

We recently produced our one millionth kilowatt-hour (kWh) of electricity. That sounds impressive compared to how much an individual home consumes (10-12,000 kWh a year), but the utility industry refers to production in terms of MWh (a thousand kWh) or GWh (a million kWh) which makes the milestone seem less imposing. Our generator is making a little bigger impact on the needs of the Puget Sound Energy Green Power program, producing a bit over one percent of all the renewable energy purchased by voluntary customers.

The New York Times published an article critical of green power programs, but one of their strengths is the ability to bring electricity usage into more human-scale terms. PSE's Green Power comes from about a dozen distinct and relatively small projects in the Northwest, while the larger utility system draws power from hundreds of often-enormous plants spread across the western U.S. and Canada. Unlike other states, Washington requires all renewable energy premiums to stay in their respective programs rather than padding utility profits. We've been very happy working with the PSE program, and we hope their customers who are familiar with us feel more connected to their electricity usage--our generator is running day and night, turning out kilowatt-hours for you!

Are cows worse than coal?

Just when the "clean coal" public-relations campaign seemed to be losing momentum, the Worldwatch Institute came out with a report blaming livestock for over half of all greenhouse-gas emissions. I can't imagine a better gift to the coal industry; the consensus has always been that burning coal is the single largest cause of warming, but now more confusion threatens to push the debate backwards.

The report makes a number of questionable claims, but one stands out: Worldwatch contends that since livestock have been domesticated, even their breathing should be counted as a human-caused emission. This ignores the reality that huge numbers of wild animals, especially methane-producing ruminants, used to roam the earth without ever registering the 25-gigaton CO2 impact ascribed to modern livestock. For example, the American buffalo population two hundred years ago likely exceeded the current population of all American dairy and beef cows combined. A report with so little concern for consistency resembles propaganda more than research.

The second half of the article reads like an extended advertisement for veggie burgers, with the implication that replacing meat with "soy analogs" could eliminate those inflated greenhouse-gas emissions. Meat has become a pretty easy target for a variety of activists and I won't try to defend it, but I do reject the claim that all animal proteins cause terrible environmental impacts relative to a vegan diet. Here are some reasons why dairy is at least as sustainable as soy:

• Production of soy protein does not use materially less land than production of dairy-farm protein; this holds true for both industrial and organic production. I encourage any reader to run the numbers--for industrial methods, both end up at about 750 pounds of usable protein per acre.
  
• Up to half of dairy cow diets typically consist of forage crops--alfalfa and grass that require minimal spraying, cultivation, and processing; in contrast, row crops like soybeans must be tilled and planted annually.
  
• American farmers produce twice as much milk with half as many cows as they kept in the 1920s. This smaller dairy population has less absolute and per-capita impact in every area.
  
• Manure in less-mechanized dairy farming is typically handled as a solid that produces little methane; farms that handle their manure as a liquid also have the ability to extract energy from that manure with an anaerobic digester--which not only destroys the methane but also can replace fossil sources of energy.
• Dairy farming provides its own fertilizer; while soybeans fix their own nitrogen, they still need regular doses of phosphorus and potassium (along with micronutrients) to stay in production.

Taking this report at face value should lead to calls to kill off our livestock while continuing to burn coal; hopefully, cooler heads will prevail and remind us that thousands of years of agriculture have fed us without cooking us.