Keeping Alternate Energy In Perspective

As you consider alternative energy (solar and wind, in particular) keep their relative sizes in mind.

Solar is currently 1% of 7% of US energy sources. Wind is currently 5% of 7% of energy sources.

While those sources may grow tremendously, and while some of the companies in the space may do very well, the nation will have to invest heavily in more traditional energy sources in the short-term to make a significant difference in supply and prices.

Alternative energy may be our future, but our immediate solutions must come from traditional energy sources and/or conservation.

There may well be more profit potential in clean coal investments or coal liquefaction or coal gasification, for example, that in wind or solar over the short-term.

This situation may be useful in making choices between ETFs such as:

• solar (TAN)
• wind (FAN)
• nuclear (NLR)
• coal (KOL)
• oil (USO)
• gas (UNG)

The chart above is what the US Dept of Energy, Energy Information Agency says about current energy sources.

 

Comments

[David Lentz]

I think you miss the point entirely when considering the amount of energy produced from green sources. While petroleum is by far the largest source of energy today, it is also the most painful, and the one that consumers most desire to avoid. Only those with an extremely short investment horizon, or a very nimble portfolio, invest in oil. The same applies to coal, natural gas, and nuclear -- with the scale of undesirable attributes diminishing in each of those. Solar, wind, and other renewable energy sources offer the (distant) promise of large amounts of energy with a low or diminishing cost, whereas the traditional energy sources all have increasing costs.

And the markets have responded accordingly. If one looks at the growth rate in megawatts of installed solar capacity, it is approaching a near-vertical slope, with no shake-out in the markets yet, ANY producer can sell all the product they can make. Wind power has a considerably higher unit cost (for generation units), but that too is being built out at a very rapid clip. One does not need to see T. Boone Pickens plunking down $2B to invest in wind farms to know it is a big deal -- just go out and drive across the country, you cannot avoid seeing huge wind generation installations going up all over. There is still a lot of space that is excellent to install windmills, and we really have not even begun yet to do offshore wind power in this country.

My point is that the very narrow slices of your energy production pie chart is where all the growth is occurring. This is both a good thing (there is great potential for gains) and a bad thing (investment prices have been bid up so high as to raise the risk to nosebleed territory).

At this point, green energy is more of a candidate for Seeking Beta than Seeking Alpha, but (apparently) there's still a lot of "alpha" to be had.

I'm not sure where you were going with the chart of national energy consumption per unit GDP -- perhaps a chart showing the national trends over time (with lines for each nation listed) would indicate growth markets for "conservation memes" or "green memes", but a single point in time perspective (and 2004 may as well be 1904 with the rate of change in the energy sector) shows very little. Too many things can account for the relative ranking of nations in their energy consumption for a single view to make sense of them.

[Jim Kingsdale]

First, the problem is not where energy comes from. The problem is that we use petroleum to power transportation and we much transition that to electicity.

Second, the greatest new source of savings in electricity in the short term is conservation. For example, if we changed out all the light bulbs to CFL's or, better, LED's (which are not quite here yet on a competitive price basis but soon will be), we could save about 15% of all the electricity now used. That is huge.

Third, it's been estimated that we could power some 80% of cars with electricity just by using hybrid efficiencies and, more important, by refueling during nightime off-peak load periods when there is plenty of spare electrical capacity.

The focus on sources of energy is not getting us anywhere. We need to focus on transforming our transportation system to electricity. In my humble opinion, of course.

[paulk8756]

Now how is petroleum "painful"? This could only be so if you are putting your politics ahead of you common sense. Without oil we could not have built our economy or won two world wars.

Let' me tell you what's going to be really painful. The permanent economic downturn and the reduction in our standard of living if we don't find more oil and build nuclear plants.

But you won''t have to wait long, it's already begun.

[paulk8756]

For those of you too young (...I don't know if you qualify, I hope you do) to know what a serious economic downturn is like, you're now witnessing the beginning of one. I can tell you it's not going to be pretty going on from here.

We have the natural resources in this country to begin to work our way out of this mess, thank God. We also have the technological prowess to develop new and alternative sources of energy. We need to do it ALL while there's still time left to save ourselves.

I doubt I'm going to change your mind, though, so do this much. Copy this post and read it again when we're broke because we sent another few trillion dollars of our money overseas and your lights go off.

[CaptBob]

Just the definition of the word renewable tells you it will be 100% of the chart someday.
The only variable is time. Do we want to transition gradually in replacing each of the finite sources before they arrive at the "Crisis" stage oil is today, or twiddle our thumbs and hold hearings till we're at crash and burn when the clock runs out on each??.

[David Lentz]

Amen.

[ART005]

Thank you for the pie chart. Nice to see all that info in one place.

There seem to be two concepts that overlap and cause a little confusion when it isn't clear which is being addressed. Balancing energy requirements vs. energy investment opportunities.

I'm not convinced solar PV is economical so I don't follow that industry much. When they get to $1/watt then future build out will be productive. I'm afraid at $5/watt the industry is going backwards as far as adding value to the world. I'm all for subsidized research towards $1/watt but subsidized installation at $5/watt doesn't sit well with me.

Solar heat (hot water, home heating) on the other hand is below $1/watt.

Wind is at or below $1/watt. Current world wind energy output is around 32K equivalent Bbl/day. At an impressive 25% annual increase it is adding additional 8K equivalent bbl/day annually to world energy supply. But the world doesn't even respond to Saudi Arabi offering 200K Bbl/day. I think the ongoing world growth rate of just oil demand is on the order of 1 million Bbl/day/year. For total world energy then, using the pie chart, about 2.5 million equivalent Bbl/day/year increase.

My point is that every little productive contribution is important but as the author suggests, the small parts of the pie can not be improved enough to carry the struggling bigger parts (oil) in the short run. Coal and nuclear are big parts that can be ramped up.

Conservation on the order of 10% would be huge, moving some energy requirements from oil to electric (coal, nuclear) via the transportation sector as suggested is another big low hanging fruit opportunity. Geothermal ground source heat pumps are another productive transfer of energy load from gas/oil to electric.

So bigger growth investment opportunities might be in the fashionable alternative energies but the world's energy balance is going to have to come from higher energy density options with large input supplies (coal, nuclear.) Don't forget that oil as a chemical feedstock is very valuable so burning it all up and then converting to alternative energies isn't an option even it was possible.

The excessivley supportive alternative energy camp needs to realize that while improvements in their camp our valuable, proposing no expansion of coal and nuclear is a death sentance!!

[nakedjaybird]

This is the energy chart we should be examining:

static.seekingalpha.co...

Here we can see that almost 60% of all that oil, gas, and coal is absolutely waste. That's right, only 40% of the author's beautiful chart actually turns into useable energy.

That being the case, capturing and converting any free solar and wind energy at whatever conversion efficiency looks mighty inviting.

That's right, if today we capture and convert only 20% of the sun's free solar energy as Photovoltaic, it immediately becomes 100% useable with nowhere near the mess and complications of oil, gas, coal, and all their supporting spiderwebed complex industries.

And, if you want to say we are going to lose some 1/5th of that free solar photovoltaic energy in transmission and distribution, fine: that still makes 16% of what we capture 100% useable and free......... duh!!.

I vote for a no-holds-barred, "time-is-of-the-e... Manhattan Project/Moon Program on solar photovoltaic to produce the electricity needed that will essentially eliminate all the hydrocarbon consumption in moving goods and people around the USA; and do it within 10 years - as quickly as we could bring any new oil source to use.

All we need is good leadership and sand for the silicon and glass. That's the supply side.


For the use side, we need to electrify the rails (get rid of the diesel) and electrify the interstate hiways/biways/beltways and push hybrids. Things we are already capable of doing - as simple as building a fence (ya right!!).

Are some of you getting tired of hearing me? Good. I heard enough about the other sides of the arguments for 40 years. Maybe someone with vision and might will hear me and do what I say to make me go away. And then, we all have won.

You know what - I'll bet Obama and some of the Democratic and Republican people could go for this program. The Republicans and Democrats in Congress and the big oil and auto majority certainly have not. Well, if they wanted to, they were just not the little red engine, were they.

Here you go Dems. Run with it.

[Richard Shaw]

Nice discussion going. To be clear, I was not addressing any social policy regarding energy, nor was I recommending for or against investing in alternative or traditional energy. My only point was to provide the pie chart for people to have in the back of their minds as one of many facts they consider when they decide where and how to invest. I did predict that right or wrong, good or bad, more money will likely flow through additional investments of one sort of the other in the traditional area as opposed to the alternative area, merely because of the relative size of each -- ergo the pie chart. I express no opinion about which investment will fare better and no moral, political, or social value in presenting the pie chart -- it is pure information without conclusion or affiliation with any particular point of view.

[nakedjaybird]

Sorry, this is the "time-is-of-the-e... energy chart to examine:

static.seekingalpha.co...

[nakedjaybird]

Wonder why this doesn't work:

"time-is-of-the-e... chart:


static.seekingalpha.co...

this time?

[nakedjaybird]

ok..


static.seekingalpha.co...

static.seekingalpha.co...

There.

[fran]

MR. SHAW--

it was clear to me--keep the invested capital where majority of returns are available

--don't be overwhelmed by renewable hype; don't ignore renewables for the loooooong run.

the graphical illustration replaces the 1000 words.


how can one miss all that?

[Richard Shaw]

nakejaybird -- that is an interesting chart. it shows a large loss of energy due to distribution -- I knew that years ago, but had forgotten about it. maybe there is nothing that can be done there, but I wonder why that huge inefficiency isn't being addressed at some level in the national conservation and efficiency discussion. my understanding is that it is related in substantial part to the length of transmission distances.

[ART005]

nakedjaybird,
The pie chart is probably of energy output not input as you are referring to mentioning efficiency. Burning material to make electricity runs into about 40% efficiency limit due to exit temperatures of combustion products and slippage turning generators among other things. 40% efficiency doesn't imply wasteful, it's a thermodynamic limitation.

Energy efficiency and economic efficiency are not the same. Ultimitely the world runs on economic efficiency. Basically cost of inputs vs. value of outputs. For instance, a geothermal power plant (not geothermal ground source heat pump menitoned above) operates at only 15% efficiency but provides some of the cheapest power the world uses, lucky for Greenland.

PV Solar is not economically efficient. I'm not an electrical engineer or physicist so I can't comment on the likelyhood of overcoming their 15% energy efficiency. If they are at $5/watt right now they need to double energy efficiency and halve manufacturing cost at the same time and even then still above $1/watt.

The energy of the sun is rated at 1kw/m^2 on the earth. The average person would be comfortable with 50 kw*hr/day (Everything personl: HVAC, hot water, elec., daily transportation. Nothing industrial or commercial) so you're right that each person only needs about 500 ft^2 of earth to meet their personal needs at 100% capture efficiency. Remember that PV is only 15% efficient so this project needs 3300 ft^2. My south racing roof is 850 ft^2 so I'm only 1/4 there. That PV installation would cost $250,000. At 6% cost of capital not even accounting for the limited 25 year life (with decaying performance into those years) that is $1250/mo which is more than 6 times the value of the electricity! That is the magic of $1/watt, the break even point for energy generation. Plus I haven't accounted for cloudy days and such.

PV is not just suffering from economy of scale. A huge amount of electricity goes into processing the "sand". If you ever get a chance to tour a PV factory you'll notice the large electric substation right outside the building. So PV manufacturing costs are closely related to energy costs, they go up together.

So watch for $1/watt or lower Alternative Energy options: car pooling, driving 65 mph max, biking, CFL lights, other conservation, electric transportation, solar heat/hotwater, wind turbines, geothermal heat pumps, nuclear, coal, hydroelectric. Probably virgin Biodiesel, deffinitely WVO to Biodiesel, probably not ethanol.

I would like to hear from someone that knows the delivered cost of nuclear power $/watt infastructure cost. My contribution is that at $60/lb for Uranium the equivalent cost of oil is $3300/bbl. My daily usuage study of 50 KW*hr/person/day results in 1.1 lbs/year/person of Uranium!! $66/year fuel costs!! Of course delivered energy costs have to account for the power plant ammoritization and waste storage. Remember Europe is running some 70% nuclear to U.S. 10%, maybe a significant cost disadvantage going forward.

[ART005]

The solar PV analyses forgot to account for ~50% darkness each day so the return is twice as bad.

[nakedjaybird]

Richard - regarding the waste:

The electrical generation process is only 35%ish effecient in converting coal, oil or gas (without co-generation which uses the lower grade steam for process uses [or district steam heating of homes in European cities nearby the power plants] and then the total conversion efficiency increases to 65%ish: but we still lose 35% of the BTU's in oil, coal or gas, whatever we do because of all the ineffeciencies of coversion - ie., burning it to make it useful; and by the way, liquifaction, gasification, LPG's, etc., only further reduce the available useable energy if we then burn them; hydrocarbons should be used for products only, and those we cannot make with biofuel (until, if ever, we really need to use coal, oil and gas). Sorry for the diversion; back to the subject.

The above energy losses are already "paid for" or do not occur when we convert to sunlight to solar PV.

And, I believe, that transmission and distribution losses do not make up all that waste - as the chart shows it; one could be misled by the label to thinking the waste is due to distribution. Don't know what the T&D losses amount to, but that's why we use high voltage tranmission for minimizing I2R heating losses, etc..; transformers lose much of the energy, and of course, we could have built amorphous metal transformers starting 40 years ago and eliminated most of the existing transformer core losses. Manufacture and replacement of existing transformers was/is not going to happen until they treat transformers like the old mercury vapor lamps; replace them with high pressure sodium lamps, and then again with low pressure sodium, which is why the US cities are yellow at night.

As for all the waste energy from oil and gas in transportation, it goes out the tailpipe or radiator as many others have pointed out. Using that fact, if we consume 26 Quads of oil and gas for transportaion and 21 Quads are waste, then we only really need 5 Quads from solar PV to do all the transporting. So starting off with solar PV, we need only 20% of the current btu consumption to power electrified transportation: go figure!

So we could do it with 1/5 the resourses, or 1/5 the time - take your pick; and eliminate coal, gas and oil exploration, drilling, extraction, processing, transportaion, cleanup, all the supporting industries, etc., etc. And retrain everyone to install electrified railways and interstate highways, etc, for hybrids and steel-wheeled rail ferries, etc.

Responsible big oil, etc., and decent politicians should lead this. Some are very capable.

Thanks for your reponse.

[nakedjaybird]

Yes, solar occurs around the clock, 24/7/365 on earth. If you happen to be in one place and it's nightime, you're in trouble if you want to use some energy. I think we can solve that problem.

Wind blows day and night. Waves move day and night. Tides, well they go both ways: hmmmm, interesting. And then there are numerous ways to store energy including water for hydro, giant capacitors, etc. Of course, we should push geothermal too, which is around the clock, and free, but more problems with maintenance, life, etc.

Now, here's a pregnant thought: why not go a step beyond renewable: make it REPRODUCABLE renewable. How? Put in place a solar PV farm adjacent to a solar PV silicon processing plant to make the silicon for free and immediately (contrary to the coal, oil and gas story [reality!!]--- hmmmmm. That reminds me of the story of God telling Darwin to go get his own dirt).

Anyhow, think REPRODUCEABLE RENEWABLE. That can't be beat short of a real perpetual motion machine.

Peace.

[nakedjaybird]

Richard - I took another look at the use-chart I mentioned which I can't reproduce on this site.

If you would do so, you can also see that we are already generating, transmitting and distributing 12 quads of electricity to residential, industrial and transportation end users. So, we already have solved a 12 Quad electrical distribution infrastructure issue. Now all we need to do is beef it up for an additional 5 Quads to handle the useful energy demand for ALL transportation (ground only, folks). AND NOT CONSUME 26 QUADS OF OIL .......DUH!!!!!!!!!!!!...

So, you solar PV guys, how much acreage in each sunbelt state do we need to produce 5-6 Quads of solar PV, worst case, at todays 15-20% conversion efficiency? Oh, and add enough to that to make the silicon, and while were at it add to also find and move the sand. Don't bother with new ground moving equipment, "steam" shovels, etc., we will have enough to last plenty of years when we stop mining coal, oil, etc.

[nakedjaybird]

Sorry, in order to stop mining coal for electrical power generation we will need an additional say 10 quads of solar PV. So, that makes a total of 15 quads of solar to not use oil, gas and coal in the US. That's max. And gets reduced where wind, solar thermal, tidal, hydro-extra, geo, etc., contribute.

[nakedjaybird]

Oh yes, and nuclear. It's not going away; the objectors are.

[ART005]

nakedjaybird,
I appreciate your enthusiam but you are just brushing past the PV capital cost issue. I took some time to check my work and dig a little deeper. I would sure like to see different energy sector experts comment on the numbers. I'll try to be more concise:

Construction and delivered energy costs of some energy methods:
PV: $7/W but 35% sunlight = $21/W, $??/kw*hr
Nuclear: $5.5/W, $0.06/kw*hr
Wind: $2/W but 35% wind = $6/W, $0.10/kw*hr
Coal: $4/W, $0.06/kw*hr
Nat. Gas: $4/W, $0.05/kw*hr

I wouldn't read precise accuracy into the numbers colleced but they came from pretty comparable sources. And it seems odd to me wind is at $0.1/kw*hr with similar $6/kw to coal and gas and no input costs but that's what I found.

The point is that unfortunately PV is off the chart to the high side and I couldn't find an estimate of PV $??/kw*hr.

Wind status:
Current U.S. (from pie chart): equiv. of 170K bbl/day, increasing annually at 42K bbl/day/yr.
Current World: equiv. 463K bbl/day increasing at 115K bbl/day/yr.
I think the wind numbers are on the cusp of being significant in terms of bbl/day oil equivalents for world energy balance.

I think your theme is right but the focus on PV is too early and I wouldn't be surprised if PV is always just beyond economic reach (it would be good to hear from transistor chip people.) Wind and conservation (includes conversion to more efficient utilization, i.e. electric transportation and things like ground source heat pumps) will answer your vision with the gaps provided by more dense energy supplies. I think nuclear needs to be high on the high density list because of how it will ease demand of other stressed inputs (oil/gas.) without the emissions of coal. Also nuclear has the lowest percent of input cost/delivered cost so going forware for 10s of years Nuclear is the least susceptible to rising fuel costs plus it has the least competing competition for its fuel supply.

Solar can still play an important part via direct heat of homes and water. Ever improving solar concentrators are helping bring costs down. Solar water heaters are already cost effective at around $0.25 - $0.5/watt and then accounting for 35% sunlight = $1.1/watt. That tops the list and addresses the distribution losses you've mentioned.

As an example my solar water heater is 70% efficient and costs about 50% as much per sq. foot as a PV panel that is typically 15% efficient. So total improved efficiency is 9 times more efficient/$ than PV! Every place you see a PV, there is 900% more justification to install direct heat panel up to the usuable amount of heat.

Regarding my earlier nuclear fuel cost estimate. I tried to be careful keeping a constant basis of unenriched uranium. That's the level I'm most familiar with. Enriched uranium has about 10 times the energy and 4 times the cost, hence the motivation for enrichment. The $/person/yr energy cost is kind of meaningless since fuel is around 10% the cost of delivered nuclear energy. But the mass/person/yr might help some people visualize the waste issue. Coal, natural gas emmissions are 1000s of times more.

Also encouraging is how close to this path we are on. Right now I was told there is a 4 year lead time for delivery of commercial wind turbines due to sold out capacity. Plug in Hybrids are less than a year away. Electric bikes and scooters are already on the road. Permits for Nuclear plants are in the works. The Uranium mining industry is ramping up as fast as they can.

Improvements needed: Bring wind turbine lead time down to 2 years or what ever sight improvement schedule is. Facilitate faster permitting of Nuclear (probably the biggest issue.) Educate consumers on benefit of solar hot water, geothermal ground source heat pumps, electric transportation including plug in hybrids, and general conservation methods. And through it all I hope PV makes more progress.

[starkoski]

I agree with your article and remember that it takes a hell of a lot of oil, coal, nat gas & nuclear energy to make any alternative energy system. Try building a solar pannel without oil - good luck. Now of course our goal must be renewable energy because all the others are non renewable and will end relatively soon. I have 7 solar systems on my house and I am the biggest supporter of alternate energy - but there is not one alternate energy system or combination that can make up for the amount of energy that we get from fossil fuels. I am also a big investor in alternate energy stocks and all energy companies including oil, nat gas nuclear & coal. Also remember that fossil fuels also make up the building blocks of everything manufactured including aspirin.

[Humblemaster]

there is only one long term alternative and it is perfect. Algae. This story is so compelling anyone who researches it will see it's the answer. Consider biofuel yeild now of one acre now: 18 barrels from corn; 650 from palm; min 2500 (now) to max of 10 to 30 k from algae. It grows in the desert. with saltwater. or sewage. It needs sunlight and CO2, and delivers oxygen. it solves the Co2 problem, the food for fuel problem, the yield problem, and the land problem.

If you are skeptical look at the members of the new consortium:
algalbiomass.org/docum...

We have a way out if we start NOW.

[Think-About-It]

ART005,
Thank you for taking the time/effort to articulate your well thought-out ideas & information... it more than makes up for the time I waste reading half-baked crap.

[ART005]

Humblemaster,
Nice post. I was at a multiday biodiesel seminar in March. The presenters commented on Algae. They said there was a problem getting the oil isolated for the esterification process. Do you know what the status of that is? I didn't realize different algaes were being cultured specific to the target fuel: diesel, jet fuel and such.

[apeakay]

The above comments have to be the most educated, polite, enjoyable to read, and non-bashing I've read anywhere on the Web. Why can't we get all the people who are needed to make this energy overhaul get going together and speak to each other in these civilized tones to finally accomplish something good?

[DMX]

Good posts, however to be more accurate the cost/KWh figures posted above should be split in non-recurring and recurring costs. Lumping those two costs in one category is pretty much useless.

PV has a large initial cost, but very low recurring cost. From an investment standpoint if you put money into a small PV system you can already expect more return per year than you're going to get from most stocks or low risk investments.

Considering the low recurring costs of PV and the already high and rapidly increasing ROI, there will soon come a point where the ROI of PV solar will reach a tipping point where it return-risk profile beats all other options, causing a crazed rush of investment $ that will send the PV market up faster than dotcom stocks in the late 90s or housing before '06.

A subtlety here is that PV enables simple small scale distributed power generation (not the case for most energy alternatives), which coincidentally is most efficient when energy demand is the highest (hot days when everyone A/C is on).

PV may be a year or two away from exploding but when it goes up it's going big.

[Ty Ritterr]

I am a small, individual investor, interested in the potential of various alternative energy sources. My understanding is that -- even after some fifteen years of heavy experimentation with coal refinement (into green fuels) and recapture or "scrubbing" technologies, no cost-competitive way has yet been found for coal.

Even the statistics of the U.S. Dept. of energy are behind the times on the AMOUNT of natural gas RECENTLY found available from gas shales, such as the Haynesville Shale. At that depth, I am told the cost per well would be about 1.7 million. I desire (and do not have) information as to whether natural gas from such a shale can be used to power motor vehicles AS IS or, if it costs to refine a certain gas, or combination FROM the gas as it leaves the well head. Also, I would love to know at what pressure liquifaction of the resulting fuel gas would take place at temperatures in which retail suppliers and automobiles would operate. If anyone has such details, I would like to create a
special email box to receive that kind of data. Please understand I am NOT an engineer, but am not naive on subjects of physics, chemistry, etc., either. Comments on these cost issues here would be enormously appreciated. Thanks