Renewables and Smart Grid – MIT speaks out
Last week, I attended a BofA/Merrill Lynch Cleantech Seminar, featuring presentations by MIT professors on Global Warming, Solar, Wind, Smart Grid, and Storage. While an academic setting might appear to be inappropriate for practical, nearer term, investors, some views were startling:
1) Without judging the conclusions, the attention to detail of the IPCC Global Warming model is scary – the commission even estimated the effect of reduced winds (and, presumably, cooling/evaporation trends) by the blockage of air flows by even a modest mix of wind mills, placed appropriately around the world. The model estimates the odds of higher temperatures under specific CO2 concentrations, using backtesting from historical data. No, it’s not going to convince anyone who believes that CO2 and human activity are not linked, but, for instance, if the model is anywhere near accurate, there is an 80% chance of 2 degrees higher temperatures, even with effort, and a 4-6 degree rise if we do nothing. Post a ‘one in four thousand’ failure in the deepwater GOM, are these good odds? Just asking. The MIT assessment is that the cost of stability is about 2% of global GDP over a ten year timeframe. Short term expensive, long term cheap?
2) MIT believes the future of wind is offshore, and has, nearly in hand, a design, using offshore platform technology, which can deliver electricity at a third of the price of the recently approved Cape Wind project.
3) The search for better solar economics focuses on maximizing ‘watts/square foot’ using multiple materials (to optimize light absorption characteristics) and, secondarily, manufacturing efficiency. It is important to note that, within five years, upwards of 80% of the cost of solar will not be the PV but the balance of system/installation costs, hence the focus on power generation per area installed.
4) The professor (John Kassakian, my senior tutor from undergrad days!) presenting on ‘smart grid’ is a director of the New England ISO, charged with managing the regional transmission infrastructure. He believes that demand response and other ‘smart grid’ applications will be useful for commercial/industrial applications, but are a near complete waste of money for residential America, where updated appliances are, by far, the best hope for energy savings. He is also extremely skeptical that the current distribution infrastructure (trunk to the outlet) can survive an all electric car market, where the average energy required to charge a GM Volt overnight is half the capacity of the average residence (and the idea of using car batteries to time shift residential power is ‘insanity’). The Obama goal for electric cars ‘in the market place’ is twice the high end estimates of the most optimistic US government agency (National Research Council). Kassakian believes that an optimized grid is likely to lead to an increase in average CO2 emissions by the industry, possibly (my guess) due to higher base load levels as peak demand shifts to overnight consumption patterns.
5) Lastly, the combined view of grid and storage experts is that hybrid and plug in hybrid vehicles can work, since the battery size/cost offers a reasonable payback. However, the cost and other issues behind the all-electric car do not make sense in the current grid. Nor are claimed miles/charge necessarily accurate, with variation as great as 3x versus advertised capabilities, due to driving requirements. All in all, a fascinating day of ‘cold water’ for ‘renewables uber alles’ fans.
Last Point – Solar is Economic in Massachusetts, but Hurry Up!!
Of course, along the lines of “if you tax something you get less of it,” and if you subsidize something, you use/get more of it,” I am pleased to announce that, as of mid August, our home on Cape Cod will be 90% off grid, thanks to all forms of subsidy (hey, why should Iran and Saudi have all the fun) from Good Old Uncle Sam and the Honorable Governor Patrick. Yes, I estimate a 14% return on investment, using discounted cash flows, not including the new roof I needed anyway. Hurry up, though, as at least one of four different Massachusetts subsidies may disappear next year.