EcoLogic Blog

Next, the fiery and riveting Department of Energy (DOE) assistant secretary Alexander “Andy” Karsner (who was in the wind power business before going to the DOE) spoke passionately about the PTC:

“Take note all you media people out there. The [Bush] administration supports the extension of the PTC. We believe the PTC should be durable, reliable, improved…unreliable policy does nothing more than stave off growth in job creation…If we’re going to use tax policy, we at least have to make it reliable and durable.

But why would the [U.S. House of Representatives] put the same legislation before the president there or four times if you know it’s going to be vetoed but then bury the PTC in it?… It’s an old trick to use veto bait during an election year. The President just wants a clean bill with the PTC! The Senate did it and was more mature about it. Why can’t the House deliver on the same thing?

We want these things to succeed and out of the basket of politics. It is not the government’s role to select electricity winners. We need neutrality of government that ensures delivery of the attributes that we seek.

That means policy that’s carbon weighted and leans to emissions-free sources.”

He went to talk about the need of natural gas and wind power to be energy partners (using natural gas as a back up to variable wind power). “We are going to need every drop of domestic natural gas and we’re going to need wind.”

He concluded:

“We are facing a new energy reality. We are in a new and unknown era where we need your leadership. Urgency is what matters. All reports say we have 10 – 15 years to cut emissions to the point needed. We’ve got the first 7 percent of the next 10 years in the last days of this administration. Even if people are taking about lame duck, it doesn’t mean government can sit back and not take action [on the PTC].”

The American Wind Energy Association’s WINDPOWER 2008 conference and expo kicked off this morning with an opening session of top-notch wind power people. The languishing production tax credit for wind (PTC) (stuck in legislation that the president promises to veto) was a big topic of discussion. In fact, chairs in the auditorium had a card on it with all members of Congress’ phone numbers.

All the speakers were very good, but one of the most interesting was Kansas Governor Kathleen Sebelius (D): She and her state have done great things for renewable energy. She talked about the struggles and successes getting there:

“Five years ago, we decided to change the fact that we were so dependent on coal. But we had a hostile regulatory environment, transmission issues and financial uncertainty. So we had to define ‘cost’ in a broader sense; when taking into account jobs, environmental and health costs, you get a very different answer than coal.

We don’t have a majority of legislators ready to embrace a renewable portfolio standard [RPS]. So I had to work on the regulatory side. We created a voluntary RPS of 10 percent by 2010 and 20 percent by 2020.

By the end of this year we’ll be at 10 percent wind in Kansas already…We’re only one of two states to have achieved this without a legislative mandate.”

Regarding the coal plants Kansas denied based on global warming concerns (a first in the nation):

“There were two new coal plants cited for Kansas. But the power wasn’t for us, it was for another state; we wouldn’t actually need to build a coal plant for a very long time.

If we opened up our doors to become a coal exporter, that would send exactly the wrong signals to developers, regulators and the public looking to Kansas for clean technologies. [Our denial of the plants] produced a firestorm. They threatened legislation mandating that the coal plants be built. But the legislature adjourned last week and all of my vetoes were sustained…We were told that without new coal plants, we wouldn’t get the transmission needed that would also help wind. A week after I vetoed, a major transmission line was announced by Warren Buffet’s company in Kansas. This myth was debunked. We’re turning a corner in the heartland.”

Some say Governor Sebelius is a vice presidential contender.

I’m in hot-hot-hot Houston, Texas for the 2008 WINDPOWER Conference and Expo (after temperature highs in the 70s in Minnesota, this 97 degree stuff is going to melt me). WINDPOWER is sponsored by the American Wind Energy Association and is the largest wind power gathering in the world - and it’s on the grow. One of the conference organizers told me last year’s Los Angeles event saw about 7,000 attendees and this year they’re expecting 12,000. Wow.

Wind power companies, developers, manufactures and others are here from all over the world: Germany, Spain and China are a few I’ve seen so far. But attendees don’t have to pour through the long list of exhibitors trying to find a relevant company: there are kiosks set up in the exhibit hall where you can enter in keywords of the type of business you’re looking for (e.g. “turbine blade manufacturer”) and the computer will give you a list of companies that fit that description and their booth number. So no wandering the aisles. Technology is great!

Tonight was the opening reception and tomorrow begins the conference learning sessions and exhibits. I’ll be liveblogging and Twittering throughout the day, and I’m scheduled to interview a few renewable energy policy movers and shakers, so stay tuned.

And if you or your company are out here, I’d love to stop by your booth - just leave a comment and let me know.

Throughout the panel discussion, I heard a lot about “the energy problem” and how hard it’s going to be to find and implement solutions. But the “problem” was never actually defined. So later on, when Paul Siegele of Chevron was generous enough to sit down with myself, Tim Hurst of Green Options and Ecopolitology, Brian Westenhaus of newenergyandfuel.com and Bonnie Hulkower of Treehugger, (that’s Tim and me with Siegele in the photo) I asked him: “What does Chevron see as the biggest energy problem? Global warming? Energy independence? Health? Finite oil supply?”

“All of the above,” he said. “I think the problem is not well defined because it’s so big and the blame is misplaced. People think we’re the ones setting oil prices, for example.”

In other words, whle oil companies should certainly be held accountable for safe, responsible business practices, it’s our job as consumers to patronize those companies and products we believe in and to responsible too. For example, while it’s nearly impossible to avoid buying gas, we can be as efficient about it as we can. The responsibility is on all of us.

So I asked Siegele how Chevron is assuring its shareholders that – with impending carbon dioxide (CO2) regulation – the company is diversifying enough to lessen the blows from any taxes or regulations on CO2. And by the way, does Chevron have a preference of a carbon tax versus a cap-and-trade system? He responded:

“Let’s step back for a minute. With any carbon regulation that may happen, we want to see China and India brought on board. The U.S. can’t solve this problem on its own. So any agreement should include everyone. Also, carbon regulation can’t disproportionately hurt one industry – it has to be fair across the board. We can’t put the economy at risk. That said, a fair cap-and-trade system would be preferable, but again there are a lot of details to be worked out. We’ve got experience with a cap-and-trade system in Europe and we’re involved in the CDM. But leadership really needs to be thoughtful and determine who pays for what.

To diversify, we’re the largest producer of geothermal energy in the world and we’re investing nearly $3 billion in the next three years in renewables like solar power and biofuels.”

API should be getting me some video clips from the event next week, so be sure to check back for those. My fellow bloggers at Green Options, newenergyandfuel.com and Treehugger are likely have their takes posted soon, as well.

Photo courtesy of API

Dr. James Sweeney, economist and director of the Precourt Institute for Energy Efficiency at Stanford, gave the closing remarks. He cautioned (much like David Victor’s comment about Silicon Valley getting “irrationally exuberant” about cleantech) that we get too excited about relatively small gains related to energy: “We’ve got to stop looking at the tiny steps we’ve made so far and thinking we’ve got a solution to the whole energy problem.” Later, when the other bloggers and I were at dinner with him and representatives from Chevron and API, he told us:

“There’s no silver bullet solution to the energy problem. There’s not even silver buckshot. We should be thinking in terms of silver birdshot!”

In other words, getting these technologies to market and scaling them up to commercial use should be the critical focus. It’s great if there’s one manufacturer out there making an efficient solar power system, but that system then needs to be on every home in American to really make a difference. And it’s got to make economic sense for the homeowner to want to put the system on their house.

There were several questions from the audience, made up of academics, venture capitalists and business folks. One of the most interesting questions was: What do you want the next president to do to address energy in their first 100 days?

Trae Vassallo from KPCB pleaded for a price on carbon dioxide to help the market start to determine the energy winners and losers. David Victor of Stanford said that even if Congress were to come to their senses tomorrow and pass sweeping energy legislation, it’d still take years to implement. This is a slow moving needle. We need massive CO2 reductions at this point. But we also need competitive prices and the ability to compete with other countries.

“The less any policy is anchored in price, the higher the risk. But a price on carbon isn’t enough just on its own. We need a portfolio of crucial technologies.

“I’m optimistic in the long-term, but in the short term - the next few decades - I’m pessimistic. You can build a coal plant in China so cheaply right now. They’re not going to change their trajectory, even if the U.S. does. At this point, we’ve committed ourselves to warming planet.”

Jackalyne Pfannenstiel, CA Energy Commission:

“The new president should not lie to people about the energy situation. The new president needs to say ‘energy prices are high. They’re going to stay high.’ Then they need to explain to people why the prices are high and why that may not be a bad thing. Let’s work with what we have and drive innovation.”

Another question from the audience: Can we really leave this huge problem up to states and municipalities to solve?

David Victor said that it’s dangerous for public policy to be based on what people think is the “next big idea” for solving the energy problem. People grasp on to a solution, think it’s the best idea and then pour money in to it. Silicon Valley acts this way and can be “irrationally exuberant” at times. There has to be a political strategy to go along with the Silicon Valley strategy. He thinks the big question is: How do we keep public policy on the right course without generating massive distortion by telling consumers what to use and how to use energy?

Jackalyne Pfannenstiel of the CA Energy Commission:

“Energy is a global problem and we need to address it globally. But you have to start somewhere. People ask me ‘Does California’s leadership really matter?’ You bet it does! We’re doing things directly applicable elsewhere. California’s policies could be adopted by other Western states. You’re going to get the regional groups working on it, which could set the model for national legislation.”

Andrew Murr of Newsweek commented:

“The Department of Energy could use a green fire lit under it. With all due respect to Chevron, it’s been too petroleum-centric in the past 7 years and we need to branch out. Renewables aren’t just something to talk about.”

Later on in the discussion, Paul Siegele of Chevron disagreed that states or the U.S. can solve this global problem on their own. China and India need to be on board for any change to take place. Different solutions around the world will not work:

“It’s a patchwork of regulations and these state-by-state regulations have increased the cost of gasoline distribution. The successful presidential candidate shouldn’t do much in the next 100 days. They should just think a lot about this problem.”

Our energy system is changing, and the panelists discussed the ways their respective businesses are strategizing for it:

Trae Vassallo of the VC firm KPCB lamented, “”Private investors are spending more than government on this issue - that’s a problem!” Forty percent of all of KPCB’s investments are going towards energy. Their “greentech” portfolio emphasizes three areas: Clean electricity, energy efficiency, and clean transportation.

“This isn’t going to be a winner-take-all energy market. There are going to be lots of solutions to the problem.”

Paul Siegele of Chevron believes we should focus on three areas: Supporting rational energy policies, expanding current supplies, and conserving natural resources:

“Global demand for oil is straining the energy system. The world’s not running out of oil, but there are accumulating risks to the ability to deliver the demand. The American public shouldn’t be asked to trade off prosperity to cut greenhouse gases or diversify the energy supply. It’s unreasonable to expect other countries to expand their access to energy for our needs when we restrict our own.”

Jackalyne Pfannenstiel of the California Energy Commission noted later in the discussion that California has kept its energy consumption flat since the 1970s, thanks to energy efficiency. And its GDP has kept up with the nation as a whole. It’s not necessarily a trade-off.

To clean up their energy system even further, California is focusing on two big strategies: Energy efficiency and renewables. CA has a law that says businesses can’t have a long-term contract (longer than five years) with coal companies because of the risk of impending carbon regulation that could skyrocket fossil fuel prices.

David Victor of Stanford said that there’s going to need to be a political strategy too, and that’s something Silicon Valley isn’t used to. We need figure out what sort of regulatory strategies need to happen in tandem with all of this innovation.

All panelists seemed to agree that energy efficiency is and should be a major focus to curb our energy use and clean up our emissions. But we still need vast amounts of energy…what should we use?

Chevron is excited about geothermal power, and they are in fact the largest producer of the power on the planet (13% of all geothermal generation, mostly in Indonesia and the Philippines where they were already drilling for oil). Siegele continued:

“We’re going to need every molecule of alternative energy. I’m not dismissing it, but if you look at the numbers of where the world is going and who’s driving the price, all of the forms of energy are going to grow. The era of findings cheap oil is over. That’s not to say there’s not an abundant supply, but it’s getting to be very costly to get it. On the other hand, a lot of these good other energy solutions have a distribution problem.”

He was quite straightforward about Chevron’s priorities. Although the company is spending nearly $3 billion in the next three years on renewables, they spend “considerably more” (as in most of their $72 billion after-tax profits) on conventional oil and gas technologies like deep oil drilling and oil shale development.

David Victor of Stanford noted that energy markets are going to get “very interesting” when liquid fuels and electricity fuels like coal start competing with each other. For example, right now liquids are used in transportation fuels and coal makes electricity. Crossing those resources between the markets is something we haven’t done before.

“But the real test of new energy technologies,” he continued, “will be when the price of oil comes down. Can biofuels or more efficient vehicles survive then?”

Jackalyne Pfannenstiel, chair of the California Energy Commission, is concerned about the current focus on high gas prices.

“When this happened in the 1970s and 1908s, people waited it out. If we do that again, we’re not going to take advantage of the opportunities in front of us! I want to hear that investors are taking advantage of this. We can’t hold our breath while prices are high and then go back to exactly what we were doing before. There’s got to be real change.”

But the general consensus on the panel seemed to be that we’re not moving fast enough on renewables to make them a significant market share. Therefore, fossil fuels are going to be our future (85% of our energy, one panelist said, until at least 2030).

Pfannenstiel did point out that although California won’t make its 20% renewables goal by 2010, it will probably hit it in 2011 and 2012. Governor Schwarzenegger wants to make renewables 33% of the energy system by 2020. Pfannenstiel thinks that’s actually going to be easier than the first target of 20% because the infrastructure (transmission, for example) will already be in place.

“And this drive for renewables is driving other technological innovations,” she explained. California’s publicly owned utilities are installing new “smart meters” on homes that will give homeowners huge amounts of information on how they use their energy, when they use it and what appliances, machines, etc in their home use the most. This is leading other technologies like big in-home displays for the information, smart grids, etc. We’re driving new technology with this new information.

Early on in the discussion on energy, the moderator, David Jefferson of Newsweek, profiled himself: He uses efficient compact fluorescent lightbulbs, but not consistently. He cares about polar bears, but cranks the air conditioner. He telecommutes, but he does it so he can work from home in sweatpants, not because he saves gas from not driving his car.

In a lot of ways, he’s just like the rest of us.

This broad but shallow care for the earth/energy/ begs the question: Instead of asking ourselves, “How can we influence consumers to make smarter energy choices?” instead of “How do we force consumers to make smarter energy choices?”

Most of the panelists agreed that people are concerned about green but don’t want to change radically. To be green has to be easy. Trae Vallasso of the venture capitalist firm Kleiner Perkins Caufield and Byers said that it shouldn’t be about changing behavior, but about finding better business opportunities. Money in the pocket - or money taken out of the pocket - will influence consumers’ behavior.

That’s why efficiency may be the best route to curbing energy use; not a silver bullet of course, but it is the cheapest, fastest, most efficient way to cut our energy use. It’s a major investment area for Kliener Perkins, Chevron is constantly looking for new ways to make operations more efficient, and Californians live the most energy efficiently of anyone in the nation. We know it works, it saves money, emissions and time, and it’s being done right now. As Paul Siegele of Chevron agreed: “The cheapest barrel of oil is the one you don’t use.”

Venture Capitalists are really excited about the energy technologies and are putting more and more money into three main areas: renewables, energy efficiency and transportation.

Trae Vassallo made a comment that struck me: Energy industry has been around a long time with little innovation.” There has been a lot of movement from the Goldman Sachs of the world and others, and investors are excited about that.

From a communications point of view, I think there’s also a lot of excitement about energy solutions because of the breadth of issues the topic touches: energy independence, global warming national security, clean air, healthy people, etc. People can wrap their minds around it, understand how it touches so many facets of our lives and the wealth of solutions.