Thursday, October 29, 2015
The Oily Alternatives
The lower price at the pump has created grins in oh-so-many quarters. Transportation companies – shipping companies, truck drivers and airlines – are watching their bottom lines flying higher. Consumers are finding their incomes stretching a bit more after decades of real discretionary income contraction. Politicians in the West are ginning as Russian power has been eroded with a massive currency plunge and an overall reduction in their economy. Saudi and other oil-powers are shuddering as American oil independence minimizes the clout of their most obvious natural resource, but battles over oil revenues still define so much of the explosive animosity that encompasses so much of the Middle East.
Then there is the displacement in the petroleum sector in the United States itself, a fall that some believe has created a loss of over 100,000 jobs, tanking regions in the country that are substantially dependent on oil. But as oil companies withdraw from their exploration efforts in the Arctic because of costs, as expensive oil extraction efforts from oil shale are shut down until the economics make sense, the once fertile new initiatives to build and sustain alternative energy systems – from geothermal, solar, wind, etc. – have become “too expensive” to justify in the face of vastly cheaper oil. The big victim: the environment.
Funding for alternative energy has hit a big snag. “Although energy and financial experts say that the basics of the [alternative energy] business remain sound, the lofty stock prices have tumbled, leading renewable energy companies to scramble for new approaches to their businesses.
“Nowhere has the retrenchment been more acute than in a newfangled financing mechanism called a yieldco. Yieldcos, public companies conceived by renewable energy companies as a way to raise cheaper capital for project development, have attracted billions in new investments.
“The yieldcos buy and operate power plants, mainly those that their parent companies develop. The yieldcos then collect the contracted electricity fees and pay the bulk of them out as dividends. With investors hungry for stable returns, energy yieldcos were greeted with enthusiasm through initial public offerings of their stocks over the last year and a half. [In early October], though, one of the most aggressive companies in the sector called a timeout.
“SunEdison, which has bought several companies in recent months in a bid to become the world’s largest renewable energy developer, told investors it would not sell any more projects to its yieldcos, TerraForm Power and TerraForm Global, until conditions change. The company said it would trim expenses and streamline operations, including reducing project development by 20 percent, withdrawing from Britain and cutting roughly 15 percent of its work force…
“That adjustment is hardly unique to SunEdison, or even to yieldcos. Last month, NRG Energy announced that it would separate its once-heralded green enterprises — which include a home solar division and an electric vehicle charging network — into a separate company with a tight budget. It also said it would pursue a more limited strategy with its yieldco. On [October 6th], Moody’s Investors Service downgraded that company, NRG Yield, saying the 30 percent decline in its share price in recent months would inhibit its ability to raise money for new projects.” New York Times, October 11th.
Sure the alternative energy business will return at least to normal, perhaps with a vengeance, but the delay in implementing alternatives is pushing global change well beyond the breaking point. Many believe we have already crossed an irreversible tipping point in warming trends, but even those experts believe failure to take drastic and immediate action will make the problems so much worse. Worse droughts. Worse fires. Worse flooding. More storm surges and eroding coastlines.
The worst single contributor to greenhouse gasses, coal, is an industry that does not seem to have “tanked” as significantly as the oil and gas industry. Given our dependence of coal, a relatively inexpensive resource, 45% of U.S. electrical power is coal-fire generated, a number that raises to almost 80% in China. While coal plants are getting increasingly efficient, there remains no real commercially viable process that creates “clean coal,” with most “clean coal” operations doing little more than shoving the effluents into underground storage for later generations to deal with. Coal has been and needs to be on the decline to the consternation of too many conservative politicians seeking to erode the Democratic Party’s traditional hold on unionized labor, particularly in the mining industry.
Indeed, the plight of coal workers has been getting worse for almost 100 years, a great political talking point, but no one really seems to care. Unless we really do get a commercially viable clean coal process, that black “gold” needs to be relegated to simply being a resource for plastics and other comparable materials. In an October speech to coal-country (West Virginia) Democrats, former President Bill Clinton noted: “I can’t resolve all the coal issues, but I’ll tell you something else that should be done… Whatever happens, we know coal employment in America peaked in 1920. Production peaked in 1950. We know that at some pace or another, there is a trend underway that cannot be reversed. Nobody has a right to claim anybody’s life over it.” Coal miners are nothing but convenient pawns in the struggle between environmentalists and pure growth “no matter what” conservatives who want to disband the EPA and kill environmental regulations.
Even from a growth/job-creation perspective, President Clinton has long stated the protecting coal-based jobs is a wrong-headed approach. He’s believes that for every billion dollars invested in a new coal-fired plant yields 870 jobs. The same amount invested in solar creates 1,900; in wind, 3,300, if the turbines and blades are made in the country where they're put up; in big building retrofits, 7,000 in home retrofits, up to 8,000 jobs, according to the former president.
We talk a good game, but right now energy politics appears to be one giant cog in a political wheel that rolls but goes nowhere. It’s time to deal with pragmatics, accept scientific reality and, most of all, responsibility for stemming the massive damages we are doing to ourselves.
I’m Peter Dekom, and talk needs to be replaced with monumental efforts to change how we live and how we power those lives.