I didn’t have to wait long for confirmation on my thesis of last week: "How to Profit from Energy Illiteracy."
Two new energy technologies were widely and breathlessly lauded in the media since then, both of which set my bullshit detector to clanging loudly.
The first was about a new type of insulated heater cable that could be used for in situ retorting of oil from the "vast" oil shale deposits of the American West, which hold "three times as much crude oil as the whole of Saudi Arabia."
All of the articles I found gushed about the potential of unlocking this hidden treasure by heating the rock underground to turn it into liquid crude, a less destructive method than surface mining. A few attempted to explain that the source rock contains not crude but kerogen, a solid, low-grade, high-ash precursor to oil, which must be heated to turn it into an upgraded form of synthetic crude. Essentially, the process attempts to do what nature did when it made crude oil, only in a much accelerated way.
None of the articles said anything however about the potential net energy of the process, its actual scale, its flow rate, or how long it might take to scale. That is, none of them said anything about anything that actually matters.
Here’s the real deal on oil shale.
After four decades and five major fully authorized, commercial, even subsidized attempts to develop oil shale into a usable liquid fuel, no one has ever been able to make it economically feasible.
The nearest thing to a serious oil shale project in the country is a small, football field sized pilot project in northwest Colorado operated by Shell. Their plan is to drill several hundred holes into the rock, into which the heating elements are inserted. They will heat up the "pay zone" of hydrocarbons, which is often buried 2000-4000 feet deep, to temperatures up to 700 degrees F, and keep it there for three to four years in order to cook the kerogen into a liquid.
Obviously, that takes a great deal of energy input, but there’s more. In order to keep the heated zone from leaking oil into the surrounding water table, a "freeze wall" is built around it, which will freeze the ground with giant chillers!
The net energy of this process isn’t yet known (and the estimates provided so far are highly questionable), but it’s so energy-intensive that I am intensely skeptical of the technology ever producing more than a long-lived trickle of extremely expensive synthetic oil. A path to American energy independence it will never be.
ASPO’s Randy Udall puts it this way: "Suppose you owned $100 million dollars, but the bank would only allow you to withdraw $100,000/year. You would be rich…sort of."
But boy, those sure are some sexy cables, huh, you techno-utopians?
The Space Based Solar Fantasy
The second story that got my blood boiling was on so-called space based solar power (SBSP).
The excitement was over a report that the California utility PG&E had sought permission from state regulators to sign a 15-year contract with California based Solaren Corp. to purchase up to 200 megawatts of solar power (850 gigwatt-hours in the first year) that would be collected in space and beamed to earth.
Again, the press gushed about the "next frontier" of solar power, which would collect power "24 hours a day" from the far brighter solar radiation available above earth’s atmosphere from a low-orbit solar satellite 240 times bigger than the International Space Station. The energy would be transmitted to a receiver based in Fresno, California via microwave or radio waves (reports differed).
To my dismay, even the Wall Street Journal got into the SBSP act, albeit with a few allusions to the unknowns of the deal.
Let’s take a look at a few of those unknowns.
First, Solaren hasn’t even determined what sort of solar cells the project would use, yet the company asserted that it is sure the project will be economically viable.
Second, according to chief executive Gary Spirnak, the company is seeking funding "in the billions of dollars" just to develop the design and launch a pilot project. Neither Solaren nor PG&E has disclosed the expected cost of the project nor the terms of the power production contract.
To get an idea of what kind of bang for the buck SBSP might deliver, the Journal quoted a Pentagon report estimating that a 10 megawatt pilot satellite would run about $10 billion, or about $1 million per kilowatt of capacity.
By comparison, an off-the-shelf solar photovoltaic (PV) system for the home runs about $8,850 per kilowatt, for a commercial system about $6,720 per kilowatt, and for an industrial sized system, about $4,850 per kilowatt (source). Even after quadrupling those costs to account for the fact that PV systems generally produce power for only about 6 hours a day, it’s still a tiny, tiny fraction of the cost of SBSP, and uses technology that is in commercially operation today, not fantasy technology of the future.
A more apt comparison would be concentrating solar power (CSP) plants, which are utility-scale systems that can run 24 hours a day with internal heat-storage technology. These plants generate power for $3,000 to $3,500 per kilowatt and likewise use current, commercially available technology (source). At 11 to 12 cents per kilowatt-hour (kWh) of production today, on its way to 7 cents per kWh for next generation plants, CSP systems will soon be economically competitive with coal-fired and nuclear electrical generation.
Why would anyone be interested in space-based solar power when commercial utility scale solar technology on the ground today costs 0.3% of its price?
Wild Claims And Hard Realities
Then there are all the other niggling questions about how exactly the power transmission to earth works without, for example, inadvertently frying a plane that happened across its path, or running the risk of destruction on the ground should anything go awry with the system.
Or how the company is so confident that we can deploy as-yet unproven technology at a scale far beyond man’s most ambitious space program to date, and do it by 2016.
Oh and I almost forgot to mention: Solaren’s director of energy services Cal Boerman claims that after four rocket launches to place the equipment into space, it would not require assembly by astronauts, but instead would unfold on its own. Anyone who has watched the evolution of cutting edge space projects like the Hubble Telescope and indeed, the International Space Station itself, knows of the many problems they have faced with systems that didn’t work according to plan. Now Solaren wants us to believe that they can make something 240 times bigger than the ISS with no astronauts needed?
The best comment I found on the Solaren project was from the Motley Fool: "As far as technology commercialization timelines go, space-based solar is likely somewhat ahead of nuclear fusion powered by a rare fuel that’s mined on the moon."
The whole plan is pure fantasy as far as I’m concerned. But it’s sexy space energy technology, so people just gobble it up.
Those inclined to excitement about such developments view PG&E’s proposed contract as verification that there is something real about the project. But I have an alternate interpretation.
PG&E is desperate to contract for enough renewable energy to meet the state’s renewable portfolio standard, which currently requires it to produce 20% of its electricity from clean sources by 2010, with a possible new standard of 33% by 2020 in the offing. However, the available supply of renewable energy is nowhere close to that, nor is it growing nearly quickly enough to meet such an ambitious target in an environment of tight credit.
My guess is the utility would be willing to sign a contract with space aliens in pink tutus at this point, if they would guarantee in writing that they would deliver megawatt-hours of clean power before 2020. Mark Toney, head of The Utility Reform Network watchdog group, called the Solaren announcement "remote" and "an act of desperation," preferring that PG&E spend "more time on proven technologies closer to home that we can really count on."
For all the doubts surrounding it, there are a few things about space based solar power that I can virtually guarantee.
One, if the Solaren project fails to round up financing, which is already a problem for earth-based utility-scale systems, or is deployed but fails to meet expectations, no one will publish its failure in big, bold headlines.
Two, it will never scale or be cost-effective on par with existing ground-based solar technology.
Three, if it ever gets off the ground, it will be plagued with technical problems, and in a post-fossil fuel world, it will become impossible to maintain.
Four, the net energy of the whole project will be ridiculously low, and the energy payback period on it will be measured in decades.
Five, it will consume a vast amount of gullible techno-utopian capital.
The Profitable Solar Reality
While that capital is chasing pipe dreams with visions of solar satellites dancing in their heads, the real money will be made by those who have the savvy to invest in the most realistic, functional, scalable, cheap, and high net energy systems on the ground today.
I’m talking about companies like Phoenix Solar AG (FRA: PS4), an international systems integrator of PV systems who builds and operates large solar plants and wholesales specialized parts for power plants. Or Acciona SA (MCE: ANA), a Spanish holding company whose subsidiary Acciona Energy deployed a 46-MW solar PV power plant in Portugal last December for $348 million ($7,565 per kW). Or privately-held Ausra, Inc. of Palo Alto, California, a pioneering provider of utility-scale CSP plants with operations in the US and Australia.
Companies like these will be the real contenders in our race against time to scale up renewable energy and leave fossil fuels behind before they leave us. While the SBSP dreamers are still working on their first hundred megawatts, these leaders will be working on their next hundred gigawatts.
Until next time,
P.S. Those solar standouts are just two of the ways our Green Chip International members have been pulling out gains during this economic downturn. But I don’t want you to just watch while others are taking advantage of this market, I want you to be a part of the action. Simply click here to learn more about Green Chip International.