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Friendly Hackin at Nerdville

Daughter Kate, son-in-law Hugh, and first grandchild Jack have moved back to the US. Enroute to their new lives, they're staying with us in Vermont. Only problem is that they got to our house before we did.

Should have been no problem: the lock is electronic; Kate had the code for both it and the alarm. But the door wouldn't open. Jack is patient but not infinitely so.

They couldn't call us on their cellphones because they hadn't yet gotten US versions and there is no GSM roaming (even though there's GSM service) in Nerdville. Nerdville isn't exactly near any phone booths even if there were any that still work.

But Kate's not a hacker's daughter for nothing. She had her laptop and WiFi; it didn't take long to determine that there was a usable signal on the porch. She knows how to get through my security. Voila.

Well, not quite. We were offline on the road; didn't respond to email. Hmmm….

Kate downloaded Skype; created an account; bought some SkypeOut minutes, and called me. We gave her an alternate path in.

Turns out the door had a mechanical problem; bummer. But fortunately there was a software fix.

Going Without Revenue

Starting a business with no plan for revenue is always a risky approach; it's especially so these days with no quick exits through either going public or being acquired and not much VC money available – especially for businesses with no revenue in the P&L.

Some people would argue that a "business without a revenue plan" is an oxymoron. That's NOT true; you can build spec houses for a business and know you won't get a cent back until you sell them; that's a business. In the Internet world you can build a service on spec hoping that it will be purchased and become a feature of another business (which probably does have revenue); nothing wrong with that except the risk. You can also speculate that, if you can only attract enough users, many revenue models will be possible; you may be right; Google was.

More on reasons why starting without revenue may be a good idea here. If you're convinced that's what you want to do, here's what you need to have any chance of success (and even with the items below, you will probably fail; but so will most new businesses WITH a revenue model):

Hugely deep pockets of your own. If you've got that, you've got lots of runway – but no verification that anyone besides you believes in your idea.

OR

Enough starting capital to survive at least twice as long as you think you're going to need to survive before you either sell out or raise more capital.

AND

A very low burn rate for personnel costs. If anyone you depend on (especially you) is taking out what they could earn in a "regular" job, you run a good chance of having to fold because they or you have to quit and earn a living.

AND

A business which can grow to scale without consuming large amounts of capital either for equipment or for hosting costs. This requirement can be met by offloading most of the cost of growth to your users' machines and Internet connections (as in a P2P service) or by frugal use of cheap hosting from the likes of Amazon.

AND

A source of follow on funding willing to raise the ante purely because you have met internal goals even if you haven't achieved the growth you hoped for and are still far from revenue. See Fred Wilson's post on why VCs DO like to do follow on funding; but remember that VCs also can and often will pull the plug (Fred again here).

The point is that many things will go wrong and, without revenue, you are walking a tightrope without a net. Revenue gets you both additional runway – infinite if you're breakeven and patient; revenue opens doors to new funding and/or acquisition from many more sources that will look at a non-revenue operation. That's why you need either a huge fortune of your own or an excellent combination of funding and low cost growth before swinging for the no-revenue fence.

 

We’re Madder Than Hell And…

We did it because we were mad. We did it ourselves with precious little help from our leaders. The average US price of regular gasoline is down 11% to $3.70 since the Independence Day peak of $4.14. That's still a lot higher than $2.76 a year ago; but we're also still mad. By coincidence, BTW, the price of gas has come down by just about the full amount of the 45.8 cents/gallon federal gas tax that didn't get suspended (good).

The price of crude oil has fallen even further from its peak. At $114.78/barrel it's down 22% from its high – and we didn't draw a single barrel from the strategic petroleum reserve (good) or increase drilling (even though I think we should). The smart money on $200/barrel is now forecasting we'll see $100 again first.

Somehow speculation didn't get outlawed (good) and speculators are apparently driving the price of oil down and the dollar up just as they were doing the opposite last month. They don't really care; they just try to get where we're going before we get there. Probably some lost their shirts (or their investors' shirts) when we got mad and started a buyers strike.

We slowed down without government lowering the speed limit. Good for us.

We are increasing the mileage of our fleet as fast as manufacturers can switch their production to gas-sippers and much faster than any government mandate could or would have dared to make us do that. The car makers can't lobby us out of self-control; we made them change their product line.

We're driving less – not happily but we're doing it. We're mad.

Meanwhile we're getting ready for winter by insulating, buying wood pellet stoves (or even electric heaters), installing better thermostats. If nature cooperates, a lot less oil and gas will go up our chimneys this winter than last. That stuff costs real money.

Our anger has scared anti-drilling politicians into "considering a compromise". A little more anger and they may do something real.

We won't stay mad forever. Already $3.70/gallon seems a lot lower on the way down than it did on the way up. Even our anger won't stop developing countries from developing into nations of drivers and home-heaters (although their development may slow a little because there's lots of stuff we're still not buying while we pay for oil).

Anger's great for short term stuff; so is fear. Without leadership, the energy of anger is dissipated on short-term measures. With great leadership, anger and fear become the launch pad for long term change. Remember Pearl Harbor (at least from the movies)? Remember Sputnik (trite but true)?

For all the assurance we have about whatever candidate we support, it'll be well into 2009 before we know if we have a leader. The opportunities (and the anger) are there.

 

 

Blogging 101 – Comment Spam

Sometimes you will find comments on your blog which link back to commercial sites and are there to promote a product or boost the google-juice of the linked to site. Are these spam? Should you remove them all?

Here are two comments which were recently posted on Fractals of Change. IMHO, one is legit and one's not:

"what a nice post Good luck!!!!!!!!!!!!***[commercial name removed] Challenge"

"We have recently created a free link exchange directory http://www.link-exchange-submit.com. Providing people use it fairly, it should help you with your SEO link building. It is automatic in terms of your link and suggested category being added. But it is also moderated daily in terms of spam removal."

The first comment is clearly spam in that it contains no internal reference to the content of the post. For some reason, the people or bots that post these almost always stick in a generic compliment thinking, perhaps, that you are starved for praise and will leave the comment posted. This one was deleted and reported to Typepad.

Since the post that the second comment was attached to WAS about links, the comment is right on target (although it could have been posted by a smart bot). My post was against link exchanges and this is clearly a contrary view; but that's fine – good, in fact. The service which is being promoted is something a blogger thinking about link exchanges would want to look at. So the comment is likely to be useful to readers of the post. It gets to stay.

Similarly, a post of how to make cheaper cellphone calls abroad is festooned with comments containing links to SIM providers and cheap or free calling services. Again, anyone interested in the post is likely to be interested in the links. Sure, they serve a commercial purpose and I don't get paid for them as would get paid for ads. But the comments expand on the post and make it more useful to readers. On FOC, that's the spam/no spam criterion.

Blocking the Sun and the Wind

If you think solar and wind power are important for decarbonizing the atmosphere and/or for reducing our need for expensive imported energy from dangerous places, then you ought to be in favor of a massive buildout of America's electric grid. Too often self-styled environmentalists (not genuine environmentalists like you and me), are a significant obstacle to making alternative energy an actual achievable alternative to traditional energy sources.

This sad story is told well in a Wall Street Journal Editorial aptly entitled "Wind Jammers":

"…the greens are blocking the very transmission network needed for renewable electricity to move throughout the economy. The best sites for wind and solar energy happen to be in the sticks -- in the desert Southwest where sunlight is most intense for longest, or the plains where the wind blows most often. To exploit this energy, utilities need to build transmission lines to connect their electricity to the places where consumers actually live. In addition to other technical problems, the transmission gap is a big reason wind only provides two-thirds of 1% of electricity generated in the U.S., and solar one-tenth of 1%.

"Only last week, Duke Energy and American Electric Power announced a $1 billion joint venture to build a mere 240 miles of transmission line in Indiana necessary to accommodate new wind farms. Yet the utilities don't expect to be able to complete the lines for six long years -- until 2014, at the earliest, because of the time necessary to obtain regulatory approval and rights-of-way, plus the obligatory lawsuits.

"In California, hundreds turned out at the end of July to protest a connection between the solar and geothermal fields of the Imperial Valley to Los Angeles and Orange County. The environmental class is likewise lobbying state commissioners to kill a 150-mile link between San Diego and solar panels because it would entail a 20-mile jaunt through Anza-Borrego state park. "It's kind of schizophrenic behavior," Arnold Schwarzenegger said recently. "They say that we want renewable energy, but we don't want you to put it anywhere.""

In the last fifty years we've passed a series of environmental laws needed to reverse centuries of environmental neglect. Unfortunately, the pendulum has swung so far that some of these laws have become a significant threat to the environment they were meant to protect. Trade-offs have become near impossible; the status quo nearly unshakable. Luddites and NIMBYers alike have learned to manipulate well-intended environmental protection laws to impose huge delays on any project of any significance. The most difficult part of any large project is filing the Environmental Impact Statement and fighting through the consecutive string of lawsuits and costly injunctions which follow.

Even way back in 1981 when I was Vermont Secretary of Transportation, we knew in the agency that it took twenty years to build or significantly improve a road. Seventeen years went to getting the permits and fighting off the lawsuits; one year or so for property acquisition; and two years (given our winter hiatus) for actual construction. When we were done, people would point out that we had built the wrong road in the wrong place. They were right; things change in twenty years but you can't change the plan or you go back to square one. Meanwhile, accidentally or on purpose, people buy real estate on the likely route so the eventual cost of land acquisition is much higher than originally planned even allowing for inflation. Overrun!

Well, we don't need that many new roads now that we have the Interstate System (which, incidentally, we'd never be able to build under current law). But we do badly need a rebuilt and expanded electric power grid if we're going to be able to effectively use wind or solar energy, wean our houses from heating oil, plug in our hybrid electric vehicles, and reduce the use of natural gas for supplying peak power. (If you want to reduce coal use, too, then you really need that grid plus lots and lots of new nukes. If you're against coastal drilling, you ought to be stringing power lines yourself through your backyard).

Not incidentally, the grid is the answer to the objection that you can't count on the sun and the wind. Somewhere in our great country the wind is always blowing; every day the sun shines someplace in the USA. Our huge hydro electric dams can hold back water when the sun is shining and the wind is blowing – and spool up on still, dark days. All of that can work IF we have a national grid with adequate capacity.

Both presidential candidates have plans to subsidize their favored forms of energy. Government subsidies and well-meaning mandates for renewable power are most likely to create another boondoggle to rival the ethanol fiasco. On the other hand, governments at all levels can and must change their own laws and regulations so that capital can effectively be put into the power grid rapidly. Because there will then be a national market for "alternative" energy, excess supply in one place can flow through the grid to meet demand in another. The economics of generation improve. The price of energy is lower than it would be otherwise. Non-carbon energy can find its own place (which I think will be big) in the national energy mix.

This change doesn't mean no environmental review. It just means the review is done on a predictable schedule and is final when it is final – not twenty years later. After all, if we wait twenty years, according to some of the same people who don't want new power lines, our coastal cities will be on an unstoppable path to inundation. If this an emergency – environmentally, security-wise, or economically, then we need to move quickly. The only real obstacle is us.

Blogging 101 – Exchanging Links

My friend Al is a new blogger. He's received his first requests for link exchanges and would like to know what I think of this practice. For non-bloggers: a link exchange is an agreement that says I'll put a link to your blog on my blog if you link to my blog from your blog.

The sites which have solicited Al do not particularly impress him; but they do have fairly high link ratings. That means that, if they point to his blog, he will gain Google juice and Technorati rank and possibly readers. All he has to do is point to them in exchange.

Should he agree to the proposed exchanges? If you're a blogger, you've probably already faced this question.

Links ARE important. I said that in the first post in this series and also described here how the math of a group of cooperating blogs gives the whole group a competitive advantage compared to blogs not in the group – an advantage that can be significant out in the attention-starved desert of the long tail. So should you or Al do link exchanges?

I don't do link exchanges because I want my readers to find that my links are relevant to them. I also don't because I want the blogs that I do link to know that I value them – but can't deny that I hope that they'll find that the value is mutual and that their readers may appreciate my posts and link to me when appropriate. So you might say that I do actually tacitly do link exchanges. I don't insist on a quid pro quo; I don't link to content which isn't either relevant to the current post or likely to be of general interest to my readers.

Readers who come through random links won't become regular readers; they have no reason to. Fractal of Change is eclectic (not a great way to build circulation – focus is better) so sometimes an automobile blog or a company blog or an environmental blog'll point to a single post of interest to their readers. FOC can get a flurry of hits this way and I'm glad for the chance to sound off on whatever the subject is to these people outside my regular reader group. But FOC doesn't get many return visits from these random hits – not enough here to interest them. On the other hand, if a VC blog or nerd blog or even an energy blog points here, some of the new readers become regulars because there's enough content relevant to them to keep them.

Assuming you want regular readers and not just more hits (which may not be true), then link exchanges aren't likely to get you there because they somewhat devalue your content. On the other hand, link exchanges with blogs much more linked to than yours WILL get you a higher Google rank for the subjects you write about than if you didn't have those links so you do pay a price for being a purist (nb. rumor has it that Google bots know how to devalue references from blogs which would otherwise gain authority from link exchanges but I haven't heard this directly from any bot's output device).

What IS a good strategy is to engage in a blog to blog dialog including comments on each other's posts with a group of blogs which cover the same subject matter as your blog – better if you're all NOT always in agreement; better if the links to each other have more substance than "Joe just posted something great"; but links which get each other readers AND give readers value by advancing a discussion are the best kind.

BTW, linking to new blogs which catch your interest is a social obligation of existing blogs,

Freeloaders’ Chickens Come Home to Roost in Georgia

For decades many Europeans have criticized America's arrogance and belligerence while peering out from behind the shield we provide for them. The Russian invasion of Georgia and the threat to the pitifully small portion of the European natural gas supply which does not come from Russia has brought some of these chickens home to roost.

It was the American presence in NATO which stopped the previous Soviet Empire from expanding even further. There were protests then against American missile defenses in Europe. America was reviled for its role in Viet Nam. Ronald Reagan was caricatured as a cowboy. Then the Wall fell down (hint: it was pushed). Eastern Europeans said "thanks" and knew whom they had to thank. Western Europe just grew more prosperous; they could reduce their military budgets thanks to what we spent on ours.

After 9/11 much of NATO, to its credit, joined us in Afghanistan. Turns out, though, that many countries – especially Germany – insist on keeping their soldiers out of harm's way. (The British and Canadians and Australians and some others shouldered a full load.) In Iraq most of Western Europe tsktsked and voted against politicians who dared support the US by sending troops. Europe is much more dependent on Middle Eastern oil than the US; but, if we keep it flowing on our nickel, why should they get involved? (Again, especial credit to the British but Brown's not Blair).

Western Europe has not been eager to put Georgia and other former Soviet bloc countries on the road to NATO membership because that might offend "The Russian Federation" from which they import an increasing percentage of their energy. Much of Western Europe has also been opposed to the US' latest plan for missile defense facilities in Eastern Europe because the Russians don't like it.

Now we know – and Europeans know – what the good will they bought from Russia is worth. Western oil companies in Russia like BP are seeing their assets seized; Russian belligerence is up worldwide; Russia is part of the problem of Iran's nuclear program, not part of the solution. And Russian tanks are again rolling into neighboring countries on the thinnest of pretexts – this time clearly threatening Western Europe's energy and prosperity. To their credit some European leaders – especially French President Nicolas Sarkozy – seem to realize that they must act if they want to remain free.

None of this is to say that the US is always right or is blameless. We badly screwed up the aftermath of the fall of Saddam. We weren't aggressive enough in Afghanistan after the fall of the Taliban. George Bush famously looked Putin in the eye and saw exactly what the exKGB man wanted him to see. We let the "war on drugs" get in the way of "the war on terror". We may have hesitated a day too long in strongly reacting to the invasion of Georgia.

Eastern countries have set an excellent example with the leaders of Poland, Lithuania, Latvia, Ukraine, and Estonia flying to Tbilisi in a show of solidarity with Georgia. These are the countries with the most to fear from a resurgent Russia; they have no illusions about appeasement as an option. The US and Poland have just reached agreement on anti-missile sites in that country.

There are some good signs that both America and Western Europe have learned some lessons. NATO is now talking about letting Georgia and other former Soviet colonies in sooner rather than later. Sarkozy's been to Moscow. The US has now sent a critically important (if symbolic) contingent of troops to Georgia and created a tripwire which should give the Russians pause.

The critics of the US are right: we can't do it all alone. Now it's time for them to help.

Should Your New Web Business be Ad-Supported?

Contrary to popular belief, the ad-supported model for a web business is very, very hard to succeed at. I've underestimated the difficulty of living on ads a couple of times in the my investment career. Wouldn't want you to do the same either as an investor or an entrepreneur.

Google, of course, is advertising-supported and is a huge success; that's bad news for you - and Yahoo and Microsoft. Google is consuming most of the free oxygen in the ad-supported cave. If someone wants to buy keyword-driven ad inventory, they go to Google. Why should they bother going anywhere else, especially to a startup very few page views? If you want ads on your service, you'll have to sell them or get them from someone else who is selling them. No matter how neat your self-help ad engine is, no one except maybe your mother will try using it UNLESS you open the way to a significant new market AND can prove that.

OK, you say, people won't by ads from me but they'll buy them from Google. I'll create the page views with my wonderful new service and Google'll put the ads there. Google'll put ads anywhere. Yeah, but. Google will put ads on your pages; some people will click on these ads (Google charges for and pays for clicks in case you've been living on Mars and missed that). You will get a small stream of revenue; it won't bring you anywhere near breakeven. It won't impress potential investors. In fact, the trickle of revenue you get from Google might even convince potential investors that you CAN'T make a living with ads; no ads and no revenue might leave them easier to convince.

Google ads are fine for harvesting ADDITIONAL revenue. Bloggers run them because any revenue is nice; but most bloggers aren't trying to make a living from their blog or attract investors to it. If your website sells something, it makes all kinds of sense to sell additional related somethings through Google ads or Amazon ads (which you can better aim at your customers). If your website has some spare space, Google ads are something people are used to looking at and they'll make some spare change for you. But they won't make your business model.

Maybe there's a counter-example (if so, please post it). In theory, I thought, since Google does such a good job of keyword targeting and increasingly good job of geo-targeting, a well-defined site that viewers come to for well-defined reasons (not an eclectic site like Fractals of Change) ought to be able to induce the Google bot to send just the right ads to attract many clicks at a high price per click. But I haven't seen it happen that way.

Besides Google there are ad networks which will actually sell your site to advertisers. Professional blogs do get a great deal of their advertising from networks like Federated Media (FOC is a small blog using FM). But it's tough to get the attention of a good ad network if you don't already have good demographics AND high viewership. Even if a network takes you on, their salesmen aren't going to be able to do much for you unless you have numbers big enough to get their attention and the attention of the advertisers and agencies they sell to. If your content is powerful enough, you might make a living with agency ads – but it's a long shot if you're not BoingBoing.

Whether it's Google or an ad network, whoever sells your ads is going to have to keep a lot of the revenue to pay the selling expense. It's highly unlikely that they'll be enough left for you to run your business on.

The bottom line is that you have to have way to sell ads if you're going to support a service on advertising revenue. Sell as in actually convince somebody to buy something, not just take orders. Selling ads nationally means having existing contacts with people who buy ads nationally AND having such a hot property that they'll pay attention to you. Selling locally means feet on the street walking into stores and helping to build local campaigns. Radio stations know how to do that; you probably don't and probably can't afford to hire someone who does. The easy local ads were the classifieds because the newspapers didn't sell them, they just took orders. Craig and his List jumped quickly into that huge niche. Almost inconceivable that you'll make money there.

If you have a better way to sell ads, then maybe you should start an ad-supported service. If you just have a better service, you probably can't support it on ad revenue alone.

Too Much Revenue, Not Enough Growth

Jeff Jarvis posted a comment on my post In Praise of Revenue:

"I'd also like to see you reprise your lesson (from the Union Square event some time ago) on extracting minimal value from the network you create so the network grows as large as possible and the value you've created and can extract in the end is greater than if you had tried to extract more value at the beginning. Did I get that right? I quote you to that effect all the time. Did it just the other day with a big publisher whose blog ad network is taking too high a cut. I told him to just cover his costs for the first year - or less - and he'd end up growing something bigger that would be more valuable to each member, thus bigger, thus more valuable to him. Eh?"

Jeff remembers quite accurately that I advocated optimizing for growth rather than revenue – in the extreme forgoing revenue. Jeff's advice to the publisher was right on. If you simply solve for maximizing revenue, you can end up with little growth – and little future revenue opportunity. Note, though, that Jeff did not advocate forgoing revenue; in fact, he did advise the publisher to cover costs, presumably so that growth can occur without needing to raise more capital or so that there will be a solid basis for raising capital when it can be put to good use.

The case Jeff presents of an ad network is particularly straight forward. It is difficult if not impossible to sell ads which will be seen by only a few number of people. The cost of selling the ads is too high to justify the effort; advertisers are not interested in taking the trouble to investigate a tiny potential market or put any creativity into reaching it. Other than in strictly local markets, there need to be millions upon millions of impressions AND data to do targeting with before advertisers are interested. So it is not practical for any but the very largest blogs to sell their own ad space – and even they usually don't. There is an opportunity for ad networks which aggregate advertisers and advertising on one side and an inventory of space ads can run on the other side. The network matches the ads to the blogs, typically collects from the advertiser, and pays the blogger. Google is the most successful example of an ad network but the ads it aggregates appear in many more places than just blogs. Federated Media, the ad network to which Fractals of Change belongs, is an example of a blog-based ad network.

If you're an ad network, the more page views you have to sell, the more and better the advertisers you can attract. The more advertisers and the higher the rate for page views you can achieve, the more bloggers you'll attract to make their page view inventory available through you. You obviously have to scratch to get started, need to have some credibility or an existing inventory of ads to start with, and are going to lose some money getting going. But now you've got traction: how much of the ad revenue should you share with the bloggers and how much should you keep? Your investors may be pushing for some return on their capital (profits); your compensation might even be tied to your margin on sales rather than just your gross sales. Nevertheless, charging more than you have to, even if you can for a while, is a mistake.

Charging too much stunts growth so you'll have fewer units to charge for in the future. Charging too much opens the door to competition.

The more that bloggers make from your ads, the more space for ads you'll have available as bloggers tell their friends which ad network to use. The more ad space you have, the more ads you'll get and – on the average – the more you'll be able to charge for ads because you'll have better opportunities to target and you'll have more advertisers interested. The more ads you get and the more you can charge for them, the more money bloggers in your network can make.  You want to keep this virtuous circle of growth going as long as you possibly can.

If you are extracting profits before you have to, you're forgoing future growth. In any sort of competitive market, profits attract competitors. Big profits attract lots of competitors. Would-be competitors can point to your profits and easily get funding. Funded competitors can undercut your rates and "steal" your bloggers. Whoops; the circle is now turning in the non-virtuous direction. If you're doing well but running at or close to breakeven, you've made it impossible for anybody to undercut you without running at a deficit which is hard to get funding for – at least in this market. The biggest danger to you is someone who finds a way to substantially cut costs or to deliver a better product. Obviously you've got to be vigilant about that and ought to lose some sleep over these possibilities – but keeping prices down keeps a plague of me-too competitors from cutting off your growth.

This logic goes well beyond ad networks, they just make a good example.

Craig's List has the successful strategy of forgoing revenue for MOST listings it runs and MOST markets that it's in. That strategy helped it attract a critical mass of listings and a critical mass of listings meant a critical mass of ad readers which attracted more ads etc. etc. If Craig now attempted to maximize revenue by charging for a substantially higher percentage of ads, a door would be cracked open for competition. There is no chance at current rates for a competitor to steal Craig's listings (and readers) by charging less. If and when Craig's List is bested, it'll really have to be by something which delivers a better way for listers and readers to communicate.

Unless you are a protected monopoly, high prices are a recipe for losing whatever lead in the market place you have. Low prices are the engine of growth.

The strategy Jeff suggested to the publisher and that I'm recommending here is to keep revenue as low as it can be and still fund growth. No revenue is a different strategy that I'll post more about.

It’s Time for Electricity to Come Out of the Closet and Go Into Storage

Way back in 1991 during a previous housing slump we had moved to Vancouver and had to sell our house in Vermont. "Replace the heating system or no one'll look at the house," the realtor said. The offending system was fairly new; it was in good shape; it was comparable in operating cost to what other people had; it was extremely low maintenance; but it was politically incorrect. It used electric (shudder) storage heat!

In the 1970s when electricity from nuclear plants was going to be "too cheap to meter," electrical everything was the rage. When nuclear power went out of fashion, so did electricity. It became the energy form that environmentalists love to hate. This distaste for electricity predated concerns about CO2 concentration in the atmosphere but was intensified by global warming concerns and the undeniable fact that a huge percentage of electricity is generated by burning coal. Reducing electricity use is still an environmental mantra. A whole generation of utility executives have grown up in an era in which they are measured by how much of their product they can manage NOT to sell.

Now it's time to sell electricity. Energy independence requires increased use of electricity. Reducing atmospheric CO2 without an economic meltdown also requires increased use of electricity.

The quickest and easiest target for electrical displacement of foreign carbon-based fuel is in home heating. In 2006 we in the United States burned 62 billion gallons of oil to heat our homes. To put this number in perspective, all on highway use of diesel fuel was only 29 billion gallons that year. Total imports of oil and petroleum products for that year were 155 billion gallons so taking home heating oil out of that would make a dent.

Now it's true that we burn even more oil for transportation than for home heating. Gasoline use in 2006 was 143 billion gallons (the number'll be lower this year). And plug-in hybrid electric vehicles (PHEVs) are very cool and will help reduce that number. But we are still at least a year away from commercial introduction of PHEVs and they won't be available in volume for a while after that. They will raise new problems (which will be solved) of disposal of lots of very toxic batteries. For some reason PHEVs ARE politically correct but maybe they'll be less so once they're widely available.

So back to home heating. It's a lot easier to get electrical energy to a house sitting still on the grid than to a car that's moving along the highway. You don't have to store electricity in a house or buy or carry around heavy batteries to use electricity in a house. But, for some reason (could it be a "electricity is evil" mindset?), there is very little discussion of converting our oil-heated homes to electricity.

"The reason is obvious," you say. "You said it above. A huge portion of electricity comes from burning fossil fuels." From an energy independence POV, that's pretty irrelevant. The fossil fuel of choice for electricity is coal. We mine that here. Second choice is natural gas which is cleaner (and more expensive) but comes from the North America in almost all cases.

From an anti-CO2 POV, heating with electricity also makes sense provided that either electricity is used to capture geothermal heat (very practical but only if you have a well or room to dig one) OR that electricity not generated from fossil fuel is used (very widely practical).

So we're back to that electric storage heat system we refused to remove from our house for sale (it sold eventually anyway). Much off-peak electricity – the so-called baseline supply – comes from non-fossil fuels, especially in areas where not much coal is used like New England. This electricity comes from hydropower and nuclear plants; an increasing but still tiny amount of it comes from solar and wind generation. The trick is to heat with these "good" electrons rather than the "bad" peak time electrons ones which are more expensive and produce more CO2 per kWh.

Electric storage heat is simple and not very expensive. All of the technology is old and tested. It requires some mechanism for storage of heat – usually special tiles. These are heated off-peak. On-peak, you use a fan to pump heat out of the tiles and into the house; even the electronics are simple. This IS a method of electricity storage but it's cheaper and more efficient than battery storage; installed correctly there is almost no energy loss because heat that "leaks" is used to warm the house.

The economics of electric storage heat only work when the consumer pays a different price for on and off peak usage. Many areas of the country do have dual rates although special meters are required. Other areas of the country are moving to "smart metering for a variety of reasons.

Groton, South Dakota is a leader in reducing costs to both its consumers and electric utility by SELLING electricity. From its website:

"The City of Groton is proud to offer Heat Storage Units and Furnaces…. There is no up-front cost for these units. You pay for the installation of the units or furnaces. Then, for the next four years, you will pay 1¢ extra on your dual fuel meter as a partial pay-back of the units or furnace. After four years, the unit is yours to keep. All the while, you will be paying the low dual-fuel rate, which is lower than the fossil fuel rates."

Political correctness has never been big in South Dakota.

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