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Back to Business

Retirement's over; I've been working on a new business. That's why I haven't been blogging for a while; startups are all-consuming.

NG Advantage LLC delivers natural gas "beyond the pipeline." Starting in early 2013 we'll truck compressed natural gas (CNG) from a compressor site we plan to build in Milton, Vermont to commercial users within a two and a half hour driving radius (see service area in VT, NH, and NY below). Large users of fuel will save 30 to 40% or more of what they're paying now for oil and propane while reducing CO2 emissions by 26% and practically eliminating sulfur and nitrous oxide from their stacks. Businesses which are not on pipelines need these savings to compete with those who are served by pipeline gas. Energy intensive businesses also need protection against the global uncertainty in oil prices.

So, if the savings are so great and it's good for the environment as well, why don't businesses like NG Advantage already exist?

Good question and there's a good answer. Until 2008 the prices of natural gas and oil products moved pretty much in lock step. If one or the other got a little out of line, there were enough users that were dual fuel – primarily power plants – to switch and bring prices back to parity on a per BTU basis. But new technology has come into the gas fields: horizontal drilling and hydraulic fracturing (unfortunately called fracking). America's recoverable reserves are an order of magnitude larger than they were originally thought to be. Production is increasing rapidly.

This is disruptive innovation in the same sense that the Internet was: it changes all the rules in the energy business. It no longer makes economic sense to build a new nuclear or coal plant in the US; electric rates are remaining stable or going down because the marginal cost of electricity depends on natural gas prices. Energy-intensive businesses are being built in the US again. And it now makes economic sense to truck natural gas to major consumers who can't get it from a pipe.

The US benefits especially from natural gas because it is NOT easy to transport – it must be either liquefied or compressed and must be carried in special vehicles (although it is safer to transport than oil or propane because it is lighter than air). It was only practical to use natural gas directly from a pipeline; it is now practical to truck it short distances as well. But the market for natural gas –unlike oil - is more local than global because pipelines don't go under oceans. Europe is stretching for new supplies and increasingly dependent on Russia for natural gas. North America has an abundant supply – President Obama says 100 years' worth; so natural gas prices are much lower here than in Europe or Asia. Our reindustrialization benefits from this energy price disparity. So does our effort to reduce our dependence on foreign oil.

Fifteen years ago I founded ITXC, which became a big company and went public, because it was clear that the invention of the Internet would take most of the cost out of telephone calls and the big telephone companies – including AT&T where I then worked - were in no hurry to crater their revenues for the benefit of their customers. There was an opportunity for new companies looking for new customers and willing to offer radically lower prices to succeed. This is another such opportunity since existing oil companies won't be in a hurry to turn natural into a competitor beyond the pipeline. We won't be the only ones to take advantage of the opportunity, but it's important to be first or among the first

Unfortunately current trucking technology doesn't support the economics of serving residences or businesses which use less than 150,000 gallons of oil or propane annually or 100,000 gallons in a six month period. We may be able to move downscale some; others will need pipelines before they can take advantage of natural gas.

Vermont Gas Systems is planning an expansion southward of their line in northwestern Vermont; that's a good thing for those residences and businesses along the path of the expansion. Since it'll be several years before the expansion is built, NG Advantage will serve major businesses along the route until the pipeline gets to them. And we'll serve businesses in Vermont and parts of New York and New Hampshire which have no immediate prospect of pipeline connections. I'd be surprised, though, if we don't end up developing markets which will then be served by pipelines faster than they would have been otherwise. That's fine with us, a measure of success; we just move our trucks out further to new areas.

We're starting to hire so we are creating jobs. But many more jobs will be created and retained because energy-intensive businesses in rural areas, where many costs are low but the price of energy is high, will be able to compete in an irreversibly globalized economy. In Vermont both food processors and manufacturers fit that definition.

Anyway, it's good to be back in the private sector. I'll blog when I can, not just about natural gas but also about how starting a business now is the same and how it is different than it was 15 years ago – not to mention lessons learned.

Related posts (while I was talking myself into doing this):

Natural Gas Disrupts the Energy Industry

The Pickens Plan Bill: The Wrong Way to Get the Right Result

Ending Tax Giveaways Isn't Raising Taxes

Good and Bad News about the Safety of Natural Gas Fracking

Irene Lesson #4 – You Can’t Spend a Lot of Money When You Don’t Have a Lot of Time

Vermonters already know that the State will spend less than half the amount originally estimated to fix the state roads and bridges decimated by Tropical Storm Irene; this post is for people in the rest of the country who will benefit from the lessons we learned.

The job got done in less than half the time anyone thought it would take – crucially all bridges and all but one state highway have been reopened prior to serious winter weather and in time for the skiers. Turns out that getting the job done fast and getting it done cheap are two sides of the same coin.

The original worst case estimate for this job was $600 million according to a story on VTDigger.org quoting Irene czar Neale Lunderville; but the final toll, according to a New York Times article, will be in the range of $175 million to $250 million. The original estimates were made quickly and were meant to be conservative; the people who made these estimates were literally up to their necks in more urgent problems. But the estimates were indubitably made according to a standard set of estimating formulas which have been in use (hopefully updated) since the time thirty years ago when I was Vermont's Transportation Secretary. History is that estimates tend to go up – not down!

The cost should've come in high. There was no time for competitive bidding. People worked overtime until they dropped (and were probably pretty tired before they dropped). Local supplies of almost everything including people and machines were exhausted. Rocks for building new embankments had to be hauled in on special trains. But the costs came in low.

The VTDigger article explains some of the reason for the savings:

"State officials attributed the drastic reduction in costs to a variety of factors, including the efficacy of emergency construction techniques and the extraordinary dedication of VTrans workers, the Vermont National Guard and private contractors. In all, 500 miles of roads were reopened in just two months after the Aug. 28 storm…

"The state also saved millions of dollars by taking short cuts during the post-Irene emergency that normally would be prohibited under state and federal laws. The standard pre-construction procedures for road and bridge repair were abandoned in order to expedite the process, according to Sue Minter, deputy commissioner of the Agency of Transportation. The processes that are normally followed for transportation projects — federal and state permitting, environmental mitigation, design review, planning, right-of-way purchases – went by the wayside.

"Transportation workers didn't have to keep roads open and contend with traffic. In some cases they used gravel and rock dug from rivers and collected from fields where floodwaters had left deposits of aggregate [my note: Working in the rivers is usually totally off limits]…

"Minter pointed to a bridge project in Newark as an example of how a brief road closure can hasten VTrans work and save the state hundreds of thousands of dollars. A bridge on Route 114 in the town was closed to traffic for one month during construction. As a consequence, it cost $300,000 to build instead of the average $1.5 million pricetag for bridge installation, she said. The bridge was completed in three months, as opposed to several years."

In other words, there wasn't time to spend a lot of money on either bureaucratic delays or costly attempts to keep the public happy by avoiding the inconvenience of temporary closings.

Vermont has learned from its experience. John McClaughry writing on VTTiger.com quotes Democratic Governor Peter Shumlin:

"You can be assured that in the interest of delivering the best possible roads and bridges and transportation infrastructure that we can to the hard-pressed taxpayers in Vermont, we have asked the Agency of Transportation… to assess how we can bring this kind of good news to future road project."

John also quotes House Republican Leader Don Turner asking: "If we can bypass some of those steps in an emergency situation and save hundreds of millions of taxpayer dollars, why can't we do that all the time?"

Like the reconstruction effort itself, learning from it is bipartisan although, as you might expect, there are many who think the state went too far in its rapid reconstruction and would like to make sure that never happens again.

IMHO there are four lessons here:

  1. Americans can still come together and do remarkable things.
  2. Government spends more of our money than we would want it to in order to keep us short-term happy – as in building a temporary bridge instead of telling us to go around during construction.
  3. The regulations which started as well-intentioned and needed protection for neighbors and the environment has turned into a nightmare of expensive delay which at least doubles the cost of both public and private projects.
  4. If we remember the three lessons above and reform both government construction practices and permitting, we can rebuild our infrastructure for less than half of what we thought it was going to cost and have a boom in private construction as well.

Related posts:

Shumlin Appointment of Lunderville as Irene Czar Great non-Partisan Decision

Irene Lesson #2: Nothing in America is Shovel Ready – Until It Has to Be

Jobs Rx: Make America Shovel Ready

The Economics of Lowell Mountain Wind: The Video

This is the video from an interview I did on WCAX 6PM news last night. Darren Perron did a good job with his questions. As always on TV, there wasn't enough time to say everything I'd have like to have said. So two additional points here:

  • Vermont can have an economically bright and CO2-light energy future if it becomes an energy corridor for Quebec Hydro and buys more from that source, expands its use of natural gas now abundantly available from the nearby Marcellus shale, takes advantage of the coming statewide SmartGrid to pass through the very low price of off peak electricity. Allows the Public Service Board to examine Vermont Yankee relicensing on its nonpolitical merits, and spends state energy dollars on projects with a real return like solar hot water, geothermal, and natural gas vehicles.
  • Even though the economics of Lowell Mountain Wind are inferior to other available clean sources of electricity, the project has had its day in court before the Public Service Board and other regulators and has been approved. I disapprove of the tactics of protestors trying to slow the project and think they ought to be liable for any extra expense they cause. In this case the extra expense to ratepayers could be considerable if project completion is delayed beyond the end of 2012 because that is the deadline for being eligible for a 2.2 cents/kwh federal subsidy (although this IS an expense we will bear as taxpayers).

If you don't see the video above this paragraph, you can view it by clicking on this link.

Related posts:

Energy for Jobs – Vermont Version

Green Mountain Power Sets Good Precedent on "Bad" Project

 

Don’t Like Smart Meters; Opt Out at Your Own Expense

If you stand nine feet from a smart meter for twenty-four hours/day for a year and a half, you'll get about the same dose of radiation that you get during a ten minute cellphone call when you're holding the phone to your ear. (math below).

A smart electrical grid is a good thing. It gives us consumers more information and choices, ways to save money, more net-metering opportunities for those who want to generate some of our own electricity, and the opportunity to replace oil for both home heating and transportation. Jobs will be created as businesses discover ways to reduce the energy-cost of their operations. Even if we choose not to make use of the smart grid information ourselves, we will still benefit because our local utility can use the information to fix outages faster and more cheaply than before (often before sleeping consumers even report them), reduce the amount of power which has to be purchased to meet demand, smooth out expensive peaks, and eliminate the cost of manually reading meters. Lower costs for our utilities mean lower rates for us – perhaps not lower than they have been but certainly lower than they would be otherwise.

So what's not to like?

Part of implementing a smart electrical grid is the installation of smart meters: electronic replacements for the electromechanical meters we've been using almost forever. Unlike the old meters, the new ones communicate information about demand and line voltage back to the utility in near real-time. The timely information from these meters is essential to the benefits the smart grid can deliver. In much of Vermont and many other places, low-power radio is the most practical way for the meters to communicate with the rest of the grid.

Some people are afraid of the electromagnetic energy generated by the meters during communication. They shouldn't be. If you stand 9 feet from a smart meter while it is transmitting (at most one twentieth of a second every 15 minutes), you are exposed to a power density of about 4 microwatts per square centimeter (µW/cm2). For comparison, if you hold a cell phone to your head during a conversation, you are exposed to anywhere from 1000 to 5000 µW/cm2. Stand one foot away from your microwave while it is operating (not even close enough to look in), and you are in a force field of 200-800 µW/cm2. So if you stand nine feet from a smart meter for twenty-four hours/day for a year and a half, you'll get about the same total dose of radiation that you get during a ten minute cellphone call when you're holding the phone to your ear, assuming the low end emission for a cellphone. All numbers here are taken from a study done by the California Council of Science and Technology (CCST) entitled Health Impacts of Radio Frequency Exposure from Smart Meters. CCST points out that, even if your smart meter somehow got stuck in transmit 50% of the time and you were standing a foot from it forever, you would not receive more radiation than the FCC guidelines allow.

Some people are afraid that their privacy will be violated because their utility will be able to determine short-term electricity use. It is true that monitoring electricity use can be an indication of when you came and left home, when you dried the laundry, and perhaps other aspects of your behavior. Even with dumb meters, for example, police sometimes use extreme electricity demand to indicate that someone is growing large quantities of pot under grow lights. There do need to be limits on how this data is used and who has access to it. There also need to be rules to assure that you have access to your own data. However, compared to what your Google searches reveal about you or the trail of electronic crumbs your cellphone leaves behind even when you are not talking, this is a very fixable privacy problem with small risk.

Reasonable or not, some people just don't want smart meters. That leaves us with four choices:

  1. Deny everyone the benefits of smart electric grid because a few people don't like smart meters.
  2. Require everyone to have smart meter if they want to buy electricity, just as we require everyone to have a dumb meter today.
  3. Allow anyone who doesn't want to have a smart meter to say "no thanks" and have everyone pay the extra cost of manually reading his or her meter and less grid management information.
  4. Allow anyone who doesn't want to have a smart meter to say "no thanks" and charge those who make the choice the extra costs they are imposing on the system as a whole. In other words, if you don't want a smart meter, you don't get a share of the benefits of the smart grid.

Central Vermont Public Service has proposed choice #4 to the Vermont Public Service Board. Their calculation of the extra cost is $10/month. Stowe Electric Department (of which I'm a board member) has not yet filed a proposal with the PSB on this issue nor has the Board taken a position However, speaking only for myself, I think it's good to give people a choice when choice is possible – and I think people need to be responsible for the cost of their own choices. I'm for option #4.

Related posts:

Irene Lesson # 1 – Smart Grid Great for Power Restoration

House Flatlines – Smart Grid to the Rescue

What's a Smart Grid and Why Does It Matter?

Irene Lesson #3: Critical Data Belongs in the Cloud, Not Under It

"As flood waters from Tropical Storm Irene swamped the Waterbury state office complex, seven employees from the Vermont Agency of Human Services rushed inside to rescue computer servers that are critical for processing welfare checks and keeping track of paroled prisoners living around the state," according to a story by Shay Totten on the 7days blog Blurt. Two of the employees - network administrator Andrew Matt and deputy chief information officer Darin Prail - lost their cars in the parking lot as the river rose but kept on working to assure that our servers were not lost. "We didn't know how much time we had," Matt said, "and our job was to save the servers."

The story continues: "The employees' quick thinking is being credited with saving the state's largest agency from disaster. AHS oversees not only the Department of Corrections but runs programs that serve thousands of Vermont children, families, senior citizens and individuals with disabilities. Within days, AHS was up and running again — its servers installed at an alternate site."

Two lessons:

  1. Vermont is lucky to have such dedicated employees who took action regardless of personal hardship and even though experts said that particular area wouldn't flood.
  2. State servers and the data on them don't belong in state. The more critical the application, the more important that it be running in a cloud with several replications and that it NOT be vulnerable to any catastrophe that might hit the state. The Internet makes the actual physical location of servers irrelevant to users. It's more important that they be well-connected in cyberspace than they be located physically close to their users.

I know from Mary's experience in the State Emergency Operations Center, which also had to evacuate the Waterbury complex, that their computer systems became unavailable just when they needed them most. Sure, you can argue that all of the servers should've been on higher ground; but you never really know what kind of catastrophe is going to strike. In an emergency communication and power outages may be widespread as well as physical damage to buildings almost anywhere. When a disaster strikes, you want your critical data and servers (as well as your less critical ones) to be as far from the impacted area as possible; that means out-of-state. It is routine in cloud computing for Amazon or Microsoft or Google or whoever hosts the cloud applications to replicate them in several different locations so you don't have to worry about out-of-state catastrophes either.

Another reason for outsourcing state computing to the cloud is to make it possible to handle spikes in demand without having to have huge amounts of expensive standby capacity during normal times. When the recession first hit and unemployment claims skyrocketed, the newly unemployed had to endure the extra pain of unresponsive or unavailable servers because of the sudden surge in claims. What is an unmanageable surge of volume to Vermont or even California is a blip that a hosting service like Amazon won't notice. They won't run out of server capacity; they won't run out of Internet access capacity; and they won't be affected by instate earthquakes, tornadoes, hurricanes, or floods just when you need them most.

Some people argue that critical state data – welfare records, for example – are only safe if hosted in state. That sounds right but it's wrong. The greatest threat to data is disgruntled or crooked employees. State employees know where the state's critical data is and may have a particular grudge against an individual or a department. Google employees are much less likely to have a grudge against anyone in Vermont or know anything about the specific nature of the data hosted on their servers. Moreover, the big hosting companies spend a fortune on both physical security and hacker-proofing. No state is going to be able to match that. Of course web-accessible applications need to be developed to be hacker-resistant; but that's true whether the hosting is in or out of state.

Employees of a cloud service are unlikely to go to the extremes our state employees did to save us from data disaster. But, since resources in a cloud can be replicated in several locations at little cost to the customer, such heroics won't be needed.

A final reason for moving state computing into an out-of-state cloud is cost. The big hosting companies have huge economies of scale which they share with their customers. Forward–looking companies have moved to cloud computing so that they can focus on what's best for their customers and products and leave the physical care and feeding of servers to those who do nothing else. Many investors I know won't look at a new company which plans to spend scarce capital on servers; inhouse servers are usually a waste of capital, an unnecessary risk, and too inflexible in dealing with unpredictable demand.

BTW, what goes for the state goes double for its towns. We don't know yet how many town records – computerized or otherwise – we're lost in Irene. A town size disaster is much more likely than a statewide one. And towns have even less resources to devote to servers and their proper backup and possible disaster recovery.

I understand that Vermont had to get up and running quickly and probably had to buy some new computers to do so. Nevertheless, one of the ways that we can learn from Irene and be stronger than we were before is to get our servers into the cloud and out of harm's way.

Related posts:

Owning Servers is Passé

Irene Lesson # 1 – Smart Grid Great for Power Restoration

Irene Lesson #2: Nothing in America is Shovel Ready – Until It Has to Be

Irene Lesson #2: Nothing in America is Shovel Ready – Until It Has to Be

"There's no such thing as shovel-ready projects," President Obama told the New York Times last year, reflecting on why the Stimulus Act didn't do what he had hoped it would do.

Less than two weeks after Tropical Storm Irene carved 166 gaps in the Vermont highway system and closed 450 mile of road to travel, there were only 33 closures and 340 miles had been reopened according to Transportation Secretary Brian Searles. More than twenty towns were initially cut off from the rest of the state; all were reconnected in less than a week. Rivers were wrestled back into their old channels – or into new ones. Temporary bridges were built immediately where the permanent ones couldn't be repaired. Miles of washed away roads were either rebuilt in place or newly carved higher up on the cliffs. Of course much of this work will have to be redone before winter sets in; more will be redone in the years ahead. When the construction is truly finished, we'll have a better and more flood-resistant highway and railroad system than we did before.

When we have an emergency, we get shovel-ready in a hurry. The new Guidelines for Instream Work from the website of the Agency of Natural Resources say that the agency "recognizes that recovery from this state-wide flood disaster will require extensive in-stream work… Conditions that existed prior to the flood may, in cases, not be desirable or even possible to recreate." In normal times it can take years to get permission to work in the water; it is almost impossible to get permits to relocate a stream. Now permission can be given on the phone if necessary. In another common sense move, the agency suspended limitations on operating hours for gravel pits and allowed closed pits to reopen. We need the fill.

From my experience as Vermont's Chief Recover Officer (Stimulus Czar), nothing is shovel-ready during ordinary times – just as the President said he learned. Like other states, we spent most of our allocation of highway funds repaving roads and making minor repairs that were in the existing right of way and didn't require permits. It takes more than 20 years to get approvals and fight your way through appeals, restraining orders, injunctions, and other delaying tactics before anything substantial can be built with either public or private money. If Congress appropriates more stimulus infrastructure money, as the President just asked, only states like Vermont with an ongoing emergency will be able to spend it on projects of any significance. The rest of the states are in danger of having to repave the same roads that they already repaved with the money from Stimulus #1.

All over the country there is infrastructure which needs to be built or rebuilt. You don't have to be a Keynesian to see that it makes sense for government to concentrate its construction spending during periods of unemployment, both to get better prices and to put people to work. You don't have to be an economist to understand that it is OK for government to borrow to build a new asset which will pay back the debt by improving the economy and that it is not OK for government to go into the hole to perform routine maintenance. So the President isn't wrong to propose more infrastructure spending; but he seems to have completely forgotten what he told the New York Times – we're not shovel-ready; we can't ramp up our infrastructure build during the current malaise; we're in our own way. The money he is asking for, if appropriated, will NOT get spent on long term projects. It will NOT generate the return necessary to pay the further debt the federal government will take on.

The President approvingly discussed Lincoln's support for the transcontinental railroad and the economic growth that came from knitting our resources together. He's right about that. But he didn't mention that, if the railroad has been proposed in more recent times, we'd still be fighting off appeals from the Pony Express whose business the railroads did destroy, from adjoining landowners who never thought that other people would be able to get to where they located, and from Luddites who believed that the pounding of locomotives would cause the earth to split and release Hellfire (I'm not making that up!).

There was a token mention of regulatory reform in the President's speech: "We're cutting the red tape that prevents some of these projects from getting started as quickly as possible." But he doesn't say how we'll do that. There is no mention of expediting projects in the fact sheet the White House supplied to go with the speech. The President can act on his own to reform the federal permission process and speed up projects and cut red tape. He could have announced some executive action without waiting for Congress; he didn't.

But Congress – including Republicans – should take him at his word. They should pass permitting reform as part of any appropriation for infrastructure. If we could cut approval of projects from more than twenty years to two; if we could stem the ability of anyone who doesn't like a project for almost any reason to impose almost indefinite delay on a project, we would have a major infrastructure building from both the public and the private sector beginning almost immediately. That would happen even without an appropriation. But an appropriation without breaking the permitting logjam and reforming the appeals process will neither create long term jobs and an improved economy nor justify even more debt. We can protect the environment just as well in two years of hearings as we can in twenty

This is, after all, a jobs emergency. We need a happy medium between the necessary rush and chaos of repairing emergency damage and the now nearly endless process of appeasing and fighting special interests to build anything at all. We can do that. We can be shovel-ready when we want to.

Related posts:

Jobs Rx: Make America Shovel Ready

Stimulus Interviews on NPR and Fox Business

America's Industrial Revival

Shumlin Appointment of Lunderville as Irene Czar Great non-Partisan Decision

WCAX just ran a story saying that they have learned that Vermont' Democratic Governor Peter Shumlin will appoint Neale Lunderville to head up Vermont's recovery from Irene. Neale previously served as both Transportation Secretary and Administration Secretary under Republican Governor Jim Douglas and headed up Douglas' first gubernatorial campaign. Assuming the WCAX story is correct (and they sound very confident of their sources), this is great news for Vermont. I know Neale well from when I served as Stimulus Czar and State Chief Technology Officer, both of which positions reported to him. There is nobody, absolutely nobody, better to do this job.

Neale will help assure that rebuilt Vermont is better than what we had before Irene; he'll think of long term consequences while dealing with the dreadful urgency of lives and institutions which need to be put back together quickly. He'll stay calm while working nearly around the clock (getting a few hours sleep on an office floor or couch rather than wasting time driving home is nothing new for Neale). Neale has excellent judgment and leadership skills. It's obvious from this appointment that he's respected by leaders of both political parties even though he was the Douglas Administration point in many tussles with the Legislature.

Obviously having been both Transportation Secretary and Administration Secretary is perfect experience. Much, but not all, of our rebuilding from Irene has to do with transportation infrastructure; another large segment has to do with getting state government itself back in business after the devastation of offices and computing equipment in the Waterbury flooding – the Agency of Administration is responsible for the functioning of state government and for some (unfortunately not all) of the state's information technology; Human Services has, at least until now, maintained its own computing capability and computers.

Legislators from both parties respect and trust Neale. He deserves much of the credit for the relatively smooth passage of Governor Douglas' last budget and many of the positive ways which the state dealt with declining revenues. Neale already has a good working relationship with many Shumlin administration leaders including now Administration Secretary Jeb Spaulding (State Treasurer during the Douglas years), Special Assistant Susan Bartlett (formerly Chair of Senate Appropriations), Commissioner of Buildings and General Services Michael Obuchowski (formerly a very influential leader in the Vermont House), and Secretary of Human Services Doug Racine (formerly Chair of Senate Health and Welfare). Neale and Finance Commissioner Jim Reardon were a very effective team during the Douglas years and they'll have a chance to work together again.

Sadly, some of the first comments I've heard on the appointment story have been negative for partisan reasons. "Shumlin should never have appointed someone who'll probably run for Governor someday as a Republican." "Neale shouldn't help Shumlin look good." Fortunately both Shumlin and Lunderville are doing what's best for the state and leaving partisanship aside for another day. We all have a stake in Vermont's success – doesn't matter who gets the credit for it.

A question I’ve heard is “why do we need another bureaucrat to coordinate all the other bureaucrats?” From my stimulus experience, I know that we do. State and Federal Government both operate in silos of (un)responsibility. In a crisis those silo walls need to be broken down, rules need to be changed fast, turf-fighting eliminated, cooperation made mandatory. In the short term, according to my wife Mary who’s representing the Red Cross in the State Emergency Operations Center, needed coordination, cooperation, and imagination is happening. But, when people go back to their day jobs, the tendency will be to step back into the comfortable silos. I’m sure part of Neale’s new job will be taming both federal and state organizations to assure that we do the right thing regardless of whose toes get stepped on or the way we’ve always done things before. There will be opportunities to rebuild transportation, communication, energy, and housing infrastructure in synergistic ways so that the new whole is better than the old parts. It takes a czar with the confidence of the Governor and the Legislature and State workers to make that coordination happen.

I sure hope the WCAX story is right. It's very good news for Vermont; couldn't come at a better time.

Related posts:

The Changing of the Guard – Shumlin's A Team

My New Gig

Irene Lesson # 1 – Smart Grid Great for Power Restoration

At 1:36PM yesterday the lights went out for 1103 members of Vermont Electric Coop (VEC) in South Hero, including us at our summer place on the Lake. No surprise; tropical storm Irene was raging up Vermont. No need to call VEC in a panic, though; I could see immediately from their website that they knew about the outage including the exact number of customers affected. VEC was the first utility in Vermont to install smart meters and they know immediately when a meter goes silent. Unlike other utilities who haven't installed smart meters yet, VEC doesn't have to wait for customers to call in. Equally important, they can tell from their monitoring system almost exactly where the break is BEFORE the trucks roll so the linepeople can go straight to the problem rather than having to search along the road or through the woods.

At 8:15PM with the wind still raging, the lights came back on for most of us. It's likely some intrepid person went up in a cherrypicker in the storm and made a repair (thank you!). Immediately the outage website showed that 199 South Hero customers were still without power; something must have happened downstream from the original break. Without smart meters, the crews probably wouldn't have known about the second break for quite a while since the people who were cut off by it would have just assumed that the original problem hadn't been fixed yet and wouldn't have called in again until they lost patience or saw their neighbors' lights on.

Within two years most Vermonters should have smart meters thanks partly to a $69 million stimulus grant awarded to Vermont utilities. We'll probably be the first state in the nation to have a near 100% smart grid. Outage management is only one of the many benefits of adding electronics to the power grid that we'll see. But yesterday and today outage management is a very large benefit indeed. Kudos to VEC for installing smart meters for better customer service even before they got a grant and helping to show the whole state what the advantages of a smart grid are.

Related posts:

House Flatlines – Smart Grid to the Rescue

What's a Smart Grid and Why Does It Matter?

What The $69 Million Smart Grid Grant Will Mean to Vermont

Energy for Jobs – Vermont Version

Program: Energy for jobs

Idea: We can make Vermont attractive to manufacturing with a combination of our great workforce and energy which is cheap (and clean) by East Coast standards. Manufacturing provides jobs for all skill levels and is an engine for economic growth in general. Low cost energy also makes Vermont more affordable.

The Five-Step Subsidy-Free Program: (unique Vermont advantages in italics)

  1. Canadian hydro power. Work with Canadian producers to have electricity routed through Vermont as it goes south. Pre-permit to take advantage of New Hampshire delays on approval. Part of the deal is flexible access to part of the load at attractive rates. We're a border state.
  2. Natural gas. Pre-permit both the expansion of Vermont Gas south from Burlington and a corridor for Marcellus Shale gas supply from Whitehall to Rutland and eventually beyond. Create standard permits for gas cogeneration giving both heat and low-cost electricity. Look for private investors (EB5?) to build a good-sized natural gas to electricity plant in Rutland area. Switch the state fleet and buildings, schools and school buses along the pipeline route to natural gas (helps incent pipeline and fuelling station builders without subsidy AND saves operating expense and reduces CO2). Buildings can do cogen as well. See if Interstate corridors can be used for NG pipelines to the rest of the state. It looks like NG will be a low cost direct energy and electricity source for a long time to come. It's domestic. It's much cleaner than oil. We're near the Marcellus Shale formation.
  3. Off-peak electricity. Use the Smart Grid to offer great deals on way off-peak electricity to businesses and residences. Clever manufacturers may save their energy intensive processes for night and displace other fuels; citizens can save money – perhaps even by plugging in cars off-peak as prices for plugins fall (subsidies are cheating!). Increasing off-peak demand and flattening the load curve lets Vermont power companies increase their electricity purchases at low base load rather than peak rates and further brings down the cost of electricity. Vermont is on track be the first state in the nation with full Smart Grid coverage.
  4. Nuclear power. Allow the Public Service Board to move ahead on Yankee's relicensing while planning to replace it in ten years with a much more modern and efficient plant, which incorporates all the lessons learned in nuclear power. We have a paid-for nuclear site with needed infrastructure and extremely low current cost of electricity and a distribution grid radiating out from it.
  5. Energy efficiency projects. Direct all state "energy efficiency" dollars from whatever source to projects with actual dollar and cents benefits to taxpayers and with paybacks less than 10 years. Hire private businesses to do the work using competitive bidding – but don't subsidize them. This means making state building, vehicles, and state-supported resources like schools and affordable housing energy efficient (see yesterday's post on Barre project). Insulation, solar hot water and geothermal would definitely be in; solar photovoltaic would be out unless and until cost effective. We have biomass, wells and ponds for geothermal heat pumps, and unshaded rooftops for panels for solar hot water.

 

Our location, work force, existing nuclear plant, Smart Grid head start, and rural environment can be unique advantages. It's up to us, all of us, whether we take advantage of them or not. Good thing for our legislature to concentrate on this year.

 

Related posts:

 

A Good Use of Our Tax Dollars for Renewables

How to Increase Your Electric Bill to $630 per Month

Natural Gas Disrupts the Energy Industry

We Need to Use More Electricity

How to Increase Your Electric Bill to $630 per Month

The opening of Vermont's largest solar farm last week demonstrates conclusively what a terrible bargain solar photovoltaic electricity at the current state of the industry is for Vermont. If we paid as much for all of our electricity as we pay for the electricity we get from the Chittenden County Solar Partners project and similar projects around the state, the average Vermont residential electric bill would go from just over $100 to over $600 monthly.

As Art Woolf wrote on Vermont Tiger, utilities are required by law to buy electricity from this and other projects at $.30 per kilowatt hour; this is called a feed-in tariff. This is not only twice the average RETAIL cost of electricity in Vermont; it is more than five times the average wholesale price that Vermont utilities paid for electricity in 2010, according to ISO New England which manages regional power sharing. These numbers were well-reported by the media as were David Blittersdorf's comments that the project would not have been built if the subsidy were lower. Blittersdorf is a cofounder of Chittenden County Solar Partners and Founder, President, and CEO of All Earth Renewables, which supplied the solar tracking arrays to Solar Partners.

What has not been reported in this context is the other subsidies this project received. The project is eligible for a 30% federal tax credit, which the Stimulus Bill allows to be collected upon project completion as a grant. The project is also eligible for a 30% Vermont tax credit (which Solar Partners elected to take as a 15% grant instead). In other words, grants and credits from public funds cover 45% to 60% of the depreciable costs – equipment and labor – of projects like this one in Vermont. When the Vermont Clean Energy Development Fund, of which I was then a member, held hearings on the Vermont tax credits, prospective developers told us that they would not be able to build these projects without the Vermont credit even though they would get $.30/kwh for twenty-five years from the utilities plus the federal credit.

Since sunlight is free, the cost of solar power is determined largely by the capital required to build the facility. If the developers didn't receive capital subsidies, then they would have to sell their generated electricity for more to cover these costs. If you take away a 60% subsidy, the cost to the developer goes up 150%. (example: with a 60% subsidy, a million dollar project costs the developer only $400,000. Without the subsidy the developer has to put in $600,000 - $150% of $400,000 – more).To recover that money, the electricity has to be sold for 150% more - $.30/kwh becomes $.75/kwh. BTW, the Vermont subsidy fund, which was paid by Vermont Yankee, is depleted and federal capital subsidies for many forms of energy are likely to disappear in budget cutting. Astute readers will point out that this electricity is already costing us $.75/kwh since our money - or money borrowed in our names- was used for the capital subsidies. As a reality check, Germany, which has no equivalent of our tax credits but has as little direct sunlight as Vermont, until recently paid about US $.75/kwh as a feed-in tariff. So let's look at the math of what this does to residential electric bills in Vermont.

Residential rates for electricity (not counting the mandatory energy efficiency charge) now average about $.15/kwh. Utilities pay about $.06/kwh for electricity at wholesale on the average, so $.09/kwh of what we pay goes for transmission, administrative expense, maintenance and utility profit. Let's assume that $.09 remains constant (conservative assumption) no matter what the cost of the wholesale electricity. If the utilities had to pay $.75/kwh, they'd have to charge us $.84/kwh. According to the Vermont Public Service Department, the average Vermont residence uses 750 kilowatt hours of electricity per month. Cah-ching – at $.84/kwh that's $630/month! At that rate do you agree with Governor Peter Shumlin, as quoted on vtdigger.com, that the project is "a small example of how we make our planet sustainable and livable"? Good thing for us it's only a small example. And good thing for us you can't get solar energy at night or much of it during the winter; we won't really get to $600 plus electric bills any time soon.

The solar subsidies are an example of how a politically well-connected industry can divert public money to its bottom line and use the power of government to force consumers to buy an over-priced product. Not only was the power of the state used to set a rate for solar-generated electricity at 500% of market price; not only were taxpayer monies used to pay direct subsidies; but the utilities are required to buy this over-priced power; and we are forced to buy from our local utility. The subsidies for corny ethanol are another example of political economics; as are prior subsidies (which exist still) for wind, oil, gas, coal and nuclear power. The solar subsidies are a particularly local and egregious example but are not unique.

This is not a partisan issue. There were Republican as well as Democrat office holders at the ceremony opening the Chittenden County Solar Power project. Business people who supported Republican Brian Dubie for Governor as well as supporters of Democrat Peter Shumlin built subsidized projects in Vermont. A literal reading of the position of some Republican US House members would be that removing the tax credits for solar energy is a forbidden tax increase.

A sensible energy policy and an affordable economic policy are dependent on avoiding public laws passed purely for special interest – even if those interests paint themselves green.

A few (dubious) counter arguments:

"Someday the cost of electricity from traditional sources will be even more than $.75/kwh so it's important that we build this solar capacity now."

Answer: This solar plant took about a year to build. The price of solar panels is coming down. In the unlikely event that electricity from Hydro Quebec, our remaining nuclear sources, and natural gas increases tenfold in price in our lifetime, that will be the time to install solar panels. In the much more likely event that the price of solar comes down enough to make it competitive without subsidy or mandate, let's go for it then.

"We need to replace Vermont Yankee."

Answer. We could just NOT shut it down. However, if we do, we'll replace it with other nuclear and hydro (already negotiated). We can't afford the cost of replacing it with solar. And what would we do at night and during the winter?

"These projects create jobs."

Most solar panels used in the US are made in China. None that I know of are made in Vermont. Some work was done in installation and the tracking apparatus is assembled by AllEarth Renewables, but there aren't many jobs involved in running a solar plant. On the other hand, high energy costs definitely drive jobs out of state and make it harder for workers who do have jobs to pay their bills.

"Any price is worth paying to avoid carbon emissions."

Answer: Look at the chart below from ISO-NE to see how carbon dioxide is NOT created by Vermont electricity production. The little bit of oil used (should be replaced by natural gas) is for short duration peaks that solar won't help with but SmartGrid may well eliminate.

"We need to reduce our use of oil from unfriendly places."

Answer: Agreed. And one very good way to do that is to replace oil used for heating and transportation with electricity. That displacement isn't going to happen if we jack up the price of electricity to subsidize the solar photovoltaic industry.

Full disclosure: a few years ago, I put in some solar photovoltaic panels. I got about 10% of the price back from various state and federal programs (incentives were much lower than they are now) and I currently get a credit against my bill of between $.05 and $.16/kwh for what I generate. I knew the panels were no more economically justified – even with incentives – than our vegetable garden, which grows the world's most expensive horseradish; but I wanted to learn about them and I don't like where my money goes when I buy oil (I use electricity for geothermal heat so I am displacing oil). But I would've bought the panels even without the incentives. I got paid for what I was going to do anyway. Should I have refused the incentives? My rationalization in applying for them is that they are funded by my tax dollars so I might as well get them back.

Related posts:

Getting Less Than We Paid for from Efficiency Vermont

Scale Matters

We Need to Use More Electricity

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