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Wednesday, Sept. 24, 2008

OUR PLANET EARTH

You know IG makes common sense: a re-energized U.S.


What if nations around the world were to adopt intelligent systems that would revolutionize the way we produce and consume energy?

These would be energy systems that would dramatically cut carbon-dioxide emissions, promote the use of renewable energy, provide millions of "green" jobs that could not be outsourced, encourage automakers to develop new generations of "clean" vehicles, and reduce by billions of dollars annually the amount of money nations spend on overseas oil.

I have always believed that — given the right policies, technologies and political will — as well as a bit of luck, or perhaps bad luck such as an international environmental disaster or a worldwide energy crisis, energy-guzzling nations will change the way they produce and consume energy.

The challenge is to get engineers, politicians and top corporate warriors to recognize that there is little choice but to change — and that change can be a win-win affair.

That's where Jay Marhoefer comes in.

Marhoefer is an energy-business consultant, IT executive and lawyer, whose 25-year career has focused on energy and information technology. He is also the author of "Re-Energizing America: A Common-Sense Approach to Achieving U.S. Energy Independence in Our Generation" (Wingspan Press, 2007).

Last month, I came across Marhoefer in the summer issue of Natural Resources and Environment, a journal published for members of the American Bar Association.

His article, titled "Intelligent Generation: The Smart Way to Build the Smart Grid," begins with the premise that the United States will eventually have to give up its present energy systems to reduce greenhouse-gas emissions and end its vulnerable dependence on foreign oil.

Marhoefer believes that "Intelligent Generation" can reduce oil use while optimizing production and consumption of energy.

IG would enable households to "acquire energy from both conventional and renewable sources of power when it is cheap or free, store energy acquired during periods of excess capacity, and use it later when it is most valuable," he writes in the NR&E journal.

For this to work, consumers will need three "personal-scale elements": renewable-energy sources, such as micro wind turbines and photovoltaic solar panels; energy-storage devices, such as batteries or hydrogen; and, computerized management of production, consumption, and storage — in other words, a microprocessor-based optimizer networked with similar individual systems, according to Marhoefer.

For consumers traveling where no public transportation is available, they can use plug-in hybrid-electric vehicles (PHEV), fuel-cell cars, or a combination of the two, namely plug-in hybrid-fuel-cell vehicles (PHFCV) that run on electricity or hydrogen.

Some readers might already be familiar with the concept of "smart grids" that coordinate energy use and distribution. These systems often incorporate net metering that enables customers — those who generate their own electricity using solar panels or wind turbines — to sell their surplus power back to the utility.

Intelligent Generation takes the smart grid a step further; it allows users to produce, store, consume and share energy at the lowest possible cost. Users would be able to "pool the data from their systems with an Internet-based aggregator, effectively creating a virtual co-op. By sharing their supply, inventory, and demand information with each other, each IG owner is able to schedule acquisition of electricity and natural gas from the utility at times when market rates are lowest," writes Marhoefer.

I know. All this sounds a bit far fetched, but it's worth considering for a couple of reasons.

First, the U.S. residential sector is a major source of carbon-dioxide emissions and is highly inefficient. "For every kilowatt-hour of electricity actually consumed by American households, our current system wastes the equivalent of more than 2 kilowatt-hours," writes Marhoefer.

Second, "because individual use of gasoline accounts for about 40 percent of total petroleum consumption (in the U.S.), the best way to end dependence on foreign oil is to evolve to a fleet of petroleum-free vehicles," he adds.

However, before we can move to the elegance and efficiency of IG, we need to get rid of our assumption that energy must be centralized and large-scale.

"Conventional wisdom has always dictated that economies of scale are the sole way to lower costs. But given the monopolistic or near-monopolistic nature of the energy sector, the opposite is true. Because the current market pits individual consumers against corporate goliaths, inefficiency is not discouraged, something wholly counterintuitive to the basic rules of a free-market economy," says Marhoefer.

So why would the goliaths accept a system that takes away their monopoly? Wouldn't they try to undermine support for Intelligent Generation? I asked.

"When looking at the potential for obstruction, one should also examine the potential proponents. In this case, electric utilities, environmental groups, IT providers and perhaps even automakers would want to see Intelligent Generation implemented. For electric utilities, for example, Intelligent Generation does two things: It shifts much of the monetary burden for implementation of new, green-generation capacity to individual taxpayers (who will do so to take advantage of the long-term, after-tax savings on energy cost); and it provides a once-in-a-generation opportunity to enter a massive new market — the automotive-refueling market (because of plug-in hybrids)," he explained by e-mail.

"That said, I don't think it's a bad idea at all to mollify some of the potential obstructionists, particularly oil companies. In my book I propose a floor on oil prices for petroleum produced in North America (Canada and Mexico are our first- and third-largest foreign suppliers). This would protect current investments in higher extraction-cost technologies as we reduce overall petroleum demand through our migration to a fleet of petroleum-free vehicles," Marhoefer said

I also wondered if he had given any thought to applications in countries other than the U.S.

"I have indeed. There is a broad range of possibilities, depending on the sophistication of a country's existing energy infrastructure. In a sense, emerging countries that do not have the type of well-entrenched infrastructure of the U.S. or Japan may be the best candidates, as they essentially have a 'blank slate.' For a variety of reasons, Intelligent Generation may be more attractive to China and India than it would be for the U.S. and countries of the European Union," he said.

Marhoefer thinks Japan in particular could greatly benefit from adoption of Intelligent Generation network solutions.

"Japan is a prime candidate for this technology, since it imports almost all of its energy. As Japan focuses more on renewable energy sources, I believe it will find that decentralized networked management of them will improve efficiency. Japan has also been a leader in fuel-cell technology, as evidenced by the work at Tokyo Electric Power Company and Honda. I see fuel cells as the '2.0' implementation of Intelligent Generation in the next four to eight years," he said.

Marhoefer's proposal calls for dramatic change, which means some will oppose it no matter how good or necessary it might be. For others who are more open-minded, he offers several reasons why we should not allow today's reality to defeat the vision of Intelligent Generation.

"First, the technologies of Intelligent Generation inevitably will reach parity with fossil fuels, and likely in the relatively near future. The cost of renewable technologies will continue to decline as fossil-fuel prices continue to rise; it is widely expected that these two trends will intersect in the next five to 10 years," he writes.

"Second, we can reduce the net cost of the system and accelerate adoption through political means," he notes, explaining that tax-code changes can enable individuals and businesses to write off some of the expenses of adopting Intelligent Generation at no cost to the government, since tax credits do not take money out of government coffers.

For me, the primary appeal of Intelligent Generation is that it democratizes energy, ensuring that consumers are active participants in choosing the energy they use, when they buy it, and when they use it.

"It is a well-known principle of economic theory that in competitive markets with an efficient, free and complete flow of information, sellers receive no excess return beyond the cost of the capital employed," notes Marhoefer, citing the writing of Hal Varian, the chief economist of Google. "Yet within the energy sector, millions of potential participants in the market — residential consumers — have little or no access to information, and thus little if any impact on prices."

Until now, energy providers have held all the information and consumers have had no choice but to pay the going rate for electricity or turn off their appliances. As for gasoline, we can either pay and drive, or walk.

With Intelligent Generation and other systems that give consumers information and choices, knowledge in the hands of consumers will put power at their fingertips, literally.

For more information, visit www.re-energizingamerica.com Jay Marhoefer can be reached at jay@re-energizingamerica.com Stephen Hesse welcomes questions and comments at stevehesse@hotmail.com


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