Redesign the Paradigm

In the first blog of this series, Problems in the U.S. Critical Sectors – Monetary & Banking, Energy, Healthcare, Food Production, and Government – An Analysis the major economic sectors critical to the survival of a modern day society were identified and their long term problems addressed. These sectors include: monetary & banking system, energy production, healthcare, food production, and water distribution. It was also noted that a stable and reliable government free of corruption is necessary to ensure proper legislation and regulation.  Finally, it was pointed out that if problems in these sectors remain unresolved they can have serious long term consequences for our economy even changing the lifestyles that Americans have grown accustomed to.

In the second blog, Problems in U.S. Critical Sectors  - Monetary & Banking, Energy, Healthcare, Food Production, and Government – The Cause problems in our critical sectors were identified as residing in a significant resistance to change from those who seek to maintain the status quo and the massive profits and wealth it generates for them. The underlying reasons for the resistance to change was also identified as an age old belief system which promotes selfish individual / group gain and achievement over all else. This philosophy has little regard for long term public or environmental consequences. In today’s world its mantra is “economic growth at any cost”, and it favors and rewards those who strive for profit maximization, wealth generation, and the influential connections to political power that ensure ongoing control. Ultimately it is greed, avarice, selfishness, and mammon (love for money above all other things). This philosophy is prevalent in many of the country’s most wealthy and influential. Their businesses and special interests constitute many of our nation’s largest investment groups and Multi National Corporations (MNC’s) and have considerable sway over our country’s critical sectors.

Societies have been warned throughout the ages by their greatest teachers and spiritual leaders of what would happen if too much wealth and power were concentrated amongst those who embrace this philosophy. Let us now consider the effects the past actions have had on our critical sectors and how the American public is faring.

Monetary System:

• U.S. national debt and lack of fiscal responsibility continues to rise making our international debtors lose confidence in our ability to pay.
• Effect – International debtors are already shying away from U.S. treasuries and looking for different currencies other than the dollar to conduct international commerce. If this keeps up expect a devaluation of U.S. treasuriesand the dollar
• Effect on main street America – foreign goods (big box store products) become more expensive and Americans experience more inflation
• The FED is caught between trying to stimulate the ec onomy with Quantitative Easing (QE) or printing money and buying financial assetsfrom large banks to increase their reserves combined with artificially keeping interest rates low, and running the risk of devaluing the dollar by printing to much money and increasing inflation by keeping the interest rates artificially low for to long.
  • Effect – The FED will likely continue the current practice of” printing money” (actually its all electronic transfers now). Large banks will continue to influence / pressure the FED to keep supplying them with free money to invest with because it is profitable for them to do so. This outcome, while beneficial for large banks and MNC’s, if continued only further lowers international debtor confidence which further devalues the dollar.
    • Note – this money is being spent on large MNC’s and in financial markets i.e. derivatives, it has not been used as was originally intended to relax credit for small / medium businesses which are the primary drivers of Gross Domestic Product (GDP) and job growth.
  • Effect on main street America - foreign goods become more expensive thus increasing inflation.

Financial /Banking System:

• Wall Street financial institutions increasingly invest in derivatives and other financial instruments that don’t contribute to GDP.  One in every three dollars is tied up in exotic financial investments like derivatives (hedges or bets on a derived value), this is essentially pulling money out of the economy that could be better used manufacturing, innovation, etc. They are also limiting investing to what they believe are safer investments – large MNC’s with global exposure in the growing economies inAsia.
  • Effect – Our largest banks virtually ignore startups, small, and medium sized business that are critical to job growth and who provide the bulk of taxable corporate revenue necessary in paying down the national debt. This has created credit restrictions to small / medium businesses which limit their expansion capabilities and our country’s job growth (85% of jobs).
  • Effect on main street America - Fewer manufacturing and other skilled labor jobs as large MNC’s export them overseas. Continuation of stagnant wages experienced in real world dollars since 2000. Fewer opportunities as growth slows and recession continues (unless you actually believe its over for most Americans)

Energy production:

• Readily available fossil fuels are becoming scarce. Extraction processes are increasing in costs and it is requiring more oil to
  extract resources. Some extraction processes are damaging the environment and contaminating water supplies.
  • Effect – Barriers to entry to protect profits from the fossil fuel industry for alternative energy resources guarantees that no
    significant funding or subsidies will become available (fossil fuel companies still enjoy subsides despite a decade of record profits). Global world production has plateau in the past 4 years while demand continues to increase.
  • The effect on main street America – Increasing energy costs at the pump and in electrical bills.  Increased inflation since almost everything has to travel hundreds of miles to get to its sales destination. Consider food which travels almost one thousand miles from processing plant to grocer. Fracking and other similar approaches contaminate
    local water supplies.

Healthcare costs:

• Insurance Companies are increasing premiums and stripping away benefits in response to rising healthcare costs in order to meet profit expectations. All this while industry executives enjoy some of the highest salaries of any industry. Billing practices have become convoluted and confusing for anyone not in a billing department.  Simple surgeries or routine testing can cost
  thousands of dollars.
  • Effect – Medical bills represent 2/3 of U.S. bankruptcies and this includes people with “good Insurance”. Huge lobbying
    efforts, campaign contributions, and sympathetic media outlets successfully act as deterrents to real non profit healthcare insurance companies or the creation of a national insurance program from which they would have to compete against.
  • Effect on main street America – Rates continue to rise while coverage becomes limited. As more baby boomers
    reach retirement age requiring additional expensive treatments for chronic diseases this problem is expected to amplify.
• The pharmaceutical industry’s concern is to provide long term expensive treatments. The public can expect few if any cures despite hundreds of millions from charities and the government for research. The toxic nature of long term drug use ensures future disease requiring still more prescription drugs. The FDA is financially supported by the very industry it is supposed to monitor.
  • Effect – The U.S. is the most medicated country in the world paying more than three times the average of all other developed countries. The medical system revolves around expensive patented prescription drug use where health and preventive measures continue to take a backseat to profits has the U.S. ranked near the bottom of developed countries in Healthy life expectancy (HALE).
  • Effect on main street America – Prescription drugs and insurance costs continue to rise. Prescription drug use
    in the population continues to rise increasing the need for more drugs and lowering the populations overall health.

Food production:

• Subsidized food production makes our food cheaper than at any point in human history, but it is processed, refined, genetically modified, and laden with additive levels of salts, sugars, fats, and additive preservatives and other compounds.  Industrialized
  farming is rapidly depleting nutrient value of soil requiring ever more petroleum based fertilizers. Four crops – corn, soy, wheat, and rice make up the bulk of all U.S. food and is becoming largely genetically modified and homogenized lowering crop resilience to disease.
  • Effect – one third of the country is obese and that figure is growing. Consumption of current processed food creates obesity related illness and expensive chronic diseases such as heart disease, stroke, cancer, etc. to rising healthcare costs which drive up the cost of healthcare and contribute to the nations debt.
    • Note – Food profit margins are low. To increase profits it is necessary for the population to consume more food. Obese people generally eat more. While this is good for the food and pharmaceutical profits, this cycle is also contributing significantly to rising healthcare cost which is approaching 2.5T per year. This in turn contributes to national debt as Medicare and Medicaid costs increase.
  • Effect on main street America – Healthcare insurance and prescription drugs become more expensive. Population (including children) are getting more obese and unhealthy (just look around). Increased consumption of addictive processed foods lowers nutrition value necessary to maintain healthy immune system requiring more trips to the doctor and more drugs.

Government:

• Politicians remain in gridlock over what to do about the rising national debt; despite recent posturing and attempts at compromise they remain more concerned with gratifying wealthy contributors’ and getting themselves re-elected. Both parties realize that tax revenues need to increase and spending needs to decrease but lack the political will to challenge party lines, contributors, and special interests.
  • Effect – Raising taxes and / or removing Bush era tax cuts and the cessation of three unproductive wars will be met by considerable resistance from Republicans. Decreasing the size of government and trimming endowment programs (Social Security and Medicare) even if only through efficiency measures will be met with considerable resistance from Democrats.
    The result is ongoing political games and kicking the problem down the road. This is degrading the confidence of international debtors in the U.S. ability to deal with fiscal responsibility causing some to seek out alternatives to the dollar
  • Effect on main street America – If the dollar experiences rapid devaluation inflation severely impacts all but the wealthiest of American families who have less money tospend in the economy. Less spending means prolonged recession.
• Legislation is being determined and in many cases written by lobbyists. Campaign contributions ensure that legislatures will champion contributors causes. Large Multi National Corporations and other special interests view the millions they spend on these endeavors as investments that provide incredible returns. The populace has no organized way of matching or countering these expenditures.
  • Effect – Corporate and special interests are determining the course of the country over the interests of the American people. The more money a group has the more favorable legislation they will receive regardless of the long term outcome for the public. New revolutionary technologies are shelved to protect existing industry profits,
  •  Effect on main street America – Polarization of wealth, stagnate wages, environmental degradation, disenfranchisement, and a loss of faith in government.

The overall effect on our critical sectors if we continue on our current course will be a continuation of the status quo and these unsustainable systems even to the point of collapse in order to protect profits and investor wealth. Our critical sectors are more than profit maximizing engines; they are the foundation of our information age society and are the staple of the lifestyles we are accustomed to. Individual and group selfishness doesn’t have to lead the U.S. into an era of decline. I agree with Warren Buffet – “our best days are ahead of us, perhaps not on this current trajectory.”

It is time to evolve our thinking beyond personal gain and include our fellow man, our communities, and our environments. Capitalism has propelled us to great heights, but current paradigms are now disproportionately benefitting a few to the expense of the overall country, we can make it work for all of us again it just involves a restructuring of the objectives. Those who are benefitting from the current systems can continue to do so, but for many who no longer see the benefits reaped by a few there are other options. In the next blog we will explore a few such options.

There are four major economic sectors that are critical for the survival of a modern information age society. These sectors include: Monetary & banking system, energy production, healthcare, and food production /water distribution. It is also necessary to have a stable and reliable government to ensure appropriate legislation and regulation.

There are growing problems in these sectors and it is spilling into other sectors. If left unresolved these problems could have serious long-term consequences to the U.S. economy. Hindrances to their resolution consist of a growing lack of political will to deal with them and a significant resistance to change from those who seek to maintain the status quo and the profits and wealth it generates for them. These influential individuals and special interest groups constitute many of our nations largest Multi National Corporations (MNC’s) and wealthiest investors.

These large MNC’s and investor groups believe they have the expertise, resources, and global exposure necessary to ride out any scenario
and with their resources they could very well be right – but what about the other 99% of Americans?

Problems in our critical sectors will have to be dealt with sooner or later. If handled proactively, it will be possible to make the changes less painful. If continually postponed, they will have to be dealt with reactively and in a state of crisis. It is unfortunate that in our society critical issues are generally not addressed until they approach a crisis mode. The population is easily distracted by the various media outlets with the issues that are of lesser relevance but has more emotional impact.

Monetary & Banking Sector -  Problems in this sector begin with the U.S. centralized banking system and way it increases the money supply through government bonds and fractional reserve banking. Debt is inherent in the very nature centralized banking  and the accumulating interest is contributing in an exponential manner to the nation’s rising debt, which is currently $15.0 trillion, and 100% of GDP. What is significant here is that our rising debt means our international debtors, if they lose confidence in the U.S. ability to manage its debt & pay interest – they will purchase less of our debt instruments i.e. treasuries. The Federal Reserve or FED will then be forced to print more dollars to cover government spending – which will lower debtor confidence even more – thus creating a cycle.

The threat here is that this loss of confidence extends to the dollar – resulting in a devaluation of the dollar and consequently our treasury bills. This scenario can also give rise to inflation. Our international debtors hold approx 28% of the U.S. debt – purchasing has already slowed or stopped altogether in China, Russia, and some of the oil bearing countries.

What does this mean for the U.S. citizen – If the dollar becomes devalued the $1.5 T worth of goods the U.S. imports each year become more expensive. More expensive goods means inflation.

In addition to rising national debt is U.S. financial markets preference towards financialization, which primarily involves derivatives investing – derivatives tie up money which could be better spent in the real economy. There is $600T worth of derivatives worldwide, $433T are interest rate contracts and swaps ($223T in U.S.). Most of this amount is notional meaning thankfully it will never come due. The scenario here starts with the devaluation of the dollar and treasuries occurring from a loss in confidence; this then requires the FED to raise interest rates / treasury yields in order to continue attracting investors and results in interest rates going up as well. Consider what will happen if interest rates, which currently are being held low artificially by the FED, raise faster than expected and just a fraction of these interest rate contracts get called due.

The FED is using something called quantitative easing to keep interest rates low. Explained simply, the FED establishes very low short term interest rates, then prints more money. It uses that money (created from nothing) to buy government and corporate bonds from banks and other financial institutions so they have more money to invest. The problem here is that it can cause inflation if too much money gets flooded into the system and printing more dollars also devalues the dollar. This risk is compounded if the FED has to raise rates to attract investors. Note – There is also the assumption the banks and financial institutions will invest in main street (small and medium size business loans ) as opposed strictly to Wall Street financial investments, this has not and is not occurring at expected rates.

Think of interest rate contracts / swaps as hedges or as insurance policies against unexpected interest rate adjustments. Now consider our four main banks, they have over $188T of interest rate contracts on their books, any significant movement in interest rates could mean another “too big to fail” scenario. Requiring even more money be printed, once again lowering debtor confidence.

Energy –  Energy sector problems involve a combination of diminishing access to natural resources (i.e. fossil fuels), production capacities reaching their limits, costs of production increasing as diminishing resources become more difficult to extract, and
increasing global demand rapidly outpacing supply. Using oil as an example, production levels appear to have plateau at around 84,500,000 barrels per day which may be indicating a potential global peak oil scenario, while demand from developing countries in Asia is rapidly increasing to support their growing middle classes. These are only a few areas remaining in the world with untapped easy to access surface oil fields, the remaining untapped fields will require greater production costs and increasing amounts of energy (oil) for extraction and processing. Consider the difficulties and energy requirements for deep water drilling and oil sands / shale production.

As production capacities peaks and demand outpaces supply oil prices will rise. Oil price increases equate to inflation since all consumables have to travel hundreds of miles to get to their final destinations. Oil is also used extensively in manufacturing processes – which also contributes to higher prices at the base component level.

Renewable Energy as yet represents only a fraction of our supply(8%), and will require heavy infrastructure costs and better efficiencies to become a viable alternative. Biofuels that could be used to ease some the oil demand as yet represent only 3% of consumption. I’m a big fan of renewable energy – but it can at best supplement oil over the next decade. There is also a lack of political will to seriously push alternative fuels like cellulosic ethanol, algae based bio diesel, or high efficient batteries or capacitors for electric cars. All of which require significantly more research and infrastructure development costs, something we will have difficulty affording in the future.

Resistance is very strong and well organized in the fossil fuel energy sector driven multifaceted lobbying efforts and campaign contribution. These corporations stand to profit greatly from higher prices regardless if demand is met, but this attitude and the subsequent higher costs in gasoline and electrical bills is not going to help the rest of the economy or the American people.

Healthcare – Escalating healthcare costs in the Unites States are at $2.5 T and rising, that’s over $8000 per person. $2950 is the global average among the developed countries. Cost drivers include expensive advances in medical technology and associated new equipment, cumbersome administrative expenses, new generations of patented prescription drugs, and of course profit taking in every sector. The biggest expectation of future costs increases will come from aging baby boomers accompanied with growing rates of obesity and chronic disease.

Possibly the greatest costs driver is the pharmaceutical industry’s ongoing concentration on expensive patented long term drug treatments as opposed to actually providing cures, and the lack of any real interest in preventative care. In addition, almost all drugs have some level of toxicity which means that long term exposure generally results in another round of future disease requiring additional treatments. While this may represent a lucrative profit model for pharmaceutical companies it is the principle driver behind the rising healthcare costs of U.S. and if left on its current trajectory could potentially bankrupt the country. Powerful lobbying pressures ensure that there is little if any political will to address these rising costs.

Do U.S. citizens benefit from these rising costs? Consider that the U.S. ranks near the bottom of the 19 developed countries in Healthy life expectancy (HALE), The U.S. is dead last in the age-adjusted amenable mortality rate before age 75 category, which is a strong indicator of the effectiveness of treating disease. To make matters worse, the US appears to be slipping even further behind the other countries despite its increasing spending and being the most medicated of developed countries.

Food Production – Food production represents problems on a number of fronts.   The U.S. is better able to provide its population with readily available low cost food supply than at any time in history. This is possible due to very efficient large scale farming and the U.S. Farm bill which subsidizes the country’s primary crops – corn, soy, wheat, and rice. These crops can then be sold to food producers for less than costs of production. Food production companies then utilizes these four crops and a variety of cheap chemicals to create the majority of the food we enjoy today.  Unfortunately, in order to achieve the mass production efficiencies necessary to keep costs as low as possible these types of  food  are heavily refined and processed, thus loosing their original nutritional value. They are also laden with addictive levels of fats, salts, sugars and numerous chemically based additives.

Long term consumption of these food products is causing an obesity epidemic and contributing to chronic diseases.  Chronic disease such as heart disease, stroke, and cancer and obesity related diseases like diabetes have no real cures and currently require expensive and often long term treatment. This in turn contributes to rising health care costs.

Food production in the U.S. is becoming increasingly dependent on genetically modified crops (GMO). These crops usually consist of only one strain lacking the genetic diversity necessary for crop resiliency against disease. There are benefits to GMO’s which include pesticide resistance (GMO companies are generally chemical companies), rapid growth, drought resistance, and large visually attractive produce. However, they  have inferior nutritional value and there are growing concerns over long term health consequences. This has resulted in GMO crops being banned in a number of countries due to inadequate testing.  Over reliance on GMO crops and the foods produced from them could be another driver towards increasing healthcare costs. Over reliance on GMO crops and the foods produced from them could turn out to be another major factor raising  healthcare costs.

GMO crops also do not produce seeds that can be replanted, thus forcing farmers to purchase seeds yearly instead of saving their own. Farmers who do not purchase GMO seeds or do not use GMO crops are subject to lawsuits if there farms contain any GMO plants. A virtual certainty when considering that plants reproduce by their seeds traveling through the air via wind currents. In addition, if there is a disease that attacks and decimates the GMO crops there simply is not enough backup seed or diversity available to quickly recover. This could spell famine for many regions in the world dependent on U.S. GMO crops since indigenous farmers stopped producing since they cannot compete against cheap GMO imports.

Modern farming has also become heavily dependent on oil. Heavy machinery is used prolifically on all large scale farms. Mass production requires petroleum based fertilizers since it degrades the soil to the point crops will not grow otherwise.  Produce and food products travel hundreds of miles to grocery stores, so when oil prices go up, food prices do as well which increases inflation.

Freshwater scarcity represents another concern.  Our glaciers are diminishing, aquifer and lakes water tables and dropping. Our largest aquifers are not even replenishable by rain water. This will threaten farm productivity and limiting urban growth in many regions. It is being expedited world wide by increasing populations and may represent one of our most significant long term threats.

Government – The final area of concern is our lack of responsible government or what some would argue is legalized government corruption. This has resulted in an ongoing decline of moral values among our leadership. The process begins with well financed special interests led primarily by large banks / financial institutions, and MNC’s all of which are using lobbying to acquire and even write favorable legislation. It also includes campaign contributions that get officials elected who are beholden to their interests, especially those who sit in key subcommittee positions, the decision makers. The return these institutions receive is substantial, for every $1 of campaign contributions and / or investment in lobbying there is a yield of $1000 in favorable legislation, tax breaks, and subsidies.

This environment also creates a lack of fiscal responsibility regardless of which political party is in office as politicians become increasingly beholden to special interests. This is one of the principle reasons for the rampant deficit spending that is increasing the U.S. national debt. These actions further decrease global investor confidence in theU.S. ability to manage its debt.

There was large scale disapproval from our international debtors when 2011 budgetary projections went from $900B to $1.5T, the bulk of this increase went to extend the tax cuts. This occurred while Europe was and is currently taking on austerity measures to address its own debt. Without fiscal responsibility, an end of extensions for the Bush era tax cuts, and a cessation of combat duties in Iraq, Afghanistan, and now Libya, CBO projections expect a debt level surpassing $20T by the end of the decade.

The abuses in lobbying combined with no limits on corporate campaign contributions are two of the primary reasons corrective actions to our problems are also so difficult.

All of these problems can be addressed effectively with the possible exception of water scarcity, which is very dependent on rising populations and changing weather patterns.

These factors also are interconnected and each contributes to the others. These issues need to be addressed as a whole in addition to their individual components.

In the next blog we will take a long honest look at the underlying cause of what is driving the scenarios in these critical sectors. Sectors essential for U.S. economic growth and maintaining the standard of life so many Americans have grown accustomed too. In a nut shell, these sectors are evolving into arenas concerned with only short term profit maximization, wealth generation, and ensuring that power and control of these systems remain in place regardless of the consequences. This emphasis is now disproportionately benefiting a small percentage of the population and it is happening at the expense of the overall country.

In the previous blog, A Call For The Transition To Renewable Energy  it was discussed that industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. Fossil fuels alone will not be able to meet demand. The easier to extract surface sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs of energy and potential shortages can create more geopolitical stresses between countries as they scramble to meet their energy demands. It is beyond time to ramp up existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) to supplement fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035.

The liquid fuel transportation sector is dominated by petroleum which is refined into gasoline, diesel, and jet fuel. The transition process in this sector would involve escalating biofuels production in order to supplement future petroleum demand. Cellulosic ethanol can be economically derived from gasification processes and will represent the most cost effective and efficient production means of ethanol production. It also doesn’t compete against food crops, requires much less water, and can be attained from a multitude of carbon based sources including the unusable residue from crops, natural fast growing grasses and plants, disposable wood from logging, and even human waste. Increasing the additive rates of ethanol in gasoline up to E30 (30% ethanol / 70% gasoline) and providing government subsidies for fuel line conversions will contribute significantly to mitigating demand and reduce the chance of rampant  price increases due to regional gas shortages.

Diesel fuel necessary for commercial transportation (large trucks and ships) can also be supplemented by biofuels, in this case utilizing bio-algae, jatropha, and halophytes to create bio-diesel.  Microbial organisms can be used during the processing to increase yield and refinement efficiencies and reduce costs. Diesel blends up to B30 (30% biodiesel / 70% petroldiesel) can be attained without major modification in fuel lines. World governments can then provide similar subsides for fuel line conversions to trucking and shipping fleets. Jet fuel blends can be supplemented with bio-algae; the U.S. military and some commercial airlines have already taken keen interest and developed prototypes for this application.  The goal is to supplement petroleum based diesel and jet fuels with biodiesel which will mitigate demand and reduce the chance of price increases in commercial transportation which adversely affects consumer goods pricing and airline ticket prices.

In addition, supplementing petroleum based fuels should be done in unison with the generation of new hybrid (gasoline/battery) or completely battery based automobiles and light truck production over the next 25 years. Battery technology and high capacitance systems need to be elevated in importance and additional government funding for research and development put in place to provide economically viable batteries and ultra capacitors with greater yields and longer life capabilities. If necessary the patents held by the fossil fuel and aerospace defense industries need to be made available for public use instead of being put on ice as a potential threat of substitution to petroleum, or classified for military uses. Suitable battery technology may very well already exist but the public sector does not have access to it. Utilization of hybrid, battery, or high capacitance system will further reduce future demand for liquid petroleum fuels but will require increased demand in electricity production. Heavy trucks, trains, and ships used for commercial transportation require considerable power to move heavy loads. Battery and high capacitor systems are not currently able to provide adequate power to solely meet commercial transportation needs. They will be more reliant on hybrid systems and will require more energy from the biodiesel / petroldiesel blends than are required for cars and light trucks.

The unspoken and long term strategic goal of many developed countries appears to be to use up the petroleum resources of other countries while saving their own reserves for emergency or to sustain their countries liquid fuel needs decades from now.  This strategy needs to be scrapped and replaced with a new 25 year goal that includes drilling and refining the readily available global petroleum resources in combination with increases in cellulosic ethanol and biodiesel production, government subsidization for replacing fuel lines on existing personal and commercial vehicles,  and creating high efficiency hybrid, battery and high capacitance electric cars and light trucks for personal transportation, and hybrid biodiesel large trucks, trains and boats for commercial uses. Then by 2035, begin the process of transitioning into hydrogen fuel based transportation models for developed countries, while allowing undeveloped countries additional time to become petroleum independent. This means limiting expensive and risky deep water drilling rigs, shale extraction, and production of more oil refineries limited only to petroleum. All government subsidization for the petroleum sector should cease and be transferred to companies generating second (cellulosic ethanol), third (bioalgae), and fourth (high yield genetically modified plants combined with microbial catalysts) generation biofuels, and for the development of biofuel infrastructure. This would include refineries that can be utilized for both petroleum and biofuels.

Resistance from the very profitable petroleum sector will be considerable and OPEC nations will put up a strong fight even going so far as to temporarily drop oil prices in order to draw attention away from the need to transition to renewables and to save the petroleum industry’s future profitability. Excuses for why renewables are a panacea will flourish and will need to be set aside. Our next generation of automobiles may not run as fast, or have the same mileage capability, but they will be clean and reduce our reliance on a polluting fuel source that has created enough geo-political instabilities and wars already. This 100 year old technology is past its prime and the world is certainly capable of doing better. The reason fossil fuels have been held in place this long as our dominate source of energy is because of the massive profitability and wealth generation it provides for a small percentage of the world’s population and not for its current benefit to humanity.

The other half of the fossil fuel equation is electricity production which is provided by coal and natural gas. Electricity production actually requires more fossil fuels than the transportation sector and demand is projected to outpace petroleum and will be further increased by the need for hybrids, electric, and high capacitance vehicles all of which will draw additional power from the grid. The transition of this sector, over the next 25 years, should be a move towards the existing renewable energy sources of solar thermal, photovoltaic, wind, tidal, geothermal, and biomass facilities. Biomass which uses carbon based refuse (forestry, crop, animal, and industrial) and wastes (sewage and municipal solid) will be the only source that requires commodity based replenishment that could be subject to price fluctuations, but this resource will be derived from throw away material.  The transition process itself can begin with the removal of coal and natural gas subsidies and strict limitations on future coal or natural gas power plant production. One such limitation could require no more coal fired plants built without adjacent bio-algae photo bioreactors for algae based biodiesel production and CO2 sequestration. Instead, funds could be allocated to infrastructure development of large solar thermal, geothermal, tidal and wind generation systems. Subsidies should also be provided to business and homeowners to put photovoltaic arrays on their premises.  If regional electricity service providers heavily vested in coal and natural gas production want to continue as public electricity providers they will need to be required to build an increasing number of energy facilities that are completely renewable in nature. Some renewable energy plants are more expensive to construct than traditional coal and natural gas facilities, certainly the case for large solar thermal operations. However, over the 25 year life span of the facility the infrastructure costs become offset within a few years since there are no ongoing requirements for expensive and environmentally damaging drilling, mining, refining, and distribution expenses associated with acquiring oil, coal, and natural gas.  Renewable energy power plants will be cheaper for developed and developing countries in the long run, providing clean energy, and not require purchasing or extracting fossil fuel commodities from potential hostile countries.

Synergies exist between complimentary renewable energy sources and with existing fossil fuel sources. Large megawatt solar thermal facilities can be designed to provide power for cities, or smaller solar thermal power plants can be utilized for neighborhood or suburb electricity generation.  Residential and commercial photovoltaic arrays with government subsidies to assist business and resident affordability can be utilized in conjunction with solar thermal (or other renewable energy sources) to help reduce the regions demand. Solar thermal, geothermal, and wind farms can share space with bio-algae photo bioreactors (PBR’s) to reduce land costs and reduce space requirements.  Biofuels can be generated from sewage, waste material, food crop residue, and wood residues creating fuel sources from material that would otherwise be burned or sent to landfills. Fast growing and drought resistant plants requiring little irrigation can be grown and harvested on lands unsuitable for crops and utilize husks, stovers, and other discardable material from traditional crop harvesting.  All existing coal fire and natural gas plants could have bio-algae PBR’s in place to absorb the CO2 that would otherwise be released into the atmosphere. In developed countries all new power plants should be renewable where possible and only natural gas if not. Coal plants should only be considered for poorer developing countries with large coal reserves.  

A new paradigm for worldwide renewable energy production can be implemented where profitability expectations are removed from future State owned and privately held renewable energy companies.  In countries with a private sector, existing renewable energy companies could be incentivized by their governments to switch to a strictly non-profit model. Another option is the creation of new private non-profit renewable energy companies with infrastructure development and scaling subsidies provided by their governments that would allow them to provide energy at lower costs to consumers and compete directly against for-profit renewable energy (and fossil fuel).  If full government subsidization is not possible then 0% infrastructure and scaling loans could be made available with repayment plans established that assure competitive energy pricing remains available to the public.  State owned energy companies with little incentive to eliminate their profit structure will still be able to provide energy indigenously and to the developing nations but in time will be hard press to remain competitive outside their own borders.

The goal of the non-profit renewable energy provider is to be able to produce and distribute electricity in the most efficient and low cost manner possible and to pass those savings onto their customers. It is also to provide energy sector jobs to replace those jobs lost from the fossil fuel industries.  Favorable government legislation and subsidization for private sector non-profits will be essential to ensure political barriers to entry are removed and to meet infrastructure costs and to develop economies of scale.  Subsidization can come from removing subsidies provided to very profitable oil, coal and natural gas companies and from tax revenues associated with providing clean energy. A non-profit model focused on efficiency and removing unnecessary expenses associated with pay for performance executive compensations, investor ROI expectations, profits for mining and drilling operations, costs related to exporting of fossil fuels, and short sighted profit maximizing decision making will be removed from the future energy equation.  I am not advocating government takeover of the western energy industry, but the establishment of true non-profit private companies in the free market economies. For already established state owned companies heavily vested in fossil fuels my hope is they will eventually operate under the same non-profit guidelines as they to transition towards renewable.  This should also decrease geo-political instability in certain regions of the world that use energy profits to sponsor terrorism or as funds to support military buildup and wars.

It is time for world governments especially those in developed countries with free market to start acting responsibly and considering its citizens. Energy is a basic requirement for all societies and the world has been limited to technology and policies that are outdated and no longer in its best interests. The question of how to pay for the transition to renewable energy is legitimate. Whether governments should increase taxes or use existing tax dollars to subsidize renewable energy infrastructure and provide assistance for companies to scale up production will be debate and heavily resisted from many channels. Interestingly enough, funding didn’t appear to difficult to acquire when it was necessary for bailing out irresponsible financial companies or providing massive subsidies to the ridiculously profitable fossil fuel industry. Fossil fuel based companies know they will eventually have to venture into the renewable market as oil, coal, and natural gas become to scarce or expensive. Why should the world wait until governments are near financial collapse due to high energy costs affecting nearly every sector of their economies, or countries are on the brink of war due to scarcity and conflicts over meeting demand?

Prior to 2035, world governments, academia, and even private sector labs should have been be utilized to search out the most promising energy sources with the greatest efficiencies that will meet the world’s long term energy needs. The push should be to develop free or extremely low cost energy systems such as fusion or kinetic systems for electricity production, and a hydrogen based fuel source for vehicles. We must begin this researching process and planning for this process now.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

How is it that our scientists and technologies have created exponential growth in computing, super colliders, nano-technology, particle weaponry, world-wide satellite coverage, etc. and yet for energy production we are limiting ourselves to a polluting, 100+ year old technology that creates geo-political instability around the world and has most recently become subject to the whims of commodities traders?

Industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. The bulk of the energy industry’s production motives which are dominated by fossil fuels and its obsession with profitability are not going to provide the solution for our upcoming energy problems. World energy producers have become very efficient at extracting, processing, refining, and distributing petroleum for transportation liquid fuels, and coal / natural gas for electricity production. However, production will not be able to keep pace with the growing world wide demand expected to rise almost 50% by 2035, much of that coming from the developing countries of China, India and in Southeast Asia. This is not a matter of peak oil or how much fossil fuel remains in the ground, but an issue of simple supply versus demand.

Fossil fuels have served our world’s growing energy needs extremely well, despite the fact that oil and coal use has been around since the turn of the 20^th century, but we are fast approaching the limits in improvements that can be expected from production capabilities. In addition, the easier to extract surface fossil fuel sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs will be passed on to end users and when combined with potential shortages will create stresses between countries scrambling to meet their own energy demands,  this may even include going to war to guarantee energy  stability. This scenario can be further complicated by fossil fuel commodities traders who take advantage of regional problems to run up prices. This is an excellent formula for State owned or privately held oil companies interested in ensuring ongoing profits for decades, but not for the rest of the world.

There is also the matter that the regions containing fossil fuels are not only proving to be environmentally difficult to work in but geo-politically hostile as well. Many countries rich in fossil fuels (ie. Middle East and African countries) also divert funds to groups and organizations that sponsor regional unrest and acts of terrorism or can use earnings to build up military capacity and develop weapons of mass destruction.

We are fast running out of time to seriously implement existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) as a supplement to fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035. The industrialized countries of the world and their private or state owned energy companies are going to have to set aside their fossil fuel based profitability expectations for energy production and begin thinking in terms of transitioning. This will not be done willingly, these companies and their holdings represent significant infrastructure investments and they are cash cows, in many cases representing the only significant source of income for the region. In countries with capitalism based economies the lobbying stranglehold the fossil fuel industry holds over energy legislation will need to be removed, and campaign contributions that help elect sympathetic representatives curtailed if there is to be any significant infrastructure support from those governments.

This process will have to be driven from the free market economies since State owned companies with large oil reserves will have little incentive to transition on their own since they can meet their domestic demand, and fossil fuels represents a substantial income source for the country and they will profit off of the projected 84% expected increase in demand from developing countries over the next 25 years. This sharp increase in demand will be buffered by developing countries themselves as S. America, China and India are currently taking their own measures to implement renewable energy sources realizing their own vulnerabilities. Even if these developing countries begin the transition process to renewable energy sources, State owned companies will be needed to fill the remaining projected demand. Privately held companies in the U.S., Canada and Europe can then be utilized to meet remaining 16% growth expectation from the developed countries with fossil fuels and renewables.

Existing renewable energy processes need to become more efficient and costs brought down through economies of scale. The purpose for expansion of these renewable sources is to increasingly supplement fossil fuels over the next 25 years.  This must become mandated. In addition, new technologies and system improvements investigated and existing patents that have been shelved to protect fossil fuels from competition should be re-evaluated. Their feasibility and economic viability analyzed, and those with satisfactory efficiencies implemented. World governments cannot immediately dump existing fossil fuel systems since renewable capacity falls far short of meeting demand. In addition, current levels of debt among industrialized countries are already to burdensome due to the irresponsible behaviors of governments and their financial leaders to sufficiently generate new infrastructure in a timely enough manner. We can however begin to aggressively supplement fossil fuels consumption with renewable energy sources in the industrialized worlds. This will allow the poorer developing countries to continue to use predominately fossil fuel sources while they implement renewable energy infrastructure themselves. This may require years of transitioning so it must begin now.

World energy demand can become as significant an issue as the 2008 world wide collapse of the financial markets and generate long term recessions. I would like to emphasize this point once again; regardless of how world fossil fuel producers try to ramp up production they cannot meet global demand. For the transition period over the next 25 years we must utilize all sources of energy and start the process of relinquishing the political stranglehold that the fossil fuel industry holds in the political arenas.

By 2035 renewable energy sources should play significant role supplementing fossil fuels and contributing towards global demand. During this transition period research and development initiatives from world government’s, academia’s, and even government funded and private sector laboratories’ should be utilized to search for new energy sources and refine existing systems for still greater efficiencies. Possibilities for new energy systems include hydrogen, advance fuel cells, new battery or high efficiency capacitors for transportation requirements, and fusion reactors and kinetic energy systems combined with advancements in solar, geothermal, wind and tidal power for electricity generation. 

The goal after 2035 is not to supplement fossil fuels but replace them. The motivation to look for energy systems that provide ongoing streams of company profits and investor return will have to be put aside and a new generation of non-profit energy providers created. Profit maximization will then be replaced with production efficiency and providing free or extremely low cost energy to end users. Research for these next generations of renewable energy systems must begin now with long term plans designed for the transition.

My next blog will discuss procedures necessary to implement the transition process to renewable energy sources in both the transportation and electricity production sectors.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

Oil companies have amassed massive profits over the past decade. BP is the largest oil and gas producer in the United States with over 22,000 oil and gas wells many on federal land) across the United States. It has enjoyed considerable profits along with the other major oil companies over the past five years. BP profits for the first quarter of 2010 alone were $5.59 billion dollars. Since 2005 profits have totaled approximately $105 Billion according to their own annual reports.

In the past three years BP has managed to receive 97% percent of all flagrant violations issued by the Occupational Safety and Health Administration (OSHA). BP accumulated 862 citations (760 classified as egregiously willful) for violations at two of its five U.S. refineries. It is also still under scrutiny by the federal worker – safety monitor for the 2005 explosion at the Texas City refinery that killed 15 workers after failing to correct problems that were pointed out by OSHA inspections.  Last year BP was fined $87 million for violations at the same Texas City refinery and another $3 million for violations at the Toledo Ohio refinery. BP is in the process of contesting the penalties.

It appears clear that BP has displayed a blatant disregard for regulations involving safety, maintenance, and operational procedures and this disregard extended to the rig Deepwater Horizon. Senior managers from BP were overheard “taking shortcuts” that involved substituting salt water for heavy drilling fluid in the well that blew out and resulted in the oil spill currently ravaging the Gulf of Mexico and 11 deaths. BP’s attitude of non-compliance towards regulation seems motivated by profit maximization and the company has not appeared overly concerned with consequences.

This may be due to the “cozy relationship” BP has with the Mineral Management Service who is responsible for safety and environmental regulation. The Obama administration has vowed that this relationship will cease. Another possible reason for non-compliance could be the tens of millions of dollars on lobbying ($16 million spent last year alone) over the past 5 years, much of which was concentrated against regulation. It also donated more than $500,000 in campaign contributions for federal elections. Another factor could be a result of oil industry lobbying influence from the past which resulted in a government reserve fund called the Oil Spill Liability Trust Fund. There is approximately $2 billion in this fund to cover a disaster like the one occurring in the Gulf. The reserve fund also ensures that operators of offshore rigs will be held liable for only $75 million in damages claimed by individuals, companies, States, or the federal government. They can still be held liable for clean up costs.

Regardless of the reasons for non-regulatory compliance, it appears BP will once again rely on lobbying to influence key legislators to reduce long term penalties and to fight violations and lawsuits in court much like Exxon did with the Exxon Valdez spill. They are confident this practice will result in the greatest cost savings and retention of future profits. Once again the U.S. taxpayer will be left picking up the tab, this time for unspecified clean up costs, loss of States revenue from tourism, and the economic damage done to numerous industries that rely on the Gulf. Not to mention the potentially irreversible environmental damage done to coastlines that may even include Atlantic seaboard states. This cannot be allowed to happen!

BP has demonstrated a willingness to take the measures necessary to cap the flow and take the lead in the clean up. Twenty-two thousand people and a small armada of ships are currently working on the spill. But in reality, they have not brought near enough resources to bear quickly enough to stem the flow or to clean up the oil. A small fleet of supertankers used successfully in the Persian Gulf spill, each capable of sucking up to one million gallons of oil / water a day has not been implemented to date. Additional fast moving Coast guard, military, and civilian vessels could have been utilized to skim and remove surface oil. Assistance from Exxon, Shell, Chevron, ConocoPhillips and other industry experts were not sought out quickly enough nor were suggestions acted upon. Many including the U.S. government incorrectly assumed that BP was the expert in such matters and had the best chance of correcting the damaged well.

BP is still cutting corners even in the face of this disaster choosing to use almost 800,000 gallons of the cheaper less effective and much toxic chemical dispersant Corexit to break the oil up even after the EPA asked it to cease. Corexit is produced by Nalco and BP enjoys a tight relationship with Nalco sharing board of director members .The Obama administration has also been accused of being at fault and not pressuring BP enough to ensure appropriate action was implemented rapidly enough.

Hopefully the Top Kill or Junk shot procedures will be effective in the next few days and a relief well will be drilled into the original borehole and drilling mud pumped in to permanently stop the oil flow. But even if these measures are implemented quickly there is no guarantee of complete success. Note – Top Kill was not successful.  All these practice were used on the Ixtox 1 back in 1979 in water 160 ft deep (Deepwater Horizon is at 5000 ft),  they were all unsuccessfull. That well was not sealed for 9 months until the releif wells were completed.

BP needs to be incentivized to ensure that it will take all actions necessary to ensure that not only the well is sealed, but that clean up is rapid and thorough, the coastlines have been restored to the fullest extent possible, and that the livelihoods of those affected by the Gulf spill are re-established or they are compensated accordingly. BP must not be allowed to lobby and litigate there way out of accountability.

The Obama administration should demand that BP have the well fully sealed by relief wells within 90 days, the bulk of surface oil be removed from the Gulf within 180 days and if necessary from Florida and the East Coast, and that the oil be cleaned from the affected coast lines and marshlands within 180 days. Note – these timelines are arbitrary and should be determined by the EPA, independent environmental, and industry experts. Failure to meet these conditions will result in:

• Suspension of all U.S. contracts and barring of future contracts – this will cease BP’s access drilling operation on all federal lands both onshore and offshore.
• Seizure of BP’s holdings on U.S. federal lands. Negotiate settlement requiring all profits derived from oil and gas obtained on U.S. federal lands be allocated clean up measures and restitution to affected parties. If BP attempts to use litigation to delay negotiations, turn over operations to U.S. base competitors and split the profits with federal/state governments until adequate cleanup measures and restitutions are made.
• Federal government will spearhead lawsuits and provide litigation support for individuals and companies affected by the Gulf disaster . Litigation will be directed at BP both domestically and abroad where applicable.
• Put a moratorium on BP’s lobby access and campaign contributions that would result in favorable legislation regarding the Gulf oil spill. This will include barring BP from hiring any third party (ie. the Chamber of Commerce) to lobby for them for the next five years or until the matter is rfully esolved in the U.S.

An investigation needs to be conducted to determine if BP was criminally liable, and to what extent TransUnion or Halliburton were at fault. If this appears harsh, it is meant to be. The long term effects of this disaster are immeasurable. It will affect people’s lives for years and the U.S. taxpayer should not be left paying the long term expenses.

My intention is not to put BP out of business, simply to stimulate the company to respond to its full potential, and not allow it to remain focused on maximizing its profits. It has lost that option concerning this situation. BPs profits over the past year should be more than suitable to cover all the expenses associated with this disaster. This will also send a strong message to the other oil and gas companies that strict adherence to the safety and maintenance protocols is serious, mandatory and can prove extremely costly.

This incident is just another in a long string of reasons as to why it is time to shift the focus away from fossil fuels and towards renewable energy sources such as cellulosic ethanol, biodiesel derived from jatropha, halophytes, and bioalgae, wind energy, solar thermal and geothermal.

http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9021605&contentId=7040949

http://www.osha.gov/dep/bp/bp.html

http://www.grist.org/article/2010-05-17-bp-has-numerous-safety-violations-at-refineries-study-finds/

http://www.opensecrets.org/lobby/clientsum.php?year=2009&lname=BP&id=

http://www.propublica.org/feature/epa-officials-weighing-sanctions-against-bps-us-operations

http://www.politifact.com/truth-o-meter/statements/2010/may/02/lamar-mckay/bp-letter-mms-urges-reduced-regulation/

http://en.wikipedia.org/wiki/Deepwater_Horizon_oil_spill

Solar thermal may represent a viable way to reduce the consumption of fossil fuels, but what will the cost be to implement the required infrastructure for the power facilities and grid connections, some of which may be required in isolated areas?

The U.S. produced 4,119,388,000 megawatts and consumed approximately 3,978,000,000 megawatts of electricity in 2008.  Production of electricity breaks down as follows:

• 1445 Coal generation plants represented 48.2% of electricity production providing 1,985,801,000 megawatts.
• 3768 Natural gas processing plants represented 21.4% of electricity production providing 882,891,000 megawatts.
• 104 Nuclear power plants represented 19.6% of production of electricity production providing 806,208,000 Megawatts.
• 3966 hydro electric plants represented 6% of production of electricity production providing 254,351,000 megawatts.
• 2576 Renewable energy plants represented 3% of electricity production providing 126,212,000 megawatts.  (Renewable sources included biomass, wind, wood derived, geothermal, and solar thermal / photovoltaic)
• 3768 petroleum power plants represented 1% of electricity and 46,243,000 megawatts.
• Other gases and their power facilities represented .25% of electricity production providing 11,707,000 megawatts.

Solar thermal even when combined with photovoltaics produces less than 1/20^th of one percent of U.S. electricity production.

Solar thermal energy (STE) systems utilize high temperature collectors that reflect concentrated sunlight collected from mirrors or lenses. The resulting solar radiation (heat) is focused to specific collection points. A liquid medium is passed through collection points where it is heated. This heated fluid can be used to produce steam necessary to drive a turbine used to produce electricity.

Most of the electricity today is still provided by steam turbines. STE systems are no exception. Traditional steam turbines have efficiencies approaching 40% with temperature conversions below 600 degrees. Above 600 degrees gas turbines can be utilized with even better efficiencies, but the highest temperature conversions are possible with liquid fluoride salts, molten salts, or synthetic oils and are approaching 800 degrees providing up to 50% efficiencies.

There are a number of STE design systems. Parabolic trough designs are currently the most common type  utilizing curved mirrors to reflect solar radiation into a pipe which contains the fluid and runs the length of the trough usually just above the collectors. Other designs include Power Tower designs or heliostat designs have arrays of flattened movable mirrors that focus solar radiation on a collection tower.  Dish systems implements a large parabolic dish that focuses sunlight on a collector positioned just above the dish. Linear Fresnel reflector designs use a series of slightly curved mirrors to focus light onto linear receivers located just above the mirrors.

STE plants need to be able to produce electricity in overcast conditions and in periods of darkness. This is possible via thermal storage mediums which store heat in an underground basin for later use. These mediums include molten salt storage commonly called saltpeter, graphite heat storage which use purified graphite, and organic or inorganic phase change materials.

There are a variety of proposed plants set for construction in the next few years. The world’s largest single planned solar thermal plant, a 340 MW facility, will be started in Arizona by the end of 2010. It will utilize parabolic trough design reflecting concentrated sunlight to a narrow tube containing synthetic oil that will be heated to 800 degrees before being pumped back to a central power block where steam will be produced to drive a turbine.

Molten salt will be the storage medium that will be heated and stored for night time use; allowing the facility to continue generating power when the sun is not shining. This will also help reduce water requirements in the arid desert environment.

A 340MW power plant regardless of type (coal, natural gas, hydro-electric, or solar) could in optimum conditions produce 340 x 24 x 365= 2,978,000 MW per year of electricity. This is contingent on the power plant running 24 hours per day, all year, without down time. For the proposed Arizona plant it means the heat retained in the molten salt must provide the same levels of steam for electricity generation in periods without direct sunlight as the heated synthetic oil during daylight hours.

The cost of comparable coal fired power plant can easily exceed one billion dollars while similar natural gas plants are pushing 700 Million. Costs for both types of power plants have been increasing significantly over the past decade.

If the United States were to be solely converted to solar thermal it would require 1383 of the 340MW plants schedule for construction in Arizona. Those STE systems would cost approximately $2.76 trillion dollars at current levels and require years to build.  Building the power plants would not be the only expenditure involved, electrical grid infrastructure will be necessary to connect the facilities to end users since most of the facilities may be in the  isolated areas of the southwest. Above ground power lines run approximately $10 per foot and up to 10 to 15 times that amount is buried.

This cost might seem ridiculous initially and from a short term position it probably is.  However, projected over 25 years the costs to build coal fired or natural gas plants are projected to continue to rise substantially while solar thermal facilities have yet to enjoy lower construction costs associated with the mass production of components. In addition operation costs for coal and natural gas are projected to increase further reducing the initial infrastructure costs.  STE designs will require ongoing maintenance and repairs as with all forms of power plants maintenance but will not require ongoing exploration costs, mining / drilling expenditures, and require distribution networks / pipelines to move the raw material to processing facilities.  These additional costs over time will overshadow initial infrastructure savings.

STE is also a completely clean source of energy releasing no pollutants and has a net zero carbon footprint. Coal and natural gas release considerable amounts of CO2 and a number of pollutants. Energy demand in the U.S. and especially worldwide will continue to grow and the more traditional fossil fuel plants built will contribute ever increasing amounts of greenhouse gases and pollutants.

The U.S. has other renewable non polluting options available so a 100% conversion will not be necessary. Combinations of renewable systems such as STE’s combined with bio-algae photobioreactors can be used in the same isolated areas and in close proximity, reducing land costs and the expense of running electrical power lines to separate facilities. Smaller STE plants can be positioned close to urban areas allocating power to sections of a city or suburbs.

STE may be initially expensive but remains one of the few truly clean power supply’s available.  Its current infrastructure development costs are on par with nuclear power plants but without the nuclear radiation storage issues or having to purchase uranium from volatile countries. These prices, as previously mentioned, will drop as more cost efficient technology and mass production takes hold. Once the facilities are built they will provide clean power for decades with only maintenance costs. If we cease building fossil fuel and nuclear power plants in favor of STE’s, geothermal, wind, and tidal facilities and start to slowly phase out older fossil fuel plants the U.S. can begin a slow but deliberate move towards sustainable energy.

http://en.wikipedia.org/wiki/Solar_thermal_energy

http://www.renewableenergyworld.com/rea/news/article/2009/03/why-dont-we-bury-more-power-lines

http://www.eia.doe.gov/cneaf/solar.renewables/page/solarthermal/solarthermal.html

http://news.cnet.com/Shrinking-the-cost-for-solar-power/2100-11392_3-6182947.html

http://cleantechnica.com/2009/05/13/worlds-largest-solar-thermal-plant-340mw-planned-for-arizona/

In 2008 28% of total U.S. energy demand was for transportation, and petroleum was used to meet 93% of those transportation needs.  The remaining 7% is from a combination of natural gas (2%), electricity, propane, and bio fuels (2%). The principle bio fuel in use today is ethanol used primarily to supplement gasoline.

The U.S. consumed approximately 819 million gallons of petroleum per day (worldwide consumption was 3.55 million gallons per day). 581 million gallons per day or 71% of that petroleum was used for transportation. Petroleum use in transportation breaks down as follows: 64% for gasoline to fuel cars and light trucks (378 million gallons per day), 22% for diesel to fuel commercial trucks, trains, and boats (128 million gallons per day), and 9% to provide for jet fuels (52 million gallons per day).

In 2008 9.6 billion gallons of bio fuels were used in the U.S. (26 million gallons per day). Production rates have increased seven fold in the past thirteen years driven by high oil prices, mandates and incentives in the Energy Policy Act of 2005, and the requirements of the Energy Independence and Security Act of 2007 that mandated the use of 9 billion gallons of renewable fuels in 2008. That number will rise to 36 billion gallons per year by 2022.

Gasoline consumption in 2008 was 378 million gallons per day. Currently, we produce and refine domestically about 34% of all our gasoline needs. The rest must come from imports. In 2008 ethanol consumption was 9.3 billion gallons (25.5 million gallons per day). That equates to roughly 7% of gasoline consumption. Almost this entire amount has been used to supplement gasoline replacing MTBE when it was deemed hazardous and seeping into the groundwater.

Blends of gasoline and ethanol vary from zero to around 10% (E10). After 10% ethanol, vehicles need to be outfitted with special lines and injectors. The flex fuel modification cost for new vehicles is $200 when incorporated into vehicle mass production, but can be much more in older vehicles and void warranties.

The future of ethanol is not in corn which represents the vast majority of current ethanol production. The second generation of ethanol will be cellulosic ethanol that can be made from a variety of sources including switch grass, wheat straw, corn stover, wood chips, forest waste, fast growing trees, and other plant material. The advantage is that the whole plant can be used instead of only the grain. Raw materials can be collected from all over the country and production facilities can be located near potential sources and even be transportable. Subsidies or tax incentives can be and have been provided to farmers, loggers, and waste management companies to provide direct feeds into those production facilities providing benefits to both parties.

Cellulosic ethanol is not without its problems. Although Cellulosic material (basically anything carbon based) is readily available and less expensive than corn, the conversion process is more expensive and more complex. But even this is being over come; traditional methods have focused on enzymatic processes that have historically generated lower concentrations of ethanol. New methods use a thermo chemical gasification process which is more efficient, contains greater yield and is also competitive with sugar based ethanol production costs (Brazil’s method).

In addition, ongoing research from private ethanol companies, and national and university laboratories will continue looking at new methods of converting biomass, engineering and growing more productive strains of crops, and maybe even genetically engineering single organisms (microbes) capable of breaking down simple sugars and fermenting alcohols, thereby eliminating some of the conversion process and further decreasing costs.

The U.S. Department of Energy (DOE) has finally provided $385 million for six different companies utilizing slightly different bio refinery processes ranging from different types of thermo chemical gasification to concentrated acid and catalytic processes. The success of these companies and their processes will be monitored over the next few years.  By the time they become fully operational; the bio refineries may become eligible for additional financing and are projected to produce in excess of 225 million gallons of cellulosic ethanol each year (616,000 gallons per day).

While these projections are impressive they fall far short of replacing the existing inefficient corn based ethanol production by many magnitudes. There have already been considerable investments from agribusiness, venture capitalists, and private equity groups who certainly don’t want their product overtaken by cellulosic ethanol. However, cellulosic ethanol can be an enabling technology that allows the harvest of two crops from each field; a food production crop from the grains and a biomass crop from the residual stalks, leaves, husks, etc. Existing ethanol refineries will continue to be required for many years before eventually being converted.

In order to move beyond prototype demonstrations and into mass production with large economies of scale, second generation cellulosic ethanol will need significant loan guarantees and federal and state grants, subsidies, and tax incentives. These projects are for the benefit of all Americans and are a vital element to our country’s ability to sustain itself, not simply for the profit generation of companies or to create wealth for investors. We need to stop being so concerned about the private sector’s return on investment (ROI). Investors assume risk and expect to be justly compensated if the venture proves profitable. However, in the event taxpayer money is used to subsidize infrastructure development for bio fuel refineries and production facilities, the U.S. government should either be adequately compensated for its investment before turning it over to private companies, or profitability taken out of the equation allowing ethanol into the U.S. market at cost of production via a non profit entity or state ownership through the DOE. The latter possibility forgoes government tax revenues from ethanol sales for lower prices to consumers. I am not really sure that state ownership option would work in the U.S. It does appear to work for many other countries since the majority of the world’s largest oil companies are now state owned and control 77% of oil reserves.

Cellulosic ethanol will be critical to supplement our gasoline until automobiles can be run on batteries or water. With China and India each creating a middle class at alarming rates demand for oil will soon exceed the ability to extract, refine, and distribute enough petroleum quick enough to meet that demand. It is no longer an issue of when or if we will hit peak oil in our lifetimes but simple supply versus demand. We cannot wait or throw token dollars at a few companies and their refineries.  Oil companies have already demonstrated reluctance to drilling the expensive oil rich off shore sites preferring instead to drill less in deep water, tap easier sources, wait for the next run on oil prices, and buy back their shares of stock. They are investing in bio fuel research at a rate of about 1% – 2% of profits, probably the same amount used to market themselves as energy providers instead of oil companies. It is quite substantial when you consider the billions they make each quarter, but they haven’t done much beyond that.

We need to choose a couple of promising thermo chemical gasification processes or develop our own (these technologies are only modifications to existing gasification technology  used by chemical companies for years ) and ramp up production of fast, easy to grow, drought resistant crops. Combine this with incentives for agricultural waste, forestry waste, and landfill waste to be made available as a raw material. Then provide for immediate infrastructure financing for the next generation of refineries and facilities. Finally provide tax or relief incentives for fuel line conversion while the federal government or states mandate the use of greater concentrations of ethanol in gasoline. At minimum all service stations should be providing E10 which require no conversion.

http://www.eia.doe.gov/

http://www.technologyreview.com/Energy/18227/

http://www.energy.gov/news/4827.htm

http://webecoist.com/2009/03/31/burning-green-15-cutting-edge-biofuel-sources/

The United States consumed 99.3 Quadrillion total btu’s of energy in 2008 (British thermal unit (Btu) is a unit of energy needed to heat 1 lb. of water 1 degree F). The breakdown follows below. What I found to be of interest is that for all the talk over the past several years regarding renewable energy we don’t produce or consume much of it. Solar is only one tenth of one percent of total consumption and it’s been around for 30 years. All the private equity money going into wind generation represents one half of one percent, and the bio fuels hope about replacing gasoline with ethanol and diesel with bio diesel appear to have stalled at about one half of one percent. I realize there are efficiency concerns and infrastructure costs related to establishing these sectors but for all the media discussion and political wrangling we have actually moved little.

When considering consumption by sector (table below), petroleum is primarily used for transportation (gasoline, diesel, jet fuel). Natural gas usage breaks down to 29% for electricity production, 29% for industrial uses and is utilized for building steel, glass, brick, etc. and 34% is for heating residential homes and commercial buildings. Coal has always been used for electric power generation and equates to almost half of the energy sources used to generate electricity. Nuclear is also almost exclusively for electricity generation as well and represents 20% of the energy sources used to generate electricity. All of these are considered non-renewable forms of energy.

U.S. Energy Consumption by sector for 2008:

• Petroleum                                      37.4%     36.7 Quadrillion Btu
• Natural Gas                                   24.0%     23.8 Quadrillion Btu
• Coal                                              22.6%     22.8 Quadrillion Btu
• Nuclear (Uranium)                           8.5%       8.9 Quadrillion Btu
• Renewable Energy                          7.0%       7.3 Quadrillion Btu

Breakdown of Renewable Energy sector for 2008

• Biomass                                        53%        3.9% of total sources of energy
• Hydroelectric                                 34%        2.5% of total sources of energy
• Wind                                               7%          .5% of total sources of energy
• Geothermal                                     5%          .4% of total sources of energy
• Solar                                               1%          .1% of total sources of energy

Breakdown of Biomass sub-sector for 2008

• Wood and wood waste                 64.5%     2.5% of total sources of energy
• Biofuels (ethanol & biodiesel)        23.5%       .9% of total sources of energy
• Garbage & Landfill gases               12.0%       .5% of total sources of energy

Although the total number for renewable energy comes in at 7% of consumption it is largely made up of wood burning in the biomass sub-sector and hydroelectric power generation both of which have been in use for years. The newer technologies of wind, solar, geothermal, tidal and bio fuels barely scratch 1.5% of total U.S. energy consumption. Total energy consumed from all sources indicates that traditional non renewable sources still dominate and will likely continue to dominate U.S. energy supply side.

When considering our nation’s demand for energy and how we use it, demand for transportation and electrical power generation make up more than half of that demand. Transportation represents 29% of energy demand. Electricity represents a 21.6% of energy demand. When considering electricity demand.  Industries and all their associated production facilities require 31% and electricity demand from industrial uses is 4.3%. The construction / maintenance of our commercial sector require 19% and electricity demands from commercial development are 7.8%. Residential construction represents requires 22%, and electricity demand for residential housing is 9.5%. The two most important energy demands regarding renewable energy is also for transportation and electrical power. 

Transportation needs are met through either importing petroleum/oil or domestically producing it. The United States produces 10% of the world’s petroleum and consumes 24%. We import 57% of our demand and, we produce 43% domestically. Of the 57% of our imports about half come from North and South America, including Venezuela. The Persian Gulf represents only 16% of our total imports, with 12% of that amount supplied by our ally Saudi Arabia. I am now wondering why there is so much diplomatic, military, and economic emphasis placed on a region that provides only 16% of the total imports of oil for our transportation needs.

More than half of U.S. Petroleum Imports Come from the Western Hemisphere

• Canada            19%
• Mexico              10%
• Venezuela          9%
• Others              10%

Remaining U.S. Petroleum imports come from the rest of the world

• Africa                   21%       (Nigeria              8%)
• Persian Gulf         16%       (Saudi Arabia   12%)
• Others                 14%

70% of all oil produced domestically or imported goes towards transportation, 24% towards industrial production, and 5% for residential / commercial heating oil. If we look at the transportation sector closely, oil constitutes 96% of the demand. The remaining 4% is made up of natural gas and biofuels. Even that is a bit misleading since the vast majority of the 2% from biofuels is ecorn based ethanol that is supposed to be used to supplement gasoline. Ethanol production has certainly seen its share of difficulties but remains the supplement of choice since it increases octane levels, and providing a safe alternative for oxygenation , and helps meet stricter emission guidelines.

62% of our oil imports are used for gasoline. Why is only 2% of ethanol being used with gasoline or as a replacement for gasoline? Ethanol is probably not going to be the sole replacement as an automobile energy source. It doesn’t have the high BTU/energy efficiency ratio that gasoline has, but it is a great supplement to our gasoline and we could be using it in greater concentrations. Current mixtures now range from 100% gasoline / 0% ethanol to 90% gasoline / 10% ethanol (E10). The E10 mixtures have had minimal negative effect on gas lines, but even E10 isn’t used throughout the country.

Second generation cellulosic ethanol can be a reality quickly. There are already cellulosic ethanol companies that have completed the prototype generation stage and are ready for full production. An additional bonus for cellulosic production is that it will not strain food crops or require thousands of gallons of water to produce one plant. We need to be stretching the use of existing oil/gas inventories and that can be done by integrating cellulosic ethanol. I don’t accept the arguments about it always costing $1000 to change fuel lines, injectors, etc. Once a mixture system for E15 or above is mandated, company’s will compete as they always do and drive prices down. So, why is this not being done immediately to relieve the pressure from all the imports? Maybe there are too many hands in the pot? Is big agribusiness trying to generate more demand from its biggest commodity cash crop, corn? Maybe big oil doesn’t like to have to share the profits with some upstart potential substitute? Maybe there is no rush to get the U.S. off of the imports from the Middle East because we really aren’t importing much from that region since 12% comes from our stable ally Saudia Arabia, leaving only 4% to come from other areas within the Middle East (essentially from Iraq). I certainly hope we end up with more oil from Iraq and that oil drilling rights do not end up in Russia’s hands for all that we have invested in the area.

Diesel and jet fuel make up another 31% of our oil imports. Both can be made from biodiesel. Biodiesel consumption currently represents less than one half of 1%. This technology has been around for a while and bio algae represents one of the greatest potentials in this field. Algae are the fastest growing organisms on the planet able to replicate themselves in a few days and some varieties can produce yields up to 50% oil. Why did all government funding get pulled from this potentially useful technology? Why is it that when a university has a breakthrough, a military defense contractor steps in and overtakes the project? Not that I don’t agree with running our fighters and transports off of biodiesel generated onsite via bio algae production, I would just like to see it fueling our semi-tractor trailers domestically as well. Trucking compannies could also benefit from access to simple inexpensive conversion processes that don’t void warranties. Perhaps federal tax incentives could be provided to trucking companies to help fund the conversion process for at least some trucks that are no longer under warranty. At the minimum the U.S. should be significantly funding research to try to increase the efficiencies of bio algae/bio diesel production.

The following breaks down the transportation sector:

Transportation    96% of all transportation needs are met by petroleum

• Gasoline              62%   Cars, Motorcycles, Light Trucks
• Diesel                  22%   Heavier Trucks, Buses, Trains
• Jet Fuel                 9%    Airplane
• Other                    5%    Cars, Light Trucks, Heavier trucks (2% from renewable energy)
• Natural Gas          2%    City fleet Cars & Light duty trucks

Energy consumption by vehicle type

• Cars & Trucks          60% of total energy used for transportation       – Gasoline
• Large Trucks            16% of total energy used for transportation       – Diesel
• Aircraft                      9% of total energy used for transportation        – Jet Fuel
• Boats                        5% of total energy used for transportation        – Gasoline & Diesel
• Agriculture                4% of total energy used for transportation        –  Diesel
• Trains & Buses          3% of total energy used for transportation        –  Diesel

In electric power generation, we clearly use non-renewable energy sources as well, and this constitute s almost 90% of electricity production. Renewable energy, when hydro-electric is taken out, is 2.5% and half of that is old style wood burning.

Electric Power – Used for electrical energy accessed through the grid

• Coal                                 48.5%
• Natural Gas                      21.6%
• Nuclear                            19.4%
• Hydroelectric                     5.8%
• Renewable Energy            2.5%
• Petroleum                         1.6%

Sources of the 2.5% Renewable Energy used for electric power generation

• Biomass                    1.3%
• Wind                           .8%
• Geothermal                 .3%
• Solar                           .02%

Percentage breakdown of the Biomass sources in electric power generation

• Wood and wood waste             70.2%
• Biofuels                                       3.7%
• Garbage & Landfill gases          26.0%

I am sorry, but these numbers seem ridiculous. I have heard all of the arguments about the inefficiencies of photo-voltaics, the poor birds hitting the wind turbines, and how geothermal is too expensive and can only be placed deep under water in volcanic rifts. But unless I’m mistaken, aren’t we one of the most advanced countries in the world? I cannot believe that we cannot come up with better electricity generation solutions than burning coal. Wasn’t this technology being used in the…1800’s?  Maybe in promoting our energy crisis we are simply guaranteeing that everyone stays in “crisis mode” and allows business as usual to continue. I do not think that there have been any serious attempts to do anything but keep the major players in place while throwing a few token renewable energy gestures out to the public.

I wonder if oil and coal had to deal with the same litany of excuses of why things can’t be done as renewable energy has faced. How were they ever able to start production in the … early 1900’s? Personally, I am grateful that we have oil and coal, they have gotten our country to where it is today, but they are polluting our environment and they are technology from our grandparent’s day. (I know, they have made amazing incremental advances in production over the years). Maybe 100 years ago we didn’t tell each other how we couldn’t do something and instead we set out to do it no matter what. Well, I think we are passed that stage. Let’s pull our heads out of our proverbial oil tanks and set to work to provide an economically viable solution for renewable energy integration.

http://www.eia.doe.gov/

http://www.planetforward.org/pages/energy-consumption-by-sector

http://www.need.org/needpdf/infobook_activities/IntInfo/BiomassI.pdf

http://tonto.eia.doe.gov/energy_in_brief/foreign_oil_dependence