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A Joyous Week in the World of Energy Deregulation

Two years ago, after much agonizing, my wife and I decided to replace our very old oil furnace with a natural gas fired boiler. We didnâ''t like the idea of making ourselves so utterly dependent on our gas company, but the local one had a good reputation, and gas promised to be cleaner and lower-carbon, if not actually cheaper. So we made the switch. Before we even had turned the new furnace on and well before the ink was dry on the contract we learned that our company had been taken over by a foreign company whose main responsibility is ownership and management of a far-away countryâ''s electricity grid. We were not pleased.

The first shock came at the end of our first winter season with the new furnace, with the arrival of a bill from the new company saying that we owed them several thousand dollars, to be paid immediately. We had reached a balanced billing arrangement with the companyâ''s predecessor and had been making monthly payments for nearly a year. The new company provided no explanation for the unexpected cost overrun and now, six months and two indignant letters later, it still has provided no explanation. Just a series of peremptory mailings telling us to pay up or face the consequences.

The second shock came this week when we noticed a peculiar smell in the house. Upon calling our company, which let it be said did send somebody over promptly, we learned from the technician that our chimney was defective, requiring him by law to turn off our entire gas supplyâ''leaving us not only without heat, but without hot water and a working stove as well. When we called the company to point out that our contract with its predecessor had required them to take care of any chimney problems when they installed the furnace, we found ourselves dealing with a different branch of the companyâ''its services division, now separated from its gas distribution division, so as to assure competition in services, presumably. The services division accepted responsibility for the situation and promised to send somebody over the next morning, leaving us without heat for one of the first cold winter nights.

When the second technician arrived the next morning he found no serious problem with the chimney after all. Being from a different division, however, he lacked authority to turn our gas back on. A couple of tempestuous phone calls with his boss followed, in which the two of us read relevant parts of the installation contract to each other over the phone, in an unharmonious two-part crescendo. Now disclaiming any legal responsibility, the man nonetheless agreed to send an independent chimney specialist over to assess the situation.

When that company arrived later in the day, it found the chimney badly needed a cleaning, but also saw no reason why the gas had to be turned off in the first place. But of course it also lacked authority to turn the gas back on. After one more cold day in the house and the purchase of an electrical space heater, men from the distribution company finally showed up in the late evening. They were reluctant to turn the gas back on, because whatever the problem was that the first technician had identified, it apparently had not been addressed. After considerable wheedling by my wifeâ''thankfully without exchange of money or other favorsâ''the men finally agreed to turn the gas back on.

A $3,200 improvement of the chimney soon followed, something the original gas company was supposed to have taken care of when it first installed the new boiler. But thatâ''s another story.

You donâ''t need to hear that story to share my nostalgia for the days when, if you had a problem with your furnace, one person from one company showed up, told you what the problem was, and fixed it.

Report Assesses and Lauds China's Green Credit Initiative

A recent report by Friends of the Earth and BankTrack, a global network that monitors commercial and investment banks, evaluates measures taken in China to encourage more green-friendly investment. â''In the past year and a half,â'' says the report, â''Chinaâ''s Ministry of Environmental Protection has launched a series of green finance policies that mark an entirely new way of addressing environmental degradation in China, and are proving to be the most powerful factor spurring and influencing sustainable finance in China today.â'' Though Chinaâ''s Green Credit Policy has so far been limited in scope, initially just barring lending to 38 companies, â''the policy has been strengthened by additional policies and tools from financial regulators, green initiatives promoted by international banks, and advocacy from Chinese non-governmental organizations.â''

In the course of big government bailouts of Chinese banks in the late 1990s, FoE contributors to the report have commented, financial institutions were forced to adopt more prudent lending practices, including consideration of environmental impacts. Overall, however, â''Chinese banks still lag behind international best practice for environmental credit risk management systems, public reporting, and stakeholder engagement.â'' Still, the reports finds â''that there has been significant progress in the development of sustainable finance in China, including the creation of influential regulations, internal bank compliance mechanisms, and some public reporting.â''

For example, a new green IPO policy requires companies in polluting or energy-intensive industries to disclose environmental information and allow for a public comment period before selling stock.

Midnight Rule Favors Mountaintop Strip Mining

According to time-honored tradition, outgoing U.S. administrations like to use their last weeks in office to make dubious appointments, issue otherwise indefensible pardons, and issue unpardonable rules. Accordingly, the Bush Environmental Protection Agency reportedly has signed off on a rule change that will make it much easier for coal companies to dump debris from lopped-off mountaintops into nearby streams. Governors of Kentucky and Tennessee opposed the rule change, but not the governor of West Virginia, where the practice is most widespread.

The practice of lopping off Appalachian mountaintops got a big impetus, ironically, from clean air regulation adopted in the 1970s that set up a sulfur emissions trading system. In order to get at the low-sulfur coal found at higher elevations in the Appalachians, companies took to lopping off mountaintops to get at the coal seams and then depositing left-over debris wherever they could.

Since coal companies began large-scale mountaintop strip mining in earnest, claims the West Virginia Highlands Conservancy, â''More than 400 mountaintops have been stripped of trees and flattened, 1,200 miles of mountain streams buried under rubble. Already the lush forest which once cloaked 387,000 acres of the worldâ''s most ancient mountain range have been replaced by apocalyptic lunar landscapes.â''

For a recent eyewitness account of whatâ''s involved in mountaintop stripping, visit my colleague Peter Fairleyâ''s recent post.

Translating Green Technology into Green Communities

The good news about the threat of climate change and the dilemma of energy dependence is that they are giving individuals, towns and cities all over the world a last, urgent opportunity to bend policymaking and technology to the service of mankind and the natural world. Exactly how that is working in the everyday lives of individuals, families and communities will be the subject of my contributions to Spectrumâ''s Energywise blog.

I will be talking about my own familyâ''s attempts to navigate the New York State Energy Research and Development Authorityâ''s Home Performance Program to make our old house more energy efficient. I will be writing about villagers on the south coast of England who used creative financing techniques to fund the reengineering of their coastal defenses after the UK government washed its hands of the project. I will be reporting on new technologies that will be used to lure people out of their cars and onto a bus rapid transit system along one of the most congested commuting corridors in the Northeast. I will be talking about a â''viralâ'' movement that started out in Totnes, England, and which is building post-peak-oil towns around the globe, enabled largely by new media channels of communication. Along the way I hope readers will share their stories too.

In 1997 I began publishing a community newspaper in a small city 35-minutes by train north of New Yorkâ''s Grand Central Station. A ring of malls had sucked the life out of the central downtown long before. Although the daytime population swelled to 200,000 from 40,000 thanks to an influx of daytime office workers, at night you could roll a bowling ball down the center of the main street without hitting a person or a moving vehicle. Old timers recalled the days when the main drag was alive with movie theatres, bookstores and soda fountains, while newcomers bemoaned the absence of community. We were good at looking back at our past for solutions but were unable to redefine ourselves for the 21st century.

My family moved back to our hometown this summer, after a three-year stint in London, to find a jazzed-up downtown now home to a Ritz Carlton Hotel, a National Amusement Megaplex, a Barnes & Noble bookstore, a Starbucks, and a high-tech pocket park with dancing fountains that play to preprogrammed music. But Iâ''m not so sure that the energy and the community are back. We are still a car-dependent city where pedestrian safety takes a back seat to a formidable computer driven traffic system for moving cars expeditiously in and out of our clogged, rush-hour streets. Weâ''ve brought thousands more people to live in luxury towers with every conceivable indoor amenity but failed to create outdoor space to accommodate them or an intra-city mass transit system to move them around.

People sit awkwardly on chairs ill-designed for ample posteriors along the hard-surface perimeter of our park of dancing fountains. With a few notable exceptionsâ''like our beautifully restored Arts Council Buildingâ''we as a city have allowed outside forces to take control of our destiny rather than channeling them to our own purposes. The â''revitalizedâ'' downtown reflects the ambitions of outside developers who sensed our desperation for something new but also our failure to harness policymaking and technology to creatively reinvent our city from the grassroots up. Maybe, thanks to a combination of a credit crunch that has stalled new development, climate change, and spiking energy prices, our second chance is here. Hereâ''s hoping we make the most of it.

Nanotech's Outsized Energy Impact

I think Richard Smalley would have appreciated recent developments in lithium batteries. The Rice University chemist shared the 1996 Nobel Prize in Chemistry for the discovery of soccer ball-shaped carbon cages called buckyballs - the primary charge-generating component in the organic solar cells we covered extensively this spring. Smalley believed that nanotechnology could multiply the efficiency of the myriad energy devices upon which modern human society relies and, as such, had a central role to play in cleaning up our energy systems.

I relied on Smalley's vision to wrap up a 2004 feature story on organic photovoltaics for Tech Review - "Solar-Cell Rollout". Smalley's belief in the rather anemic, flimsy plastic cells' potential to someday be rooftop-ready lent the technology crucial authority. (Doesn't seem so crazy now. Just yesterday a German R&D agency decided the technology's performance warranted a â'¬2.5-million investment in improving its stability.)

In the same breath I passed along Smalley's plea for bold investments in physical sciences research:

Nanotech could help solve the energy problem, Smalley contends, by providing new tools and materials that make widespread use of solar cells economically viable. But he believes it will take billions of dollars in funding and the focused efforts of the world's top chemists and physicists to make that happen. So for the past two years, he has been crisscrossing the United States, evangelizing for nothing short of a modern-day Manhattan Project to use nanotech to deliver a sustainable energy system.

Smalley died from leukemia in 2005, but the vision he championed continues to spread and the advances he foresaw are being realized. My article "Realizing Lithium Battery Potential" which headlines MIT TechReview.com today presents nanotech-fueled advances that could multiply the energy storage capacity of lithium batteries. The immense potential of lithium batteries is the inspiration for today's renaissance in electric vehicle development. But auto industry analysts say their cost will constrain EV expansion through 2020; see for example these uninspiring growth curves from PriceWaterhouseCoopers' Calum MacRae. More potent batteries should help by extending EVs' range and thus improving their value proposition.

Nanotech, by the way, is already improving the lithium battery. Boston-area technology developer A123, profiled by Spectrum last September, coats its batteries' positive electrodes with nanoparticles of iron-phosphate to boost safety and reduce cost relative to conventional laptop-style batteries. A123 is believed to have lost its bid to supply GM's Chevy Volt plug-in hybrid vehicle, but if current trends it will have plenty of other EVs to bid on.

Probing for Fluff in Europe's Supergrids Vision

Renewable supergrid model inspired by energy modeler Gregor Czisch / Graphic design by Wibke von FlemmingLast month the European Commission (EC) called for construction of regional power transmission grids that would ultimately merge into a supergrid distributing Mediterranean solar energy and offshore wind energy across Europe. Today, in MIT's Technology Review, I test the political reality of sharing power across Europe (see "Europe Backs Supergrids") and show that the EC just might pull it off.

Why be skeptical? Because for over a decade the EC has been pushing the liberalization of the European electricity market. Whereas, given the limited capacity for exchange of power between many European countries one could fairly question whether a 'European market' for electricity even exists.

Wind power developer Eddie O'Connor, for example, told me that his priority - building an offshore grid to connect tens of gigawatts of North Sea wind farms to be installed in the coming decade - would remain a dream so long as the European states and their politically powerful utilities control tranmission planning. "The utilities are the enemy," says O'Connor, founder of wind developer Airtricity and CEO of Mainstream Renewable Power. "Even at this stage theyâ''re still the enemy."

What my report for TechReview shows, however, is that change is possible. The best example is a French-Spanish agreement this summer - under intense prodding from the EC - clearing the way for a much-needed second powerline across the Pyrenees. A special envoy appointed by the EC broke what had been a 15-year impasse complicated by local environmental concerns, Catalan fury, and diverging interests of the utilities involved.

Even O'Connor is optimistic. He believes that new international institutions must be created to conjur up Europe's supergrid. But, says O'Connor, both are possible: "I believe the building of the supergrid is imminent."

Leading Physics Society Sets Energy Efficiency Goals for USA

The American Physical Society, the premier organization representing U.S. physicists, has issued a public policy report recommending targets for energy efficiency in buildings and transportation. It says that the average fuel efficiency of light vehicles should reach at least 35 miles per gallon by 2020, and that all new light vehicles should achieve 50 mpg by 2030. Energy use by all U.S. buildings, instead of increasing by a projected 30 percent in the next two decades, should be held flat at current levels.

The APS panel, chaired by physics Nobelist Burton Richter of the Stanford Linear Accelerator Center and David Goldston of Harvard, a former House Science Committee staff chief, justifies its ambitious objectives in terms of both energy dependence and climate risk. It points out that the United States imports twice as much oil as it did 35 years ago, at the time of the first international oil embargo. As for global warming, though the precise extent of the human contribution needs deeper understanding, â''there is virtually no disagreement among scientists that it is real and substantial.â''

The panelâ''s emphasis on buildings and transportation is broadly consistent with the findings of a presidential climate technology task force, which found two years ago that energy use and greenhouse gases can be cut fastest in those sectors. Specifically, the panel recommends that the Federal government increase research spending on next-generation building technologies from $100 million per year to $250 million, its level in 1980. New residential buildings should be zero net energy by 2020, and new commercial buildings by 2030. A more balanced Federal research portfolio is needed if we are to have the batteries that will be needed to make 300-mpg electric cars a reality and the breakthroughs that would be required to make hydrogen cars â''more than a niche product.â''

Washington should adopt policies that encourage states to require their utilities help customers conserve energy, including â''time of useâ'' electricity metering.

To guarantee adequate support for long-term energy efficiency research, the government could either create a new structure within the Department of Energy or adapt the Advanced Research Projected Agency, established last year by the American COMPETES Act. â''ARPA-E, if funded, needs to have its purposes better defined.â''

Edison Panel Gives Glimpses of Major Electric Trends

A media briefing held yesterday, Nov. 20, in New York Cityâ''a regular event sponsored by the Edison Electric Instituteâ''opened a window into the radically new world in which energy companies are operating. While similar events in the past have been dedicated almost entirely to nifty new technology, yesterdayâ''s talks by industry leaders were about poor people unable to pay their electricity bills and corporations unable to raise capital. Sure, there was a lot of good tech talk too, but it always was in the context of how innovation can be promoted in whatâ''s a very difficult environment for everybody.

While thereâ''s hope that the situation may ease some with fossil fuel prices coming down, Ralph Izzo, chairman, president and CEO of New Jerseyâ''s Public Service Enterprise Group, warned that consumers should not expect instant relief. Though their suppliers may be paying less for oil and gas, the cost of capital to pay for new infrastructure is going up sharply, â''and everybody is repricing risk.â'' Izzo warned his colleagues against just waiting for a better business environment. Rather than looking for the economy to improve, â''we can help the economy improve by investing in energy efficiency,â'' he said.

Anthony F. Earley Jr., Chairman and CEO of DTE Energy, described programs such as one that gives customers an incentive to get rid of second refrigerators (which are almost always energy hogs) and to allow for automatic interruption of air conditioning under peak load conditions (when electricity is most expensive). Ruth Ann Gillis, executive vice president of Exelon Corp., described the companyâ''s roadmap for cutting its own greenhouse gas emissions, which includes plans to enforce green production all the way down its supply chain.

Exelon, the nationâ''s leading nuclear operator, describes itself as the countryâ''s top electricity and gas company, in terms of market cap. DTE is a holding company that owns Detroit Edison, among other things. PSEG has been recognized in three of the last four years as the countryâ''s most reliable utility, according to Izzo.

Having said that, Izzo conceded that customers donâ''t seem to care all that much about reliability and safety these days. Whatâ''s on their mind is cost and conservation.

Edison Electric Institute took advantage of the media briefing to publicize a letter it sent yesterday to the National Association of Regulatory Utility Commissioners, with the Natural Resources Defense Council, calling for regulatory reform to encourage energy efficiency. EEI and NRDC asked regulators to create mechanisms that would allow utilities to recover costs they incurred in efforts made to persuade customers to use less energy, to encourage industry investment in smart metering and smart grid technologies, and to support more energy research.

Obama Promises Prompt and Aggressive Action on Climate

In a short speech delivered yesterday to the bipartisan Governors Climate Summit, Obama pledged in very strong words to not delay action on climate because of the economy and to proceed as he promised with creation of a cap-and-trade carbon reduction program. The speech, which the avowedly liberal political blog Talking Points Memo appears to have been the first to post, can be viewed at its website. The speech also is reported in the lead story in todayâ''s New York Times, a general status report about the Obama transition.

In the 3 minute, 53 second talk to the governors, Obama said that climate change together with energy dependence threaten the U.S. economy and the countryâ''s national security. He pledged to create a carbon trading system that would get U.S. carbon emissions back to 1990 levels by 2020, and 80 percent below that by 2050, and to renew U.S. world leadership on global warming, working cooperatively with other nations. He said that from now on, any U.S. governor seeking to reduce emissions and any company seeking to develop green technology will have an ally in the White House.

Obama said he will fund research on wind and solar energy and next-generation biofuels, and encourage more reliance on nuclear energy thatâ''s safe and coal thatâ''s clean. â''Delay is no longer an option. Denial is no longer and option,â'' he said at the close of his speech. At the beginning he said: â''The science is beyond dispute, and the facts are clear.â''

Note: though Obama promised to set demanding national targets for annual carbon reductions, his goal of getting emissions back to 1990 levels by 2020 still falls far short of the target set in the Kyoto Protocol, which was a 7 percent reduction from the 1990 level by 2012. The United States has sat on its hands for eight years, while countries like the United Kingdom and Germany have forged ahead with concerted efforts to cut emissions and develop green technology. It will be years before the United States will be in a position to assert true leadership on climate. For the foreseeable future, however hard Obama tries, it will be playing catch-up ball.

Top British Newspaper Mounts Climate Challenge Contest

The Financial Times of London, with backing from Hewlett Packard and Britainâ''s Forum for the Future, has opened a competition to identify and promote innovative ways of tackling climate change. The winner, to be picked next March, will get a $75,000 prize. Considering that the paper is looking for ideas that â''have progressed further than the drawing board but are not yet fully commercial,â'' it would be nice of course if the FTâ''s winner emerged from the technologies Spectrum has picked as energy winners, such as lithium ion batteries for hybrids and carbon capture from coal.

The paperâ''s panel might also consider our feature on mass-producing solar energy in North Africa to power Europe, or any number of other innovations it could easily find by searching our site on categories like solar, wind, geothermal, and tidal. But certain restrictions FT has put on the prize probably preclude our contributing directly. For one thing the newspaper has ruled out giving the award to any large company, because it wants the prize to induce or accelerate breakthrough activity. Also, the paper defines innovation more the way economists do, as opposed to technologistsâ''examples of what it has in mind include the Grameen Bank, which pioneered microcredit in Bangladesh, and the Zipcar, which encourages people to use cars only when they absolutely need to or want to.

The prize procedure is as follows. For the next 11 weeks, FT readers are encouraged to submit ideas and names of companies. Then a panel that includes Virginâ''s Richard Branson and the Pew Centerâ''s Eileen Claussen, will make a short list. In March, Financial Times subscribers will be invited to vote the winner.

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