Presentation to Covering the Green Economy Workshop at the Society of Environmental Journalists Annual Conference, Oct 172011.

1. Green Energy: What the Numbers
Mean
SEJ Miami
Covering the Green Economy Workshop
October 19, 2011
by
Tom Konrad Ph.D. CFA
Editor, AltEnergyStocks.com

2. About Me
● Ph.D. in mathematics (chaos theory)
● Investment adviser specializing in green
portfolios.
● Blogging about clean energy investing since
2006
●
Earned Chartered Financial Analyst (CFA ) ®
designation in 2009

3. Outline
● Electric Grid Primer
● Common Reporting Mistakes
● Q&A
● Time permitting
– Green Jobs

4. Electricity Jargon
● MWh (megawatt- ● MW (megawatt), kW,
hour), kWh, GWh. GW, etc.
● Quantity of electricity ● Power of electricity.
● Work done/ Energy ● Rate of
created. production/use.

5. How much electricity does it take to
power a home?
● About 10.6 MWh/year
(2001)
● 10.6 MWh/year= 1.2
kW on average.
● But peak usage in a ● Better: “This wind
home can be as 5 or 6 farm produces as
kW. much energy in a
● Pet peeve: “This wind year as is
farm can power 1,000 consumed by 1,000
homes.” homes.”
●

6. Types of electricity generation
● Baseload ● Variable ● Dispatchable
(Constant) (depends on (controlled)
● Ex: Coal, weather) ● Most useful!
Nukes, ● Ex: Solar, ● Ex: Gas, some
Geothermal Wind hydro.

7. Capacity Factors
● Capacity factor (CF) = Average power
produced / Rated Power
● Power Produced in a year = 365 x 24 x CF x
Power rating
Average Capacity Factors
Oil
Gas (Combustion Turbine)
Solar
Wind Baseload
Hydro Variable
Gas (Combined Cycle) Dispatchable
Coal
Geothermal
Biomass
Nuclear
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

8. Cost Measures
Measure Advantages Weaknesses
Cost / Watt Easy to calculate Flatters low capacity factor and variable
resources. Often deceptive even when
comparing the same type of technology.
Payback Intuitive Deceptive when comparing measures with
different lifetimes.
Levelized Cost Economically Depends on many variables and assumptions:
of Energy Meaningful initial cost, O&M, fuel cost, lifetime, and
(LCOE) interest rate.

9. Thoughts about Electricity
● Electricity is very expensive to store.
● Timing and location matter a lot.
● It's easier to move electricity from place to
place (transmission) than it is to move it in
time (storage.)
– That's why homes that “produce all their own
electricity” are still connected to the grid.
● Even distributed generation benefits from
transmission.

10. A Few Common Mistakes in Reporting
on Clean Energy

11. Oops: Energy is not the Internet

12. Energy is not the Internet
“Energy has much
longer lead times; it
needs much more
capital than the typical
IT or software startup...
Even accelerated
energy transformation
will take decades”

13. Oops: Prices do not stand still
● Production Costs Depend on Inputs
● Rising Utility & Hydrogen costs hit Neste Oil

14. Markets Respond to Prices:
The Rebound Effect
● When things get
cheaper, we tend to
use more of them.
● How much more
depends on “price
elasticity.”

15. How the Market Reacts
In elastic markets
– Buyers can switch easily to
other options
– Sellers can rapidly supply
more in response to
changes in price
– Some potential buyers can't
afford it, others might give it
up.

16. How the Market Reacts
● Inelastic markets:
– Buyers and/or sellers cannot
easily increase or decrease
the quantity used / available
– Earth is priceless because both
supply and demand are
inelastic: We can't do without it
(demand) and there is only
one (supply.)

17. Why we care about elasticity
● In an elastic market, ● Inelastic markets
price serves as a respond poorly to
good regulator- so price. A less
long as it reflects all expensive or better
externalities. product may not
Regulation (other catch on just
than internalizing because it's cheaper
externalities) usually and better.
causes problems. Regulation can help.

18. Inefficient Markets
● Not elastic nor inelastic
● Do not respond to price signals
● Various market barriers
– Lack of information
– Split incentives
– Etc., etc.

19. Oops: Confusing Reserves w/ Flows
● The amount of oil in the
ground is not the same as
how much we can use
today.
● Like confusing MW with
MWh.
● Peak oil is about flows.
● Oil is getting harder to
obtain: Supply is becoming
inelastic.

20. 0
20
40
60
80
100
120
140
160
Apr 22, 1983
Dec 16, 1983
Aug 13, 1984
Apr 12, 1985
Dec 09, 1985
Aug 07, 1986
Apr 06, 1987
Dec 01, 1987
Jul 27, 1988
Mar 23, 1989
Nov 16, 1989
Jul 16, 1990
Mar 12, 1991
Nov 04, 1991
Jun 30, 1992
Feb 24, 1993
Oct 20, 1993
Jun 20, 1994
Feb 14, 1995
Oct 11, 1995
Jun 07, 1996
Feb 04, 1997
Sep 30, 1997
May 29, 1998
Oil Price, Cushing
Jan 26, 1999
Sep 21, 1999
May 19, 2000
Jan 18, 2001
Sep 18, 2001
May 17, 2002
Jan 15, 2003
Sep 11, 2003
May 12, 2004
Jan 10, 2005
Sep 06, 2005
May 04, 2006
Jan 03, 2007
Increasing price volatility
Aug 29, 2007
Apr 25, 2008
Dec 18, 2008
Aug 17, 2009
Apr 14, 2010
is a sign of decreasing elasticity
Dec 07, 2010
Aug 03, 2011

21. Oops: Oil Price is Not Just About
Supply
● Who Will Use Less Oil?

22. Oops: Efficient Buildings more
Expensive than PV?
● McKinsey considered measures in isolation,
not energy as a system.
●

23. Systems Thinking
● Efficient buildings
mean fewer power
plants, lowering
upfront cost to about
$5/ton, not $40.
● Over their lifetime,
even McKinsey
found that the cost of
efficient buildings is
negative.

24. Take Aways
● Consider the
whole system
● New
technologies
will reshape
the energy
landscape as
they scale up.
● Not all markets react in the
same ways, and how they
react will change over time.

25. Tom Konrad
845 493 0312
tom@altenergystocks.com
Questions?

26. Extra Slides

27. Confusion around Green Jobs
Used with permission from Union of Concerned Scientists / John Klossner

28. Green Jobs: Substituting Labor for
Energy Can add Jobs

29. Saving Money Can Add Jobs

30. Green Jobs: Example
● Transit can save
money through
reduced fuel use and
car ownership.
● It creates at least
one job: the driver.

31. ● Mining/drilling creates jobs...
Jobs and ● But only once- we're also taking
Resource jobs from the future.
Extraction ● Ghost towns were
Boom towns.

32. How to Create the Most Green Jobs
● Break down barriers to energy efficiency
(make demand for energy more elastic.)
● Regulation can increase jobs- if it makes the
economy more efficient
● Extracting fossil fuels may creates jobs today
at the expense of jobs tomorrow

33. Tom Konrad Ph.D. CFA
(845) 493 0312
tom@altenergystocks.com
Questions?

34. RECs and Offsets
● REC = Renewable Energy Credit
● Why don't you be good so I don't have to?
● But how do I know you would not have been
good anyway? (Additionality)
● Many certifications, such as Green-e
(shown at right)
● 1 RE = “green attributes” of 1 MWh of
Renewable Energy.