to construct a geothermal powerplant in northern Nevada and resell 30 megawatts of power to SierraPacific Resources. Ormat currently has four new geothermal projectsunder construction in Nevada, four in California, one in Hawaii, one inKenya, and one in Guatemala.r Caithness Energy, LLC (privately held). Caithness Energy (caithnessenergy.com) operates approximately 13 percent of geothermalpower plant capacity in the United States with over 360 megawatts ofgeothermal projects located in California and Nevada. It is a privatelyheld company that specializes in power generation.r CalEnergy Generation (privately held). CalEnergy Generation (calenergy.com) operates approximately 11 percent of geothermal powerplant capacity in the United States. It was founded in 1971 to provideconsulting and developmental services for geothermal power production facilities in North America. In the 1980s and 1990s it developed itsown projects and acquired the assets of several U.S. geothermal companies. It now operates ten geothermal power plants near the SaltonSea in southern California with a combined 340 megawatts of generating capacity. It is currently developing new projects in the Salton Seageothermal area with a 215-megawatt facility under construction andhas 200 megawatts of other projects under development. In additionto its U.S. projects, CalEnergy owns three geothermal facilities in thePhilippines with combined capacity of 490 megawatts.r Northern California Power Agency (municipal entity). NorthernCalifornia Power Agency (www.ncpa.com) operates approximately8 percent of geothermal capacity in the United States. It wasestablished in 1968 as a California Joint Action Agency with membership open to municipalities, rural electric cooperatives, irrigation districts, and other publicly owned entities interested in the purchase, aggregation, scheduling and management of electricity. NCPA operatestwo geothermal power plants of 110 megawatts each at the Geysersgeothermal field in California.r Enel SpA (NYSE: EN). Enel (www.enel.it) is a worldwide leader ingeothermal power generation with geothermal plants in Italy, Canada,
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United States, South America, Spain and Slovakia. Enel operates asmall percentage of geothermal power plant capacity in the UnitedStates. With the acquisition in 2007 of AMP Resources, LLC, Enel is currently working on developing additional geothermal projects throughout the world. Enel is a large electricity operator based in Italy with58,000 employees, 34 billion euros of 2006 revenues, and a $66 billionmarket cap.r U.S. Geothermal (OTCBB: UGTH)—U.S. Geothermal (www.usgeothermal.com) is a small renewable energy development company that is in the process of constructing a geothermal plant at RaftRiver, Idaho and developing Neal Hot Springs in eastern Oregon. U.S.Geothermal has signed a power sales contract for one 10-megawattpower plant with the Idaho Power Company and is currently innegotiations for additional output with Idaho Power Company andother customers. U.S. Geothermal has secured transmission capacityfor up to 36 megawatts with the Bonneville Power Association.r Polaris Geothermal (Toronto: GEO CN). Polaris Geothermal(www.polarisgeothermal.com) began trading on the Toronto StockExchange in January of 2007. The company was established as acombination of Polaris Geothermal and Iriana Resources Corporation. In 2006, Polaris acquired an 87.6 percent controlling stake in aPanamanian company, which through its wholly owned Nicaraguansubsidiary, San Jacinto Power S.A., controls the San Jacinto-Tizategeothermal fields in Nicaragua. Polaris is developing a 75-megawattgeothermal power project in Nicaragua.r Nevada Geothermal Power (OTCBB: NGLPF). Nevada GeothermalPower (www.continentalridge.com) is a Canadian-based company thatdevelops geothermal power for energy projects in Nevada. It has a20-year power purchase agreement with Nevada Power and Light forup to 35 megawatts of geothermal power and has plans to develop aninitial 30-megawatt geothermal power plant in Blue Mountain, Nevada.
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Cleaner UtilitiesTeaching an Old Dog New Tricks
lectricity power plants using fossil fuels produce about one-third ofthe world’s total emissions of CO2 , according to the International Energy Agency.1 Those fossil fuel power plants and utilities also spewa large amount of pollution into the world’s atmosphere, which in turn produces acid rain. The problems caused by fossil fuel power plants have beenwell documented, but the real problem is what to do about them, particularly since the world needs a huge amount of new electricity generatingcapacity in coming decades.Power companies, left to their own devices, will typically choose thecheapest way to generate electricity regardless of environmental impactbecause the impact is not a cost to their bottom line. Instead, it is an “external cost” borne by society at large. The CO2 cap-and-trade system is designed to address this problem by capping CO2 emissions and by putting aprice on the CO2 emissions that exceed the cap. Another approach is to puta so-called “carbon tax” on CO2 emissions. With either method, placing aprice on CO2 emissions increases the cost of using fossil fuels by includingthe environmental costs, thus placing renewable energy on a more equalfooting with fossil fuels.While changing the economics of fossil fuel usage is part of the solution, many national and state governments are not relying solely on thistactic. Instead, a large number of countries and states have imposed “Renewable Portfolio Standards” on utilities. These standards require a utilityto generate or buy a certain amount of renewable electricity based on apercentage of its total electricity output. As discussed in Chapter 3, thereare a large number of states in the United States that have already imposed
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renewable electricity targets or standards, although the U.S. federal government had yet to take that step as of mid 2007. Renewable energy mandates in the U.S. and elsewhere in the world, along with feed-in tariffs, havehad a big impact on forcing utilities to buy into clean energy.
GREEN POWER MARKETING PROGRAMSSome utility companies have recognized that they have a serious publicrelations problem and have decided to be proactive in “going green.” Utilities have also realized that some consumers are willing to pay a premiumto get their electricity from renewable sources. Green power marketing istherefore blooming at many utilities.To encourage electric utilities to use more clean energy, the U.S. Environmental Protection Agency (EPA) set up the Green Power Partnershipprogram (www.epa.gov/greenpower/). In this voluntary program, the EPAworks as a partner with hundreds of organizations such as local, state andfederal agencies, manufacturers, retailers, and other businesses.To become a partner, an organization agrees to encourage its localelectric utility to get more of its electrical power from green power sourcessuch as wind, solar, geothermal, biomass, or low-impact hydro. To encourage the local utility to use more green energy sources, electricity customerscan sign a contract with the local utility in which the customers agree topay more for their electricity and the utility agrees to get more of its electric power from renewable sources. The utility can either buy the renewable power from a third-party electricity generator or the utility can buildits own renewable energy plant. In either case, more renewable power isadded to the national grid somewhere when a customer signs up for a renewable power program. The utility cannot just pocket the money and continue to do what it did before. Furthermore, the new green power must bein addition to any federal, state or local mandates the utility may be underto use more renewable energy.The electricity customer can benefit by becoming an environmentalleader and becoming part of the solution instead of the problem. Theremay also be a public relations benefit for businesses that go green. Theutility benefits since it gets extra revenue to cover the higher costs of renewable power and doesn’t have to take a hit to its profits. The biggestbenefit, however, is to the environment in that the program causes an incremental increase in the use of renewable power.There is a similar program at the U.S. Department of Energy, the GreenPricing Program, for smaller users. Over 600 utilities in most of the states
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are participating. Under this program, smaller users, including residentialcustomers, can pay a little extra for their electric power to buy what arecalled energy credits. In return, the local utility agrees to increase its useof green power, either by buying it from a third party or by building itsown renewable energy plant. There is a list of state-level Green PricingPrograms at the U.S. Department of Energy Web site.2 By purchasing theenergy credit, smaller users can offset the negative impact caused by theirelectricity usage.Vail Resorts provides a good example of how the Green Pricing Program works. Vail Resorts decided to be “responsible stewards of our mountain environments” and effectively buy all of its electricity from windgeneration.3 To do that, it purchased enough renewable energy creditsfrom its local utility to equal all the electric power used at its five ski resorts, its lodging properties, all 125 of its retail locations, and its corporateheadquarters. The energy credits it purchased required Vail’s local utility topurchase the equivalent amount of electricity from wind-power electricitysuppliers. The deal was estimated to keep about 211 million pounds of CO2out of the atmosphere each year. That is equivalent to taking about 18,000cars off the road. Vail Resorts purchased nearly 152 gigawatt-hours of windpower and became the second largest corporate user of wind power in theUnited States. Vail Resorts used this information extensively in its ad campaigns to generate good will among customers.4A good example of how a utility can encourage its smaller customersto use the Green Pricing program can be found at Florida Power and LightCompany (parent company is FPL Group, NYSE: FPL), which serves morethan 8.5 million customers. FPL is one the greenest utilities in the UnitedStates. The company already has over 23,000 customers signed up for itsSunshine Energy program. To participate in the program, customers add$9.75 to their electric bills each month. In return, FPL commits itself tobuilding solar projects to supply pollution-free energy to its customers. FPLalso ensures that for each month that a customer participates in the program, FPL will buy or generate 1,000 kilowatt-hours of clean power fromsources such as wind, biomass, or solar. This program is one of the largestin the southeastern part of the United States.5Many energy conscious electric utilities also participate in the federalgovernment’s “Energy Star” program. This program certifies that certainelectrical products are “energy-efficient.” The local utility then periodicallygives special rebates to customers who buy those products. There is a listof such programs at the Energy Star Web site.6 These rebates cover thepurchase of Energy Star certified appliances, heating and cooling equipment, fans, electronic equipment, lighting equipment, CFL bulbs, and otheritems.
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TABLE 9.1
Top 10 U.S. Utilities for Renewable Energy Sales (as of December2006)Sales(GWh/yr)
Rank
Utility
Resources Used
12
Austin EnergyPortland General Electric(NYSE: POR)
Wind, landﬁll gasExisting geothermaland hydro, wind
581433
3
Florida Power & Light (NYSE:FPL)PaciﬁCorp (unit of IberdrolaSA (Madrid: IBE SM))Xcel Energy (NYSE: XEL)Basin Electric PowerCooperative
Landﬁll gas, biomass,wind, solarWind, biomass, solar
303
WindWind
237217
7
Sacramento Municipal UtilityDistrict
Wind, landﬁll gas,small hydro
216
8
National Grid (formerlynamed New EnglandElectric System)
Biomass, wind, smallhydro, solar
156
910
OG&E Electric ServicesPuget Sound Energy (NYSE:PSD)
WindWind, solar, biogas
135132
456
300
Source: U.S. Department of Energy, Oﬃce of Energy Eﬃciency and RenewableEnergy, “Top Ten Utility Green Power Programs,” http://www.eere.energy.gov/greenpower/resources/tables/topten.shtml.
The National Renewable Energy Laboratory (NREL) monitors greenpower usage at U.S. power utilities. Each year the NREL issues a reporton green power programs and ranks the top 10 utilities in terms of thegreen programs they offer. In its 2006 report, the NREL found that nationwide utility green power sales in 2006 rose sharply by 30 percent over 2005to 3,500 gigawatt-hours.7 The study also found that there were more than500,000 customers participating in green energy programs in the UnitedStates in 2006, up more than 10 percent from 2005. Table 9.1 shows the top10 U.S. utilities for green power sales in 2006, as ranked by NREL.
RENEWABLE ENERGY CERTIFICATESAs mentioned earlier, a Renewable Portfolio Standard (RPS) requires thata power utility must obtain a certain percentage of its power from cleansources, either from its own generating plants or from third party suppliers.
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More than 20 states have implemented mandatory RPS programs so far.Other states have implemented voluntary programs.An important feature of an RPS program is that each clean energy generating plant is awarded one Renewable Energy Certificate (REC) for eachunit of clean energy produced, usually one megawatt. Once that amountof clean energy power has been generated and delivered, the REC may besold to a third party. The environmental value of the REC is equal to thecontribution that one megawatt of clean power makes to improve the environment. The monetary value of the certificate, however, is determined bythe marketplace, that is, how much a buyer of a REC is willing to pay andhow much a seller is willing to accept.The seller of the REC is the company that generated the clean power.The buyer of the certificate is usually a company or individual that wants tooffset CO2 emissions, either voluntarily or in order to comply with a mandated renewable energy use requirement. Once the buyer purchases theREC certificate, it cannot be resold and is effectively retired. The moneythe seller received for the REC helps offset the cost of constructing or operating the renewable energy facility, or buying more renewable energy.The REC program mainly comes into play among utilities that are subject to the state-level Renewable Portfolio Standards, which require a certain percentage of electricity to be derived from renewable sources. Suppose a utility that is subject to an RPS is not in a position to construct arenewable power plant, either because the plant cannot physically or economically be located in its district or because the utility does not wantto make the capital expenditure. That utility can simply buy REC creditsfrom another power generator that did construct a renewable power plantsomewhere in the country, thus ensuring that the renewable power was delivered into the national grid somewhere. This program helps to ensure thatrenewable power is being added to the national grid at the lowest possiblecost, which of course is a benefit to power consumers.8The REC program is monitored by Green-e, which the leading independent certification and verification company for renewable energy in theUnited States (see www.green-e.org).9 Because each REC certificate carries an individual identification number, Green-e is able to track each certificate so that it is not double counted or used in an inappropriate manner.The buying and selling of RECs has become large enough that there arenow brokerage companies that facilitate the purchase and sale of RECs.10
SOURCES OF RENEWABLE ENERGYUtilities can increase their use of renewable electricity by building powerplants that use solar, wind, or geothermal power. Those methods were
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discussed in previous chapters. We will discuss three other methods here:biomass, methane gas extraction, and tide/wave power.
Biomass Power PlantsBiomass power plants have been in operation for many years consideringthat some power plants burn wood or wood products, which is a biomassproduct. Biomass is defined as organic matter that was once a living plantor tree. Biomass power typically involves burning paper mill residue, lumber mill scrap, municipal solid waste, and other waste. In the near future,with new technology, corn stalks and wheat straw will be used. Longerterm plans are to use “energy” crops such as fast-growing trees and grassesthat can be grown on land that will not support food crops. Dried animalmanure, which typically contains a substantial amount of leftover plant material, can also be used as a feedstock for biomass power plants. Biomassis not a particularly clean source of power since it involves burning wasteproducts and releases CO2 and other pollution into the air, but it is at leastcleaner than burning fossil fuels and is also a homegrown source of energy.Although biomass power receives little attention, it is currently thelargest domestic source of renewable energy in the United States. In 2003,biomass accounted for about 4 percent of total U.S. energy production, according to the Department of Energy.11 Biomass is also a large source ofpower generation worldwide.There are three major technologies for using biomass as a power generation fuel: (1) direct fired, (2) cofired, and (3) gasification. Most biomasspower plants today use a direct-fired system, which means the biomassfeedstock is burned in a boiler system to produce high-pressure steam thatin turn drives a steam turbine to generate electricity. In a co-fired system,biomass material is combined with coal to burn in a power plant. In a gasification system, the biomass is first converted into a flammable gas usingheat and steam, and the resulting biogas is burned to run the steam turbineand generator system.Unfortunately, biomass fuel releases about as much CO2 into the atmosphere as burning fossil fuels. There is a difference, however. Biomassfeedstock generally comes from tree or plant matter that was recently alive(as opposed to coal and petroleum, which formed from organic matter millions of years ago). When that tree or plant was alive, it converted CO2 intooxygen during its life as a tree or a plant. The CO2 that the tree or plantabsorbed during its lifetime can therefore be treated as an offset to theCO2 that is emitted when the tree or plant material is burned. Thus, whenlooking at the net CO2 situation, burning biomass is more neutral on CO2emissions than it might seem.
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METHANE GAS EXTRACTIONThere are two other technologies for converting biomass-related materialinto fuel that can be used to generate electrical power. One process is tocapture the gas that is emitted naturally from municipal waste landfills asorganic matter decomposes. Landfill gas is about 50 percent methane (CH4 )and 50 percent CO2. The gas is extracted from the landfills using a series ofwells and pipes to collect the gas and bring it to a central point where it canbe processed and treated. As of December 2006, there were approximately425 landfill gas (LFG) energy projects in operation in the United States.These 425 projects generate approximately 10 billion kilowatt-hours ofelectricity per year. The Environmental Protection Agency estimates thatthere are about 560 more landfills that could be developed.12The second process is called anaerobic digestion. In this biochemicalprocess, microbes starved of oxygen are used to break down animal andfood industry waste into inorganic compounds. A principal product of theanaerobic digestion process is a biogas that is 60 percent to 70 percentmethane (CH4 ). One of the major advantages of this process is that it captures methane from animal waste that would otherwise be emitted intothe air. This is especially important at large cattle and pig farms wheremanure disposal is becoming a serious problem due to environmental andregulatory issues. The problem is compounded by the trend toward tryingto concentrate the process of raising livestock on the minimum amountof land.With varying degrees of treatment, the methane from landfills andanaerobic digestion gas can be used as a replacement wherever natural gasis used to create electricity since methane is actually the principal component of natural gas. Methane can be burned to run an electricity generator,or can even cleaned to reach natural gas standards and placed into the natural gas distribution pipeline.13It is true that burning biogas to generate electricity also generates CO2 .However, the amount of CO2 put into the atmosphere by burning biogasin a steam boiler is far less harmful to the environment than releasing themethane. In fact, according to EarthSave, methane is responsible for nearlyas much global warming as all other non-CO2 greenhouse gases put together. Methane is 21 times more harmful as a greenhouse gas than CO2 .14Therefore, it is better to burn the methane to create electricity than it is tojust let the methane be released into the atmosphere.Companies that collect or produce biogas not only receive the revenuefrom the sale of the biogas or the generation of electricity but can alsoearn revenue by acquiring and selling greenhouse gas credits. An operation that prevents methane from being released into the atmosphere qualifies for greenhouse gas credits, since, as mentioned earlier, methane is
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21 times worse than CO2 . This makes it more worthwhile for companiesto extract methane from landfills or install anaerobic digestive plants atlivestock farms.
COMPANIES OPERATING IN BIOMASS ANDBIOGASThere are a number of companies that are working in the biomass andbiogas power area.
r Covanta Holding Corp (NYSE: CVA). Covanta’s subsidiary, CovantaEnergy Corporation, considers itself to be mainly a waste disposalcompany for municipal clients. However, Covanta receives additionalrevenue by operating biomass power plants that burn the municipalwaste, produce electricity, and sell the electricity to the municipality,the local utility, or industrial customers. The company currently ownsand operates biomass power plants in 15 states. Covanta also ownsand operates 10 other renewable power plants using a variety of energy sources including water (hydroelectric), waste wood (biomass),and landfill gas (methane).r Environmental Power Corp. (Amex: EPG). Environmental PowerCorp. was founded in 1982 and operates renewable energy facilities.The company’s subsidiary, Microgy, Inc., is a large-scale producer ofmethane-rich biogas from agricultural and food industry wastes using a licensed Danish biogas production process. The technology hasbeen in use for 15 years in Europe where there are dozens of plantsin operation. Here in the United States, Microgy has already developedthree anaerobic digester plants, seven hydroelectric plants, two municipal waste projects, and three waste coal-fired generating facilities. Thecompany owns and operates these facilities and earns income from either the biogas or the electricity generated. As part of its income, thecompany also earns greenhouse gas credits that it can sell. In 2006. thecompany’s total revenue was $51.7 million.r Schmack Biogas AG (German Xetra: SB1 GR). German-based SchmackBiogas is the world’s largest biogas plant manufacturer. The companywas founded in 1995 and since then has built 179 plants to generatebiogas from animal and agricultural waste for a combined nominalelectricity output of 45 megawatts. Recently, the company formed asubsidiary to operate its own biogas plants. The company’s revenuefor 2006 was €90 million, up 164 percent from 2005. In March 2007,Schmack received the “Cleantech Emerging Enterprise of the Year”award from the Cleantech Venture Network in the United States.15
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WAVE AND TIDE POWERAnother source of renewable power involves the use of moving water, either by wave or tidal action to generate electricity. There are three maintypes of systems involved in wave and tidal power: tide level, tide current,and wave motion.
r Tide level. In locations where there is a large difference in ocean levels between low and high tide (16 feet is considered the minimum required difference), a dam with gates is used to seal off a large tidalbasin. When the tide is rising the gates are opened to allow the risingtide to fill the basin. At the point of the highest tide level, the gates areclosed, thus trapping the water in the basin. When the tide begins tofall, the trapped water is allowed to flow back out to the ocean throughturbines that power electricity generators. A large 240-megawatt tidaldam has been in operation in France since 1966, a 100-megawatt system has been in operation in China since 1987, and a 100-megawattsystem has been in operation in Canada since 1984.16r Tide current. Tidal current systems capture energy from fast-movingtidal currents that flow in and out of harbors, or between offshore islands and the mainland. As tides rise and fall, water can flow at speedsof six to nine miles per hour through the channels. A set of turnstilescan be installed near the surface of the channel to rotate as the current flows by, thus driving generators and creating electricity. Underwater turbines can also be used to drive a generator.17 These systemscan also be placed in rivers that have strong currents. The first majortidal project in the United States is being installed in New York’s EastRiver off Manhattan Island. A privately owned company named Verdant Power is installing the system and several turbines were in placeas of the end of 2006.18r Wave motion. Wave motion is another type of energy that can be harnessed from the ocean. Wave action can generate electricity by usingfloating buoys or platforms that move with wave action. That movement can be converted into electricity. A Portuguese company ordered several wave energy converters in 2005. Wave energy systemshave already been installed in Norway, Scotland, Japan, Australia, andIndonesia.19 Wave motion is also being used to generate electricity forlighted navigation buoys.While the oceans of the world contain a huge amount of energy, systems to harness that energy and convert it into power are still in the earlystages of development. The capital costs for these systems are high and alarge amount of additional research needs to be done to make this type ofpower feasible on a large scale.
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The following companies are involved with using wave and tidal powerto generate electricity.
r Ocean Power Technologies (Nasdaq: OPTT). Ocean Power Technologies went public in a $90 million IPO in May 2007. The company is usingthe proceeds to construct demonstration wave power stations and tocontinue the research and commercialization of their PowerBuoy systems (see www.oceanpowertechnologies). Ocean Power Technologieshas installed a wave energy system for the U.S. Navy off the coast ofOahu, Hawaii.r Finavera Renewables (Toronto: FVR CN). Finavera Renewables,based in Canada, focuses on wind and wave power (see www.finavera.com). The company is working a number of renewable energyprojects. Finavera, through its subsidiary AquaEnergy Ltd in Seattle, isworking on a floating buoy system that produces electricity.r Verdant Power (privately held). Verdant Power (see www.verdantpower.com) has an underwater propeller system that generates electricity as water tides and currents turn the propellers. Verdant Poweris the company that is installing an underwater turbine system in NewYork’s East River near Roosevelt Island. The company is currently privately held and is being funded in part by a $15 million investmentfrom well-known hedge fund manager Paul Tudor Jones of Tudor Investment Corp. The company may be headed for an eventual IPO.20
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Power Efficiency“The Cheapest and MostAvailable Source of Energy Is theEnergy We Waste”
he cheapest and most available source of energy is the energywe waste.”1 This quote by U.S. Department of Energy SecretarySamuel Bodman aptly summarizes why efficiency and conservation should be the first place to look to solve the world’s energy problems.To the extent that power is not used, that is power and fuel that does notneed to be produced, thus saving pollution, greenhouse gas emissions andenormous capital costs.Rising global electricity demand and the need for an improved electricity transmission infrastructure will require a major global building effortover the next several decades. The International Energy Agency estimatesthat investment in the generation, transmission and distribution assets required to meet electricity demand worldwide will be $10 trillion in the30-year period from 2003 to 2033.2The U.S. Energy Information Administration estimates that 292 gigawatts of new power-generating capacity will be needed in the UnitedStates by 2030 to meet the “growth in electricity demand and to replaceinefficient, older generating plants that are retired.”3 For reference, thatwould require the equivalent of 584 new 500-megawatt power plants. Inaddition to new power plants, the Electric Power Research Institute estimates that another $50 to 100 billion will be required over the next 10 yearsjust to bring the North American transmission and distribution grid up tothe standards set by