An excellent article on speculation in the commodities markets from the German newspaper Spiegel:
The Attack on Prosperity: How Speculators Are Causing the Cost of Living to Skyrocket
I don't think there's any doubt there's been huge run-ups in commodities starting in August 2007 and another bump in February 2008. To my mind, this is another bubble being blown by investment bankers desperate to mitigate or avoid realizing their losses in the sub-mortgage crisis. There's clearly no willingness to shine any light onto the books of the big banks, since probably 50 % of the top ten would be insolvent if they had to truly account for the value of their highly-leveraged mortgage-based instruments of financial suicide.
Like all bubbles, this one will probably go on for longer than seems possible in spite of the clearly unsustainable nature of the beast. The investment losses, in the end, will only be that much bigger as a result. That said, I think this bubble will burst a little faster than the housing one. For one, turnover is much faster than housing. The price of commodities is rising much faster than housing did so we'll reach the tipping point that much faster.
16 June 2008
03 June 2008
A Primer on Desiccation and Cryopreservation
(a.k.a. Storing Seeds)
I would like to take a brief break from energy issues for a moment to discuss a different topic: the science of freezing plant seeds to preserve them for the future. The cultivars of produce that we purchase in the supermarket are typically pretty bland, especially if they have to be shipped by reefer truck from California or worse, Chile. On the other hand, I can buy heritage vegetables from my local farmer's market, figure out which varieties I like, and seed them. This isn't possible for all varieties (i.e. root vegetables like carrots) but the results can be impressive. The other goal here is to get a good yield, so that most of your seeds sprout, by following good practices.
Most of this comes from knowledge I gleaned from a graduate-level mechanical engineering course I took on cryogenics. (Note: cryogenics is the science of liquefaction and refrigeration at temperatures far below zero; cryopreservation is the science of freezing biological tissues with minimal damage; cryonics is freezing dead people's heads. Can you spot the quack?) This is not to say that I have years of experience successfully freezing seeds. This is simply some of my scientific knowledge of how one should approach the problem. I had a yield of 7.5 sprouts from 9 seeds planted from a heritage tomato I bought and seeded.
Cryopreservation can be used to freeze (small) whole organisms — I have read in books on cryopreservation that commercial goldfish can be frozen by liquid nitrogen, shipped by air from China, and defrosted. About half live, the rest die if you look at them wrong when you take them home. Cold-water fish are probably uniquely well suited to protection from freezing damage, since they have natural protective agents.
The basic problem with freezing tissue is that: 1.) water increases in volume when it freezes, and 2.) water forms potentially sharp crystals (dendrites) when it freezes. If an ice crystal punctures a cell wall, it tends to cause irreparable damage and the cell will lyse (die) upon defrosting.
It takes a great deal of energy to thaw ice — the equivalent of heating water by 80 °C, actually. Freezing ice requires taking away the same amount of energy. When water freezes, the process always starts at some local density variation (homogenous nucleation) or some feature such as a protein (heterogenous nucleation). When you freeze slowly only a few nucleation sites form and then the bulk of the water amalgamates onto existing crystals. This leads to a relatively small number of large crystals. Faster freezing encourages more nucleation sites to form, so the end product is many, small crystals. Hence the plunge into liquid nitrogen as the basis of most cryopreservation techniques.
There are two basic methods of cryopreservation: replacing the water with another fluid or solution (such as ethylene glycol) which vitrifies (freezes as an amorphous glass) rather than forms crystals, or dehydrate and freeze. Since I'm talking about plants here, we're going to ignore the vitrification process, since it is technically much more challenging and impractical outside of a laboratory.
The approach then, is to dehydrate the seeds before freezing. This acts to increase the concentration of solutes (sugar, etc.) in the cytoplasm which in turn tends to inhibit the formation of large ice crystals. It reduces the likelihood that the cell walls won't be burst when the water expands as it freezes. Aside: a lot of the literature on cryopreservation discusses the concept that intracellular ice observed in a cell tends to imply that the cell is not going survive thawing. Functionally, what this really means is that if ice crystals large enough to observe with an optical microscope form inside the cell, then the cell will probably die.
Most people recommend drying seeds before storage. This page from Colorado State states that most seeds should be reduced to 8 % moisture content before storage. The typical process is to air dry over a week or two. If you live in a wet climate or are impatient I would think, however, that it is safe to use a food dehydrator to speed up the process. The keys would be don't allow the temperature to rise too high such that it denatures protein (< 45 °C to be safe) and don't overdo it. Plants can tolerate greater dehydration than animals due to the cellulose in their cell walls but you can still kill them. Unfortunately it's quite difficult to assess the moisture content of a seed. Also note the discussion on 'hard seed' at the above link.
After dehydration, you want to put the seeds into a dry environment so that they don't try and germinate. For this, you need an air-tight box (a desiccator) and some material that strongly adsorbs water (a desiccant). For home use, a hundred-dollar laboratory desiccation cabinet is overkill. A glass mason jar with a rubber seal and a tight clamping mechanism should work fine. You may want to grease the rubber gasket with a silicone grease so that it remains pliable in the freezer. When greasing a gasket, you want to work the grease into the material, and then wipe it clean with a paper towel until it no longer feels tacky. Avoid greases with petroleum (i.e. Vaseline) in them as they will break down rubber polymers. Ideally you should also wear latex or nitrile gloves to protect the gasket from the oil on your hands but that would be overkill for non-vacuum applications.
All you need then is a desiccant to put into your cheap desiccator before you pop it into the freezer. You've probably seen a desiccant before in a pill bottle marked "Silica gel - Do Not Eat."
Desiccants are hydroscopic (they adsorb water very readily) so they will basically suck all the water out of the atmosphere of your jar. Personally I would probably want to buy a cartridge (such as this one from Fisher Scientific) for convenience but their are likely cheaper suppliers. Most desiccants can be regenerated by putting them into an oven and baking them above the boiling point of water for awhile. This will drive away the water they have adsorbed onto their surface. Keep in mind that if you leave them exposed to atmosphere for very long they will fully adsorb and no longer fulfill their function.
As I mentioned previously, one of the primary damage mechanisms in cryopreservation is the sintering of ice crystals during thawing. Hence repeatedly defrosting and re-freezing is very harmful and likely to reduce your yields significantly. As such, you need to store them in a deep freeze or freezer with no automatic defrost cycle. Incidentally, this is why stuff stored in a 'frost-free' freezer tends to turn into mush after enough time.
Commercial cryopreservation processes often use microwaves to defrost material quickly. I wouldn't recommend this for home use, however. Home microwaves are generally too powerful and will cook the seeds. Turning down the power won't help, as microwaves simply run 1/10th the time when set to 10 % power. The obvious solution would be to soak them in tepid water. This will unfreeze them fast and start the rehydration process as well, encouraging them to germinate.
If you observe the above steps, and remember to sterilize your soil mix in the oven before you plant your seeds, I think you'll be pleasantly surprised at just how many of your seeds germinate.
Most of this comes from knowledge I gleaned from a graduate-level mechanical engineering course I took on cryogenics. (Note: cryogenics is the science of liquefaction and refrigeration at temperatures far below zero; cryopreservation is the science of freezing biological tissues with minimal damage; cryonics is freezing dead people's heads. Can you spot the quack?) This is not to say that I have years of experience successfully freezing seeds. This is simply some of my scientific knowledge of how one should approach the problem. I had a yield of 7.5 sprouts from 9 seeds planted from a heritage tomato I bought and seeded.
Cryopreservation can be used to freeze (small) whole organisms — I have read in books on cryopreservation that commercial goldfish can be frozen by liquid nitrogen, shipped by air from China, and defrosted. About half live, the rest die if you look at them wrong when you take them home. Cold-water fish are probably uniquely well suited to protection from freezing damage, since they have natural protective agents.
The basic problem with freezing tissue is that: 1.) water increases in volume when it freezes, and 2.) water forms potentially sharp crystals (dendrites) when it freezes. If an ice crystal punctures a cell wall, it tends to cause irreparable damage and the cell will lyse (die) upon defrosting.
It takes a great deal of energy to thaw ice — the equivalent of heating water by 80 °C, actually. Freezing ice requires taking away the same amount of energy. When water freezes, the process always starts at some local density variation (homogenous nucleation) or some feature such as a protein (heterogenous nucleation). When you freeze slowly only a few nucleation sites form and then the bulk of the water amalgamates onto existing crystals. This leads to a relatively small number of large crystals. Faster freezing encourages more nucleation sites to form, so the end product is many, small crystals. Hence the plunge into liquid nitrogen as the basis of most cryopreservation techniques.
There are two basic methods of cryopreservation: replacing the water with another fluid or solution (such as ethylene glycol) which vitrifies (freezes as an amorphous glass) rather than forms crystals, or dehydrate and freeze. Since I'm talking about plants here, we're going to ignore the vitrification process, since it is technically much more challenging and impractical outside of a laboratory.
The approach then, is to dehydrate the seeds before freezing. This acts to increase the concentration of solutes (sugar, etc.) in the cytoplasm which in turn tends to inhibit the formation of large ice crystals. It reduces the likelihood that the cell walls won't be burst when the water expands as it freezes. Aside: a lot of the literature on cryopreservation discusses the concept that intracellular ice observed in a cell tends to imply that the cell is not going survive thawing. Functionally, what this really means is that if ice crystals large enough to observe with an optical microscope form inside the cell, then the cell will probably die.
Most people recommend drying seeds before storage. This page from Colorado State states that most seeds should be reduced to 8 % moisture content before storage. The typical process is to air dry over a week or two. If you live in a wet climate or are impatient I would think, however, that it is safe to use a food dehydrator to speed up the process. The keys would be don't allow the temperature to rise too high such that it denatures protein (< 45 °C to be safe) and don't overdo it. Plants can tolerate greater dehydration than animals due to the cellulose in their cell walls but you can still kill them. Unfortunately it's quite difficult to assess the moisture content of a seed. Also note the discussion on 'hard seed' at the above link.
After dehydration, you want to put the seeds into a dry environment so that they don't try and germinate. For this, you need an air-tight box (a desiccator) and some material that strongly adsorbs water (a desiccant). For home use, a hundred-dollar laboratory desiccation cabinet is overkill. A glass mason jar with a rubber seal and a tight clamping mechanism should work fine. You may want to grease the rubber gasket with a silicone grease so that it remains pliable in the freezer. When greasing a gasket, you want to work the grease into the material, and then wipe it clean with a paper towel until it no longer feels tacky. Avoid greases with petroleum (i.e. Vaseline) in them as they will break down rubber polymers. Ideally you should also wear latex or nitrile gloves to protect the gasket from the oil on your hands but that would be overkill for non-vacuum applications.
All you need then is a desiccant to put into your cheap desiccator before you pop it into the freezer. You've probably seen a desiccant before in a pill bottle marked "Silica gel - Do Not Eat."
Desiccants are hydroscopic (they adsorb water very readily) so they will basically suck all the water out of the atmosphere of your jar. Personally I would probably want to buy a cartridge (such as this one from Fisher Scientific) for convenience but their are likely cheaper suppliers. Most desiccants can be regenerated by putting them into an oven and baking them above the boiling point of water for awhile. This will drive away the water they have adsorbed onto their surface. Keep in mind that if you leave them exposed to atmosphere for very long they will fully adsorb and no longer fulfill their function.
As I mentioned previously, one of the primary damage mechanisms in cryopreservation is the sintering of ice crystals during thawing. Hence repeatedly defrosting and re-freezing is very harmful and likely to reduce your yields significantly. As such, you need to store them in a deep freeze or freezer with no automatic defrost cycle. Incidentally, this is why stuff stored in a 'frost-free' freezer tends to turn into mush after enough time.
Commercial cryopreservation processes often use microwaves to defrost material quickly. I wouldn't recommend this for home use, however. Home microwaves are generally too powerful and will cook the seeds. Turning down the power won't help, as microwaves simply run 1/10th the time when set to 10 % power. The obvious solution would be to soak them in tepid water. This will unfreeze them fast and start the rehydration process as well, encouraging them to germinate.
If you observe the above steps, and remember to sterilize your soil mix in the oven before you plant your seeds, I think you'll be pleasantly surprised at just how many of your seeds germinate.
21 May 2008
Photovoltaic Update
According to photovoltaic industry analyst SolarBuzz, total PV installations in 2007 were 2826 MWpeak, representing a growth rate of 62 % (!!!) over 2006 . By way of comparison, Worldwatch claims that PV installations were 2935 MWpeak in 2007 (hat tip Peak Energy).
Germany continues to be the main driver for the PV industry, although Spain is now coming on very strong with their subsidy program as well. Ontario now has a similarly (over) generous subsidy program in operation so we are starting to see many announcements for PV power plants there as well. Japan is falling behind as their subsidy program was for a fixed capacity (i.e. 100,000 homes).
Thin film is growing much faster than poly- and mono-crystalline Silicon. SolarBuzz claims growth of 123 %, from 180 MW to 400 MW of installed capacity. Since a lot of the newer thin-film capacity is either CdTe or microcrystalline Silicon rather than the simpler amorphous Silicon (which happens to degrade quicker), the 400 MW number is probably actually 'firmer' than the 180 MW deployed in 2006.
The current leader of the direct bandgap thin film solar industry is First Solar of Ohio. The manufacturer of CdTe thin film solar cells has gone from $67 million in sales in the first quarter of 2007 to $197 million in the first quarter of 2008. Net profits increased 830 %, from $5 million to $46.6 million. With profits being about 25 % of sales, they have a much higher profit margin than most industries, including any oil major. That tends to imply they will be able to grow their production capacity very, very fast. They are currently advertising for 105 positions. According to the above report, First Solar is selling their modules for $2.45/Wpeak, and since the cost of sales is 47 % of total sales, that implies a cost of $1.15/Wpeak.
It will be interesting to see how the CIGS manufacturers stack up. As long as the price of solar is supported by overly generous government subsidies we aren't going to see technology sorting out winners and losers in the market, however.
Update: in case you wonder what $1.15/Wpeak means, I calculate that for an environment with a capacity factor of 0.2 (i.e. San Franciso), when amortized over 25 years it works out to under $0.04/kWh. Each peak Watt will average 1.6 kWh/annum (max of 1.75 kWh in first year, dropping by 20 % over 25 years). Assumptions: energy inflation of 2.5 %/annum, general inflation of 2.5 %/annum, interest on financing of 6.0 %/annum. You have to add in all ancillary costs onto that four cent figure (such as frames, inverter, etc.) but the point remains obvious.
Germany continues to be the main driver for the PV industry, although Spain is now coming on very strong with their subsidy program as well. Ontario now has a similarly (over) generous subsidy program in operation so we are starting to see many announcements for PV power plants there as well. Japan is falling behind as their subsidy program was for a fixed capacity (i.e. 100,000 homes).
Thin film is growing much faster than poly- and mono-crystalline Silicon. SolarBuzz claims growth of 123 %, from 180 MW to 400 MW of installed capacity. Since a lot of the newer thin-film capacity is either CdTe or microcrystalline Silicon rather than the simpler amorphous Silicon (which happens to degrade quicker), the 400 MW number is probably actually 'firmer' than the 180 MW deployed in 2006.
The current leader of the direct bandgap thin film solar industry is First Solar of Ohio. The manufacturer of CdTe thin film solar cells has gone from $67 million in sales in the first quarter of 2007 to $197 million in the first quarter of 2008. Net profits increased 830 %, from $5 million to $46.6 million. With profits being about 25 % of sales, they have a much higher profit margin than most industries, including any oil major. That tends to imply they will be able to grow their production capacity very, very fast. They are currently advertising for 105 positions. According to the above report, First Solar is selling their modules for $2.45/Wpeak, and since the cost of sales is 47 % of total sales, that implies a cost of $1.15/Wpeak.
It will be interesting to see how the CIGS manufacturers stack up. As long as the price of solar is supported by overly generous government subsidies we aren't going to see technology sorting out winners and losers in the market, however.
Update: in case you wonder what $1.15/Wpeak means, I calculate that for an environment with a capacity factor of 0.2 (i.e. San Franciso), when amortized over 25 years it works out to under $0.04/kWh. Each peak Watt will average 1.6 kWh/annum (max of 1.75 kWh in first year, dropping by 20 % over 25 years). Assumptions: energy inflation of 2.5 %/annum, general inflation of 2.5 %/annum, interest on financing of 6.0 %/annum. You have to add in all ancillary costs onto that four cent figure (such as frames, inverter, etc.) but the point remains obvious.
28 April 2008
Magna Proposes Plug-in Hybrid
An article by George Keenan in the Globe and Mail has revealed that Magna International Inc., the huge Canadian automobile parts manufacturer, is proposing to build a plug-in hybrid vehicle by 2010. The owner, Frank Stronach, was interviewed by Keenan and stated,
My personal suspicion is that Magna is looking to get into the hybrid parts business, and developing a complete vehicle is a way for them to achieve this. Magna has previously stated that they think hybrid sales will top 1.7 million a year by 2013. Right now Ford's hybrid efforts are stymied by the fact that most of their supply chain is Japanese. GM will have similar issues with the Volt.
This project is largely simply good business practice by Magna in the face of increasing fuel costs. The article makes clear that the viability of a plug-in hybrid is a function of the difference between the price of oil and the price of gasoline. Fortunately, plug-in hybrid technology can be rolled out in small increments, gaining market share first from the early adopters and then through economic advantage as the price of batteries declines and gasoline increases.
I did take a look at the comments in the article (probably a mistake), and I was a little annoyed to see that people were suggesting that we didn't have the electricity or power would be supplied by "Ohio coal plants." Practically, all the early adopters of plug-in cars can be recharged by the idle capacity that exists and night-time. Giant thermal plants aren't easily throttled down, so there is typically a surfeit of power that is otherwise wasted at night. In the future, plug-ins can be aggregated to act as 'deferrable demand' for the power utilities, smoothing out the intermittency of solar and wind power, and allowing greater market penetration from those technologies.
New technologies such as hybrids offer a great market for Magna's parts and its ability to build complete vehicles, Mr. Stronach said in an interview, noting that cars with Magna-developed hybrid engines are already being tested in Europe. "You don't have to be a great scientist to know that we're going to be out of oil sooner or later," Mr. Stronach said.The effort is being fronted by Magna Steyr in Austria. Steyr actually builds complete vehicles that are badged under other manufacturers. Magna is budgeting $30 million for the effort, which is hardly insignificant when you consider it's only over two years, even for corporate research (i.e. no cheap graduate student labour). Overall I think that their project will be late, however, unless their goal is simply 'proof of principal'. That said, Magna claims to already be working on the project, so who knows how long they've kept this under wraps. Magna is also involved with the Tesla Roadster.
My personal suspicion is that Magna is looking to get into the hybrid parts business, and developing a complete vehicle is a way for them to achieve this. Magna has previously stated that they think hybrid sales will top 1.7 million a year by 2013. Right now Ford's hybrid efforts are stymied by the fact that most of their supply chain is Japanese. GM will have similar issues with the Volt.
This project is largely simply good business practice by Magna in the face of increasing fuel costs. The article makes clear that the viability of a plug-in hybrid is a function of the difference between the price of oil and the price of gasoline. Fortunately, plug-in hybrid technology can be rolled out in small increments, gaining market share first from the early adopters and then through economic advantage as the price of batteries declines and gasoline increases.
I did take a look at the comments in the article (probably a mistake), and I was a little annoyed to see that people were suggesting that we didn't have the electricity or power would be supplied by "Ohio coal plants." Practically, all the early adopters of plug-in cars can be recharged by the idle capacity that exists and night-time. Giant thermal plants aren't easily throttled down, so there is typically a surfeit of power that is otherwise wasted at night. In the future, plug-ins can be aggregated to act as 'deferrable demand' for the power utilities, smoothing out the intermittency of solar and wind power, and allowing greater market penetration from those technologies.
23 April 2008
Recycled Steam
So I'm in the process of moving (yet again), which has put the brakes on me producing another technical post. So, in lo of that, I think I'll beat on a journalist. Yeah I know, it's like killing kittens, they're just so cute and helpless, but hey, if it helps me vent some frustrations, it's all good.
So I recently read in The Atlantic (home of the esteemed James Fallows) an article by Lisa Margonelli on combined heat and power. In general, this article is fairly good, especially the second half. However, I still saw some paragraphs that rankled. Let's dive in, shall we?
Ok, so definition time: this article is about combined heat-and-power (CHP), but you won't see those words in this article. In fact, the article only talks about the other way around — capturing waste heat to make electricity.
CHP usually aims to take an industrial activity where you burn a fossil fuel for process heat, and run the fuel through an electricity generation process first and use the waste heat for the process. Margonelli, on the other hand, provides an example where electricity is used for heating. This isn't common, because electricity is still far more expensive than natural gas on a pure dollar per Joule basis. In fact, it's only used when you need either extremely high purity or extremely high temperatures. Such as,
TANSTAAFL (There Ain't No Such Thing As A Free Lunch) applies here as much as anywhere. For some plants, better insulation may be a better buy.
The other giant impediment to CHP the article sort of dances around but never really addresses. In the giant race to the bottom of labour costs (i.e. off-shoring), it is a pretty big gamble for a power plant to setup for combined heat and power and then hope that their customer will still be around in five years. Low-grade steam isn't something you can pump around the state to find a new customer because you'll simply bleed it all off as parasitic losses to the pipeline. So I think the emphasis on Free Trade which has introduced such volatility in the cost of labour is probably a big part of the general failure of CHP to have a big impact on our energy economy.
The other reason CHP hasn't really taken off is that natural gas hasn't turned out to be as cheap or as fungible as expected, and it's the only fossil fuel that's really clean enough to run with decentralized power and easily pipelined. Coal isn't.
So I recently read in The Atlantic (home of the esteemed James Fallows) an article by Lisa Margonelli on combined heat and power. In general, this article is fairly good, especially the second half. However, I still saw some paragraphs that rankled. Let's dive in, shall we?
The U.S. economy wastes 55 percent of the energy it consumes, and while American companies have ruthlessly wrung out other forms of inefficiency, that figure hasn’t changed much in recent decades.and, later,
For the better part of a century, we’ve gotten electricity from large, central generators, which waste nearly 70 percent of the energy they burn.A ha! Yes, the ever popular confusion regarding the difference between useful work and waste heat. Once is forgivable as editorial discretion, but twice is a pattern. Let's take nice, high-pressure and hot steam and pass it through a steam turbine. Surprise, we lose heat and pressure from the steam in order to run the Rankin cycle. You can take that steam and pass it through another turbine, but the 2nd cycle will get a lot less electricity out for the same capital costs. The final potential use then is to take the latent heat from the low-quality steam and dump it somewhere: process heat for drying , heating the factory floor, or speeding up some chemical reaction.
Ok, so definition time: this article is about combined heat-and-power (CHP), but you won't see those words in this article. In fact, the article only talks about the other way around — capturing waste heat to make electricity.
CHP usually aims to take an industrial activity where you burn a fossil fuel for process heat, and run the fuel through an electricity generation process first and use the waste heat for the process. Margonelli, on the other hand, provides an example where electricity is used for heating. This isn't common, because electricity is still far more expensive than natural gas on a pure dollar per Joule basis. In fact, it's only used when you need either extremely high purity or extremely high temperatures. Such as,
Heat, which in some industrial kilns reaches 7,000F, can be used to produce more steam.tungsten tool making for one. Needless to say, most industrial activity isn't involved in the manufacture of refractory materials, zone-refined silicon, etc. This is my major problem with the article. The example provided isn't very representative of industrial uses of heat. What can be economic for a specialty steel refiner probably isn't for an ethanol plant or oil refinery.
TANSTAAFL (There Ain't No Such Thing As A Free Lunch) applies here as much as anywhere. For some plants, better insulation may be a better buy.
In some industries, investments in energy efficiency also suffer because of the nature of the business cycle. When demand is strong, managers tend to invest first in new capacity; but when demand is weak, they withhold investment for fear that plants will be closed. The timing just never seems to work out. McKinsey found that three-quarters of American companies will not invest in efficiency upgrades that take just two years to pay for themselves.This says a lot more about business leaders' acumen than the particulars of a efficiency upgrade. If you can't generate some cash flow to invest in capital equipment (and that is what we are discussing here — a gain in productivity) during a boom you probably aren't going to survive the inevitable bust. Why the emphasis on capacity growth? Are the CEOs really that concerned about losing market share? Or is this just an example of knee-jerk brownian attitudes? Or are executives just really dumb? (Don't answer that.)
The other giant impediment to CHP the article sort of dances around but never really addresses. In the giant race to the bottom of labour costs (i.e. off-shoring), it is a pretty big gamble for a power plant to setup for combined heat and power and then hope that their customer will still be around in five years. Low-grade steam isn't something you can pump around the state to find a new customer because you'll simply bleed it all off as parasitic losses to the pipeline. So I think the emphasis on Free Trade which has introduced such volatility in the cost of labour is probably a big part of the general failure of CHP to have a big impact on our energy economy.
The other reason CHP hasn't really taken off is that natural gas hasn't turned out to be as cheap or as fungible as expected, and it's the only fossil fuel that's really clean enough to run with decentralized power and easily pipelined. Coal isn't.
02 April 2008
Boom and Bust Stifles Non-resource Economic Activities
Canada is, by in large, a resource-based economy. There's significant manufacturing in Ontario and Quebec, but most of the country operates on the principle of collecting natural resources and selling them to more populous countries. Basically we take advantage of our low population density relative to the fact that we're the 2nd largest country in the world. Being a resource economy comes with the drawback that you live at the mercy of the large economies of the world.
One often heard complaint is that we don't process our raw materials to add value to them, to any significant degree. In British Columbia in the 1990s the cry was over raw logs being exported to Japan without any milling.
The Globe and Mail's Inside Energy Blog had a post up recently on how the provincial and federal governments were showing no interest in pushing bitumen producers towards upgrading the product to synthetic crude in Alberta. Rather, they pipeline the bitumen (and presumably some solvent) South to the terminals around Chicago so that it can be upgraded there. The obvious complaint by unionized workers is that it should be done locally.
Technically, upgrading the bitumen elsewhere makes Alberta's carbon dioxide emissions look just a little better, but the net addition to the atmosphere is still going to be the same. The reason the corporations might want to do this is pretty obvious: labour is very expensive in Alberta, and much cheaper in the American Midwest.
The problem with this whole concept of trying to encourage a "value-added" industry is that it simply cannot survive the boom-and-bust resource cycle. To put it simply, if you are a manufacturer, would you want to put your operation in Alberta with the knowledge that in a boom all your costs would inflate like crazy and your employees decamp for the oil patch? And in a bust, the USA is likely in a recession, so you hurt then too. It seems like a no-win situation.
Peter Lougheed (famous ex-premier) is well known for wanting to develop a plastics industry in the province, but I simply don't see it happening without a radical change in the royalty structure. The development of "value-added" industry would require provincial governments to apply a brake to resource development when commodity prices are high, something they generally don't have the discipline to do.
One often heard complaint is that we don't process our raw materials to add value to them, to any significant degree. In British Columbia in the 1990s the cry was over raw logs being exported to Japan without any milling.
The Globe and Mail's Inside Energy Blog had a post up recently on how the provincial and federal governments were showing no interest in pushing bitumen producers towards upgrading the product to synthetic crude in Alberta. Rather, they pipeline the bitumen (and presumably some solvent) South to the terminals around Chicago so that it can be upgraded there. The obvious complaint by unionized workers is that it should be done locally.
Technically, upgrading the bitumen elsewhere makes Alberta's carbon dioxide emissions look just a little better, but the net addition to the atmosphere is still going to be the same. The reason the corporations might want to do this is pretty obvious: labour is very expensive in Alberta, and much cheaper in the American Midwest.
The problem with this whole concept of trying to encourage a "value-added" industry is that it simply cannot survive the boom-and-bust resource cycle. To put it simply, if you are a manufacturer, would you want to put your operation in Alberta with the knowledge that in a boom all your costs would inflate like crazy and your employees decamp for the oil patch? And in a bust, the USA is likely in a recession, so you hurt then too. It seems like a no-win situation.
Peter Lougheed (famous ex-premier) is well known for wanting to develop a plastics industry in the province, but I simply don't see it happening without a radical change in the royalty structure. The development of "value-added" industry would require provincial governments to apply a brake to resource development when commodity prices are high, something they generally don't have the discipline to do.
31 March 2008
Lifetime Electricity Costs for High-end Video Cards
So a few weeks ago I discussed how we're going to need a greater emphasis on low power consumption electronic design in the future. I thought it would be helpful to actually put down some numbers and see how big a cost power consumption is for high-end computer equipment. On some equipment, especially that used in server farms such as hard drives, power draw is already an important metric. For other components, we often are not even given consumption numbers by the manufacturers.
High-end graphics cards are becoming particularly power hungry, as this chart by anandtech.com shows. The two current best-performance at a reasonable price-point video cards are the 8800GT by NVidia and Radeon 3870 by ATI. Even idling, these systems chew through an impressive amount of power — 165 W in the case of the NVidia product and 125 W for the ATI one. I don't know if anandtech.com's methodology is normalized for the efficiency of the power supply or not, but regardless they are burning a lot of power for doing next to nothing. Average residential electricity prices are up to 10.4 ¢/kW·h now in the US for 2006.
Let's assume that the lifetime of a card is always on at idle for two years. "Idle" in this case would basically extend to using any 2-D application, such as browsing the internet or using a word processor. Only 3-D accelerated games are going to stress these systems to any significant degree.
As we can see, the operational cost of these two cards is roughly comparable to the purchase price. Even with the modern price of gasoline, automobiles don't have such a high proportion of their lifetime cost associated with fuel.
Both of these cards come with 512 MB of fast memory spread out over eight chips. However, a single buffer at 1280x1024 pixels with 32-bit resolution requires less than 6 MB of RAM, so there's no need to maintain all that memory powered on for the vast majority of computer applications. One chip should suffice for a triple buffered display.
Similarly, it should be technically possible to clock down the processor and bus speeds dynamically to reduce the power consumption of the GPU. Alternatively, one could embed a slow GPU for 2D applications. Most motherboards are available with on-board video on the Northbridge chipset which is just fine for web browsing (useful if you ever want to flash the BIOS on your video card BTW). The marginal cost of on-board graphics is probably around $5 to the manufacturer.
I find it somewhat surprising that neither of the major graphics manufacturers have tried to radically improve the power performance of their cards. There is, potentially, a major competitive advantage to be had. For example, if ATI was to spend $5 per card and drop the idle power requirement to 1/8th that of the Nvidia model, and advertise that fact and the estimated savings aggressively, they could recapture a lot of the market share they've ceded since the heyday of the Radeon 9700 Pro.
High-end graphics cards are becoming particularly power hungry, as this chart by anandtech.com shows. The two current best-performance at a reasonable price-point video cards are the 8800GT by NVidia and Radeon 3870 by ATI. Even idling, these systems chew through an impressive amount of power — 165 W in the case of the NVidia product and 125 W for the ATI one. I don't know if anandtech.com's methodology is normalized for the efficiency of the power supply or not, but regardless they are burning a lot of power for doing next to nothing. Average residential electricity prices are up to 10.4 ¢/kW·h now in the US for 2006.
Let's assume that the lifetime of a card is always on at idle for two years. "Idle" in this case would basically extend to using any 2-D application, such as browsing the internet or using a word processor. Only 3-D accelerated games are going to stress these systems to any significant degree.
| Video Card | NVidia 8800GT | ATI Radeon 3870 |
| Initial Purchase Price | $260 | $255 |
| Idle Power Consumption | 165 W | 125 W |
| Expected Lifetime | 17500 hours | 17500 hours |
| Lifetime Est. Power Consumption | 2187.5 kW·h | 2887.5 kW·h |
| Lifetime Electricity Cost | $300.30 | $227.50 |
| Total Cost | $560.30 | $482.50 |
As we can see, the operational cost of these two cards is roughly comparable to the purchase price. Even with the modern price of gasoline, automobiles don't have such a high proportion of their lifetime cost associated with fuel.
Both of these cards come with 512 MB of fast memory spread out over eight chips. However, a single buffer at 1280x1024 pixels with 32-bit resolution requires less than 6 MB of RAM, so there's no need to maintain all that memory powered on for the vast majority of computer applications. One chip should suffice for a triple buffered display.
Similarly, it should be technically possible to clock down the processor and bus speeds dynamically to reduce the power consumption of the GPU. Alternatively, one could embed a slow GPU for 2D applications. Most motherboards are available with on-board video on the Northbridge chipset which is just fine for web browsing (useful if you ever want to flash the BIOS on your video card BTW). The marginal cost of on-board graphics is probably around $5 to the manufacturer.
I find it somewhat surprising that neither of the major graphics manufacturers have tried to radically improve the power performance of their cards. There is, potentially, a major competitive advantage to be had. For example, if ATI was to spend $5 per card and drop the idle power requirement to 1/8th that of the Nvidia model, and advertise that fact and the estimated savings aggressively, they could recapture a lot of the market share they've ceded since the heyday of the Radeon 9700 Pro.
16 March 2008
Carbon Trading, Bubble Hysteria
In the past, I thought that carbon trading of the style proposed by the Kyoto treaty could be a positive way to affect change, both from the point of view of climate change and peak oil. I have gradually come to change my mind, and I now favour a vanilla carbon tax with no loop holes. My decision was largely made watching the fallout from the dot-com bust, and now the US mortgage security shenanigan's.
Anything that Wall Street can game to enrich themselves, they will game. These crony capitalists with their derivatives and good-old-boys compensation schemes are really the enemy of free market entrepreneurship. If you bought $50 puts on Bear Sterns on Monday (10Mar2008), you gained a lot of money, but no wealth was crated.
I fail to see any advantage in giving Wall Street access to the carbon market.
A lot of people suspect that the recent run-up in commodities is largely due to money flowing out of mortgage securities and into commodities. I am not convinced of this, due to a number of factors.
Past pump and dumps in commodities — such as nickel — can work because you can store an entire years worth of the world's nickel production in a single large warehouse. On the other hand, a day's worth of oil production is roughly a cube 300 m on each side. It's very difficult to take oil out of the system unless you are a national oil company.
Furthermore, demand remains remarkably inelastic. Predictions of any tipping point where demand suddenly falls off at some price-point haven't panned out. When oil is consumed, it's really gone.
In addition, a huge hunk of the recent run-up in crude oil prices is simply due to the devaluation of the US dollar. The proof is in the US dollar index. So yes, the US is getting hosed on their oil consumption but the majority of the world's consumption is pretty well hedged against this rise.
China even subsidizes the cost of oil to their citizen-consumers. They have to do something with their dollar reserves. So even if we see a lot of demand destruction for petroleum from the USA it's not clear if that will really hammer the price of oil back down to $80 for a sustained period. The twin inflationary and deflationary pressures currently at war between the US Federal Reserve and Wall Street respectively make that an extremely difficult call to make.
I know one thing for sure. I will never hire someone with an MBA on their resume.
This brings up another question, namely is there potential for a bubble in investment in the so-called 'Cleantech' sector?
The world economy is in a slow transition from fossil fuels to alternative sources of energy, true or false? If you answer "true," then your only reasonable explanation for a bubble would be that the alternatives are growing at an unsustainable rate relative to the increase in the price of fossil fuels.
Unlike say, Pets.com or granite counter tops, a wind turbine or photovoltaic power has intrinsic value. They produce electricity, which is a very high-quality form of energy. I can calculate the net present value of a set of photovoltaic panels to a rather high degree of accuracy (~10 %), merely by noting the climate in which they are installed and their age.
The gap between the cost of doing work with oil as your energy source compared to electricity continues to enlarge. Consider, with electricity at $0.09/kWh, natural gas futures at $10.00/MMbtu, and oil at $111/bbl, the value of switching to electrons may pay back quickly. Note: these numbers are changing as fast as I can type this article.
At this point, electrifying train tracks or heating your home with a heat pump looks really good going forward (natural gas isn't nearly as fungible as oil). Look at it this way, there are 153 million employed people in the US, and they consume 19.6 million barrels of oil a day. That's $14.20/day or $5190 a year per (money earning) person at current prices. That's a lot of Starbucks.
There is a potentially enormous sum of money to be made in weaning North America, Japan, and Europe off the oil habit. It's not going to be easy since there is still a massive amount fossil fuels in the Earth's crust. The saving grace of the alternative energy industry is that its costs will go down with time whereas fossil fuel companies will have to extract poorer and poorer quality resources and hence become more expensive.
Of course, not everyone involved in cleantech will be idealists. A number of companies will be formed with the express aim of relieving investors of their capital. These fraudsters will primarily aim at people conceited enough to believe that they understand science, but lack the actual formal education to evaluate what they are seeing in numerical terms. I'm looking at the dot-com millionaires here. Beware the Rube Goldberg machine, or the company with salaries a much higher proportion of their expenses than equipment.
I will say, from personal experience, doing research in a corporate environment where every line of research has to have an immediate application and money for equipment is tight isn't very efficient compared to government funded labs. Now the bureaucracy, well...
Anything that Wall Street can game to enrich themselves, they will game. These crony capitalists with their derivatives and good-old-boys compensation schemes are really the enemy of free market entrepreneurship. If you bought $50 puts on Bear Sterns on Monday (10Mar2008), you gained a lot of money, but no wealth was crated.
I fail to see any advantage in giving Wall Street access to the carbon market.
A lot of people suspect that the recent run-up in commodities is largely due to money flowing out of mortgage securities and into commodities. I am not convinced of this, due to a number of factors.
Past pump and dumps in commodities — such as nickel — can work because you can store an entire years worth of the world's nickel production in a single large warehouse. On the other hand, a day's worth of oil production is roughly a cube 300 m on each side. It's very difficult to take oil out of the system unless you are a national oil company.
Furthermore, demand remains remarkably inelastic. Predictions of any tipping point where demand suddenly falls off at some price-point haven't panned out. When oil is consumed, it's really gone.
In addition, a huge hunk of the recent run-up in crude oil prices is simply due to the devaluation of the US dollar. The proof is in the US dollar index. So yes, the US is getting hosed on their oil consumption but the majority of the world's consumption is pretty well hedged against this rise.
China even subsidizes the cost of oil to their citizen-consumers. They have to do something with their dollar reserves. So even if we see a lot of demand destruction for petroleum from the USA it's not clear if that will really hammer the price of oil back down to $80 for a sustained period. The twin inflationary and deflationary pressures currently at war between the US Federal Reserve and Wall Street respectively make that an extremely difficult call to make.
I know one thing for sure. I will never hire someone with an MBA on their resume.
This brings up another question, namely is there potential for a bubble in investment in the so-called 'Cleantech' sector?
The world economy is in a slow transition from fossil fuels to alternative sources of energy, true or false? If you answer "true," then your only reasonable explanation for a bubble would be that the alternatives are growing at an unsustainable rate relative to the increase in the price of fossil fuels.
Unlike say, Pets.com or granite counter tops, a wind turbine or photovoltaic power has intrinsic value. They produce electricity, which is a very high-quality form of energy. I can calculate the net present value of a set of photovoltaic panels to a rather high degree of accuracy (~10 %), merely by noting the climate in which they are installed and their age.
The gap between the cost of doing work with oil as your energy source compared to electricity continues to enlarge. Consider, with electricity at $0.09/kWh, natural gas futures at $10.00/MMbtu, and oil at $111/bbl, the value of switching to electrons may pay back quickly. Note: these numbers are changing as fast as I can type this article.
| Energy Currency | Energy Cost (US$/GJ) | Energy to Work Efficiency | Exergy Cost |
| Electricity | 25.00 | 1.0 | 25.00 |
| Natural Gas | 9.50 | 0.4 | 23.70 |
| Crude Oil | 17.35 | 0.35 | 49.55 |
At this point, electrifying train tracks or heating your home with a heat pump looks really good going forward (natural gas isn't nearly as fungible as oil). Look at it this way, there are 153 million employed people in the US, and they consume 19.6 million barrels of oil a day. That's $14.20/day or $5190 a year per (money earning) person at current prices. That's a lot of Starbucks.
There is a potentially enormous sum of money to be made in weaning North America, Japan, and Europe off the oil habit. It's not going to be easy since there is still a massive amount fossil fuels in the Earth's crust. The saving grace of the alternative energy industry is that its costs will go down with time whereas fossil fuel companies will have to extract poorer and poorer quality resources and hence become more expensive.
Of course, not everyone involved in cleantech will be idealists. A number of companies will be formed with the express aim of relieving investors of their capital. These fraudsters will primarily aim at people conceited enough to believe that they understand science, but lack the actual formal education to evaluate what they are seeing in numerical terms. I'm looking at the dot-com millionaires here. Beware the Rube Goldberg machine, or the company with salaries a much higher proportion of their expenses than equipment.
I will say, from personal experience, doing research in a corporate environment where every line of research has to have an immediate application and money for equipment is tight isn't very efficient compared to government funded labs. Now the bureaucracy, well...
11 March 2008
Squestration in the Oil Sands
Soooo.... last year the federal government of Canada introduced a bunch of new environmental programs. This year, they threw a lot of that out the window. Now we have a new environmental program: legislating projects that produce large quantities of carbon dioxide to employ sequestration. These large sources are coal plants and oil sands developments. The obvious loophole for everyone to observe is that it only applies to projects started after 2011, and there's evidently no grandfathering.
I'm not sure I believe whether they Conservative government actually intends to go through with this. Afterall, they are a minority government and while the opposition has no stomach for a new election, they aren't likely to last until 2011. The proof will really be in the activity in the oil patch. If they all rush to start projects before 2011 and have nothing scheduled after that, then maybe the Conservatives are actually serious.
Another question that crosses my mind is the quantity of good sequestration locations in close proximity to the main oil sands patch by Fort McMurray. Alberta is, generally speaking, a big sedimentary basin but the Northeast portion of the province is somewhat different if my memory is correct.
Personally, I foresee the cost of sequestering 'dirty' fuel sources such as bitumen or bituminous coal being onerous. Alberta already has the highest electricity prices in the nation and prices can only accelerate with the introduction of sequestration.
I'm not sure I believe whether they Conservative government actually intends to go through with this. Afterall, they are a minority government and while the opposition has no stomach for a new election, they aren't likely to last until 2011. The proof will really be in the activity in the oil patch. If they all rush to start projects before 2011 and have nothing scheduled after that, then maybe the Conservatives are actually serious.
Another question that crosses my mind is the quantity of good sequestration locations in close proximity to the main oil sands patch by Fort McMurray. Alberta is, generally speaking, a big sedimentary basin but the Northeast portion of the province is somewhat different if my memory is correct.
Personally, I foresee the cost of sequestering 'dirty' fuel sources such as bitumen or bituminous coal being onerous. Alberta already has the highest electricity prices in the nation and prices can only accelerate with the introduction of sequestration.
15 February 2008
The Difference between Economics and Physics
In economics, one assumes people are rational. In physics, one tests assumptions.
Economics
Physics
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