Oil Endgame 2: Creative Business Models
AEman's going to let the RMI folks carry the day on this one, as they are quite adept as describing transitions from made-things models to doing-things models: manufacturing vs. services-centric economies. Here they do it again, with the auto industry. The propulsive points for AE are self evident, and the last sentence hits close to home once again:
Perhaps the greatest peril, though it’s only starting to emerge on the
fringes of automobility, is transformation of the business model.
Traditionally, automakers sell vehicles and oil companies sell gallons. Both
want to sell more, while customers prefer on the whole to buy fewer (but more
physically and stylistically durable) vehicles that use fewer gallons. These
opposite interests don’t create a happy relationship. But suppose an
automaker or an oil company leased a mobility service that
provides vehicles or other means of physical or virtual mobility, tailored to
customers’ ever-shifting needs. Customers would pay for getting where
they want to be, not for the means of doing so. Then vehicles and
gallons, instead of being the providers’ source of profit, turn into a cost:
the fewer vehicles and gallons it takes to provide the mobility service that
the customer is paying for, the more profit the provider makes and the
more money the customer saves. Most major car and oil companies are
thinking quietly but seriously about this business model. Most industry
strategists fear that the first firm to adopt it on a large scale could
outcompete all the rest, both because of a better value proposition and
because aligning producers’ with customers’ interests tends to yield better
outcomes for both. There is no guarantee that such transformative business
models will start in America.
posted by Andy Bochman at 10:18 PM
 
Oil Endgame 1: Doubling Oil Efficiency?
Bet you know what AEman's going to say on this one. RMI says doubling oil efficiency is one fourth of the solution to coming up roses by 2025, and that the transportation sector, particularly cars and light trucks is the sweet spot for this improvement. Great. So How do we do it? Make vehicles lighter using new tech. What makes RMI think humans, particularly US-based humans, will go for something smart like this? Read:
Growing evidence suggests that besides fuel taxes and efficiency regulations,
there’s an even better way: light vehicles can become very efficient through
breakthrough engineering that doesn’t compromise safety, size, performance,
cost, or comfort, but enhances them all. Disruptive technology could make
government intervention, though potentially still very helpful, at least less
vital: customers would want such vehicles because they’re better, not because
they’re efficient, much as people buy digital media instead of vinyl phonograph
records. Of course, the hopeful AEman, is quite a bit skeptical about this. Barring sudden global calamity (see "The Day After Tomorrow" - spectacular, but silly) most Americans (does AEman have a problem with "most Americans"?) will opt for heavy metal every time. Only one thing helps us get our heads on straight when we aren't seeing something clearly: ass-kicking competition. Check this out:
The 2004 Prius is not only ~104% more efficient in ton-mpg than a modern
non-hybrid; it also gets 38% more ton-mpg than the 1998 Prius. That six-year
gain beats the average new U.S. light vehicle’s gain during the past 26 years
(1977–2003).
Ahhh. Sooo. GM is getting ready to re-live the sins of the past when it mistook a car with "toy" as part of its name for a joke. Except this surprise is no surprise at all ... excepting the fact that hybrids arrived on our fair shores a full ten years before US auto industry projections expected them. Or maybe the car guys were guilty of wishful thinking. AEman knows all about that. Bet you do too. Until the next post then, when we'll attempt to vet RMI's thinking on "creative business models and policies" ... that'll be exciting for sure. Better buckle up.
posted by Andy Bochman at 8:54 PM
Must Read: Winning the Oil Endgame
The folks at RMI, the Rocky Mountain Institute, have published a timely and definitive treatise plotting how to get from where we are to where we need to be. The book, entitled Winning the Oil Endgame is available online as an executive summary or a full electronic book in PDF form.
Once again the unholy trinity of old power demons raise their ugly heads as drivers for change: (1) economic impact (of high and volatile oil prices); (2) geopolitical risk of the enormously vulnerable oil and gas supply chain; and (3) climate and health impacts.
More interesting, is the prescription for how the U.S. can radically diminish its dependency on foreign oil sources. The authors, including Amory Lovins (Natural Capitalism) begin by saying we could/should save half of the oil we currently use and replace the other half with "cheaper alternatives". This is achieved through technological efficiency improvements and real conservation efforts on a broad scale. Think about it. Is that doable or possible? Are most Americans going to do that when they still mock Jimmy Carter for promoting wearing sweaters and turning the heat down during a real squeeze? Anyway, I'll assume the positive long enough to hear them out as they build their case: the four initiatives that get us there are as follows:
- Double the efficiency of using oil
- Apply creative business models and public policies
- Provide another one-fourth of US oil needs via domestic biofuels
- Save half of the projected use of natural gas
I'll take on each of these four pillars in later posts, but you have to admit it a pretty ballsy claim. Will it hold up as science ... maybe. Will it hold up as politically possible in our country in our time ... doubtful. But still, you can't make something great without first imagining it. Check it out.
posted by Andy Bochman at 9:43 PM
DOE Funds Hydrogen Research Projects
Most of the light and heat generated by our sun still comes from hydrogen. Now the Department of Energy (DOE) wants to explore reversing the process here on Earth, creating hydrogen from sunlight. See the this recent announcement from the great DOE Energy Efficiency and Renewable Energy (EERE) site. It's not the Manhattan project, but it's a start.
posted by Andy Bochman at 9:13 PM
Quixote and Fear of Cape Wind
An apt metaphor for what’s going on in the US and its failure to embrace wind turbines more vigorously, especially offshore, is provided for us by Miguel Cervantes’ in his masterpiece Don Quixote. Written in the 17th century, the half-blind protagonist Quixote repeatedly mistakes the early windmills for evil giants and ineffectually attacks them.
 ,
This is happening again, isn’t it? The Massachusetts coastal Cape Wind project can’t get built without inciting a massive legal assault as if Cape Wind wanted to line Nantucket’s beaches with hazardous waste incinerators. A Federal regulatory morass creates a fertile environment for opportunistic blocking maneuvers.
Attorney Carolyn Elefant, keeper off the Wind and Wave Energy Weblog, lays out a few of the reasons Cape Wind and other similar projects spend as much money on attorney fees as they do on developing improved technologies: - Applicants don’t always know where to go t always know where to go – and even the agencies are not aware of each others even the agencies are not aware of each others’ jurisdiction (Corps and FERC)
- Agencies w/jurisdiction may not be properly geared Agencies w/jurisdiction may not be properly geared for processing applications (Corps and offshore for processing applications (Corps and offshore wind; FERC and wave energy) wind; FERC and wave energy)
- Success of technologies will hinge on the extensiveness of a permitting process and not the extensiveness of a permitting process and not the merits merits
- No central repository [exists] for data No central repository for data – which leads to which leads to duplication of effort
We've got to cut to start cutting through this mess. Today’s sleek turbines are about as hazardous to humans and the environment as the mechanical marvels made of wood and cloth. Constructed of 21st century composites in computer optimized shapes, they are much taller and generate many thousands of times the power of their early ancestors.
I find the reasons for fighting wind power installations in 2004 about as cogent as Quixote’s four centuries ago: primarily based on blindness. With all due respect, the folks seem to be blissfully ignorant of: - The volatile price of oil and its effects on the economy
- Environmental impacts of old energy power sources
- The human pain and suffering from the casualties incurred defending middle east supply lines
What gives?
posted by Andy Bochman at 10:33 PM
Pump Dreams/Nightmares
In the October 11 edition of the New Yorker, John Cassidy asks “Is energy independence an impossible goal?” in his piece entitled “Pump Dreams.” Cassidy holds that:
There is another, more basic problem with Kerry’s [alterative energy] proposals. Switching to renewable energy wouldn’t reduce oil imports much, because most power stations don’t run on oil, which is largely used for road and air transport. Developing a transport fuel that can compete with oil is an enormous challenge. For this reason, among others, many
analysts regard the candidates’ endorsement of energy independence as a political diversion. [One recently said] “It makes absolutely no sense to talk about energy independence. We cannot produce our way to energy independence, and we cannot use efficiency or conservation to achieve energy independence. It’s just not going to happen, at least in my lifetime.” No one (other than Saudi Arabia) could argue against US “Energy Independence” as a desirable goal. But according to most energy experts, it is something we’re not even close to, neither technologically nor politically. The technologies of new energy and new efficiency technologies to make old energy last longer have a hell of a long way to go before they’re going to make a significant impact on the national level. And the political will, among the leadership and the mainstream citizenry, is simply not there. A situation not unlike the collective lack of will to deter and fight terrorism we harbored until 9-11. Even after the first Trade Center attack. Even after the attacks on our embassies in Africa and the U.S.S. Cole … still not quite enough to wake us up.
Not to overwork the analogy, but humans being humans, it would appear we’re going to need some real and serious shocks to the energy system before Joe SUV realized the threat to this lifestyle and makes enough noise for his congresswoman to listen.
posted by Andy Bochman at 10:12 AM
AEman's Full Cost Energy Formula (first draft)
Of course, most folks in the AE community are somewhat familiar with the pure economic comparative cost points per kilowatt hour of new techs vs. old techs. In late 2004, with oil at or above $50 a barrel, current generation wind turbines have achieved rough parity with old tech with most solar installations still significantly more expensive to deploy than old tech generation approaches.
Without getting too provocative about this, I'm working on a formula that considers the related costs and ramifications of old and new tech energy. It factors in (have to work on weighting) two cost types beyond pure price per barrel of oil. Something like this:
Energy Produced (KWh) / Costs to produce ($) * Casualties (deaths + wounded) * Environmental impact ($).
Each of the categories will need some refining (no pun), and I don't want it to get too complicated, though certainly it'll need another layer or two of detail. I'll stay away from the more subjective attributes like non-financial environmental impacts, though environmental impacts should include things like increased health care costs from diminished air quality surrounding old tech power plants.
Help me out please - how would you tweak this for best communication and fit?
posted by Andy Bochman at 9:34 PM
What the Hell is the US Waiting for ???!!!
This month's Popular Science has an article - "Wind Power Reconsidered" - that includes the following devastating assessment of the United States' lethargy in harvesting its abundant wind power potential:
Next spring, General Electric will inaugurate the Arklow Bank Offshore Wind Park, a wind farm just off the eastern coast of Ireland. The plant is already operating at nearly full capacity, its seven massive 3.6-megawatt turbines cranking out enough electricity for 16,000 households. Arklow Bank is Ireland’s first offshore wind-energy project and Europe’s 19th, with at least 10 more slated to go up in 2005. The U.S. has zero.
What are we doing? The Euro's aren't geniuses, but in this domain, they know what works. Why are our heads so far up our asses on wind power and alt energy in general? Check out the great picture of the stunning Arklow turbines in the article. Their beauty and boldness almost makes me weep.
posted by Andy Bochman at 9:36 PM
Bush or Kerry
Seems obvious right? One born into the oil industry, nursed on crude, and never quite weaned. The other espousing the type of AE-friendly language (rhetoric?) people like AEman hunger for. Without trying to sound too cynical though, I have to ask, would Kerry be willing to deliver ... to spend some political capital to get things rolling? And if willing, would he be able? And are these just sound bites from Kerry designed to get people like me on board or is he sharing what he's feeling deep down?
Business Week has a flash piece comparing the AE and energy positions of the contenders ... read fast ... it goes by quickly!
Republican house and senate for the foreseeable future. So is there a chance a significant percentage of Republicans ... if they caught a whiff of real financial downside from holding to the status quo might join in for the fight against darkness? And/or if they started getting a twinkle in their rapacious capitalist eyes about firing up a whole new economy based on rebuilding the entire global energy infrastructure ... would that be sweet or what? Or am I on crack?
Can either scenario happen with or without Bush? Guess we'll see, but it's going to take some time to play out either way. AEman is watching with a mixture of excitement, curiosity, and agita.
posted by Andy Bochman at 6:30 PM
Report Declares we can Have AE Cake and Get Paid to Eat it Too
This report just published by the so-called Blue Green Alliance in Oakland builds the case for "How smart energy policy can boost job growth, save money for consumers, and strengthen national security."
Check it out ... do you think it's for real? Stronger Cleaner Stronger: Secure Jobs and Clean Environment and Less Foreign Oil.
posted by Andy Bochman at 3:55 PM
NIMBY must become PIMBY
This completely pisses me off - the proposed Cape Wind offshore wind turbine project is being assaulted from several directions at once. One was a senate defense appropriations rider that would have banned all offshore wind farms - it went down to defeat about a week ago. But the other that captured my eye and roiled my mind is Ted Kennedy's opposition based on how the view from the Kennedy compound would be marred. Kennedy, usually a supporter of alternative energy initiatives, considers wind mills an eyesore he'd rather others endure, not him.
Man, that is so messed up. Issues of aesthetics, symbolism and "form fits function" aside, Kennedy's position is so absurdly out of step with what he professes to hold dear, it's a great example of a prevalent mindset that's got to be rapidly reworked. Here's a person who:
- rails against pollution from old energy sources
- who wants to get us out of the middle east oil and blood-soaked battlefields, and,
- who notes with concern the economic impact of steadily climbing prices of oil ($55/barrel today)
Yet still doesn't get it in his quite abundant gut. For many, NIMBY will quickly become PIMBY - Please In My Back Yard as the above three drivers steadily worsen. I'm not a profit of doom, just an observer of current events informed by a little bit of history. How in hell can Kennedy hold these conflicting positions without his head exploding? He should consider himself truly lucky to have a chance to have such a great view of something so good on so many levels. Time to wake up, man.
posted by Andy Bochman at 10:37 AM
|
