The Answer, My Friend, Is Certainly Not Blowing in the Wind—or the Corn
This is the last of my articles taking cleantech investing to task sector by sector (keep the hate mail coming, hippies!). The next few will focus on some areas I really like, including storage, solar thermal, water, and others. But first, a bit more constructive bludgeoning.
This is a bit of a “two for one special” looking at biofuels and wind—two forms of clean energy poised to wreck the environment they are purported to save. These dual titans of uselessness are powered by hype and corporate sugar daddies using influence on Capitol Hill in ways that would make even oil company executives blush. The VC community has avoided wind pretty well (with PE and traditional investment firms more than picking up the slack) but man, they have got quite the teenage crush on biofuels.
I’ll note from the top that some of these arguments are the very same ones I have with solar, and they apply to some extent to all new energy technologies. They’re about the cost of potential entry, if you will.
First wind, which has been getting a lot of attention lately, partly due to those late-night TV commercials from Texas oil baron T. Boone Pickens (who seems to have taken the place of Ron Popeil and the rotisserie-oven ads I so love). Pickens has a huge investment in wind and a plan to replace natural-gas-produced electricity that’s so ambitious that even the Sierra Club’s number crunchers find it unrealistic.
Wind power is rather straightforward: build a big propeller and put it up on an even bigger pole. The spinning of the blades generates 1 to 2 megawatts of power per turbine; wind farms generally consist of hundreds of turbines. But behind this simplicity is a highly engineered and heavily maintained system. Much like power from solar photovoltaic cells, wind power has serious downsides—such as being ugly, land-intensive, hugely dependent on subsidies, and unreliable.
How unreliable? Current industry estimates claim wind “can” work 30-40 percent of the time over the course of a year. But actual output is all that matters, and real-world experience shows that annual outputs of 15 to 30 percent of capacity are more typical. The wind just doesn’t blow as often at the right speed as a grid power system needs. The Searsburg wind farm in Vermont, for instance, produces no electricity at all 40 percent of the time.
Wind farms also require huge amounts of land, which is then rendered fairly useless for other purposes. Some wind farm proponents counter this by noting that monstrous wind turbines are actually a tourist attraction. Yes, and what family vacation isn’t built around a three-day drive out to rural Texas to watch giant blades create noise, vibrations, and seizure-inducing strobe effects, while slicing up bats and birds in a manner that would warm the hearts of the Khmer Rouge? Screw Disneyland, kids, we’re going to Uncle Boone’s Wonderiffic Wind Farm for vacation!
And more often than not, wind farms are built in pristine wilderness, on ecologically fragile ridgelines—places that, without the wind farm, might actually be attractive hiking or nature-observation areas. Getting the leviathan-like wind turbines out to these remote and beautiful locations requires huge trucks running over new roads ripped through the forest or prairie.
And at the beginning of this whole circle of destruction, don’t forget that wind turbines need to be manufactured. Football-field-length propellers don’t grow on trees. As with solar, it takes lots of energy to power those factories, which also use huge amounts of mined metals, petroleum-based plastics and lubricants, and tons and tons of concrete. And you ‘d be hard pressed to find dirtier industries than steel, plastics, and cement production and mining.
I know what you’re saying: “Well, every new energy source is going to need manufacturing and industrial development.” I agree, but the point is that we shouldn’t forget to factor that into the overall environmental impact. The oil, gas, and coal industries are already built out. It’s just like looking at the overall sustainability of buying a new Prius, when keeping your five-year-old Celica well tuned and on the road is actually better for the planet.
When you look at the portion of our energy requirements covered by wind power—less than 1 percent—it ends up being the most heavily subsidized of all energy sources. Ed Feo of Milbank Tweed recently noted that two-thirds of the economic value of wind projects come from tax breaks and subsidies from the federal government. And he was being generous, not adding that a wind farm operation can get another 10 percent in breaks from the coffers of state governments. That ‘s quite a racket.
It may not surprise you to learn the wind industry as we know it was structured by a little company called Enron (Enron Wind is now GE Wind, by the way). And investors know it’s just a giant subsidies racket. Navigant Consulting, which advises on renewable energy technology, estimated that investments in wind and solar power in 2009 would amount to $26.6 billion with government handouts, but would fall to $7 billion without them. Ultimately the cost of these tax breaks and subsidies shifts costs from wind farm owners to ordinary taxpayers and electric customers.
And the biofuels industry. Urgghh! It’s little more than a scam perpetrated by agribusiness (with the possible exception of algae-based biofuels, if they can be made to work). I could end it there, but I will keep blathering. There are two categories of biofuels. Ethanol is essentially alcohol produced from corn, wheat, sugar cane, and sometimes even biomass such as corn stalks and produce waste. When combined with gasoline, ethanol increases octane levels while also promoting cleaner combustion. Then there’s biodiesel—a renewable fuel for diesel engines made from natural oils like soybean oil.
The issues with biofuels are straightforward: it’s hard to scale up their production, they aren’t great for the environment, and they put pressure on the agriculture system by raising commodity prices, hurting the most vulnerable.
Now, as unbelievable as it may sound to the people who responded to my previous articles by calling me a Bush-loving fascist, I am actually a rather liberal Democrat. Right after I finished school I worked as an aide to two Clinton Administration cabinet secretaries, including Dan Glickman at USDA. I also come from a family of farmers, and I know that farming is all about resources, the environment, the elements, and tradeoffs presented by them.
First off, there isn ‘t enough biomass in the country to replace 30 percent of the petroleum we use, as our politicians are calling for. As Berkeley Professor Tad Patzek noted in a recent study, the energy in the fossil fuels we consume every year in the United States comes out to about 105 exajoules. If you burned every living plant within our borders, including its roots, you’d get 94 exajoules of energy—and much of that plant material goes to other things we need, like food, feed crops, paper, and building materials. An acre of good land can yield about 139 bushels of corn, which can be converted into 250 gallons of ethanol, according to USDA studies. This means that using the entire 300 million acres of U.S. cropland for corn-based ethanol production would meet about 15 percent of the demand.
One alternative is to squeeze ethanol out of cellulose from switch grass, cornhusks and other biomass sources. But cellulosic ethanol remains quite experimental. Huge breakthroughs in enzyme biochemistry would be required to make its production cost-effective on an industrial scale.
Using these “waste” materials from crops also raises some environmental issues. Two words for you: soil depletion. The material that is removed to make cellulosic ethanol is actually the same stuff that replenishes the soil for next year’s crops. In other words, it’s not really waste. To keep land farmable for even a short time without plowing non-food biomass back into the soil, you would need GMO seeds and lots more fertilizers and water. And outside of America’s heartland, in places like Brazil, they’re leveling the rainforest to grow crops for biodiesel. A Princeton study points out that clearing previously virgin soil to grow biofuel crops releases long held carbon into the atmosphere. The Nature Conservancy adds: “Converting rainforests, peatlands, savannas, or grasslands to produce biofuels in Brazil, Southeast Asia and the United States creates a ‘biofuel carbon debt’ by releasing 17 to 420 times more carbon dioxide than the fossil fuels they replace.”
As if that wasn’t enough, ethanol may be directly linked to the Gulf of Mexico dead zone—a region off the coast of Louisiana where oxygen levels are so low that the water can’t support carbon-fixing aquatic life. If farmers produced enough corn to meet Congress’s goal of producing 15 billion gallons of ethanol by 2022, nitrogen runoff into the Gulf would increase by 10 to 19 percent, according to University of Wisconsin researchers. At that point, shrinking the dead zone would be “practically impossible.”
The unpredictable nature of drought, bad weather, and crop disease is another major issue with biofuels. Add to that the need for new biorefineries construction and the dangers of bailing and storing hay before it’s processed into ethanol. Yes, farming neophytes, hay can be dangerous—it can (and does) spontaneously combust, and once on fire, can’t be extinguished, leading to fire loss and increased fire insurance costs, not to mention carbon emissions. Somehow the bales have to be kept from combusting during the several months it takes to dry them from 50 to 15 percent moisture. A large, well drained, covered area is needed to vent fumes and dissipate heat. Finally, biofuels must be delivered by fossil-fuel-powered trucks, ships, and trains, as pipelines seem to be a poor solution for transporting it.
So, for the most part, biofuels are pretty crappy, whether they are made from corn, switchgrass, soybeans or any other agricultural commodity. They lead to environmental problems and higher commodity prices, potentially raising the threat of starvation for the world’s poorest. Wind is also unattractive for anyone but the heavily-subsidized wind operators. It’s unfortunate that some folks in the environmental movement have taken the short-sighted stand in favor of “anything but petro or nuclear.” Worse still, many financiers are reenforcing this erroneous position with their investment dollars.
My point with these pieces is really to ask hard questions and avoid letting our desire for a cleantech revolution press us into making bad assumptions and hasty decisions. Showing the warts on these technologies doesn’t make them irredeemable, it just means that the costs and benefits need to be fully explored. Next time, I’ll write about energy technologies that actually make economic and environmental sense. I promise.
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