Archive for May, 2011

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Will Android@Home help make smart grid more consumer-centric?

May 12, 2011

Lynne Kiesling

I think the past 18 months have been disappointing for consumer-centric smart grid proponents and companies. In January 2010 the incisive Katie Fehrenbacher pronounced 2010 the year in which the consumer would be the king of home energy management, and this pronouncement has not come to fruition. I’ve been formulating some ideas about why that’s the case, and in large part I think it’s a combination of the utility-centric rollout of consumer-facing technology, the perverse regulatory incentives facing utilities and regulators, and how those factors combine to perpetuate the consumer’s indifference to home energy management technologies.

However, the new ideas and chipping away at that indifference are happening, slowly. Over the past several weeks I’ve seen ads for ADT Pulse, the new remote service from ADT Security (complete with mobile phone app!) that enables energy efficiency and lighting/thermostat controls under its “lifestyle” and “home automation” features. These features leverage their existing in-home communication technology, and are a form of the kind of bundling and product differentiation that characterizes innovative consumer-facing industries. ADT Pulse is not yet a transactive technology, but I hope there will be a chicken-and-egg development of dynamic pricing as these bundled services proliferate — knowing that they have the automation technology available to them, more and more consumers will be eager to have retail choice in their electricity contract, including dynamic pricing.

On Tuesday this space got more interesting as Google announced its entry into the home management technology space with Android@Home:

At its I/O developer conference on Tuesday, Google showed a sneak preview of its Android@Home project, which will extend the Android platform into household objects. That means some day in the future, you could control home appliances — your dishwasher, the heating system, the lights in your house — using your Android device as a remote control.

“Think of your phone as the nucleus that this all started with,” said Google engineering director Joe Britt in an interview. “We’re opening the platform up to everyone to do whatever they can imagine.”

This makes my geeky heart go pitter-pat; think of the potential here! Android is an open-source development platform, and as such it has interoperability requirements baked into its development culture already. This culture of interoperability is growing, slowly, in the electricity industry, as interoperability standards development proceeds. It can leverage pre-existing wireless sensors and networks in smart buildings, again thanks to interoperability.

The essential next step is to create differentiated products and bundles with dynamic pricing options so consumers can actually simultaneously save money, reduce energy use, and be empowered to control their own choices in their own homes. That will not happen through conventional regulatory processes.

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Should buildings be wired for DC power distribution?

May 11, 2011

Michael Giberson

From Paul Savage in EnergyBiz Magazine:

The majority of our devices today use DC, so let’s give it to them. Using a DC distribution circuit for a building brings many benefits such as better compatibility with renewables and battery storage, greater safety and higher efficiency no matter what the type of power input.

By moving the point of conversion of AC to DC from the device to a little farther upstream closer to the source, we can capture conversion efficiencies that cost too much to provide for loads as small as your cell phone charger… If you have 15 power supplies turning AC into DC in your house, it’s quite likely the average efficiency of those devices is about 70 percent. If instead those devices were optimized around a common DC input like 24-volt DC, we could achieve 90 or 95 percent efficiency.

The article notes the efforts of the EMerge Alliance to develop standards for DC power distribution in commercial buildings.

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Study finds methane in Pennsylvania, NY groundwater associated with gas well fracking

May 10, 2011

Michael Giberson

An article to appear in the Proceedings of the National Academy of Sciences, “Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing,” reports finding methane in Pennsylvania and New York groundwater that can be attributed to nearby natural gas resource production. In brief, the study finds that substantially higher dissolved methane levels in water from wells within 1 kilometer of an active gas production site than in nearby wells that are farther than 1 kilometer from active gas wells. Further investigation demonstrates that most of the methane is almost certainty from deep geologic sources (as, for example, the shale gas produced via fracking) and not biogenic methane from nearer the surface.

That deep rumbling sound in the distance is the slow shifting of the burden of proof moving from groundwater interests a few steps closer to shale gas producers. One published study doesn’t end investigation, of course. This particular study focused in and around Dimock, Pennsylvania, an area of significant controversy with respect to groundwater and shale gas development. Other areas of the Marcellus Shale in Pennsylvania as well as the extensively fracked Barnett Shale in Texas and Haynesville Shale in Louisiana should also be studied. The problem may be general with respect to fracking or specific with respect to the geology of the area, methods used locally, or operating practices of specific companies in the area examined.

In addition, evidence collected before and after well development would be useful. The report indicated that several sites currently greater than 1 kilometer from an active well are scheduled for future drilling, so a follow-up study using the same methods and sites should provide additional insights.

Also significant in the report is that it found no evidence of fracking fluids in groundwater, nor any evidence of migration of deep brines into groundwater near active gas wells.

A separate paper by the study authors and others makes research and policy recommendations. Their research recommendations are:

  1. Initiate medical review of the health effects of methane.
  2. Construct a national database of methane, ethane, and propane concentrations and other chemical attributes in drinking water.
  3. Evaluate the mechanisms of methane contamination in drinking water.
  4. Refine estimates for greenhouse‐gas emissions of methane associated with shale‐gas extraction.
  5. Systematically sample drinking water wells and deep formation water.
  6. Study disposal of waste waters from hydraulic fracturing and shale­-gas extraction.
The policy recommendations are:
  1. Consider regulating hydraulic fracturing under the safe drinking water act.
  2. Fully disclose chemicals used in hydraulic fracturing.
(HT to Fuel Fix, “Study finds gas…“; see also Science NOW, “Study: High tech gas drilling…“)
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Opportunities in power market design: wind power, capacity markets, optimization software

May 10, 2011

Michael Giberson

A handful of stories raising power market design issues:

  • The Oregonian, ”Northwest wind power to double but inconsistency creates nightmare“: “The value of BPA’s surplus power sales are already being undermined by wind energy sloshing into the market. That ultimately increases rates for its public utility customers, who are loathe to absorb any additional costs incurred by BPA for integrating wind output that isn’t serving them.”

  • Naturlig Energi, “Who owns the wind?“: “The valuation authority has agreed to take on the two Danish cases, not because it will accept ownership of the wind but because a wind turbine is considered real estate, and because a wind turbine, if the wind is influenced by new turbines, actually loses value.”

  • Next 100, “Who owns the wind?” (commenting on the prior item): “…as wind power developers dot the landscape with giant turbines, litigation is growing all over the world not just with NIMBY neighbors, but also with rival developers to answer the novel question: who owns the wind?”

  • News release, “Brattle study shows positive outlook for long-term sustainability of Alberta’s energy-only electricity market“: “The report analyzes a number of challenges to resource adequacy that the Alberta energy-only market will face over the coming decade … [but] concludes, however, that the current market design is generally well-functioning and should be able to support this higher and more challenging rate of generation additions, as long as large simultaneous retirements can be avoided.”

  • California ISO, “Compliance filing in Docket No. ER11-2256-000“: On December 1, 2010, the ISO proposed modifications to the California ISO Tariff to implement the Capacity Procurement Mechanism (CPM) to replace the expiring Interim Capacity Procurement Mechanism (ICPM) as the backstop mechanism that authorizes  the ISO to procure capacity to address a deficiency or supplement resource adequacy (RA) procurement by Load Serving Entities (LSEs) as needed in order to comply with  applicable reliability criteria and maintain reliability of the grid. The compliance filing responds to FERC’s March 17 order in the docket.

  • FERC Technical Conference, “Increasing market and planning efficiency through improved software“: “Take notice that Commission staff will convene a technical conference on June 28-30, 2011, from 8:30 AM to 4:30 PM, to discuss opportunities for increasing real-time and day-ahead market efficiency through improved software. This conference will bring together diverse experts from ISOs/RTOs, non-market utilities, the software industry, government, research centers and academia for the purposes of stimulating discussion and sharing of information about the technical aspects of these issues and identifying fruitful avenues for research.” (From official notice.)

(HT to Eric S. for pointing out the Alberta study.)

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Sidney Hook’s 1960 review of Hayek’s “The Constitution of Liberty”

May 9, 2011

Michael Giberson

Francis Fukuyama’s review of the new edition of F. A. Hayek’s “The Constitution of Liberty” has prompted a small eruption of commentary in the econoblogosphere.  (See here and here, for example.)

I thought there might be some interest in Sidney Hook’s review of the original edition of “The Constitution of Liberty,” published in the New York Times Book Review on February 12, 1960. Here is an extensive selection from the review:

Of Tradition and Change

by Sidney Hook

Even those who accept little of his argument will find Friedrich A. Hayek’s comprehensive analysis of the nature of freedom an interesting and provocative work. “The Constitution of Liberty” develops the basic assumptions from which he derived the views expressed fifteen years ago in his book “The Road to Serfdom.” They are applied in a free-ranging way to an impressive variety of themes and social disciplines. The result is a reflective, often biting, commentary on the nature of our society and its dominant thought by one who is passionately opposed to the coercion of human beings by the arbitrary will of others, who puts liberty above welfare, and is sanguine that greater welfare will thereby ensure.

Admitting that there are few who would openly oppose the value of liberty, Mr. Hayek, who is Professor of Social and Moral Science at the University of Chicago, contends that its traditions and safeguards are constantly being eroded in the democratic welfare states of Europe and America. Economic and other social controls have invaded what should be regarded as man’s private sphere. While the Communist threat to the survival of free society may be more immediate, the more formidable danger comes from within in the form of a poisonous ideology wrapped in a dough of flabby rhetoric about democracy, iced over with sugary formulae of goodwill and social justice.

The first two parts of the book concern themselves with the value of freedom and its relation to the rule of law; the third is devoted to showing how these are subverted by the measures of the welfare state all along the line. In a concluding eloquent postscript, “Why I am not a conservative,” the author indicts the Conservatives, especially in England, for being somewhat infected with socialist principles, as shown by their fear of uncontrolled social forces, and their efforts to discredit free enterprise, especially in agriculture. […]

There are two clear merits possessed by this book outside of the validity of its argument. It has a courage and honest not often avowed by those opposed to modern trends of social legislation. The author does not believe in mitigating social inequalities or even establishing equality of opportunity. He is opposed to any measures which would curtail the accidental advantages not only of being better endowed by nature but of being socially better born.

The law can protect mean only in their liberty to get as much property as the rules of the market permit; it should not be used to redistribute income and consequent privilege merely because it turns out that to those who hath shall be given and from those who hath not shall be taken away. Progressive taxation is discriminatory against the rich. A tax should consist of the same proportion of a man’s income whether he earns ten hundred or ten million dollars. That this would cut into one man’s food, but only into another’s number of yachts is irrelevant. The price of liberty, so conceived, is so high one wonders why anyone not well endowed would want it.

The second and greater merit of Mr. Hayek’s work is that it challenges the first principles of any view in which in the interest of human welfare and social justice seeks some control of the economy. This embraces not only Socialists, New and Fair Dealers but also Herbert Hoover. Every generation takes its first principles too much for granted. It is a salutary experience to rethink them in light of their alternatives.

Only a treatise as long as Mr. Hayek’s could do critical justice to it. One can challenge his failure to grasp the ways in which private property as well as public can be used to control the lives and freedom of those dependent upon it for their livelihood. One can challenge his assumption that a theory of market prices can take the place of a theory of social justice. More far reaching, however, in its practical implications is his notion that the original sin of the social reformer consists in the view that human intelligence can direct or control social change. According to the author wisdom must rely only on the slow non-rational processes of trial and error, on the traditions and customs of the past rather than on human plans and contrivance. […]

It is demonstrable that Hayek suffers from the defects of the very rationalism he condemns. His antitheses between tradition and reason, experience and experiment, are analytically untenable and historically unjustifiable. Intelligent social control always learns from experience and history. It no more need take the form of a Utopian blueprint than concern for history need make a fetish of the past. Revolutions have more often been the result of unendurable evils that intelligent reforms would have abolished … than of the imperialism of reason.

In the light of the evidence it is the author who appears doctrinaire, as one who refuses to learn from history. A generation ago he predicted that planning would lead to the eclipse of our freedoms. The state of liberty in England is healthier than when he made his dire prediction; and in this country, far better than in the heyday of unregulated capitalism. In countries where freedom has been lost, its destruction preceded the introduction of planning.

Planning need not be all or none. In a political democracy, it can take plural forms resulting in a mixed economy. That there are threats to freedom in some types of planning cannot by gainsaid. But there are also threats to freedom, even if more indirect, in a pure market economy. It is doubtful whether free cultures could survive severe depressions again. […]

The tendency of the author to think in terms of either-or instead of more-or-less vitiates the discussion of other basic themes. Although the essence of freedom for him is equality before the law, he ignores the extent to which social inequalities result in the imposition of unequal penalties under the law. His conception of the just law makes it compatible both with treating and mistreating everybody equally under the same rule. […]

As a cautionary voice Mr. Hayek is always worth listening to. He is an intellectual tonic. But in our present time of troubles, his economic philosophy points the road to disaster.

The review noted that the price of the original 570 page hardback from the University of Chicago Press was $7.50 in 1960, or about $54.59 in today’s dollars according to the inflation calculator. That compares to $81.22 for the hardback of the new “definitive edition” at Amazon today and $16.50 for the paperback version.

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Hayek and Dennett on the design fallacy

May 9, 2011

Lynne Kiesling

Since we’re riffing off of Hayek today, I’ll take one of his most pithy and insightful quotes, from The Fatal Conceit:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

I want to use that quote to tee up a video I’ve been meaning to share for some time — philosopher Daniel Dennett discussing evolution, and how the attempt to infer “intelligent design” in evolutionary processes reveals just how deeply the design fallacy runs in human cognition.

Why do humans have so much difficulty with emergence, with spontaneous/unplanned order? Why do so many people believe that ordered and coordinated outcomes must be intentionally designed?

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Hayek’s birthday, Hayek’s week, Hayek’s century

May 9, 2011

Lynne Kiesling

Yesterday was F.A. Hayek’s 112th birthday, and as Hayek’s work inspired the name of this blog, and continues to inspire my work every day, I encourage you all to celebrate this anniversary by reading (or re-reading, I hope!) his seminal Use of Knowledge in Society (1945):

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

Knowledge problem, indeed.

As it happens, I was writing at the same time as Mike was posting his remarks about Fukuyama’s NYT review of the new edition of Hayek’s Constitution of Liberty … I’ve been quite struck by the juxtaposition this past week of two quite dramatic partially-misguided and incorrect readings of Hayek. Fukuyama’s was one, and the analyses by Easterly, Boudreaux, and Boettke cover much of my reaction to his misreading.

The other dramatic partial misreading came last week from George Soros, at a panel discussion at the Cato Institute (with fellow panelists Bruce Caldwell, Richard Epstein, and new edition CoL editor Ron Hamowy) discussing Hayek’s Constitution of Liberty in celebration of the release of the new edition. David Boaz provides some summary remarks about the panel, and Soros’ reading of Hayek, in this post from Cato @ Liberty. I watched the panel live online, and was struck by Soros’ claim that Hayek would have supported the efficient markets hypothesis and was a “Chicago school” economist — my reading of Hayek says that nothing is farther from the truth! Boaz’s post recounts Caldwell’s response to Soros:

First of all, Hayek and the Austrians in my estimation reject the usefulness of an efficient market hypothesis and a theory of rational expectations for capturing the workings of a market process. So if the acceptance of those two theories is the defining characteristic of being a market fundamentalist, then he’s not the sort of market fundamentalist that you’re describing. I think a pithy way of putting this is that there’s definitely a difference methodologically and in other realms between Chicago and Vienna.

I actually think that public intellectual exchanges such as those following Fukuyama’s review and Soros’ panel comments are highly salutary, and not just because they create opportunities for Hayek scholars to correct misperceptions about his ideas that others hold. The more we share ideas around the multidimensional political and philosophical spectrum, the more we understand where we have common cause and where we don’t.

David Boaz has a post reviewing the Hayek-related discourse over the past week at the Encyclopedia Britannica blog, and I recommend it, in addition to the other links in this post and Mike’s earlier one.

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Fukuyama reviews new edition of Hayek’s Constitution of Liberty

May 9, 2011

Michael Giberson

The Sunday New York Times Book Review carried a review by Francis Fukuyama of the new edition of Hayek’s The Constitution of Liberty. The review does Hayek the favor of distinguishing his views from those of a certain recent talk-radio enthusiast. Fukuyama noted that Hayek’s views are more complex than they are usually rendered in public discourse (both by supporters of Hayek and his opponents), and Fukuyama’s discussion provides some evidence to support that reading. Then, strangely, Fukuyama concludes his review with an overly simplistic caricature of Hayek’s work.

The review is worth reading, but complement it by reading William Easterly’s response, which asserts: ”To sum up,  Hayek’s skepticism about government was NOT based on his certainty, as Fukuyama would have it,  but on his awareness of his ignorance (and everyone else’s).”

Pete Boettke’s response, “Come on Frank, you can do better than this” works as an elaboration of Easterly’s line. Boettke buries his substance in the middle of a long paragraph, here is the meaty goodness of it:

But Frank produces a caricature of Hayek’s The Road to Serfdom and then conflates that with The Constitution of Liberty, and then produces a confused reading of Hayek’s description of the problem situation we face as economic actors with the epistemic critique of government decision makers attempting to plan (or intervene optimally) in the economic reality that emerges from the mutual adjustments of economic actors who faced that problem situation.  To understand how we cope with our ignorance, Hayek focused on the institutions of the market economy (property, prices and profit/loss). In short, it is a cute attempt to claim that Hayek suffers from a Cartesian hubris, but it simply isn’t true.  Frank would have been much better off had he tried to take Hayek as his word in The Constitution of Liberty, and that is that he is pursuing a Humean project of ‘using reason to whittle down the claims of reason.’

For more reactions, see Don Boudreaux 1 and Don Boudreaux 2 at Cafe Hayek, and at the The Future of Capitalism blog Ira Stoll produces a letter to the editor in response from Hayek himself.

ADDED: Also see David Boaz posting at the Brittannica blog:

Reagan and Thatcher may have admired Hayek, but he always insisted that he was a liberal, not a conservative. He titled the postscript to The Constitution of Liberty “Why I Am Not a Conservative.” He pointed out that the conservative “has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the coexistence of different sets of values that makes it possible to build a peaceful society with a minimum of force. The acceptance of such principles means that we agree to tolerate much that we dislike.” He wanted to be part of “the party of life, the party that favors free growth and spontaneous evolution.”

STILL MORE, HT to Greg Ransom at Taking Hayek Seriously: Tibor Machan and Anton Howes.

AND not every critic of Fukuyama’s review favors Hayek’s views; see Peter Drier at Huffington Post.

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Oil and Gas Price Fraud Working Group aims to take the air out of the gasoline price parachute

May 6, 2011

Michael Giberson

To call the administration’s Oil and Gas Price Fraud Working Group a circus clown’s balloon would insult clowns and their balloons, but there are certainly similarities: both are capable of being twisted this way and that, both are filled by hot air, and both are wholly lacking in meaningful economic content.

From the Press Secretary to the U.S. President, aboard Air Force One en route to Indianapolis, Indiana today:

Q    In April of 2008, President Obama — or then candidate Obama appeared at a gas station in Indiana — gas was at $3.60 a gallon — said we need to vote for change, a new set of policies. He’s returning to Indiana now with gas well over $4.00 a gallon. What does it say about the success he has had over the last three years in dealing with the fuel issue, the gas issue?

MR. CARNEY:  Well, I think you’ve heard the President speak quite a lot lately about the impact of high gas prices on Americans’ pocketbooks and wallets.  We’re very concerned about it.  We do note the steep drop in oil prices in the last couple of days.  And I would also note that one of the things the Attorney General task force will be looking at is coordinating with state attorneys general to make sure that we don’t have a what I’ve heard described as a “rockets-and-parachutes phenomenon,” where prices at the pump rocket up when oil prices rocket up, and yet they come down in a parachute fashion when oil prices go down.  So we want to make sure that a drop in oil prices is appropriately reflected in a drop in gas prices at the pump.

Q    Does the President believe gas prices will drop in the coming months?  The futures market seem to be indicating they will.

MR. CARNEY:  We don’t understand markets here, obviously.

I’m sorry, it looks like I’ve misquoted that last line. Carney’s actual response to the question about future gasoline prices was, “We don’t predict markets here, obviously.”

More on the President’s remarks in Indiana here.

On the “rockets and feathers” phenomena, aka asymmetric price adjustment, try here.

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EPRI white paper surveys the electrical energy storage field

May 6, 2011

Michael Giberson

The Electric Power Research Institute has just published “Electricity Energy Storage Technology Options: A White Paper Primer on Applications, Costs and Benefits.”

I haven’t read the report – including appendices it is 170 pages long – but the news release claims: “Study results indicate that the total U.S. energy storage market could be as large as 14 gigawatts of capacity if energy storage systems could be installed for about $700–$750/kW-h and the energy storage owners and operators could monetize the estimated benefits.”

ABSTRACT: A confluence of industry drivers—including increased deployment of renewable generation, the high capital cost of managing grid peak demands, and large capital investments in grid infrastructure for reliability—is creating new interest in electric energy storage systems. New EPRI research offers a current snapshot of the storage landscape and an analytical framework for estimating the benefits of applications and life-cycle costs of energy storage systems.

This paper describes in detail 10 key applications which can support the entire chain of the electrical system, from generation and system-level applications through T&D system applications to end-user applications. Included are: wholesale energy services, renewables integration, large and small storage and transportable systems for T&D grid support, ESCO aggregated systems, commercial and industrial power quality and reliability, commercial and industrial energy management, home energy management, and home back-up storage. Capturing multiple benefits—including transmission and distribution (T&D) deferral, local or system capacity, and frequency regulation—was found to be key for high-value applications and for supporting the business case for energy storage. Applications that achieve the highest revenues do so by aggregating several benefits across multiple categories. An analytic framework is presented to estimate the benefits and life-cycle costs, and help guide and shape the economic treatment of energy storage systems. Because energy storage systems have multi-functional characteristics, which complicates rules for ownership and operation among various stakeholders, policy challenges were identified that need to be resolved to realize the true potential of storage assets.

The current status of energy storage technology options and updated estimated ranges for their total installed costs, performance, and capabilities for key applications is also presented based on technology assessments as well as discussions with vendors and system integrators. Despite the large need for energy storage solutions, very few grid-integrated storage installations are in actual operation in the United States. This landscape is expected to change around 2012, when a host of new storage options supported by U.S. stimulus funding begins to emerge and, in turn, catalyzes a portfolio of new energy storage demonstrations. Such tests in real-world trials will provide needed data and information on the robustness of such systems, including performance and durability, cycle life costs, and risks.

As a key industry stakeholder, electric utilities are positioned to support energy storage applications because they can test, evaluate and deploy applications in different sections of the electricity value and supply chain, and enable the monetization of benefits of the various stakeholders. The high-value markets identified can help focus future demonstration activities to advance the deployment and adoption of energy storage systems.

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