Archive for August, 2011

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Beacon Power patents idea of flywheels for frequency regulation?

August 31, 2011

Michael Giberson

Can Beacon Power patent the idea of using flywheel technology for frequency regulation? Apparently the answer is yes, at least according to Beacon’s press release.

“Beacon Power invented the idea of using high-energy flywheels to regulate grid frequency, so it’s appropriate that we’ve now been awarded a core patent for the idea,” said Bill Capp, Beacon president and CEO. “The patent gives Beacon exclusive rights to this innovative method of providing an essential grid service, and further strengthens our intellectual property position.”

The patent is U.S. Patent No. 8,008,804, “Frequency Regulation Using Flywheels.”

Beacon has certainly developed a great deal of control  and grid integration technology to enable their flywheels to supply ancillary services in regional power grids. For some background see, for example, this 2010 paper from Beacon that describes flywheel system performance in an 18 month field trial in the ISO New England system. A paper from 2004 presents Beacon’s analysis of the benefits of using flywheels for grid frequency regulation instead of using hydro or fossil-fueled generation.

Still, I don’t see how they can claim to have invented the idea of using flywheels to supply frequency regulation services. Especially given the prior use of flywheel systems to provide grid frequency regulation service, as described in this paper published in 2000 describing a 1996 commercial installation of a flywheel on the Okinawa Electric Power Company transmission grid in Japan.

The 2000 article, which refers to the flywheel system as ROTES  (ROTary Energy Storage system), reports:

This is the world’s first commercial operation of such a large capacity flywheel energy storage system… When the ROTES was disconnected from the 66kV bus, frequency fluctuation of over +/- o.4 Hz often appeared in the line frequency, resulting from sudden load changes as large as 30 MW. When the ROTES was connected, the frequency fluctuation was suppressed within +/- 0.3 Hz, thus meeting the goal of installation. The ROTES has been operating properly for more than two year, showing great promise as a FACTS device which has the capability of releasing or absorbing electric power with a response time as fast as less than 100 ms.

(HT to correspondent/former colleague/occasional reader MH for tipping me off to the press release and useful dialog.)

UPDATE: A commenter from Beacon helpfully provides a link to the patent, http://bit.ly/nMupPp, and notes that the above article was specifically considered by the patent examiner as part of the patent application review.

Posted in Electricity, Energy markets, Technology | Tagged , | 8 Comments »

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Whales and electricity, and sustainability

August 29, 2011

Lynne Kiesling

A few weeks ago I was thrilled to speak at the inaugural Summer Institute on Sustainability and Energy, organized by the University of Illinois-Chicago in partnership with Argonne National Laboratory, Northwestern University, Illinois Institute of Technology, and the University of Chicago. The students were from diverse fields and between them and the other speakers I learned a lot (including some cool vertical farming design!).

My talk focused on the history of the electricity industry, the economics of the industry and of its regulation, and how technological change is changing the economics of the industry and making its regulation maladaptive. When thinking about the history of electricity through the lens of technological change, I like to start with lighting, because better-quality lighting was the primary consumer objective toward which entrepreneurs and innovators were driving electricity technology. Talking about lighting in the 18th-19th century in the US means talking about whale oil, which was the dominant lamp fuel because of the bright clarity of its light. You can think through the rest of the story — demand for whale oil shifts to the right, prices rise, whalers have to go further and harder to catch whales from a declining population, which shifts supply to the left, which increases prices … ultimately the increase in the price of whale oil saved the whales, inducing innovators to create new lighting technologies: first kerosene lamps, and then electric lighting. That’s why when you’re thinking about the confluence of energy, why consumers use energy, technological change, and sustainability, whale oil is a good place to start.

My NU colleague Beth Herbert is the Assistant Director of Science in Society, a really good science outreach effort at NU, and she attended SISE that day and blogged about my presentation (thanks Beth!). She draws out the innovation and sustainability lesson and makes it explicit:

There was a time not too long ago when a significant portion of the American public looked to whale oil as its source of power, and the companies who procured and sold the oil were very powerful. But it was a limited resource, and fortunately we looked to alternatives (unfortunately, not entirely sustainable alternatives) before depleting the entire whale population. So the moral of the story? What you think you “need” today—say, lots of fossil fuels—might not seem so necessary in the future, if we continue to apply our creativity and innovation to finding and developing sustainable energy sources.

She also makes some other great observations, so I encourage you to click through and check out the rest of her post, and of Science and Society.

And a reading recommendation: for the history of the evolution from whale oil to kerosene lighting, and the innovation in the kerosene lamp as a great example of the innovation process, Daniel Yergin’s The Prize has an excellent chapter on the subject. The rest of the book also provides a thorough and well-told history of the global oil industry.

Posted in Economics, Electricity | Tagged , , , | 3 Comments »

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Smart appliances and the innovation cycle

August 25, 2011

Lynne Kiesling

Appliance and consumer electronics manufacturers are starting to incorporate digital technology with energy-related applications into their products … but as with most new technologies, the first commercial stage of the innovation cycle takes the form of “because we can” product differentiation rather than use-specific innovation. Take the example that Technology Review highlighted this week: Samsung’s new refrigerator with an Android LCD display panel on the door. This high-end, gorgeous, stainless-steel refrigerator has an Android touch screen, which I think is pretty neat even if it does not read from the scripture of “the Internet of Things” that Christopher Mims wants it to — if I store my recipes in Evernote or in an Epicurious app, I can pull up a recipe on the door as I’m cooking, or make a shopping list as I’m looking in the fridge to see what I need. Mims’ tone is almost condescending when he observes that

A really smart fridge, part of the Internet of Things, would know when you put that lettuce in the crisper, so it could alert you when it was about to become inedible. It would tweet its current temperature so you know when your kid failed to close the door all the way. A really smart fridge probably doesn’t even have a display — far better to control it from any other internet-connected device.

The cynical view of Samsung’s move to embed a tiny tablet in its fridge is that these devices have become so cheap that sticking one in a fridge hardly makes any difference to their margins. It’s just one of those features — like a pop-up spoiler on the back of a luxury sports car — that makes a buyer feel like they got their splurge’s worth. If that’s the case, we can all look forward to Android-powered microwave ovens and clothes washers.

No. First of all, while I agree that automated monitoring features like produce spoilage detection and door ajar detection are desirable and user-friendly, Mims’ hyperbole about “Oh noes! We’re doomed to useless technology kitchen candy because of this!” shows a strong misunderstanding of the economics of consumer product innovation life cycles. The “version 1.0 mass-market user friendly right out of the gates model” is an outlier, a great exception to the typical evolution of technology; in fact, I’m having trouble thinking of a consumer technology product other than the iPod that comes close to that description. The “because we can” product differentiation puts the technology in the hands of early adopters, who are eager to kick the tires and are willing to spend their income to do so. These customers guinea-pig the technology for the rest of us, and provide companies like Samsung with feedback, which I’m sure will include comments like “it would be great if this technology enabled me to detect produce spoilage” and “this screen is pretty useless if all I can do is get to the Internet and not monitor my food”. Those experiences get incorporated into the evolution of the technology. Starting with the “because we can” technology is not necessarily going to lead to missed opportunities, as Mims argues, as long as companies like Samsung combine their engineering and business knowledge of what’s possible with the feedback they receive throughout the new technology adoption process.

Second, I think his definition of a “really smart fridge” is too limited. A really smart fridge would be transactive. A really smart fridge would enable its owner to program in price triggers to change settings on the chiller during expensive hours, saving the owner (an admittedly fairly small amount of) money and reducing energy use (good if the owner cares about conservation) and reducing peak demand on the distribution infrastructure (good for the wires company) — all without changing the quality of the refrigeration that the owner experiences, thanks to the beauty that is thermal mass. A transactive fridge would enable its owner to choose to cycle the chiller down if there isn’t much green power available, up to the point where the temperature change impairs the refrigeration, if the owner has a preference for green power. A transactive fridge is empowering for consumers.

A better article on the same topic comes from Greentech Media from earlier this summer (and has been sitting open in my browser to be blogged for too long!). In it Katherine Tweed argues that the current, first generation of smart appliances are oversold relative to their features. Without saying it explicitly, she makes the point that these first-generation smart appliances are expensive and likely to appear to early adopters — buyers more at the Viking end of the product line than the bottom of the Whirlpool line. She also, correctly, points out that if the value proposition to the consumer is saving money by reducing energy savings, the smart appliance features do not contribute much at the margin beyond the EnergyStar appliance standard; so if you are buying to save money by saving energy, you aren’t going to get much bang for the buck at the margin by choosing a smart fridge over an EnergyStar fridge. But as I remarked earlier, that’s not the only value proposition, because consumers care about other features.

It’s going to take some time to get the technology integration across the value chain to create all of these features, from spoilage detection to transactive automated response to dynamic pricing to preferentially choosing green power to sending the beer order to the store when my supply is low. It’s also going to take some choice in terms of electricity pricing for residential customers, and (surprise surprise) monopoly utilities and regulators are dragging their feet on that front. But don’t dismiss smart appliances today simply because V1.0 isn’t perfect. V1.0 never is.

ETA: I also recommend reading the comment thread on the Greentech Media article; it has a good back-and-forth about dynamic pricing.

Posted in Economics, Electricity, Technology | Tagged , , , | 2 Comments »

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Bastiat, Krugman, Horwitz on earthquakes

August 24, 2011

Lynne Kiesling

One quick note before I turn on my Internet-blocking software and retreat to my writing cave: yesterday’s earthquake naturally prompted a lot of snarky comment that the earthquake would at least create jobs … the absurdity of which illustrates Bastiat’s broken window fallacy (a topic of great interest to both of us at KP). Paul Krugman claims that the Google+ page with his name and this post is not his:

People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage?

Steve Horwitz explores why such a spoof is so persuasive from “the Krugman who cried stimulus“. He also expands on a conversation we were having on Facebook about how the “government spending to create jobs” argument focuses solely on flows, and ignores the destruction of the stock of wealth that arises from exogenous shocks like this. Repairing damage creates a flow of economic activity, but our accounting has to include the cost of the destruction of the stock of wealth. The flow of economic activity devoted to replacing that stock does not create any net new value.

Or, as one of my physics colleagues said in a different context, don’t confuse activity with accomplishment.

Posted in Economics | 4 Comments »

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The industrial revolution required more energy resources than provided by the annual cycle of photosynthesis

August 24, 2011

Michael Giberson

Tony Wrigley’s new book is Energy and the English Industrial Revolution. He provides some flavor of the fundamental thesis of the book in a post at VoxEU.org: “Opening Pandora’s box: A new look at the industrial revolution“:

The most fundamental defining feature of the industrial revolution was that it made possible exponential economic growth – growth at a speed that implied the doubling of output every half-century or less. This in turn radically transformed living standards. Each generation came to have a confident expectation that they would be substantially better off than their parents or grandparents. Yet, remarkably, the best informed and most perspicacious of contemporaries were not merely unconscious of the implications of the changes which were taking place about them but firmly dismissed the possibility of such a transformation. The classical economists Adam Smith, Thomas Malthus, and David Ricardo advanced an excellent reason for dismissing the possibility of prolonged growth.

…

Photosynthesis was the source of mechanical energy which came predominantly from human and animal muscle power derived from food and fodder. Wind and water power were of comparatively minor importance. Photosynthesis was also the source of all heat energy used in production processes since the heat came from burning wood.

The implications of this situation in limiting productive potential are clear and dire. The land constraint was a severe impediment to growth. It is epitomised in a phrase of Sir Thomas More. He remarked that sheep were eating up men. An expansion of wool production meant less land available to grow food crops. Or again, it is easy to show that, if iron smelting had continued to depend upon charcoal, a rise in the production of iron to the scale which became normal in the mid-nineteenth century would have involved covering the entire land surface of Britain with woodland.

Breaking free from photosynthesis

Access to energy that did not spring from the annual product of plant photosynthesis was a sine qua non for breaking free from the constraints afflicting all organic economies. By an intriguing paradox, this came about by gaining access to the products of photosynthesis stockpiled over a geological time span. It was the steadily increasing use of coal as an energy source which provided the escape route.

Much more at VoxEU.

Posted in Economic history, Economics | Tagged , | Comments Off

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Free the electricity consumer!

August 23, 2011

Lynne Kiesling

In late July I spoke at Cato University, which was great; I met so many interesting and thoughtful people, and learned a lot from my fellow participants and speakers. I’m also happy that Cato has made the presentation notes and recordings of the presentations available on their website, so you can see and hear them too!

One of my talks was called “The Economics of Intervention”, which is a large topic … so I focused on the interplay of technological change and regulation, ranging from Schumpeterian disruptive innovation to the history of the electricity industry and its regulation to current smart grid issues. You can also listen to a recording of my talk. If you are a regular KP reader you will recognize the themes and connections that I drew in the talk — innovation makes monopolies temporary, regulation that purports to “stand in for competition” cannot do so, and unless smart grid includes transactive technology and transactive market options, it’s not smart. The best way to deliver these potential benefits, and to avoid the distrust and Orwellian concerns attached to having such technology at the behest of government-granted monopolies and regulators is to open up retail electricity markets, reduce entry barriers, and enable innovators and entrepreneurs to transition electricity from a commodity product to a service that can be differentiated, bundled with other services, etc.

While I was there I also talked with Caleb Brown about the potential value creation from smart grid technologies and customer-focused business models, and he has posted our conversation as a podcast. I like his framing of the issue: free the electricity consumer!

Posted in Economics, Electricity, Regulation, Technology | Tagged , , , | 1 Comment »

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Biking and climbing and driving … and eating!

August 23, 2011

Lynne Kiesling

I am just back from a long weekend trip to Denver, to participate in Sunday’s Deer Creek Challenge bike ride. We did the metric century — 62 miles, with 7,022′ of elevation gain along the way. Pretty daunting for a flatlander! But this event was my “A race” (although not a race, but triathletes tend to prioritize events as a way to structure training across multiple events), so I have been doing some rides with climbs and lots of mileage … and, of course, in the midwest we have the perennial “headwinds are hill training” opportunity. So although I was a bit slow, I got it done, and it was a gorgeous ride.

We drove from Chicago to Denver (in large part due to my flying boycott thanks to the TSA, our feckless Congress that does not rein them in, and the airlines that go along with it to reduce their security liabililty), stopping in Omaha for one night on the way there. As an enthusiast for early American colonial and frontier history, I was excited to drive through the parts of Iowa, Nebraska, and Colorado that I’d not seen before, and I thought the high plains in western Nebraska and eastern Colorado were particularly beautiful; I love the combination of rolling hills and semi-arid landscape.

In Omaha we visited the Art Deco Union Station, which now houses the Durham Museum, so it’s a great stop if you like history and architecture. But the highlight of our Omaha visit was dinner at the Boiler Room, a fantastic restaurant in, you guessed it, an old renovated boiler room for The Bemis Company in the Old Market area of town. The food was fresh, seasonal, and creative, and we happened in to a special winemaker dinner. Outstanding from beginning to end.

We didn’t intend for this trip to be a foodie trip, but then in Denver we ate at Potager, which was also outstanding. Again fresh and seasonal, with a great wine list; melon soup with shrimp, zucchini carpaccio, lots of dishes based on just-harvested peaches, wonderful bread.

Our drive home was a bit of a quick blast, but we did stop in Des Moines yesterday for lunch at Smokey D’s BBQ, which was very good. We shared beef brisket and pork ribs; both were really good, but the brisket was especially good. Their sauces ranged from mild to extra-fiery, which definitely lived up to its name.

All in all, a fun late-summer road trip.

Posted in Food and wine, Sport and fitness, Travel | 1 Comment »

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Passage of Wisconsin’s anti-price gouging bill boosted by President Bush’s public remarks

August 22, 2011

Michael Giberson

Wisconsin didn’t have an anti-price gouging law in 2001, so the state government’s response to post-9/11 reports of gasoline price gouging was pretty limited. While the Wisconsin governor called for an investigation of gasoline retailers, for all practical purposes the investigation was limited to fighting collusion in price setting and instances in which stations may have changed prices more than once in a 24-hour period. (See the previous post for a related discussion. The state also had a law which prescribed a minimum 9.18 cent per gallon retailer margin, to prevent prices from becoming ‘too low,’ but that law was not an issue at the time.)

In early 2002, Wisconsin State Rep. Marlin Schneider introduced an anti-price gouging bill limited to petroleum-based fuels and providing for fines up to $10,000 and prison terms as long at 15 years, but the Wisconsin legislature did not pass it. Wisconsin did eventually pass an anti-price gouging law in 2006, largely in response to gasoline price increases after Hurricanes Katrina and Rita (see regulation here).

One of Wisconsin State Rep. Josh Zepnick’s talking points in favor of the bill was President George Bush’s public call in April 26, 2006 for an investigation into “illegal manipulation or cheating related to the current gasoline prices,” which was followed up by a letter from Attorney General Alberto Gonzales to state Attorneys General asking them to “enforce vigorously the laws of your State against any anticompetitive, anticonsumer conduct in the petroleum industry.”

Zepnick observed that Wisconsin lacked a law that would enable the state to support the President. More:

“Wisconsin consumers are worried about price gouging,” concluded Zepnick. “President Bush and Attorney General Gonzales are worried about price gouging. Legislative Democrats are worried about price gouging. Everyone is worried about price gouging except for Wisconsin’s Legislative Republicans. It’s time they get with the picture.

The law was enacted within a month.

ADDENDUM: Seven states did pass anti-price gouging laws in 2001 or 2002, primarily in response to post-9/11 reports of price gouging on gasoline and other goods and services: NJ, ID, IN, KS, SC, TN, WV. A few states passed anti-price gouging laws in 2003, 2004 and 2005, responding to both post-9/11 reports and hurricane-related price gouging: NC, KY, VA, UT. The other three states passing an anti-price gouging law in 2006 were ME, PA, and VT. Oregon followed with an anti-price gouging law in 2007.

Posted in Economics, Energy markets, Law, Politics | Tagged , | 2 Comments »

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Post 9/11 gasoline price gouging in Wisconsin: two views

August 22, 2011

Michael Giberson

The terrorist attacks of September 11, 2001, created a great deal of uncertainty and fear among Americans. In the retail gasoline market, some (but not all) consumers reacted to the uncertainty and fear by heading to a gas station to fill up their tanks. Some (but not all) gasoline retailers reacted to the uncertainty and fear by raising their gasoline prices, in some cases raising prices dramatically. A newspaper story published September 12, 2001, in the Madison, Wisconsin The Capital Times captured a sense of the concerns and reactions at the time.

One common response to 9/11 gasoline price increases was to try to shame retailers for their actions:

Citing reports of gas prices as high as $8 per gallon in Wausau and $4 per gallon in Waunakee, Gov. Scott McCallum said this morning that price gouging will not be allowed in Wisconsin….

“We are not going to stand for it. It is un-American for people to take advantage of other people for what happened yesterday, of such a tragedy,” McCallum said.

The story also includes a quote from a “Desert Storm veteran,” who called the price increases “war profiteering.” Another consumer said of gasoline retailers, “this is like them having blood on their hands and profiting from one of the worst situations we’ve ever seen.” These are the attitudes that politicians cater to when they call for state action to control price gouging.

Contrast efforts to shame retailers to these remarks by a University of Wisconsin economist, directed more at consumers:

But Mark Ready, an associate professor of finance at the University of Wisconsin-Madison and former chief economist at the Securities and Exchange Commission, said people who lined up for gas Tuesday night bought more than fuel.

“The people who paid a lot last night were buying more than gas. They were buying protection against uncertainty and they were buying the ability to hoard,” Ready said. “To me, I don’t necessarily see it as a problem that they were charged a lot. There were some people who rushed out and gave blood and others who rushed out and bought gas.”

Note the two parts: (1) consumers were buying a bit of physical insurance by getting fuel into their tank, which was particularly valuable to consumers fearful of subsequent market disruptions, but also (2) the implied but relatively mild criticism of consumer selfishness in the remark, “some … gave blood and others … bought gas.”

The moralizing impulse to cast price increases during emergencies as immoral attacks by the retailer against the community seems to be pretty strong, at least among many people. Since the laws implemented to cater to these moralizing impulses almost certainly make consumers worse off, the impulses have dysfunctional outcomes.

 

Posted in Economics, Energy markets, Politics | Tagged , | 4 Comments »

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FERC, NERC conclude “weather-related causes” explain most electric power and gas supply problems during February’s extreme cold in Southwest U.S.

August 17, 2011

Michael Giberson

The Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC) have issued their report on the events surrounding electric power and natural gas supply interruptions around the Southwest United States in early February, 2001. The culprit? According to the press release: “the task force found a majority of the electric outages and gas shortages were due to weather-related causes.”

My initial snarky response was, “It took you six months to figure this out? I think ERCOT power system operators had reached the same conclusion by about 6 AM on February 2.” But, of course, at the time there was some uncertainty about contributing factors and it is useful to go back over the event carefully in order to see what can be learned from the experience.

In the case of this report, “go back over the event carefully” seems to dramatically underestimate the effort. The resulting document totals 357 pages from cover to cover, including eleven appendices on topics ranging from “Electricity: How it is generated and distributed” to “Impact of cold weather on gas production.”

Much of the report, appendices included, is more or less a primer on current electric power and natural gas systems, focusing on the Texas, New Mexico and Arizona systems, and with an emphasis on reliability and weatherization issues. The report adds to that primer an account of what went wrong during the cold snap lasting February 1-5 and then reaches some conclusions and offers recommendations. The report appears to be a “one stop shop” for policymakers, power systems operators, and others interested in what went wrong.

The FERC press release highlighted a recommendation to Southwest states to consider whether to require winterization plans. In addition, the press release noted the following (from among the total of 26 electric power and 6 natural gas system recommendations):

  • Generation owners and operators should ensure adequate construction, maintenance and inspection of freeze protection elements such as insulation, heat tracing and wind breaks.
  • Reliability coordinators and balancing authorities should require generators to provide accurate data about the temperature limits of units so they know whether they can rely on those units during extreme weather.
  • Balancing authorities should review the distribution of reserves to ensure that they are useable and deliverable during contingencies.
  • State lawmakers and regulators in Texas and New Mexico, working with industry, should determine if weather-related production shortages can be mitigated through the adoption of minimum winterization standards for natural gas production and processing facilities.

Also of interest in the report, FERC/NERC reviewed the ERCOT Independent Market Monitor’s report on the rolling blackouts (which concluded no market manipulation was involved) and similarly found that there was no evidence of market manipulation.

While there is a great deal of additional detail in this report, the overall conclusions are more or less the same as reached in earlier reviews. This information, along with the economic incentives to put it to work, will likely keep the energy industry in the Southwest from experiencing rolling blackouts next winter.

RELATED: Tom Fowler offers a summary at FuelFix.com. The rolling blackouts in ERCOT were the topic of many posts earlier this year at Knowledge Problem, the interested reader can start with this KP search: ERCOT+blackout.

Posted in Electricity, Energy markets | Tagged , , | 1 Comment »

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