Tag Archives: energy

Developing Countries Care More about Environment

Thesis: Developing countries are more environmentally conscience than the developed world.

While this might come off as a bit backwards because surely the developed world with much more disposable income have the ability and the desire to be more environmentally friendly than their developing country neighbors, but I am going to prove this argument is wrong.

David Cheesewright, chief executive of Wal-Mart’s international business recently sat down and discussed this topic with the Wall Street Journal and said, “Surprisingly, it’s the developing markets that tend to be more passionate about green products. They do it from a very different dimension.” As can be witnessed by the graph below, areas that have a majority of developing countries are willing to pay extra money for products and services committed to making a positive social and environmental impact.

Green Energy Graph

This is exactly the opposite of the intuitive argument that the developed countries have a much higher disposable income and therefore should be more willing to sacrifice a bit more of this for a product that is environmentally safe. However as Mr. Cheesewright later went on to explain, “In developed markets, you tend to find it’s a much more aspirational purchasing decision. Whereas, in developing markets, it’s much more pragmatic. It’s about the realities of life. If you have to carry your water from a pump a mile away from your home, you love products like shampoos that don’t require water, or detergents that are very efficient. That’s why I think they’re more prepared to look for those sort of products.” People in developing countries do not have the luxuries us developed countries have, and so sometimes environmentally safe products just make more sense.

 

Opponents of this will argue that developed countries are reducing the amount of coal generated electricity they have, while developing countries are relying on this cheap electricity for much of their populations, and they would be right. However, these countries do not have the economic capabilities in place yet to utilize these much more expensive forms of renewable power. While we want/need to make some changes to help reduce the impact humans are having on the earth’s environment, we also want to help people in developing countries rise out of poverty and to an adequate standard of living. This may mean that these developing countries use more harmful sources of power for longer, hopefully the price of renewable energy keeps declining so that it will become more of an economically viable option for these developing countries to implement. As the WSJ reported, “The price reduction of renewables has been nothing short of dramatic, 80% in the last five years. The wholesale price into bid markets for these technologies comes close to zero. I think the coal companies are going to have to pay attention to these technology trends.” This reduction in price, as well as more initatives from developed countries and international organizations should help these developing countries implement more and more renewable energy sources into their power grids. The citizens of these countries will certainly appreciate it more!

States Should Expand Incentive Programs for Smart Thermostats (Revised)

Thesis: States could boost economic activity in just a few short years by making subsidy programs for smart thermostats more popular amongst households. 

Smart thermostats are devices that allow a household to optimize the use of their heating and cooling utilities by auto-scheduling the process: they turn the temperature up or down at key times, like in the morning and around dinnertime, and let the HVAC system relax when users are asleep or out of the house.  While programmable thermostats have been around for a while, new brands like Nest utilize smartphone GPS data or sensors to make the process far easier for users by detecting when people are home, learning a customized schedule that can react to sudden changes.  It’s a household product that makes too much sense to not be utilized – Nest estimates that they save the average household $173 a year on utility bills, but homes in more extreme climates or those with less efficient heating systems, such as those that use heating oil, stand to save even more.  One user’s analysis of his change in utility bills from blog Get Grok, controlled for temperature changes, demonstrated that by using all of the Nest’s features, he was able to reduce his bill by a whopping $305 in a mere four months.

With a price tag of just $250, the average household’s savings would pay for a Nest or a similar product in just a year and a half, and many homes like the one in the example above would earn back the upfront cost in essentially no time.  Considering this short payback period, states should expand their rebate programs that can be applied to smart thermostats – the aggregate savings from consumers making the switch would ripple through the economy within a few years, translating to more spending on other goods and services.  There are currently a couple dozen rebate programs available for smart thermostats, in the range of $10 to $100, as compiled by a post on the Nest community page, but most of them are offered by local utility companies, making them scattered and inaccessible to many homes.  By making these incentives available statewide and more attractive (i.e. increasing the subsidy), states would see consumer savings get a slight bump as households hold on to a portion of their utility bill savings, and overall consumer spending on other goods increase as households spend the rest.  And there is evidence to suggest that spending on other goods and services is more valuable to the economy than spending on utilities: according to the American Council for an Energy-Efficient Economy, “one dollar of avoided utility bill costs has 2.24 times the effect on domestic employment and wages compared to one dollar spent on utility bills”, mostly since such a large portion of expenditures on energy services ends up overseas.  Since states generally have a higher sales tax than a utility tax rate, they would recoup the costs of the subsidy programs off the spread between tax rates.

Reducing the cost of utility bills for consumers would have another desirable effect, addressing one of the nation’s most hotly contested topics: income inequality.  Since utility costs are fairly uniform across socioeconomic status, low-income households spend a far bigger proportion of their income on utilities than most – a hefty 17%, as compared to the 4% that the average American household spends.  Subsidy programs that reduce utility costs would help improve economic parity by leaving low-income families with more disposable income.  I won’t recommend a specific value for the subsidy, as that will vary state to state (those with more extreme climates than average can afford to offer more, as their consumers will save more and they will earn back the cost quicker).  But every single state in the nation stands to benefit from these types of policies – and the reduction in carbon emissions is just icing on the cake.

States Should Expand Subsidy Programs for Smart Thermostats

Smart thermostats are devices that allow a household to optimize the use of their heating and cooling utilities by scheduling the process, turning the temperature up or down at key times, like in the morning and around dinnertime, and letting the system relax when users are asleep or out of the house.  Programmable thermostats have been around for a while, but new brands like Nest make the process far easier for users, using monitors or smartphone GPS data to detect when users are home or not and create a customized schedule that can react to sudden changes.  It’s a household product that makes too much sense to not be utilized: Nest estimates that they save the average household $173 a year on utility bills, but homes in more extreme climates or those with less efficient heating systems, such as those that use heating oil, stand to save far more.  One user’s analysis of his change in utility bills from blog Get Grok, controlled for temperature changes, demonstrated that by using all of the Nest’s features, he was able to reduce his bill by a whopping $305 in a mere four months.

With a price tag of just $250, the average household’s savings would pay for a Nest or a similar product in just a year and a half, and many households like the one in the example above would clearly earn back the upfront cost in practically no time.  With that in mind, states should expand their rebate programs that can be applied to smart thermostats – the aggregate savings from consumers making the switch would ripple through the economy within just a few years, translating to more spending on other goods and services.  There are currently a couple dozen rebate programs available for smart thermostats, in the range of $10-100, as compiled by a post on the Nest community page, but I think states should consider expanding those programs, especially those with households that spend more than average on heating and cooling.  By making such programs more popular amongst consumers (by making them more easily accessible and more attractive by increasing the subsidy), states would see consumer savings get a slight bump as households hold on to a portion of their utility bill savings, and overall consumer spending increase as households spend the rest.  Since states generally have a higher sales tax rate than utility tax rate, they would recoup their subsidy costs off the spread between tax rates.  And there is evidence to suggest that spending on other goods and services would be more valuable to the economy than spending on utilities – according to the American Council for an Energy-Efficient Economy, “one dollar of avoided utility bill costs has 2.24 times the effect on domestic employment and wages compared to one dollar spent on utility bills”.  Subsidy programs that reduce household utility bills would also carry the benefit of improving economic parity, as low-income families spend a far bigger portion of their income on utilities than most, since utility bills are fairly uniform across socioeconomic status.

For Japan, Nuclear Energy is a Touchy Subject

Naomi Hirose, the president of the infamous Tokyo Electric Power Company (TEPCO), recently expressed his optimism in a Wall Street Journal interview that his company was “making progress in persuading the local community to accept the restart of the Kashiwazaki-Kariwa nuclear power plant on the Japan Sea coast”.  The power plant in question was shut down in the wake of the Fukushima Daiichi nuclear disaster, which not only devastated the public image of TEPCO but shattered the already-shaky faith that the people of Japan had in nuclear power.  In terms of the technical process involved, restarting the plant’s reactors is a relatively simple process.  The real barrier to resuming operations is widespread public resistance to nuclear power in Japan – polls conducted by Japanese news publications have found that roughly 80% of Japanese citizens are now anti-nuclear, as reported by the Christian Science Monitor.

This was obviously not always the case.  The nation was once a leader in the field of nuclear power: it created its nuclear program in 1954, the very year that the world’s first nuclear plant opened.  Prior to the Fukushima incident, Japan generated 30% of its energy via nuclear plants, and aspired to reach 40% by 2017 (per the World Nuclear Association).  Nevertheless, it is reasonable that the Japanese people are now so skeptical, particularly of TEPCO, which was found to be ill-prepared for natural disaster.  While Japanese authorities should be wary of companies trying to jump the gun and restart production to save their bottom line, restarting nuclear production could provide the jumpstart that a lackluster Japanese economy needs.  The country recently emerged from two recessionary quarters with disappointing growth numbers, per Reuters, and much of that is due to their new energy identity as a nation dependent on fossil fuel imports.  As seen in the graph below, since Fukushima occurred in 2011, the country has fallen into a trade deficit.

Japanese Trade Deficit

 

Japanese wealth is leaving the country, their electricity prices have skyrocketed (up about 20% for consumers and 30% for businesses, per the Washington Post), their energy companies are bleeding out, and they are now completely import-dependent for energy, all while the country’s massive investments in a network of nuclear plants, which could solve all of the above problems, sits by idly.  Japanese legislators have indicated that they wish to make nuclear production a part of the country’s future at some point in the future, as described by the Japan Times, but they have been vague and slow to make concrete decisions.  Some may see the cheap oil market as reason to postpone nuclear production, but the process of inspecting and approving the country’s plants to re-open could take years to complete, by which point most certainly expect oil to have recovered.  In the mean time, Japan should work on public media outreach programs to raise awareness amongst its populous as to the benefits nuclear power could have for their country, with new stricter regulatory standards in place.

 

 

 

 

 

Naysayers about Cheaper Oil are Missing the Big Picture

Thursday, a panel of 69 economists surveyed by the Wall Street Journal discussed the economic impact of the weak oil market, noting their concerns that the low price of oil is causing a drag on capital expenditures by energy companies.  The article claimed that cheap oil is “a double-edged sword for the economy given how it might affect the boom in U.S. oil and natural-gas production”.  While there may be some truth to that statement, one edge of the sword is far duller than the other.  Capital investment has not even begun to exhibit the “sharp pullback” that the the economists are predicting: they only cut their forecast for the increase in plant property and equipment by 1.5%, and that is still only an estimate – such forecasts are often off by even more than 1.5% as it is quite difficult to predict how the economic landscape may change over the course of a year.  As demonstrated by this graph from QZ, even though the US oil rig count is down, production is still rapidly climbing.

US Oil Prod

The slide in oil prices began almost nine months ago now, and it’s clear that production shows no signs of slowing down, especially since prices seem to have bottomed out and are now back on the rise.  While it may look like the energy sector is going to take a hit this year, I doubt that will be the case as prices continue to bounce back and growing US oil producers seek to lock in capital investments before interest rates begin to rise, which will likely occur sometime midway through this year, as indicated by the Fed and reported by the New York Times.  On top of that, the US oil production industry is still growing rapidly, and it seems likely that producers would want to ramp up investment now so as to carve up their slice of the market before it fully matures.

So while the Journal’s economists did still admit that cheap oil was a net positive on the economy, they might be overplaying the threat of a drop in capital investment.  The availability of cheap oil will not only continue to drive up consumption and thus overall business growth, but will spur investment from other sectors that benefit from cheaper energy.  As transportation-focused industries take advantage of the low prices by increasing their own investment, demand for oil will grow, strengthening the case for oil producers to keep increasing production.

 

Why picking Nature in the battle of Nature v Nurture is picking the easy way out

“The idea that math ability is mostly genetic is one dark facet of a larger fallacy that intelligence is mostly genetic” (Kimball, Smith 2013).

This quote brought back memories of the 7th grade. I always had a liking for mathematics. I believe it is because I found solving the problems rewarding, and I liked the feeling of accomplishment that it gave me. There was no gray area, I liked that it was just facts. This resulted in me helping other classmates with their work. I remember many times that the classmate that I was helping would saying something like, “I do not get this,” or “Math just is not for me.” I think I am lucky that I studied mathematics as I view as a strong skill to have, but the idea that certain skills are innate is not limited to mathematics, and much more of an issue of note wanting to put effort into difficult situations. I have definitely given up on some new challenges, simply because they were too hard.

“For almost everyone, believing that you were born dumb—and are doomed to stay that way—is believing a lie” (Kimball, Smith 2013).

Some new experiences will probably come easy to people, but most will be challenging at first. This can be a great inhibiter for most people resulting in many missed opportunities. People ending up tuning out many issues, because most issues, or anything worth knowing is complicated.

“Analysts at some securities firms are worried that the 40% slide in gasoline prices at the pump since April might hurt demand for electric cars” (Ramsey, 2015).

The reason I am tying in this quote from The Wall Street Journal is I believe it is an indicator of the general public’s opinion on energy in America. Most cheap gasoline has come as a result of greater supply, but that supply is still not a renewable form of energy. I think most of America views themselves as “not a math person”, and “not a science person,” or at least not a “climate person.” Whether you want to be a certain type of person or not, the issue does not just go away. Mathematics still encompasses many areas of life, and climate issues are definitely not something that should be ignored. Although stocks respond in the short term, people are also buying all future value of that firm as long as they hold that stock.

Do not get me wrong. I like having cheaper gasoline at the pump, but I also am aware that the issue of creating renewable energy for growing population levels is not solved. Only put on the back burner, at least in the eyes of the general public.

“Tesla’s forthcoming Model 3 and capable of traveling 200 miles…” (Ramsey, 2015).

“The Chevrolet Volt, a plug-in hybrid introduced by GM in 2010, has an electric range of just 38 miles, though next year’s model will go 50 miles” (Ramsey, 2015).

From just a pure numbers standpoint Tesla clearly is producing a more sustainable, and practical vehicle, although typically at a higher cost (Tesla Motors, Chevrolet).

If I was thinking about future value, Tesla Motors might be a good investment. Assuming they can reduce the sticker price, without sacrificing the traveling distance. Tesla Motors may not be the future of automobiles but I think Elon Musk is at least going down the right path, and not ignoring the issues that we are all facing.

I hope that people, myself included, continue to realize that mathematics, science, or anything new and foreign may be difficult, but it is worth knowing and possible to understand with enough effort.

Sources

http://www.wsj.com/articles/electric-car-pioneer-musk-charges-head-on-at-detroit-1421033527?mod=WSJ_hp_RightTopStories

Ramsey, Michael. “Electric-Car Pioneer Musk Charges Head-On at Detroit.”WSJ. N.p., 11 Jan. 2015. Web. 12 Jan. 2015.

http://qz.com/139453/theres-one-key-difference-between-kids-who-excel-at-math-and-those-who-dont/

Kimball, Miles, and Noah Smith. “There’s One Key Difference between Kids Who Excel at Math and Those Who Don’t.” Quartz. N.p., 27 Oct. 2015. Web. 11 Jan. 2015.

© October 27, 2013: Miles Kimball and Noah Smith, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2015. All rights reserved.

http://my.teslamotors.com/models/design

“Resale Value Guarantee.” Model S Design Studio. N.p., n.d. Web. 11 Jan. 2015.

Tesla Motors

http://www.chevrolet.com/volt-electric-car/build-your-own.html

“Build Your 2015 Volt.” Www.chevrolet.com. N.p., n.d. Web. 12 Jan. 2015.

Chevrolet

Link

Everyone knows that the oil price keeps significantly falling. Back in June 2014, the price of oil was around $120 per barrel. However, the oil price has decreased more than 40 % since June and it is now $ 55 per barrel in January 2015. This statistics suggests that the drop in the oil price is just not a coincidence. Then why does the price of oil keep falling?

The oil price is mainly determined by actual supply and demand of oil, indicating that the technology is also an important factor that impacts the price of oil. As of 2010, the U.S. oil companies succeeded to extract a massive amount of oil using shale oil extraction. Shale oil extraction is an industrial process involves use of hydrogenation, or thermal dissolution to convert kerogen in oil shale into shale oil. Due to the growth of shale oil production, American oil companies are the world’s largest oil producer that produces a huge amount of oil. Thus, the supply of the oil has been significantly increasing since 2010, which also led to decrease in a price of oil.

In addition, many oil experts assumed that it would take longer time for Libya to produce oil because of internal strife. However, Libya succeeded to solve the inner problem much quicker than the anticipation and began to produce oil, increasing unexpected quantity of oil.

More importantly, however, OPEC members failed to come up with an agreement to increase their oil prices or decrease their quantity produced, which could stabilize the price of oil. OPEC is the world’s largest oil cartel that has powerful control over the quantity of oil. However, OPEC members such as the Saudis and Kuwaitis did not make a decision to give up market share and they are now hoping that lower oil price would damage the U.S oil companies that employ shale oil extraction. OPEC Secretary-General Abdalla El-Badri said, “We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves”, suggesting that there is a still possibility that the price of oil would decrease even further.

At the same time, the demand for oil has been decreasing in most countries due to weakening economics. This partly explains why the oil price keeps falling as the supply of oil exceeds the demand for oil. This is well described by the below chart that shows the supply of oil is much higher than actual demand by late 2014.

Why Gas

The demand for oil from Asia, Europe and even the United States began to shrink as their economics are doing poorly. At the same time, countries like Indonesia and a few other Asian countries have been cutting back on fuel subsidies, which decreased the demand for oil even more.

It is hard to predict if oil prices will keep falling but I think that the price will stay low as long as demand is substantially lower than oil supply. More importantly, if OPEC decides to decrease their production and the consumption of oil from developing countries increase, the price of oil would increase. Yet, no one can exactly predict what will happen to oil prices and its impact on the world economy.

 

 

 

 

 

 

New Homebuilding Practices may Mean Future Troubles for Energy Sector

Last week, the National Association of Homebuilders revealed this year’s design for their New American Home showcase, an annual event featuring a model house that encapsulates the current trends and innovations of the homebuilding industry.  This year’s home, per the Wall Street Journal, is a net-zero electricity model built by Blue Heron Design.  A net-zero building is one that, as stated plainly in the term itself, consumes no energy in net, due to energy-saving features such as energy-efficient lighting, high-quality insulation, modern windows and doors, and most importantly, solar panel installations.  Such homes often produce more energy than they consume, allowing homeowners to earn credit from utility companies by feeding their excess electricity into the grid.  The fact that the NAHB is showcasing such a design reflects confidence from the industry that net-zero homes are finally becoming financially viable for widespread production – due to the rapidly falling costs of energy-efficient technology as well as increased demand from homebuyers.  As noted in the article above, “The Solar Energy Industries Association says the average price of an installed solar-power system has declined more than 50% since 2010”, leading Blue Heron to claim that they are capable of mass-producing net-zero homes for as little as $700,000.  In recent years, most homeowners who desired zero-energy houses would have had to retrofit their homes out of their own pocket, requiring costly investments in technologies like solar panels, often on top of fees for energy-efficiency consultants.  Hence, it is no surprise that net-zero homes have remained a rather niche concept – many homeowners, even if they are savvy and patient enough to see the benefit in reduced utility bills in the long-term, cannot afford the up-front costs of installing energy-efficient features.  The notion that homebuilders are beginning to construct new homes fully equipped for energy efficiency is an exciting one, and I believe it will only be a handful of years before building zero-energy homes becomes an industry standard (at least in climates where current technology permits feasibility), especially once keeping up with the Joneses syndrome kicks in.

So what does the momentum behind zero-energy homes mean for the energy industry?  Clearly, the trend represents an emerging threat for any company dependent on demand for electricity, as the US Energy Information Administration estimates that 40% of U.S. energy consumption is accounted for by residential and commercial buildings.  I have little doubt that energy-efficiency standards will be applied to commercial buildings at the same rate as residential homes (if anything, commercial buildings will be faster to adopt new technologies, since they are more likely to eat the installation costs with an eye on the longer horizon), and so it is entirely possible that within the span of the next few decades, electricity suppliers will see almost half of their current market dry up.  While the threat is by no means immediate, it will be difficult for capital-intensive energy companies to adapt to the future hit to demand – at least in the U.S., since global energy demand is still certainly on the rise.  Nevertheless, it will be a very long time before any homes are ready to go completely off the grid.  Until battery technology catches up to solar panels, houses will still need to be plugged in to the electricity grid during times when solar panels cannot produce.