So can I feel bullish on America yet?

[IlyaKEightSix]

http://cbs3.com/local/new.jersey.wind.2.833870.html

Leave it to a Goldmanite to kick off going green.

I am hoping that this is the beginning of many, MANY good things to come.

And there's plenty more green around the corner...


If you smell-alalalalal...

What *Barack*

...

Is cooking.

And of course, my favorite car company ^_^

Tesla Motors

And some more green goodness:

The Race For The Electric Car Video - CBSNews.com

Am I the only one predicting a green industrial revolution before our financial system goes bust?

What does it mean to us financial engineers?

Carbon-credit backed securities, anyone?

As hilarious as this sounds after the MBS debacle, I'm banking on A) regulation that actually works so that these things are easier to value and B) putting high-risk investment back into the hands of the rich that know what they're doing--or at least parting fools from their unearned money, rather than creating a monster which can engulf the rest of the innocent people.

I'm also banking on one other aspect--me. In risk management. Working with the best people. Learning from the best people in the business. And kicking away any corrupt people looking out for their bonuses before their work results. Funny that I was the head risk manager for my first place suburban soccer team. Oh the hilarity. My old role as risk manager comes back to join me.

I definitely think that now is one of the best times for entry-levels to get in the business. We know nothing, have everything to learn, and we're cheapies with wide eyes and open minds.

So yeah...here's one would-be new-school quant that's BULLISH on America. Anyone feel like joining me?

And the sooner we can get all this newfangled electric-ey goodness up and running with unlimited green energy, the sooner we can tell the middle east to go screw itself and laugh as we see their economies completely collapse and the end of global terrorism!

 

[woody]

I believe part of the 'bailout' bill that was passed last week included renewing the tax incentives for Wind. I didn't read the whole article you linked to, but I bet NJ was just waiting on that bill to be passed (the wind part) before going forward with this. Every time the wind laws expire, investment drops off a cliff. Then when they're picked up again, investment spikes.

Many of us have been saying that the so-called 'green revolution' is the next big boom for our economy. It could do two things at once: help the environment and eliminate the need to import energy. A plan to provide energy independence in 10 years will be a bigger boon to our economy than the porn+internet combo. First, it keeps $700 billion (and growing) in the country. Second, we produce the energy here, which creates jobs that *cannot* be exported (well, okay, maybe they'll be able to export windmill blades or something, but you get the point). I won't mention the national security angle and the need to protect American 'interests' overseas.

 

[alain]

Does anybody know how the US uses all the oil it imports? I would like to see a chart with some sort of distribution. I know it is not in electricity since US uses oil to produce around 9% of the electricity it consumes. It means the oil we import is used mostly on something else, but.... what else?

I think it is mostly transportation (or the plastic industry or something I don't know) but, if that is the case, how is all the alternative energy talk going to help us?

 

[Christian]

Alain,

From 1000 Barrels a Second by Peter Tertzakian (which references the US Energy Information Agency) one barrel is divided in the following way:

47% Motor gasoline
21% Distillate fuel oil
8% Jet fuel and kerosene
6% Propane
1% Lubricants
3% Asphalt & road oil
4% Residential ful oil
2% Petroleum coke
8% Other

Overwhelmingly oil in the USA is consumed for transportation.

 

[IlyaKEightSix]

Does anybody know how the US uses all the oil it imports? I would like to see a chart with some sort of distribution. I know it is not in electricity since US uses oil to produce around 9% of the electricity it consumes. It means the oil we import is used mostly on something else, but.... what else?

I think it is mostly transportation (or the plastic industry or something I don't know) but, if that is the case, how is all the alternative energy talk going to help us?

Electric widgets on wheels!

 

[woody]

Wind and Solar are mostly replacements for coal and natural gas as electricity producers. Transportation is the biggest use of oil, as Christian points out. To remove our dependence on foreign energy we need to have vehicles that run on electricity, natural gas or hydrogen. Hydrogen is way off. It requires replacing an entire infrastructure. NatGas is easier. Many homes have NatGas lines already hooked up. Electricity is obviously everywhere, but there are the issues of how long it takes to 'fill up the tank' and how far you can go one one 'tank of gas.'

Cars like the Volt, an electric car with a gas generator, will be huge IMO. If you commute 40 miles to/from work, you won't need gas at all. It can go 300 miles on a charge + gas and is said to get 150 mpg. (It uses the gas-powered generator to create electricity for the motor.)

Assuming electric cars are what we will end up mostly using, we need to shore up the electricity infrastructure to handle the additional demand. This is where wind, solar, geo-thermal, and nuclear come in. There will also have to be a HUGE effort to upgrade the grid.

A large part of that 47% for transportation (don't remember the stat) is for fleet vehicles--trucks, busses and such that do daily rounds and return to a central location each night. These can more easily be converted to electricity or NatGas. Most of the 21% for distillate fuel oil can be replaced. The rest will likely have to stand pat. The US gets 25-30% of it's oil here (btw this will run out in the coming decades with or without drilling offshore and in Alaska, so we need to figure out how to live without it) and a large portion of our imports comes from Canada (20.8%) and Mexico (11.1%). If we can live with importing from the NAFTA countries, we should be able to eliminate the most risky oil dependencies pretty easily.


Source: United States Oil Imports by Country: March 2008 | Perot Charts

 

[bob]

Cool topic.

I once did a back-of-the-napkin calculation that showed we could produce electricity equal to the world's annual energy need with a surface area of solar panels roughly equal to the size of New Hampshire. Sounds big, but there's a lot of BLM land out West that gets good wattage pretty much year-round.

The intial cost, again very crudely estimated, would be in the neighborhood of $4 trillion. Maintenance would be very expensive, solar being what it is, and silicon would probably become the most expensive metal in the world, likely causing some problems in other industries. Also, distribution is a huge issue. Another big benefit of consumer demand for electric vehicles is that it would create incentives to develop new battery technology, which would in turn make large-scale solar generation more practical.

In the end, solar has to be the solution, unless we happen to discover workable fusion. Solar radiation is the only external energy input into the system; it's the ultimate source of wind, hydroelectric, and even fossil-fuel energy. The only exceptions are geothermal and nuclear.

As for hydrogen, IMHO it's a waste of time. Hydrogen isn't an actual energy source; it's a means of delivery. There is essentially no free hydrogen on Earth, meaning that it either would need to be produced by electricity centrally (almost certainly through electrolysis of water), which means you still need a clean way to generate electricity; or else the vehicle itself produces the hydrogen, with or without a fuel reformer. This method gives better efficiencies than an internal combustion engine, but it still produces mountains of C02, which is a big part of the point of getting away from fossil fuels in the first place.

It appears that the country has lost the appetite for such initiatives, but a CVA (Colorado Valley Authority) that did with renewable energy what the TVA did in the 30's would be a big boon. It wouldn't prevent recession, but it would create jobs, infrastructure, and most importantly knowledge that would be a big help to the country for decades.

 

[charlesdwright]

Crude Thoughts

Stop to consider just why crude oil has become such a ubiquitous energy supply. Right off the top of my head: It is historically cheap; it is easily transportable and loses none of its energy storage in the process. Coming from the ground, as it does, its ownership is a simple matter of property rights, and therefore its management and distribution is a market issue and benefits from market intelligence.

Hydrogen has always been cheap. Yet it hasn't caught on. Centralized mass power production requires enormous scale, management, and costly distribution and is therefore either a government proposition (antithetical to a market proposition) or a large consortium proposition, and subject to all the wonderful characteristics of grand-scale institutional mechanisms.

Unless something that holds the basic characteristics of crude oil -- private ownership and physically efficient energy and management properties -- is developed or discovered, the implications for social organization of other forms of energy are staggering and not necessarily desirable.

 

[woody]

Hydrogen has always been cheap? The biggest cost in hydrogen is the energy cost required to make the hydrogen. Wind is the cheapest way to make it currently. But probably the most common way is with NatGas. Increase the price of energy and the cost of hydrogen goes up.

Hydrogen hasn't 'caught on' because it will take an enormous investment to build the infrastructure to support it and car manufactures won't go full speed ahead without the infrastructure or some assurances that there will be the infrastructure so that their investments pay off. It's a chicken-egg thing. Hydrogen is probably 20-30 years away from being a reality and there is serious risk that plain old electric cars will make hydrogen cars unnecessary.

I pretty much disagree with this:

Unless something that holds the basic characteristics of crude oil -- private ownership and physically efficient energy and management properties -- is developed or discovered, the implications for social organization of other forms of energy are staggering and not necessarily desirable.

If every house had a roof made of solar material and could produce their own energy, which was also used to power their car, how is this undesirable for society? Maybe it is undesirable if you are a power producer or an oil company. The political resistance to this kind of energy utopia would be hard to overcome though. (Oil companies, car companies, gas stations, mechanics, and more depend on the oil economy and are resistant to change without serious government incentives and regulation to reduce the risk associated with the required investments.)

Although, if by "private ownership" you mean that each citizen owns their own source of energy and by "efficient energy and management properties" you mean that I can make all the energy I need for myself, then I guess I could agree.

 

[Stefan Zota]

Cool topic.

I once did a back-of-the-napkin calculation that showed we could produce electricity equal to the world's annual energy need with a surface area of solar panels roughly equal to the size of New Hampshire. Sounds big, but there's a lot of BLM land out West that gets good wattage pretty much year-round.

The intial cost, again very crudely estimated, would be in the neighborhood of $4 trillion. Maintenance would be very expensive, solar being what it is, and silicon would probably become the most expensive metal in the world, likely causing some problems in other industries. Also, distribution is a huge issue. Another big benefit of consumer demand for electric vehicles is that it would create incentives to develop new battery technology, which would in turn make large-scale solar generation more practical.

In the end, solar has to be the solution, unless we happen to discover workable fusion. Solar radiation is the only external energy input into the system; it's the ultimate source of wind, hydroelectric, and even fossil-fuel energy. The only exceptions are geothermal and nuclear.

As for hydrogen, IMHO it's a waste of time. Hydrogen isn't an actual energy source; it's a means of delivery. There is essentially no free hydrogen on Earth, meaning that it either would need to be produced by electricity centrally (almost certainly through electrolysis of water), which means you still need a clean way to generate electricity; or else the vehicle itself produces the hydrogen, with or without a fuel reformer. This method gives better efficiencies than an internal combustion engine, but it still produces mountains of C02, which is a big part of the point of getting away from fossil fuels in the first place.

It appears that the country has lost the appetite for such initiatives, but a CVA (Colorado Valley Authority) that did with renewable energy what the TVA did in the 30's would be a big boon. It wouldn't prevent recession, but it would create jobs, infrastructure, and most importantly knowledge that would be a big help to the country for decades.

If you look at simple numbers, in order to replace fossil fuels, solar or wind is very, very far. Furthermore in the process for these alternative energy sources, you get to consume conventional source energy.

I think the only direction for immediate replacement is: nuclear fission (short-term) and nuclear fusion. The latter can produce large amounts of energy, with little radioactive impact.
After that, all can be based on simple electric same as Woody showed.
There is no pragmatic approach in this direction because the interest of the industry is still around oil and natural gas. Everybody is complaining about dependency on Middle East, though there is high profit in this direction.

Some countries in Europe are more advanced when it comes to non-fossil energy. Also, they drive a lot less than in U.S., smaller cars too. It is an example to follow for regular American truck owner.

 

[charlesdwright]

Hydrogen is as close as the nearest water molecule. Prying it loose is a different matter. Your point about why it hasn't caught on is my point... "enormous..."

Solar? I've been hearing about solar for 30 years. If it could be made to power your car from your roof, etc. etc., like we've been reading about in Popular Mechanics most of my life, that would be great. That would be better than crude oil based on the desirable properties I mentioned.

But we're all still waiting. In the mean time, simple economics continues to direct us what is plentiful and effective, speculation and rhetoric to the contrary notwithstanding.

***

Anyway, my point isn't that there aren't alternatives or that they shouldn't be developed, or etc. etc. I simply wanted to call to mind some of the very useful properties of an energy source that are often taken for granted. And to suggest that any proposition that requires a radical reordering of the economic and social order, that fails to provide equally compelling efficiencies from the bottom up, isn't going to fly.

 

[IlyaKEightSix]

Simple economics? How much more for $4 per gallon? How much more borrowing from China to pay people that fund international terrorism?

Granted, the technology is not QUITE yet cost-efficient. The Chevy Volt is on the category of $40k, the Tesla Sedan at $60k (!!), and the Tesla Roadster at barely six figures (which is actually PRETTY **** CHEAP for such a sexy sports car when most of them are at least twice that with horrid MPGs)

However, with the media going crazy over terrorism, soaring gas prices, and green initiatives and commercials, the question isn't if--but when. Which of course, is nontrivial. However...the sooner we start, the better. Rome wasn't built in a day, and nor will we completely overhaul to fully green overnight. But we should at least START.

And--in my opinion--the ones that could start this could be the ones that right now are giving money to charity to solve health problems in Africa, namely Gates and Buffett. If you're going to give money away to charity, why not re-invest it in green energy which is not quite yet economic, provide it at a loss for now, and then PROFIT off of it in the future and then have MORE to re-invest in this "charitable" cause?

 

[woody]

I know I may be unpopular for believing that the government should play a role in this, but government regulation/policy/incentives are required for the transition away from oil (as they were for building roads for cars). The primary thing government should be doing for the economy and business is creating a stable environment that encourages long term investments in these areas. The wind example is obvious: with incentives, wind investments spike; as soon as those incentives expire, investment plummets. Businesses need to know what the next 10-20 years will look like so they can invest. It's the same for oil companies. Ask just any energy company or expert about what we need for alternative energies and they will say that a stable government policy and regulations are what investors want.

As Charles says, 'simple economics' is keeping us with oil as the cheap and available source of energy. Look at how much $150 oil affected our economy, our daily choices and what cars are being sold. Those prices are pretty devastating to our economy as is the volatility of those prices. The more we depend on oil the harder it will be to thrive. (Btw, NatGas and coal are in super-abundance here in the US, which is why I'm singling out oil.)

Solar is already being used by people who can afford the 10-75k it takes to install it. There now exists solar sheets that blend in with the architecture. The technology lacks a firm commitment from government, so we are 'still waiting.' Wind is more important than solar now though, since it's easily implemented at costs that are close to other power generation sources. Remember, there is no silver bullet. We need all different types of power sources dictated mostly by proximity.

Oh, and the electric car existed back in the 90's too, with good batteries that were improving. GM killed the project because they didn't believe they could make a profit on it and instead starting selling the Hummer 2 the same year. And, to boot, an oil company bought the best battery technology at the time and we haven't seen it since.

 

[charlesdwright]

If you think you're going to be unpopular....

The Doomsday Myth: 10,000 Years of Economic Crises

 

[IlyaKEightSix]

Judging from that summary, I am in full agreement with the proposed statements of that book.

That said, the fact that we set a floor of welfare and food-stamps means that we can't have truly *free* markets because I believe it always has to be a zero-sum game. If you have the potential to get as rich as Buffett, you should also have the potential to be kicked out of house and home, live in a homeless shelter, and survive off of meager foodstamps and not be a parasite to welfare.

Edit:

MORE BULLISHNESS!

http://news.yahoo.com/s/nm/20081006/sc_nm/us_solar_flexible;_ylt=Au5.85lbvYAqDynurpt2Ej5xieAA

 

[woody]

Time to buy American? Warren Buffett is.

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&scp=1&sq=buffet&st=cse&oref=slogin