Autonomous Vehicle Consultant

While attending the Clean Energy Reception at MIT on June 14, 2011, I heard talks given by the President of MIT, Dr. Susan Hockfield, the Governor of Massachusetts, Deval Patrick, and the former Governor of Michigan, Jennifer Granholm. MIT is making great strides in terms of their program, the MIT energy initiative (MITEI), founded by President Hockfield two  years ago. Governor Patrick summarized accomplishments in the renewable energy sector regarding standards, efficiency, loan programs and tax credits. Governor Granholm made the case for enacting policies to encourage the development of clean energy technologies, such as a national renewable portfolio standard. At present, only 29 states have such standards (e.g., 20 percent electricity generation from renewable sources by 2020).

An overarching question was, “Who is winning the clean energy race as of 2010?” The United States has slipped to third  place behind China and Germany in terms of monetary investment and installed renewable energy capacity for wind, solar, biofuels, efficiency, and other renewables.

During the public question and answer session following the speeches, I suggested that there is a time period for the development and massive commercialization of new engine technologies and fuels for 137-million passenger cars in the United States. That period is 11 years from now because by the United States will be totally dependent on imported crude oil then. Seventy percent of U.S. crude oil is consumed by transportation, while the rest is used in manufacturing many products, such as plastics. (Please see post of June 14th).

Conclusion: No one at this reception seemed to be aware of an 11 year window, or any window for that matter.

In President Obama’s Blueprint for a Secure Energy Future (March 2011), he recommended expanded drilling and development of one million electrically powered vehicles to maintain reasonable gasoline prices. That will not achieve stable gasoline prices because United States oil reserves are declining, new reserves are uncertain and one million electric vehicles is a small percentage of the total vehicle fleet (i.e., 137 million passenger vehicles).

Gasoline prices are likely to increase because the United States is now importing nearly 60 percent of its crude oil needs. In 11 years that figure will rise to 100 percent without a combination of large-scale conversion to a new engine technology, massive oil discoveries, wide spread use of public transportation or a significant decline in oil consumption due to an economic depression.  This situation was totally ignored by President Obama and if not recognized and corrected by realistic, publicly supported planning, it will lead to:

• U.S. economy and trade balance will become far worse than it is now

• OPEC will exert even more influence over U.S. policy

• U.S. transportation and manufacturing will be at risk

There is before the Congress a continuing resolution related to a program that should have been reauthorized more than  two years ago. That program is the Small Business Innovation Research (SBIR) program that was founded in 1982. Since then it has enabled nearly 18,000 small businesses to develop state-of-the art products and compete for Government research and development funds.

The SBIR program helps to sustain job creation with SBIR companies employing approximately 1.5 million employees with nearly a quarter holding advanced  degrees in engineering  and science.  These companies have contributed greatly to the U.S. defense, transportation, environment, energy, information technology, healthcare, robotics, materials and electromagnetic systems. A total of $2 billion is awarded each year by eleven Government agencies participating in the SBIR program.

The SBIR program was intended to benefit small business where the term “small” (i.e., less than 500 employees) did not imply companies owned by venture capitalists (VC). During the past two years, the VC industry has been lobbying Congress to redefine the “small” to the point where their political influence has stalled the SBIR reauthorization process. Unless Congress acts by September 30, 2011 the SBIR program will expire or be held on “life support” by yet another continuing resolution (i.e., that would be the twelfth one, a record setting number since 1982).

Cape Wind Project: Started in 2001, the Cape Wind project is an offshore wind farm that will consists of 131 turbines situated within a 24 square mile area on the south coast of Cape Cod. The peak nameplate generating capacity is 454 megawatts (MW) and will deliver 170 MW on average due to the intermittent nature of wind. The developer, Cape Wind Associates, claims that 170 MW is nearly 75 percent of the 230 MW used by Cape Cod, and the islands of Martha’s Vineyard and Nantucket. Project cost is expected to be $2.5B.

The Cape Wind project has several issues. These include long development time, high capital cost, high cost of electricity, need for subsidies, and small percentage contribution to overall electricity generation in Massachusetts. Please see the posting of April 18 for reference to postings regarding these issues.

Business Development Issues:

During January 2009, Governor Deval Patrick set a goal of developing 2,000 megawatts (MW) of wind power capacity. My previous post of April 7th determined that onshore wind would only provide approximately 1000MW at most. The remaining 1000MW would have to be provided by offshore wind installations.  As of this writing the only potential source of offshore wind electricity is from Cape Wind, which may generate 454MW at most, if it is ever funded. This particular project has encountered long delays, high capital costs, expensive cost of electricity and requires large government subsidies to support an otherwise uneconomic venture.  In the future, the cost of wind energy may seem less expensive compared to, say, coal when the heretofore-unpaid costs of coal are factored into its price. These costs include climate change, air pollution, water shortage, wastewater, soil pollution and land degradation.

Cape Wind Project: Started in 2001, the Cape Wind project is an offshore wind farm that will consists of 131 turbines situated within a 24 square mile area on the south coast of Cape Cod. The peak nameplate generating capacity is 454 megawatts (MW) and will deliver 170 MW on average due to the intermittent nature of wind. The developer, Cape Wind Associates, claims that 170 MW is nearly 75 percent of the 230 MW used by Cape Cod, and the islands of Martha’s Vineyard and Nantucket. Project cost is expected to be $2.5B. This post discusses subsidies and contribution by wind energy to Massachusetts’s electricity generation. Please see the posting of April 18 for reference to postings regarding other issues.

Issue 1.

Subsidies: “The Cape Wind project owners would be eligible to receive a federal tax credit, currently $0.021 per kWh for electricity produced during the first 10 years of the project life. Using the production expected by Cape Wind (1,150,000,000 kWh per year), a $0.021 per kWh credit (adjustable for inflation), would permit the owners to avoid federal corporate income taxes of $24,150,000 per year or $241,500,000 over 10 years.”

“ Wind farm owners are also permitted by the IRS to use the lucrative 5-year double declining balance accelerated depreciation” (5-yr; 200%DB) to recover the capital costs from their otherwise taxable income. Depreciation deductions would permit the owners to avoid $490 million in federal corporate income taxes – in addition to the Production Tax Credit – again shifting the tax burden to ordinary taxpayers.”

Issue 2.

Insignificant Cape Wind Contribution to Electricity Generation in Massachusetts: According to the Independent Systems Operator (ISO) of New England, Massachusetts generated 13,765 MW of electricity during the peak summer period of 2009. Thus, the maximum fraction of electricity generated by the Cape Wind project compared to the summer of 2009 is 450/13,765 or 3.3 percent.