Category Archives: energy

Caroline Flint’s gift to hedge funds

A highlight of the Party Conference season was Labour leader Ed Miliband’s promise to freeze energy prices for 20 months.  Now in a radio interview his shadow minister for energy Caroline Flint has told us more.  There will be a freeze, regardless of what wholesale prices do and that’s OK because the energy companies contract for their supplies 2 years ahead anyway.

Oh, erm, right.  Yes, there is a market for energy futures, and energy companies use it (though just contracting everything with a fixed time window would not merely defeat the purpose, it would leave no flexibility to respond to demand issues such as a cold spell).  So too do pure speculators who contribute nothing of value but who, free of constraints like the need to supply energy to real customers, have the flexibility to exploit whatever market trends might constrain and force the hands of real users.

Who is going to take advantage?  It’s the nimble and flexible.  Private individuals may get in on the act, but the big players who will really call the shots are the hedge funds.  Mr Miliband and Ms Flint have announced a huge gift to hedge funds!

There’s nothing hypothetical about that.  The banking crash of 2008/9 threw up similar opportunities for the nimble, and even as a complete rookie investor I was able to take advantage and trade bank shares at a profit.  Commodities are not so accessible to the little man, but professional investors are doubtless looking forward to it.

Nor is it just hedge funds.  There’s another class of passive speculator called ETFs (Exchange Traded Funds) that are, I believe, quite a lot bigger.  They are the very opposite to nimble: they must just follow the markets.  Whatever hedge funds do will automatically be magnified by ETFs.  They’ll make money on momentum and lose it when nimble hedge funds switch their positions, but their overall effect is to amplify the market movements that take advantage of our utilities’ positions being forced.

Meanwhile the losers will be the companies themselves, their less-nimble shareholders (from less-sophisticated individuals to sophisticated-but-constrained pension funds), and of course future energy supplies (though, to be fair, that last applies to politicians on all sides).  Above all, our suppliers are coerced into buying energy at artificially-inflated wholesale prices, so who will eventually pay for that?

I wonder what our utility companies are even now doing to prepare for the possibility of their market being rigged against them?  They’re always up against the hedgies up to a point, and now in addition they have one hand (two hands if Labour look like winning the next election) tied behind their back.  Nor can they afford to compete on pay for top hedgies to trade futures markets, though that at least is not necessarily a drawback.  Whatever they do, they’re now going to have to pay, in effect, an insurance premium against adverse market conditions out of their control.  And pass that cost on to consumers.

Powering the future

I have a few quid invested in the well-known forms of renewable energy.  The more successful investments are in managed funds which benefit from venture capital tax breaks.

But I’ve hitherto been missing what is surely the UK’s best renewable energy resource: the sea that surrounds us.  In particular the tidal flows that raise and lower vast amounts of water around our coast, completely reliably, every day.

Back in the 1990s when I worked with satellite images, one striking set showed the shallow waters of the North Sea off the Essex and Suffolk coast, where the phase of the tide can be seen from space due to the surface wave patterns caused by the rapid tidal flow in and out.  Mile after mile of shallow water and powerful, reliable flows: westward as the tide rises, eastward as it falls.  Why are we not installing underwater turbines to harness all that energy?  In places there are wind turbines harnessing an altogether more fickle source, so there is presumably even the infrastructure to erect turbines and harvest energy!

Well, I haven’t found anyone building tidal stream technology in the North Sea, but there is a credible alternative suitable for certain coastal locations and capable of generating substantial amounts.  And there is a project to build a tidal lagoon in Swansea Bay.  It looks like a win-win: they’ve gone to a lot of trouble to design a facility that serves not only to generate substantial power, but also to make an environmental and recreational virtue of it.  It appears to have a good level of local support, judging by what I can find in sources such as comments at the local paper’s website.

And the project is open for  investment.  And it’s offering EIS tax breaks, which are even better than the venture capital breaks I enjoy on other investments[1].  And due diligence gives me confidence in the management, not least the man in charge who has a very impressive track record and a lot of his own money at stake.

That’s a lot of very positive boxes ticked.  Today I finally got around to filling in the application form and writing my cheque.  I’m investing in our best future energy source.

[1] 30% tax break up-front, with a lock-in of just 3 years, compared to 5 for Venture Capital.  And further downside protection in that if the investment fails I can offset any losses against tax all over again.

Falling energy bills

The news is full of outrage about rising domestic energy bills.  So by way of contrast, I thought I should mention this morning’s letter from my electricity supplier, EDF.  From next month they’re making a 32% reduction in my monthly direct debit payments.  From above to below what they were last time I blogged on a related subject.

My usage hasn’t changed significantly in all that time.

🙂

FWIW, UK energy charges have been kept artificially low for many years, as policy (and regulators) put cheap supply now ahead of essential investment in future supply, energy security, and cleanup – all areas where we significantly lag much of Europe.  All part of The Liar’s feelgood bubble.  In general terms, I expect prices should be rising.

Energy inefficiency

I got an unsolicited package through the post: four “low-energy” light bulbs.  They’re from British Gas (a domestic energy supplier), and no doubt part of an effort to play “green”.  I guess they can join the spare bulbs I already have sitting in a drawer.

As feelgreen efforts go, it seems mostly harmless: a low-cost effort that could have a very marginal positive outcome.  But as ever, there’s a downside: these are old-fashioned, ugly bulbs, and could reinforce prejudices about “energy-saving” bulbs being horrible in people like my mother.

More problematic is the government’s latest: free or subsidised improvements to the insulation of some peoples homes.  Again, on a narrow view there should be a positive outcome, but this time it’s not cheap&easy: the energy companies could more usefully direct their resources to clean energy.  Rising energy costs are the right stimulus to home insulation.  And, unlike the light bulbs, free home insulation is limited to homeowners, and so completely excludes the poor.

Having said that, there is at least an argument that the government is doing the right thing.  Namely, political expedience.  The fact that energy companies will be paying helps defuse the pressure for a so-called windfall tax: something that would damage their ability to invest in the future, not so much in direct costs, but in scaring investors away.  It could even do collateral damage in other industries.

Alas, none of this does anything for clean energy.  The Alice-in-Wonderland windfall handed to energy generators[1] in free CO2 allowances is genuine and very wrong.  If we accept the carbon market, it should be operated by auction to the highest bidders.  If relief to polluters is considered necessary, give them some measure of corporation tax relief tied to the energy they produce, so clean energy gets the benefits.

[1] who are not the same as domestic providers – something the commentators seem to overlook.

Solar Energy: Handouts for the Rich

Today’s junkmail: someone providing solar energy for the home.  Oh, and the private swimming pool.  With big subsidies: up to 100% on selected promotional properties, and government subsidies on others.  Great!  Clean energy on the very-cheap.

Unless of course you’re stuck with renting your home, and any such investment would be in the hands of your landlord.  Yep, like so many benefits, this one excludes the poorest 30% (or whatever) of the population, who just get the privilege of subsidising richer folks.  OTOH, rather pay for their solar power than their excessive consumption of dirty energy.  Except – we get to do that too, through a range of payments, as well as tax-breaks like low-rate VAT.

How’s this for a radical suggestion.  Increase solar-energy microgeneration while at the same time benefitting poorer folks by legislating for its installation in rented property.  Add ever-tougher energy standards as mandatory requirements when letting a property.  To include basic solar panels for any property with a south-facing area of roof.  In the case of flats, these should feed communal (but metered) hot water supplies.  Nah, dream on …

Power consumption trends.

I just looked at my latest electricity bill.  EDF (the supplier) appears to have introduced a usage measure, showing my comparative consumption now vs the last quarter and a year ago:

My electricity consumption

That’s a small reduction, which is entirely explained by the fact that I was away from home for 3 of the 14 weeks covered, as against 1 of (probably) 13 last year. No surprise there: I haven’t changed my lifestyle, and much of my usage is dictated by the fact that I work full-time from home (which means 100+ hours/week of computer time, and corresponding kitchen usage). In other words, no real change.

I don’t know what their units are, but good on EDF for including this information. If it helps some users to “slim”, then it can’t be a bad thing! At least, until it induces complacency. Have other suppliers introduced anything like that?

Paradigm shift: Eliminating waste heat

In a comment on my recent blog entry, Mads points to water-cooled systems from Sun.  In another comment, John mentions a project he’s involved in that may or may not get the goahead to harness heat from a data centre.

Following Mads’s link, I see Sun claims its watercooled systems to 40% more efficient than some alternative – presumably one that would be equivalent in functional terms.  Whilst 40% may be better than nothing, it’s still a helluva lot of waste.  You could say you waste 50% more than you save.  What is missing from Sun’s pages is any suggestion of harnessing that energy and putting it to good use.

What Sun should produce, and what could make the decision much easier for John’s project, is systems in which capturing and re-using waste heat is integral.  A plumber should be able to able to plug them in to a normal heating system, just as they would another heat source like a boiler or immersion heater.  That is a paradigm shift in computer design, and it is indeed manufacturers such as Sun who are best-placed to take the lead in it.

On a smaller scale, manufacturers of desktop and home computers could perhaps do something similar.  A computer with builtin water cooling, that could be plugged in to the cold water supply feeding a domestic water tank.  So the computer’s waste heat goes into the household or office heating/hot water, and less energy is required from conventional sources.  The cooling system is plumbed in, but the computer’s innards need to be accessible so components can be changed whenever necessary.

In the case of desktop-replacements, that’ll work best where the water tank is within bluetooth range of the desk for connecting peripherals.  But if the idea takes off, we’ll soon see it incorporating longer-range options, such as a terminal that just plugs straight in to a wireless router (whose heat should really also be captured), or wired mini-boosters.  The principle is simple: concentrate energy use in the plumbed-in components, and minimise it elsewhere.

Waste heat

Just mentioned this on IRC … and it occurs to me that it’s something the chattering classes don’t seem to have noticed. Perhaps if I blog about it, someone might.

Heat exchange is a lot more efficient than generating heat. So we should be using heat exchangers to harness far more of the heat that we generate. Some slight efforts have been made in this direction with combined heat and power, and with harnessing industrial heat for heating living or working space.

On the other hand, all the heat from my computer goes to waste. That on its own is fairly negligible, but in a big data centre that’s a lot of heat. Surely it’s time for server, rack, and other infrastructure-manufacturers to incorporate water-cooling pipes, so that their waste heat can be pumped into an exchange? The industry should adopt a standard size and placement for cooling pipes, so that components can slot together and just work.

With Nature’s heat, it’s the same story. Geothermal heat is popular in some of the most obvious places, like volcanic Iceland where it’s abundant and cheap. But heat exchange works even where there isn’t that extra natural heat: for example, in the UK, it can drastically reduce the energy required to heat a building. Not something you can easily retrofit, but it’s a shame to see it being ignored in new buildings.

One thing I would like to retrofit, if I had a garden, is a heat-exchange with a compost heap. That should be relatively easy, and compost generates lots of heat. Should work well for heating water, or feeding into a heating system.

Sounds like a great class of technology project for sixth-formers or college students with practical abilities. Any students or teachers listening? What are you doing?

UK constitutional brokenness rears its ugly head

That the UK constitution is horribly broken is no news. The Liar spent his first few years in office playing with it like a twelve-year-old with his toys. His own party (among others) told him it was broken, and Tam Dalyell famously posed the Westlothian Question.

Now it appears to be leading towards a crisis. First, the Brown government makes some serious-sounding announcements about long-overdue improvements to a horribly-broken energy policy. The EU backs it up by imposing legally-binding targets on us.

Then the Scottish parliament refuses both nuclear and wind power developments. While as a matter of geography, Scotland is much better-suited than other UK countries for clean energy generation.

So, what does that mean? The EU’s target for the entire UK falls by default entirely on England? Or England-and-Wales, if the Welsh assembly graciously accepts inclusion.

In a sense, that’s no bad thing: it imposes much tougher targets on England than the EU negotiators intended when they gave the UK such unambitious targets. But as a matter of principle, it’s clearly wrong, and it will certainly fuel justified resentment.

Perhaps that’s the Scottish Parliament’s game plan. Where they’ve been given power without responsibility, they’re going to exercise it to raise resentment, and with it support for proper independence. Once they have independence, it all becomes clear again. In this instance, if the EU had set England and Scotland each its own target instead of a collective UK one, we wouldn’t have this problem.

Blooming in the desert.

Sunday Evening. Time to be the barroom bore.

Leading scientists have proposed that we should put giant tubes in the ocean. The idea is that nutrients will rise up the tubes from the ocean depth, giving rise to algal blooms at the surface. The nutrients are moved by wave power, and the algal blooms will grow on solar energy, absorbing substantial amounts of CO2. If the plan goes ahead and is successful, it will no doubt only be a matter of time before someone proposes a method to harvest the algal bloom for biomass energy.

This plan, like any other, has a downside: algal blooms are hugely damaging to existing marine ecosystems. It could also precipitate large-scale climate events of its own if, for example, ocean currents are affected. But it appears nevertheless likely to be of net benefit on balance, just as, for example, wind, hydro, and nuclear energy are. Since there’s vastly more ocean than land (let alone land under a benign climate), it looks much better than current biomass schemes which involve similar damage to large areas of land. Another factor in its favour is that the existing ecosystem it displaces is not as dense or as productive as areas of rainforest being cleared for biomass.

So here’s another proposal. Let’s requisition some of the Earth’s poorest ecosystems for production of algal bloom and biomass. Specifically, the deserts. Where there’s very high sunlight for energy, and ample minerals to nourish the bloom. All it needs is water.

This is not about irrigating the desert. That’s a tradition that goes right back to the cradle of civilisation, for example along the Nile. Neither is it relevant that many such schemes have proved unsustainable, leaving ghost towns (or cities) where an irrigated area has deteriorated over time. In any case, freshwater sources that could be harnessed for irrigation are already under huge stress.

The only water source sufficient to pour onto the desert on any scale is the sea itself. That’s going to require a lot of energy to move vast quantities of water, maybe with something like an array of giant archimedean screws. My suggestion is that *potentially* we get back a lot more than we put in. That’s on the premise that it enables growth of rich biomass, maybe indeed huge algal blooms (though not of course existing land-based vegetation) if we create saltwater lakes. Thus the Earth’s most barren and unproductive lands become a carbon sink powered by the immensely fierce desert sun, and a biomass source.

This is of course thoroughly experimental, and I’m neither a biologist nor a civil engineer. Assuming the engineers can solve the logistics, the most obvious risk is that the areas used experience such huge buildups of salt that they become like the dead sea (or even like conventional irrigation that turns bad). To avoid that implies ongoing management of the chemical balance of the desert schemes.

Or a biological alternative. Can genetic engineering help evolution on a little by combining fast-growing algae with extremophiles that thrive in a challenging environment?

Here in Europe, we’re a major energy consuming area. We have the research capabilities and the money. And just to the south, we have the world’s biggest desert! The EU, or indeed individual countries within it, should get together with an appropriate North African country and embark on a major research programme. That needs to be managed in a politically sensitive manner, so that it’s clear that the African country (or countries) will (also) see substantial benefits if the experiment is successful.