The Answer, My Friend, Is Certainly Not Blowing in the Wind—or the Corn

9/4/08

This is the last of my articles taking cleantech investing to task sector by sector (keep the hate mail coming, hippies!). The next few will focus on some areas I really like, including storage, solar thermal, water, and others. But first, a bit more constructive bludgeoning.

This is a bit of a “two for one special” looking at biofuels and wind—two forms of clean energy poised to wreck the environment they are purported to save. These dual titans of uselessness are powered by hype and corporate sugar daddies using influence on Capitol Hill in ways that would make even oil company executives blush. The VC community has avoided wind pretty well (with PE and traditional investment firms more than picking up the slack) but man, they have got quite the teenage crush on biofuels.

I’ll note from the top that some of these arguments are the very same ones I have with solar, and they apply to some extent to all new energy technologies. They’re about the cost of potential entry, if you will.

First wind, which has been getting a lot of attention lately, partly due to those late-night TV commercials from Texas oil baron T. Boone Pickens (who seems to have taken the place of Ron Popeil and the rotisserie-oven ads I so love). Pickens has a huge investment in wind and a plan to replace natural-gas-produced electricity that’s so ambitious that even the Sierra Club’s number crunchers find it unrealistic.

Wind power is rather straightforward: build a big propeller and put it up on an even bigger pole. The spinning of the blades generates 1 to 2 megawatts of power per turbine; wind farms generally consist of hundreds of turbines. But behind this simplicity is a highly engineered and heavily maintained system. Much like power from solar photovoltaic cells, wind power has serious downsides—such as being ugly, land-intensive, hugely dependent on subsidies, and unreliable.

How unreliable? Current industry estimates claim wind “can” work 30-40 percent of the time over the course of a year. But actual output is all that matters, and real-world experience shows that annual outputs of 15 to 30 percent of capacity are more typical. The wind just doesn’t blow as often at the right speed as a grid power system needs. The Searsburg wind farm in Vermont, for instance, produces no electricity at all 40 percent of the time.

Wind farms also require huge amounts of land, which is then rendered fairly useless for other purposes. Some wind farm proponents counter this by noting that monstrous wind turbines are actually a tourist attraction. Yes, and what family vacation isn’t built around a three-day drive out to rural Texas to watch giant blades create noise, vibrations, and seizure-inducing strobe effects, while slicing up bats and birds in a manner that would warm the hearts of the Khmer Rouge? Screw Disneyland, kids, we’re going to Uncle Boone’s Wonderiffic Wind Farm for vacation!

And more often than not, wind farms are built in pristine wilderness, on ecologically fragile ridgelines—places that, without the wind farm, might actually be attractive hiking or nature-observation areas. Getting the leviathan-like wind turbines out to these remote and beautiful locations requires huge trucks running over new roads ripped through the forest or prairie.

And at the beginning of this whole circle of destruction, don’t forget that wind turbines need to be manufactured. Football-field-length propellers don’t grow on trees. As with solar, it takes lots of energy to power those factories, which also use huge amounts of mined metals, petroleum-based plastics and lubricants, and tons and tons of concrete. And you ‘d be hard pressed to find dirtier industries than steel, plastics, and cement production and mining.

I know what you’re saying: “Well, every new energy source is going to need manufacturing and industrial development.” I agree, but the point is that we shouldn’t forget to factor that into the overall environmental impact. The oil, gas, and coal industries are already built out. It’s just like looking at the overall sustainability of buying a new Prius, when keeping your five-year-old Celica well tuned and on the road is actually better for the planet.

When you look at the portion of our energy requirements covered by wind power—less than 1 percent—it ends up being the most heavily subsidized of all energy sources. Ed Feo of Milbank Tweed recently noted that two-thirds of the economic value of wind projects come from tax breaks and subsidies from the federal government. And he was being generous, not adding that a wind farm operation can get another 10 percent in breaks from the coffers of state governments. That ‘s quite a racket.

It may not surprise you to learn the wind industry as we know it was structured by a little company called Enron (Enron Wind is now GE Wind, by the way). And investors know it’s just a giant subsidies racket. Navigant Consulting, which advises on renewable energy technology, estimated that investments in wind and solar power in 2009 would amount to $26.6 billion with government handouts, but would fall to $7 billion without them. Ultimately the cost of these tax breaks and subsidies shifts costs from wind farm owners to ordinary taxpayers and electric customers.

And the biofuels industry. Urgghh! It’s little more than a scam perpetrated by … Next Page »

Mark just helped found a Somerville-based stealth cleantech start-up which recently spun out of Harvard. He is a veteran technology entrepreneur and the former managing director and co-founder of Bang Ventures, an investment firm based in New York with offices which focused on early stage technology investments. Follow @

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  • jason
  • greensolutions

    I agree that centralized wind power is a boondoggle but distributed wind is another story. Maintaining a 5kW wind turbine is relatively easy, while maintaining a 1MW turbine is a big job. Small wind turbines, generating power where the power is used, don’t need special roads built for them or massive cranes to lift them or dedicated substations to deliver their electricity. Small wind turbines don’t have the long-distance delivery losses (due to grid resistance) that large wind farms do. Small wind is also more socially equitable with more of the manufacturing, installation and generation revenues benefiting a larger number of smaller companies and individuals–the complete opposite of centralized wind. Having said all that, people should be realistic about what a wind turbine will deliver–ideally by installing an anemometer at or near the proposed turbine site (and height) and observing wind speeds for a full year. That information can lead to a very accurate assessment of the potential for that site.

    About the biofuels, you’re damn right. It’s a bunch of bullsh*t from thermodynamic, economic, social and ecological perspectives.

    One biomass energy technique that I think has promise is decentralized gasification. I think a small farm can divert a portion of its resources (you’re right–it’s not WASTE and it NEVER WAS) to a small gasifier that creates biochar (an incredible, very stable soil amendment) and producer gas, which can be used in place of propane or natural gas, though it doesn’t have nearly the energy density. This only makes sense when done locally (as in all the inputs come from the farm and all the outputs go to the farm) and it makes even more sense if the gasifier is cogenerating (for hot water and/or space heat at the farm house). One major obstacle to this is the inherent threat to agribusiness and energy companies, who would stand to lose revenue from fertilizers, biocides and natural gas.

    I am curious, in your time as a cabinet aide, (or your farming family background) did you ever hear the word “permaculture?” A major part of the solution to our energy problems lies there.

  • alan

    Mark,
    This is the second article by you I have read. You make rather good sense and I enjoy your read but I hold very little hope for our species when a substantial number of adults think the sun goes around the earth. Is it asking too much for most adults to understand a little about thermodynamics, quantum mechanics and chemistry? Yes sir. I have hope for their kids but I won’t be around to see their success.

    Cheers.

  • Michael McCann

    I think the tremendous PR that wind energy is receiving (and buying) these days has completely ignored the variety of impacts of the huge industrial wind farms that are sprouting up in the U.S, and indeed world wide. In that regard, and despite the unpopularity of my research findings amongst the wind energy industry and cash-hungry rural governments, I believe I am perhaps the only independently objective professional who is actually studying the impact on home values of being surrounded by these modern day power plants… as differentiated from merely being able to see the 400 foot towers from one’s front porch against the distant horizon, 5 miles or more away.

    The empirical and factual evidence I have researched to date reveals that a significant impact occurs, as homes sit on the market for 800 or more days, once would-be buyers view the “neighborhood”, or will sell at a steep (20-30%) discount after the market has almost entirely rejected such an overlaid “industrial” home setting. Clearly, the turbines are having a significant negative financial impact on homeowners, and only the tip of this iceberg has thus far emerged.

    The wind energy developers are somehow able to place their projects on thousands of acres in rural residential and agricultural settings, without any consideration of the pre-existing residents with homes on 1 to 5-acre lots, or any official requirement that the home owners at least be offered a buy-out or property value guarantee. Having worked on numerous large scale development projects, I can think of no other example that mirrors the wind industry lack of consideration toward the existing residents. I feel quite comfortable in asserting the truism that if any developer tried to build a shopping center, etc., “around” any residential lot and home, without buying them out or convincing the sponsoring governmental agency to employ eminent domain powers for the “public good”, the chance of obtaining zoning approval would be slim to none.

    The majority of the public has only been exposed to the positive aspects of wind farm produced energy. However, when the financial and social gain to the public or even just the profit margin for the energy companies is achieved at the expense of a (increasingly large) handful of non-participating property owners, and the destruction of their property values results, then that is tantamount to a large scale shelving of the long established legal requirement that just compensation must be paid to a property owner when they lose the use, enjoyment and value of their property for the public purpose or use in question.

    No one wants to live among the towering giants sent to save us from dependence on Arab oil. Case in point: Even T. Boone Pickens was quoted as saying he will not build any part of his $10-billion Texas wind farm on his 6,000 acre ranch….”because they are ugly”.

    Mr. Obama and other influential proponents of wind energy would be fully justified in making sure the rural residents of this nation are protected from a property value “meltdown”, rather than simply rolling out the red carpet for poorly planned growth and energy production. Otherwise, it will be too late for 30, 40 or 100 times as many people as have been ignored thus far, and the parallel lessons of the mortgage crisis will have been too quickly forgotten.

    There are other experts familiar with noise and health impacts, which would “round out” the issue with counter points to the wind energy PR statements. I provide this snapshot of wind farsm through the lens of my expertise, and it is not the pretty picture the wind energy PR has talked about.

    Sincerely,

    Michael S. McCann
    McCann Appraisal, LLC
    Chicago

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  • http://web.mit.edu/tlo Chris Noble

    Mark Modzelewski makes some provocative points but reality is more nuanced than that. These are fast-changing technologies, and the companies working on each of them are in a steep and useful learning curve. There is no single silver bullet that will replace fossil fuels, and most of the alternatives in development have an important role to play. Mark criticizes some of the startup aspects of wind power, as if they will be permanent features. To take just one example: oceans cover 70% of the Earth, and many deep-water areas are far from shipping lanes, bird migration routes and view of land — and are very windy. Deep-water anchoring and transmission lines are not there yet but they will be. Clean technology is a movie that has just started, and today’s technologies should be examined in that context. I applaud the companies that are working to solve the inevitable start-up problems (and misssteps) in every sector of this planetary challenge.

    Chris Noble
    MIT Technology Licensing Office

  • Eric Wesoff

    Mark,
    Step away from your computer before you hurt yourself, try to make a contact with someone who actually works in the energy industry, take a tour of a wind farm, do a little research on the wind industry, and then try to write a cogent column from an informed viewpoint. Wind works in certain instances and geographies, all energy sources are subsidized to a certain extent, and wind will provide a small piece of the global energy mix. You have the potential to do for the renewable energy industry what you did for the nano-industry.
    Eric

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  • Sam Nejame

    Mark;

    You’re smart, funny and a good writer, but you clearly know just enough about these subjects to be dangerous. Sorry I don’t have time to correct all your conclusions, but here are a few thoughts…

    Wind is the only alternative energy technology that can go toe to toe on price with new coal. A vast majority of wind projects in the states have a positive ROI without subsidies, which make up about 30% of operating revenue. Subsidies just make them more attractive to (greedy?) investors.

    As for turbines being ugly… have you spent much time in Texas? Most of our wind resource is in the midwest from TX to MN and that’s where these things are getting built. Forgive me, but I can’t think of another good use for this land… which can still be farmed under the props. Perhaps you’re part of the yachting crowd that doesn’t want to see a wind farm in Nantucket sound, but hey even I’ll admit they don’t belong everywhere. And come on, no one who works in the Wind Industry claims they operate at 30-40% capacity, the goal is 20% in Germany capacity averages 8%.

    In terms of biofuels… No one who knows anything about this thinks ethanol is the right molecule and no one, absolutely no one thinks corn, soy or other food grains are the right feed stock. Even the etoh facilities cranking it out to meet the RFS mandates know its shit, but hey, they’re making money. Yes, the corn lobby needs a spanking, but this is colossal, will take decades to get right and the country has to start somewhere. Out of time.

    Best,

    Sam Nejame
    Promotum

  • Drew Thornley

    An article in today’s Wall Street Journal makes the same mistake that most articles make re: wind capacity. In a piece on Siemens’ plans to expand international operations (subscription required), the Journal writes,

    “This year, Siemens expects installed capacity of 2 to 2.1 gigawatts. A gigawatt is equivalent to one billion watts, enough to power about 300,000 U.S. households.”

    Yes, a gigawatt is equivalent to one billion watts; but, no, a gigawatt of wind capacity alone is not enough to power 300,000 homes. Saying a certain wind capacity is “enough to power X households” is misleading, as it indicates that wind power is all you need to ensure the light comes on when you flip the switch. If you are not concerned with whether the power will work at all times, then, sure, your home can be powered solely by wind energy.

  • Rich Mac

    Mark,

    It’s painful to watch politicians talk about energy independence and investing in alternative fuels, etc. You just made a great case as to how the whole wind power and biofuel industries are built on a flawed set of assumptions, government subsidies and economics. Not to mention that if you compare the various energy sources from creation through operation and distribution, the real footprint of these alternative energy generators after all this investment isn’t impressive…at all.

    What kills me is that one of the best potential sources of alternative energy isn’t either of these two boondoggles. Its biogas…not to be confused with biofuels. And why haven’t we heard more about biogas??? Because biogas is made from waste…from landfills, wastewater treatment plants, dairy farms, and food industry/agricultural waste. As anyone can imagine…waste isn’t sexy. Cow poo, raw sewage and landfill refuse don’t make for nice posters, brochures or photo opps for the green crowd, the political crowd or even the media. And of course, waste, sewage and garbage don’t have groups promoting their use as a superior energy source and they don’t have lobbyists trying to create tax breaks, grants and subsidies for converting them into productive energy sources. I don’t recall the united waste creators for alternative energy coalition being formed.

    The funny thing is, someone said that the current alternative energy focus is all bullsh*t, well it is, but the real potential is actually in “sh*t” itself! In landfills around the country, methane gas is being released by a natural anaerobic process that pumps a potent greenhouse gas into the atmosphere that is 20 times more harmful than CO2. And we have all sorts of waste that has the potential to throw off methane, a gas that can be cleaned up and used to produce energy in co-generation, or it can be cleaned up to pipeline quality.

    Why do I know this? Because Biogas is a growing multibillion dollar industry in Europe with real results. Germany by 2010 will generate 17% of its power from biogas…and the source for this gas is sewage, refuse, organic waste, etc. The US isn’t even in the game yet on this power source and unlike just about every other alternative fuel, Biogas actually has a negative carbon footprint!

    Maybe when reality sets in on the current approaches, someone will wake up and see the huge opportunity to turn our waste into energy with the dual benefit of capturing methane before it gets released into the atmosphere and converting it productively and economically into a viable and sellable energy source. No single alternative energy source is the answer, but when we have one this easy and this smart, we should be investing in it and we are not.

  • gmcq

    Mark,
    Interesting article. So after all that negativity, what do you like? Wave/tide power, geothermal, a.n. other? What are areas of true potential?